<PAGE>
[LOGO]
STAGECOACH
FUNDS-REGISTERED TRADEMARK-
ANNUAL
- ---------
REPORT
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California Tax-Free
Money Market
Mutual Fund
[ART]
Money Market
Mutual Fund
Class A
DECEMBER 31, 1995 Advised by Wells Fargo Bank, N.A.
Sponsored/Distributed by Stephens Inc., Member NYSE/SIPC
NOT FDIC INSURED
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS iii
MANAGER COMMENTS AND PORTFOLIOS OF INVESTMENTS
California Tax-Free Money Market Mutual Fund 1
Money Market Mutual Fund 18
STATEMENT OF ASSETS AND LIABILITIES 23
STATEMENT OF OPERATIONS 24
STATEMENTS OF CHANGES IN NET ASSETS 25
FINANCIAL HIGHLIGHTS 27
NOTES TO THE FINANCIAL STATEMENTS 29
INDEPENDENT AUDITORS' REPORT 33
LIST OF ABBREVIATIONS 34
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- ARE NOT FDIC INSURED MONEY MARKET MUTUAL FUNDS SEEK
- ARE NOT GUARANTEED BY WELLS FARGO TO MAINTAIN A STABLE NET ASSET [LOGO]
BANK VALUE OF $1.00 PER SHARE,
- ARE NOT DEPOSITS OR OBLIGATIONS OF HOWEVER, THERE CAN BE NO
THE BANK ASSURANCE THAT THE FUNDS WILL
- INVOLVE INVESTMENT RISK, INCLUDING MEET THIS OBJECTIVE. YIELDS
POSSIBLE LOSS OF PRINCIPAL WILL VARY WITH MARKET
CONDITIONS.
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i
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THIS PAGE IS INTENTIONALLY LEFT BLANK --
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ii
<PAGE>
LETTER TO SHAREHOLDERS
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TO OUR SHAREHOLDERS
A BANNER YEAR FOR BONDS AND STOCKS
The investment markets had a banner year in 1995. The stock market had its
biggest one-year gain since 1958, as measured by the Standard & Poor's 500
Index. Long-term bond returns were the third highest since 1950, according to
various bond indexes. The effect of this remarkable rally was reflected in
equity and fixed-income mutual funds, where double-digit returns were common.
Stagecoach long-term Funds shared in 1995's impressive returns.
One lesson for the long-term investor after the disappointing returns in 1994
was clear: patience and a long-term commitment are keys to successful investing.
And while it is unlikely that 1996 will repeat 1995's impressive performance,
the climate remains favorable for the long-term investor.
THE BOND MARKET
The Federal Reserve lowered the federal funds target rate by 0.25% in July,
1995, and again by 0.25% in December. These cuts signaled a reversal of Fed
policy after a series of rate increases in 1994 and early 1995. Longer-term
rates followed suit, with two-year Treasury yields falling 2.50% and thirty-year
Treasury rates down almost 2%. While rate decreases lower the returns on new
bonds, the resale value of higher paying, existing bonds increases. The Fed's
actions sparked a strong rally in the bond market and the resulting price
appreciation helped to erase the erosion bond-holders endured in 1994.
The Orange County bankruptcy, which caused concern among municipal securities
investors early in the year, moved toward a resolution when the County filed a
reorganization plan which should see the County emerge from bankruptcy by June,
1996. Meanwhile, Orange County has been forced to raise interest rates by as
much as 0.20% in order to attract investors. The Stagecoach Funds do not
currently hold any Orange County obligations which are not credit enhanced (for
example, backed by a line of credit) or revenue-backed (backed by the income
from a particular project) so that the resolution of the bankruptcy should have
little effect on the Funds.
The outlook remains positive for fixed-income markets in 1996. Several broad
trends continue to support a declining interest rate environment. Sluggish
economic growth and low inflation should lead to further easing of monetary
policy early in the year, and both short-term and long-term rates should
decline, continuing the bond market rally. Money market instruments, however,
closely follow the federal funds target rate and should see decreased yields in
1996. The Stagecoach Money Market Mutual Funds have responded to this
environment by purchasing longer-term securities in order to lock in the higher
rates. For the Money Market Mutual Fund, this has
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iii
<PAGE>
LETTER TO SHAREHOLDERS
resulted in an increase in average maturity from 42 days at the end of 1994, to
72 days at the end of 1995.
Although the decline in interest rates in the months ahead will likely not be as
steep as last year's, 1996 should reward bond investors. The Federal Reserve
will likely lower the federal funds target rate by 0.25 to 1.00% from the 1995
year-end level of 5.50%.
THE STOCK MARKET
In 1995, the ingredients were in place for a spectacular year: declining
interest rates, low inflation, increasing profit margins and a strong flow of
funds into the market. U.S. equities responded with near-record returns.
Technology stocks were winners as strong earnings growth drove prices higher for
the year. Financial stocks, which traditionally benefit from falling interest
rates, were also market leaders due to industry consolidation and record
profits, as well as the Fed's actions. Strength was also seen in the traditional
consumer goods companies, particularly among large U.S.-based multinationals
where global name recognition and a history of consistent positive earnings
resulted in strong stock prices.
Although 1996 is not expected to repeat 1995's impressive performance, many of
the ingredients for attractive market returns, however, are still in place: a
favorable interest rate environment, corporate restructurings, mergers and
acquisitions, corporate share repurchase
programs, and the continual stream of contributions into mutual funds,
retirement plans and household savings ear-marked for long-term equity
investment. We feel that the stocks of those companies which focus most on
enhancing shareholder value should be the least volatile and provide the best
long-term results.
THE ENVIRONMENT REMAINS "FRIENDLY" FOR INVESTORS
Under current economic conditions, we expect the stock and bond markets to
continue to benefit from lower interest rates during 1996. We also expect that
modest growth and historically low inflation should set the stage for further
interest rate reductions over the next several months. Corporate earnings should
help support the stock market as well. While the federal budget debate is making
some investors more cautious about investing in long-term government and
municipal bonds, the plan to reduce the federal deficit is encouraging news and
should have a positive effect on investors.
Of course, the financial markets are not without their risks and uncertainties.
Investors should not take continued market increases for granted, especially in
the short-term. Diversification and a long-term strategy are important elements
of successful investing. We do believe, however, that we can look forward to a
sustained period of slow growth and continued long-term bond rate declines with
little risk of inflation throughout 1996.
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iv
<PAGE>
LETTER TO SHAREHOLDERS
A COMMITMENT TO INVESTMENT QUALITY
We believe a conservative, straight-forward approach to portfolio management to
be the most effective long-term investment strategy. On the following pages you
will find commentary on each of the Funds, offering insight into individual Fund
performance, strategies, portfolio holdings and other helpful information.
The portfolio managers pictured with each Fund are only a part of the extensive
team assembled to help you meet your financial goals. Over fifty investment
professionals concentrate on specific disciplines within the equity and debt
markets to develop strategies and focus on individual investments. Our
investment professionals have access to state-of-the-art technology, numerous
research databases and services, and a scale of assets which assures
cost-efficient trade execution and thorough investment research coverage.
Thank you for your continued investment in Stagecoach Funds. We will work
diligently to help you realize your financial goals in 1996 and in the years to
come.
STAGECOACH FUNDS, FEBRUARY 1996
PS During 1996, Stagecoach Funds will be introducing a new choice for
investors: the STAGECOACH AGGRESSIVE GROWTH FUND. This Fund is for the
experienced investor who is willing to accept an above-average degree of risk in
exchange for the potential of high performance. The Aggressive Growth Fund is
not for everybody, but it reflects our commitment to offering a variety of
Stagecoach Funds to meet a broad range of investment goals. -- FEBRUARY 15, 1996
"STANDARD & POOR'S-REGISTERED TRADEMARK-," "S&P-REGISTERED TRADEMARK-," AND "S&P
500-REGISTERED TRADEMARK-" ARE REGISTERED TRADEMARKS OF MCGRAW-HILL, INC. THE
S&P 500 INDEX IS AN UNMANAGED INDEX THAT TRACKS THE PERFORMANCE OF 500 LARGE
COMPANIES, INCLUDING INDUSTRIAL, TRANSPORTATION, UTILITY AND FINANCIAL
COMPANIES.
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v
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
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INVESTMENT
ADVISORS
FUND OBJECTIVE:
To seek a high level of income exempt from federal income and California
personal income taxes while preserving capital and liquidity.
[PHOTO] LAURA MILNER has been co-manager of the California Tax-Free
Money Market Mutual Fund since January of 1992. Her
background includes ten years experience specializing in
short and long-term municipal securities. Laura is also a
member of the National Federation of Municipal Analysts and
its California chapter.
[PHOTO] LIZ GOODMAN has recently assumed responsibilities as
co-manager of the California Tax-Free Money Market Mutual
Fund. She has worked as an economic analyst on all aspects
of the United States and California economies. Liz has a
broad educational background, including a Ph.D. in
Anthropology from the University of California at Riverside
and graduate training in Agricultural Economics at the
University of Arkansas.
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1
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE SEVEN-DAY YIELD FOR THE CALIFORNIA TAX-FREE MONEY MARKET MUTUAL
FUND AT THE END OF 1995?
The Fund finished the year with a seven-day yield of 3.81% for the period ended
December 31, 1995, which is equivalent to a taxable yield of 6.61% assuming a
combined federal and state income tax bracket of 42.4%. This was down from the
1994 year-end seven-day yield of 4.37%. (The Fund's manager has voluntarily
waived or has reimbursed expenses, thereby reducing operating expenses. Without
this reduction, yields would have been lower.)
WHY WAS THE YIELD LOWER?
The Fund's seven-day yield was lower at the end of 1995 than 1994 because of an
easing in the federal funds target rate which fell by a total of .50% after an
increase in February 1995. Short-term, tax-exempt rates generally move in tandem
with the federal funds target rate. If the Federal Reserve lowers rates as
expected in 1996, the Fund's yield will likely fall by a similar amount. The
Fund's December 31, 1995, 7-day taxable equivalent yield of 6.61% remains an
attractive alternative for investors seeking double tax-free income, capital
preservation and liquidity.
THE FEDERAL BUDGET DEBATE MAY RESULT IN MORE FISCAL RESPONSIBILITIES BEING
SHIFTED TO THE STATES. WHAT EFFECT WOULD THIS HAVE ON CALIFORNIA MUNICIPAL
SECURITIES?
While federal shifting of some fiscal responsibilities to the states may not be
fully offset by federal block grants, California, with its growing economy and
state revenues, should be able to at least partially offset any loss in federal
funding. Improvement in the economy and revenues is expected to have a positive
impact on credit quality. As always, we will be monitoring federal budget
developments and their possible effects on the state's credit quality.
WHAT ABOUT THE FLAT TAX? COULD IT POTENTIALLY LIMIT OR ELIMINATE THE TAX
BENEFITS OF INVESTING IN MUNICIPAL SECURITIES?
We do not think that a flat tax is likely to be implemented over the next couple
of years, and, even if it were enacted, we believe that any flat tax plan would
likely be phased in, allowing muni investors to benefit from tax-free yields for
several more years. If a new federal tax code limited or eliminated tax-free
earnings from municipal securities, municipalities would probably be forced to
increase yields to attract and keep investors. For now, however, it is important
to remember that the benefits which attract investors to municipal securities
still exist.
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2
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
WHAT IS THE OUTLOOK FOR CALIFORNIA'S ECONOMY?
Current economic indications suggest that the California economy will continue
to recover in 1996. The state should benefit from continued growth in the high
technology and entertainment industries, among others. State revenues are also
expected to experience continued growth.
DO YOU SEE ANY LINGERING EFFECT FROM LAST YEAR'S FINANCIAL TROUBLE IN ORANGE
COUNTY?
The Fund does not hold any Orange County issues that are not credit enhanced
(for example, backed by a line of credit) or revenue-backed (backed by the
income from a particular project) so that the resolution of the bankruptcy will
have no direct impact on the Fund. As for the general climate, investors
continue to disfavor Orange County issues, forcing the County to pay interest
rates as much as 0.20% more than other California counties when they borrow in
the municipal securities market. Orange County has filed a reorganization plan
with the bankruptcy court and expects to restructure some of its outstanding
obligations. If all goes according to the plan, the County expects to emerge
from bankruptcy by June 30, 1996.
WHAT IS THE CURRENT COMPOSITION OF THE PORTFOLIO?
As of December 31, 1995, the Fund was composed of approximately 65% daily and
weekly variable rate demand notes that are in most cases backed by a letter of
credit from a bank ranked in the top tier by national credit rating agencies
(such as Moody's and Standard & Poor's) and/or are supported by municipal bond
insurance. Approximately 17% of the fund was invested in tax-exempt commercial
paper which typically also has a letter of credit from a bank. Municipal notes
composed another 15% of the Fund. Approximately 3% of the Fund was invested in
pre-refunded bonds, where the municipality has issued a second bond at a lower
interest rate in order to retire an earlier issue. The proceeds from the second
issue are invested in U.S. Government obligations, which are considered among
the most credit worthy investments in the world.
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3
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - 101.45%
$ 4,900,000 ABAG Finance Authority for Nonprofit Corp CA
Lucile Salter Packard Project V/R AMBAC
Insured 5.00 % 08/01/23 $ 4,900,000
10,000,000 Alameda County CA TRAN LOC - Union Bank of
Switzerland 4.75 07/25/96 10,044,015
5,000,000 Anaheim CA Housing Revenue V/R LOC - Citibank 5.35 12/15/23 5,000,000
13,900,000 Anaheim CA Public Improvement COP LOC -
Industrial Bank of Japan Ltd 5.30 08/01/19 13,900,000
4,500,000 Barstow CA MFHR Desert Vista Apartments V/R LOC
- Federal Home Loan Bank of San Francisco 5.15 12/01/20 4,500,000
5,325,000 Bell Garden CA RDFA Central City Project
Prerefunded 8.00 07/01/19 5,546,674
3,700,000 Big Bear Lake CA Industrial Revenue Southwest
Gas Corp V/R AMT Series A LOC - Union Bank of
Switzerland 5.05 12/01/28 3,700,000
8,000,000 Brea & Olinda CA USD Brea High School
Prerefunded 7.70 08/01/18 8,334,520
14,000,000 California State GO V/R FGIC Insured 5.20 11/01/24 14,000,000
5,000,000 California State GO V/R MBIA Insured 3.75 09/01/03 5,000,000
1,475,000 California State HFA Home Mortgage Revenue V/R 5.00 08/01/17 1,475,000
2,000,000 California State HFA Home Mortgage Revenue V/R
MBIA Insured 5.29 08/01/10 2,000,000
6,750,000 California State HFA Revenue Home Mortgage
Series E V/R AMT 4.60 08/01/27 6,750,000
4,000,000 California State HFFA Catholic West Hospital
Series B V/R MBIA Insured 4.85 07/01/05 4,000,000
4,800,000 California State HFFA Childrens Hospital V/R
MBIA Insured 4.75 11/01/21 4,800,000
</TABLE>
- ---------------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
- ---------------------------
4
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$15,600,000 California State HFFA Kaiser Permanente V/R 4.90 % 05/01/28 $ 15,600,000
13,400,000 California State HFFA Memorial Health Services
V/R 4.90 10/01/24 13,400,000
4,500,000 California State HFFA N. T. Enloe Memorial
Hospital V/R LOC - Bank of America 5.10 01/01/16 4,500,000
4,000,000 California State HFFA Revenue Catholic
Healthcare West Series C V/R MBIA Insured 4.85 07/01/11 4,000,000
300,000 California State HFFA Revenue Catholic
Healthcare West V/R MBIA Insured 4.85 07/01/09 300,000
3,000,000 California State HFFA Revenue Catholic
Healthcare West V/R Series B MBIA Insured 4.85 07/01/16 3,000,000
1,100,000 California State HFFA Santa Barbara Cottage V/R
LOC - Credit Suisse 4.75 09/01/15 1,100,000
1,915,000 California State IDA Merrills Packing Inc V/R
LOC - Bank of Tokyo Ltd 5.10 12/01/18 1,915,000
2,000,000 California State PCFA Chevron Project V/R 4.10 06/15/05 1,996,300
2,000,000 California State PCFA Dow Chemical Project CP 3.80 01/09/96 2,000,000
2,000,000 California State PCFA Resources Recovery
Revenue V/R LOC - Banque Nationale de Paris 6.00 09/01/18 2,000,000
5,000,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.55 04/11/96 5,000,000
10,000,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.70 01/10/96 10,000,000
5,000,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.70 02/26/96 5,000,000
6,250,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.70 03/08/96 6,250,000
2,900,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.75 01/10/96 2,900,000
</TABLE>
- -------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
---------------------------
5
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 2,500,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.75 % 01/11/96 $ 2,500,000
5,000,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.85 01/11/96 5,000,000
4,800,000 California State PCFA Revenue Pacific Gas &
Electric CP 3.95 01/11/96 4,800,000
4,000,000 California State PCFA Revenue Pacific Gas &
Electric CP AMT 3.75 01/11/96 4,000,000
1,000,000 California State PCFA Revenue San Diego Gas &
Electric V/R 4.00 12/01/08 1,000,000
5,000,000 California State PCFA Revenue Southern
California Edison CP 3.55 03/27/96 5,000,000
1,050,000 California State PCFA Revenue Southern
California Edison CP 3.60 02/21/96 1,050,000
5,000,000 California State PCFA Revenue Southern
California Edison CP 3.60 02/27/96 5,000,000
2,500,000 California State PCFA Revenue Southern
California Edison CP 3.90 01/16/96 2,500,000
1,000,000 California State PCFA Sanger Project Series
90-A V/R LOC - Credit Suisse 5.05 09/01/20 1,000,000
8,000,000 California State PCFA Solid Waste Disposal
Revenue Colmac Energy Project V/R Series A
LOC - Swiss Bank 5.05 12/01/16 8,000,000
3,400,000 California State PCFA Solid Waste Disposal
Revenue Taormina Industries Project AMT
Multiple LOC's 5.40 08/01/14 3,400,000
1,000,000 California State PCFA Southern California
Edison CP 3.75 01/11/96 1,000,000
500,000 California State PCFA Southern California
Edison V/R 5.40 02/28/08 500,000
400,000 California State PCFA Southern California
Edison V/R Series C 5.40 02/28/08 400,000
6,000,000 California State PCFA V/R San Diego Gas &
Electric Co V/R Series A 4.25 12/01/07 6,000,000
</TABLE>
- ---------------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
- ---------------------------
6
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 2,000,000 California State PCFA V/R Shell Oil Co Project
Series B 4.75 % 10/01/11 $ 2,000,000
3,700,000 California State PCFA Wadham Energy V/R LOC -
Banque Paribas 5.15 11/01/17 3,700,000
36,690,000 California State RAW Series C Multiple LOC's 5.75 04/25/96 36,900,485
12,325,000 California State RAW Series C V/R FGIC Insured 5.91 04/25/96 12,399,683
20,000,000 California State School Cash Reserve Program
Pool Series A MBIA Insured 4.75 07/03/96 20,087,361
15,000,000 California State School Cash Reserve Program
Pool Series B MBIA Insured 4.50 12/20/96 15,097,762
12,000,000 California Statewide CDA Apartment Development
Revenue V/R Series A-2 FNMA Collateralized 4.90 05/15/25 12,000,000
15,100,000 California Statewide CDA Apartment Development
Revenue V/R Series A-4 FNMA Collateralized 4.70 05/15/05 15,100,000
3,700,000 California Statewide CDA Barton Hospital V/R
LOC - Banque Nationale de Paris 5.10 12/01/09 3,700,000
1,100,000 California Statewide CDA Revenue DV Industries
V/R AMT Series A LOC - Bank of Tokyo Ltd 5.35 08/01/19 1,100,000
2,000,000 California Statewide CDA Solid Waste Facilities
Revenue Chevron USA Inc Project V/R AMT 6.05 12/15/24 2,000,000
3,800,000 California Statewide CDA St Joseph Health
System V/R 4.90 07/01/08 3,800,000
2,000,000 California Statewide CDA Sutter Health Group
V/R AMBAC Insured 5.90 07/01/15 2,000,000
680,000 California Statewide CDA V/R AMT LOC - Bank of
Tokyo Ltd 5.55 05/01/12 680,000
</TABLE>
- -------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
---------------------------
7
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 675,000 California Statewide IDA APM Inc Project Class
A V/R LOC - Bank of Tokyo Ltd 5.35 % 06/01/04 $ 675,000
9,700,000 Chula Vista CA IDR San Diego Gas & Electric V/R 4.85 12/01/27 9,700,000
5,000,000 Chula Vista CA PCFA Revenue San Diego Gas &
Electric CP 3.70 03/06/96 5,000,000
5,000,000 Chula Vista CA PCFA Revenue San Diego Gas &
Electric CP 3.75 03/07/96 5,000,000
2,000,000 Chula Vista CA PCFA Revenue San Diego Gas &
Electric CP 3.80 02/12/96 2,000,000
2,500,000 Colton CA RDFA MFHR V/R LOC - Federal Home Loan
Bank of San Francisco 4.55 05/01/10 2,500,000
745,000 Contra Costa County CA MFHR El Cerrito Royale
V/R LOC - Bank of America 5.00 12/01/17 745,000
2,500,000 Contra Costa County CA MFHR Park Regency
Apartment V/R LOC - Bank of America 5.30 08/01/32 2,500,000
2,700,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue V/R FGIC Insured 4.90 03/01/09 2,700,000
18,000,000 Eagle Trust V/R Series 94 MBIA Insured 5.20 09/01/03 18,000,000
10,845,000 Eastern Municipal Water District CA Revenue
Series B V/R FGIC Insured 5.00 07/01/20 10,845,000
350,000 Farfield CA IDA Herman G Rowland Project V/R
LOC - Bank of America 5.40 04/01/05 350,000
8,300,000 Foothill / Eastern CA Transportation Corridor
Agency Toll Road Revenue Series B V/R LOC -
Morgan Guaranty Trust 4.75 01/02/35 8,300,000
16,900,000 Foothill / Eastern CA Transportation Corridor
Agency Toll Road Revenue Series C V/R LOC -
Credit Suisse 4.80 01/02/35 16,900,000
</TABLE>
- ---------------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
- ---------------------------
8
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 3,000,000 Foothill / Eastern CA Transportation Corridor
Toll Road Development Series D V/R LOC -
Industrial Bank of Japan Ltd 5.00 % 01/02/35 $ 3,000,000
1,500,000 Fowler CA IDA Bee Sweet Citrus Inc V/R AMT LOC
- Bank of America 3.50 12/01/05 1,500,000
6,800,000 Fullerton CA IDA Sunclipse Inc V/R LOC - Bank
of America 3.50 07/01/15 6,800,000
8,000,000 Hayward CA MFHR V/R FGIC Insured 5.00 08/01/14 8,000,000
1,380,000 Irvine CA IDA Improvement Bond V/R LOC -
National Westminster Bank Plc 5.80 09/02/15 1,380,000
2,700,000 Irvine Ranch CA Water District LOC - National
Westminster Bank Plc 5.90 08/01/16 2,700,000
1,000,000 Irvine Ranch CA Water District V/R LOC - Bank
of America 6.00 04/01/33 1,000,000
6,500,000 Irvine Ranch CA Water District V/R LOC -
Commerzbank AG 5.90 01/01/21 6,500,000
3,900,000 Irvine Ranch CA Water District V/R LOC -
Sumitomo Bank Ltd 5.90 10/01/10 3,900,000
200,000 Lancaster CA HFA MFHR Westwood Park Apartments
V/R LOC - Bank of America 4.80 12/01/07 200,000
6,000,000 Long Beach CA Harbor CP 3.50 01/19/96 6,000,000
1,000,000 Long Beach CA Harbor CP 3.65 01/12/96 1,000,000
5,900,000 Long Beach CA Harbor CP 3.80 01/11/96 5,900,000
7,500,000 Long Beach CA Harbor CP 3.80 02/13/96 7,500,000
22,600,000 Long Beach CA Health Facilities Memorial Health
Services 4.90 10/01/16 22,600,000
4,000,000 Los Angeles CA Department of Water & Power CP 3.65 02/23/96 4,000,000
3,700,000 Los Angeles CA MFHA Malibu Meadows Project
Series A V/R LOC - Sumitomo Bank Ltd 5.10 12/01/15 3,700,000
2,515,000 Los Angeles CA MFHR Canyon Apartments Series C
V/R LOC - Swiss Bank 3.40 12/01/10 2,515,000
</TABLE>
- -------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
---------------------------
9
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 4,600,000 Los Angeles CA MFHR Channel Gateway Apartments
Series B V/R LOC - Fuji Bank Ltd 5.30 % 08/01/19 $ 4,600,000
1,800,000 Los Angeles CA MFHR Masselin Manor V/R LOC -
Bank of America 4.80 07/01/15 1,800,000
1,000,000 Los Angeles CA MFHR Poinsettia Apartments
Series A V/R LOC - Dai-Ichi Kangyo Bank Ltd 4.17 07/01/19 1,000,000
5,300,000 Los Angeles CA MFHR V/R AMT LOC - Federal Home
Loan Bank of San Francisco 6.25 08/01/26 5,300,000
1,500,000 Los Angeles County CA HFA MFHR Harbor Cove
Project V/R LOC - Citibank 5.30 10/01/06 1,500,000
9,800,000 Los Angeles County CA HFA MFHR Park Sierra V/R
AMT LOC - Citibank 5.30 12/01/08 9,800,000
4,100,000 Los Angeles County CA HFA MFHR Sand Canyon
Ranch Project V/R LOC - Citibank 5.30 11/01/06 4,100,000
500,000 Los Angeles County CA IDA Komax System Inc V/R
AMT LOC - Dai-Ichi Kangyo Bank Ltd 6.25 12/01/06 500,000
500,000 Los Angeles County CA IDA Walter & Howard V/R
AMT LOC - Dai-Ichi Kangyo Bank Ltd 6.25 12/01/06 500,000
4,000,000 Los Angeles County CA Metro Transportation
Authority CP Multiple LOC's 3.80 02/08/96 4,000,000
4,500,000 Los Angeles County CA Metropolitan
Transportation Authority CP Multiple LOC's 2.50 12/01/06 4,500,000
10,000,000 Los Angeles County CA Metropolitan
Transportation Authority CP Multiple LOC's 3.35 01/18/96 10,000,000
</TABLE>
- ---------------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
- ---------------------------
10
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 5,800,000 Los Angeles County CA Metropolitan
Transportation Authority CP Multiple LOC's 3.50 % 01/12/96 $ 5,800,000
8,400,000 Los Angeles County CA Metropolitan
Transportation Authority CP Multiple LOC's 3.60 02/09/96 8,400,000
1,000,000 Los Angeles County CA Metropolitan
Transportation Authority CP Multiple LOC's 3.60 02/15/96 1,000,000
1,700,000 Los Angeles County CA Metropolitan
Transportation Authority CP Multiple LOC's 3.60 02/21/96 1,700,000
3,600,000 Los Angeles County CA Metropolitan
Transportation Authority CP Multiple LOC's 3.75 01/10/96 3,600,000
3,000,000 Los Angeles County CA Metropolitan
Transportation Authority CP Multiple LOC's 3.80 01/10/96 3,000,000
5,500,000 Los Angeles County CA Metropolitan
Transportation Authority CP Multiple LOC's 3.80 02/08/96 5,500,000
5,500,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
V/R Series A 5.00 07/01/20 5,500,000
1,900,000 Los Angeles County CA MFHR Series 84B V/R LOC -
Citibank 6.22 09/01/96 1,900,000
33,000,000 Los Angeles County CA TRAN Multiple LOC's 4.50 07/01/96 33,103,720
13,700,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue V/R FGIC Insured 5.10 07/01/12 13,700,000
10,000,000 Marin County CA TRAN AMT LOC - Sanwa Bank 4.50 10/29/96 10,054,177
1,000,000 Metropolitan Water District of Southern CA
Waterworks Revenue CP 3.40 01/30/96 1,000,000
</TABLE>
- -------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
---------------------------
11
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 5,500,000 Modesto CA MFHR Westdale Commons Apartments V/R
LOC - Federal Home Loan Bank of San Francisco 4.85 % 12/01/15 $ 5,500,000
3,100,000 Monterey CA Peninsula Water Management District
Wastewater Reclamation Project V/R LOC -
Sumitomo Bank Ltd 5.30 07/01/22 3,100,000
4,300,000 Monterey CA Regional Waste Management Authority
Revenue Series A V/R LOC - Dai-Ichi Kangyo
Bank Ltd 5.30 04/01/15 4,300,000
18,500,000 Monterey County CA Financing Authority Water
Reclamation Projects V/R AMT LOC - Dai-Ichi
Bank Ltd 5.30 09/01/36 18,500,000
2,700,000 Moorpark CA MFHR Le Club Apartments V/R LOC -
Citibank 4.80 11/01/15 2,700,000
3,300,000 Oakland CA Childrens Hospital Health Facility
V/R LOC - Banque National de Paris 4.95 07/01/08 3,300,000
400,000 Oakland CA MFHR Skyline Hills V/R LOC -
Citibank 4.80 01/01/09 400,000
2,800,000 Ontario CA MFHR Park Centre Apartments V/R LOC
- Bank of New York 4.80 08/01/07 2,800,000
11,000,000 Orange County CA HFA Bear Brand Apartments
Project Series Z LOC - Fuji Bank Ltd 5.80 11/01/07 11,000,000
2,249,000 Orange County CA HFA Harbor Pointe Apartment
V/R Issue D LOC - Citibank 5.15 12/01/06 2,249,000
4,200,000 Orange County CA HFA Monarch Bay Apartments V/R
LOC - Mitsubishi Bank Ltd 5.55 10/01/07 4,200,000
700,000 Orange County CA HFA Niguel Summit Apartment
V/R LOC - Bank of America 5.15 11/01/09 700,000
13,300,000 Orange County CA HFA The Lakes Apartments V/R
LOC - Citibank 5.30 12/01/06 13,300,000
</TABLE>
- ---------------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
- ---------------------------
12
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 1,700,000 Orange County CA HFA Vintage Wood Apartments
V/R LOC - Mitsubishi Bank Ltd 5.40 % 11/01/08 $ 1,700,000
2,000,000 Orange County CA MFHR Heritage Point V/R LOC -
Banque Paribas 5.20 05/01/22 2,000,000
1,700,000 Orange County CA Office & Courthouse Projects
V/R LOC - Dai-Ichi Kangyo Bank 5.90 12/01/15 1,700,000
2,500,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 5.90 08/01/15 2,500,000
2,675,000 Orange County CA Sanitation Districts 1,2,3
Joint Facility Project Prerefunded 7.10 08/01/01 2,756,232
1,000,000 Orange County CA Water District CP LOC - Union
Bank of Switzerland 3.50 02/14/96 1,000,000
2,100,000 Orange County CA Water District CP LOC - Union
Bank of Switzerland 3.65 02/20/96 2,100,000
1,000,000 Orange County CA Water District CP LOC - Union
Bank of Switzerland 3.75 02/14/96 1,000,000
1,500,000 Orange County CA Water District CP LOC - Union
Bank of Switzerland 3.85 02/07/96 1,500,000
5,000,000 Sacramento CA City USD TRAN 4.00 11/29/96 5,016,193
6,000,000 Sacramento CA MUD CP 3.35 01/30/96 6,000,000
2,500,000 Sacramento CA MUD CP 3.70 01/11/96 2,500,000
17,300,000 Sacramento County CA Administration Center &
Courthouse Project V/R LOC - Union Bank of
Switzerland 4.75 06/01/20 17,300,000
1,100,000 Sacramento County CA COP LOC - Sanwa Bank Ltd 5.15 06/01/96 1,100,000
5,900,000 Sacramento County CA Series C V/R LOC -
Dai-Ichi Kangyo Bank Ltd 5.30 04/15/07 5,900,000
1,380,000 San Bernardino County CA IDA Transamerican
Plastics V/R LOC - National Westminster Bank
Plc 4.95 12/01/06 1,380,000
4,925,000 San Bernardino County CA MFHR V/R Series A LOC
- Federal Home Loan Bank of San Francisco 4.65 05/01/17 4,925,000
</TABLE>
- -------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
---------------------------
13
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 400,000 San Bernardino County CA MFHR Western
Properties Project II V/R LOC - Bank of
America 4.55 % 05/01/05 $ 400,000
700,000 San Bernardino County CA MFHR Western
Properties Project III V/R LOC - Bank of
America 4.55 08/01/05 700,000
100,000 San Bernardino County CA MFHR Western
Properties Project IV V/R LOC - Bank of
America 4.55 08/01/05 100,000
1,900,000 San Bernardino County CA MFHR Woodview
Apartments V/R LOC - Bank of America 5.00 04/01/07 1,900,000
20,000,000 San Bernardino County CA TRAN Multiple LOC's 4.50 07/05/96 20,051,223
5,000,000 San Bernardino County CA Transportation
Authority Sales Tax Revenue V/R Series A LOC
- Toronto Dominion Bank 4.75 03/01/10 5,000,000
6,000,000 San Bernardino County CA V/R LOC - Canadian
Imperial Bank of Commerce 5.20 08/01/28 6,000,000
2,635,000 San Diego CA MFHR Flora Aparments Series A V/R
AMT LOC - Swiss Bank 3.40 06/01/05 2,635,000
3,220,000 San Diego CA MFHR La Cima Apartments V/R LOC -
Citibank 4.80 12/01/08 3,220,000
200,000 San Diego CA MFHR Lusk Mira Mesa Apartments V/R
LOC - Bank of America 5.00 04/01/07 200,000
3,500,000 San Diego CA Multi Family Apartments V/R LOC -
Bank of America 4.80 10/01/15 3,500,000
7,500,000 San Diego CA Regional Transportation Commission
Sales Tax Revenue V/R 3.00 04/01/05 7,500,000
7,000,000 San Diego County CA Regional Transportation
Commission CP 3.55 01/12/96 7,000,000
1,800,000 San Diego County CA Regional Transportation
Commission CP 3.75 01/12/96 1,800,000
4,000,000 San Diego County CA TRAN Multiple LOC's 4.50 09/30/96 4,013,485
</TABLE>
- ---------------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
- ---------------------------
14
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 7,000,000 San Diego County Regional Transportation
Commission CP 3.70 % 02/07/96 $ 7,000,000
9,000,000 San Francisco CA MFHR Bayside Village
Apartments V/R LOC - Industrial Bank of Japan
Ltd 5.00 12/01/05 9,000,000
14,700,000 San Francisco CA MFHR Filmore Center Apartments
V/R LOC - Bank of Nova Scotia 5.15 12/01/17 14,700,000
3,000,000 San Francisco CA MFHR Filmore Center Apartments
V/R LOC - Bank of Nova Scotia 5.30 12/01/17 3,000,000
15,000,000 San Francisco CA MFHR Filmore Center Apartments
V/R LOC - Citibank 5.30 12/01/17 15,000,000
8,150,000 San Francisco CA MFHR Winterland Project V/R
LOC - Citibank 5.30 06/01/06 8,150,000
11,690,000 San Francisco CA RDFA MFHR Rincon Center V/R
LOC - Citibank 5.30 12/01/06 11,690,000
6,800,000 San Joaquin County CA Transportation Authority
Sales Tax Revenue V/R LOC - Sumitomo Bank Ltd 5.15 04/01/11 6,800,000
1,800,000 San Jose - Santa Clara CA Water Financing
Authority Sewer Revenue Series B V/R FGIC
Insured 3.35 11/15/20 1,800,000
2,200,000 San Leandro CA MFHR Haas Avenue Apartments V/R
LOC - Bank of America 4.80 10/01/07 2,200,000
835,000 San Mateo County CA COP V/R LOC - Swiss Bank 4.75 07/01/98 835,000
5,300,000 Santa Clara CA Electric Revenue V/R Series 85A
LOC - National Westminster Bank Plc 4.90 07/01/10 5,300,000
1,300,000 Santa Clara CA Electric Revenue V/R Series 85B
LOC - National Westminster Bank Plc 4.90 07/01/10 1,300,000
</TABLE>
- -------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
---------------------------
15
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 5,400,000 Santa Clara CA Electric Revenue V/R Series 85C
LOC - National Westminster Bank Plc 4.90 % 07/01/10 $ 5,400,000
2,500,000 Santa Clara County CA HFA Lincoln Pajaro
Apartments Series 85A LOC - Sumitomo Bank 5.05 01/01/97 2,500,000
9,200,000 Santa Clara County CA MFHR Grove Garden
Apartments V/R LOC - Citibank 5.30 03/01/17 9,200,000
4,950,000 Simi Valley CA MFHR Creekside Village
Apartments V/R LOC - Bank of America 4.80 07/01/23 4,950,000
7,000,000 Southern California State Public Power
Authority Hydroelectric Revenue Hoover
Updating Project Prerefunded 8.13 10/01/17 7,378,027
10,000,000 Southern California State Public Power
Authority Series B Prerefunded 7.13 07/01/15 10,365,770
17,700,000 Southern California State Public Power
Authority Southern Transmission Project V/R
LOC - Swiss Bank 4.75 07/01/19 17,700,000
400,000 Southern California State Rapid Transit System
V/R MBIA Insured 3.00 07/01/00 400,000
4,200,000 Tracy CA MFHR Sycamore Village Apartments V/R
LOC - Bank of America 4.55 05/01/15 4,200,000
6,390,000 Union City CA Skylark V/R LOC - Sumitomo Bank
Ltd 4.95 11/01/07 6,390,000
4,000,000 Union City CA V/R LOC - Sumitomo Bank Ltd 4.95 10/01/07 4,000,000
2,300,000 Upland CA HFA MFHR Upland Village Green Project
V/R LOC - Bank of Tokyo Ltd 5.25 09/01/10 2,300,000
4,200,000 Vacaville CA MFHR Western Properties Sycamores
Project V/R LOC - Bank of America 4.55 04/01/05 4,200,000
3,000,000 Visalia CA Convention Center Expansion Project
COP V/R LOC - Mitsubishi Bank Ltd 5.35 12/01/15 3,000,000
</TABLE>
- ---------------------------------------------------------------------------
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A DEMAND
FEATURE WHICH REDUCES THE
REMAINING MATURITY.
- ---------------------------
16
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES (CONTINUED)
$ 5,700,000 Walnut Creek CA MFHR Creekside Drive Apartments
V/R LOC - Bank of America 4.55 % 04/01/07 $ 5,700,000
1,000,000 West Basin CA Municipal Water District COP
Escrowed to Maturity 5.90 08/01/96 1,012,187
4,000,000 Whittier CA EDFA Revenue Whittier College
Series A Prerefunded 7.00 12/01/09 4,113,810
--------------
TOTAL SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES $1,045,925,624
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $1,045,925,624)* (Note 1) 101.45% $1,045,925,624
Other Assets and Liabilities, Net (1.45) (14,921,927)
------ -------------
TOTAL NET ASSETS 100.00% $1,031,003,697
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A
DEMAND FEATURE WHICH REDUCES THE REMAINING MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
---------------------
17
<PAGE>
MONEY MARKET MUTUAL FUND
- ---------
INVESTMENT
ADVISORS
FUND OBJECTIVE
To seek a high level of income while preserving capital and liquidity by
investing in high-quality, short-term securities.
[PHOTO] MARK KRASCHEL has co-managed the Money Market Mutual Fund
since its inception in July of 1992. He has specialized in
short-term bond investments for over a decade. Mark 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.
[PHOTO] MADELINE GISH has co-managed the Money Market Mutual Fund
since July 1994. She joined Wells Fargo in 1989 as the
portfolio coordinator for the Mutual Funds Division.
Madeline also holds a B.S. in Business Administration from
the University of Kansas.
- ---------------------
18
<PAGE>
MONEY MARKET MUTUAL FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE SEVEN-DAY YIELD FOR THE MONEY MARKET MUTUAL FUND CLASS A AT THE END
OF 1995?
The Money Market Fund's Class A share 7-day yield for the period ended December
31, 1995 was 4.98%. This was slightly below 1994's year-ending seven-day yield
of 5.08%. (The Fund's manager has voluntarily waived or has reimbursed expenses,
thereby reducing operating expenses. Without this reduction, yields would have
been lower.)
THE FEDERAL RESERVE REDUCED THE FEDERAL FUNDS TARGET RATE BY 0.25% IN JULY AND
AGAIN IN DECEMBER. WHY WAS THE YIELD ONLY 0.10% LOWER?
After peaking in February, money market yields decreased steadily over the
course of the year. The federal funds target rate, the benchmark for short-term
interest rates, after an increase in February, was decreased by 0.25% in July
and by the same amount again in December. The Fund's yield generally moves in
tandem with the federal funds target rate, although investor anticipation of
rate changes can prevent it from having a direct one-to-one correspondence. At
the end of 1994, for example, investors expected rates to rise, just as they
expected rates to fall at the end of 1995. These expectations altered the
relationship between the target rate and the yields in the Fund, reducing the
difference between the year-end figures. Despite the lower yield, the Money
Market Fund remains an attractive alternative for investors seeking liquidity
and capital preservation.
WHAT STEPS WILL YOU TAKE DURING 1996 IN ANTICIPATION OF LOWER INTEREST RATES?
In anticipation of the Fed further easing rates, the WEIGHTED AVERAGE MATURITY,
or the average length of time before the securities in a portfolio mature
weighted by dollar values, has been extended in order to lock in current rates
for a longer period of time. As of December 31, 1995, the Fund's weighted
average maturity was 72 days compared to 42 days at year-end 1994. In 1996, if
current market conditions prevail, we intend to maintain a longer average
maturity in anticipation of lower interest rates.
PLEASE DESCRIBE THE PORTFOLIO'S SECURITIES.
As of December 31, 1995, the Fund was composed of approximately 52% commercial
paper, 21% floating rate notes, 19% U.S. Treasury Bills, 4% repurchase
agreements, 3% federal agency discount notes, and 1% bank notes or certificates
of deposit. All the commercial paper purchased by the Fund is rated in the
highest category by national credit rating agencies such as Standard & Poor's
and Moody's.
---------------------
19
<PAGE>
MONEY MARKET MUTUAL FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
YIELD TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER - 52.40%
$25,000,000 ABN Amro North American Finance Corp Inc 5.69 % 01/26/96 $ 24,901,215
40,000,000 ANZ Delaware Inc 5.67 02/13/96 39,729,100
50,000,000 ANZ Delaware Inc 5.70 01/24/96 49,817,917
50,000,000 ANZ Delaware Inc 5.70 02/02/96 49,746,667
45,000,000 Asset Securitization Cooperative Corp++ 5.65 02/29/96 44,583,313
50,000,000 Associates Corp of North America 5.59 03/21/96 49,378,889
50,000,000 Associates Corp of North America 5.60 04/11/96 49,214,444
50,000,000 Beta Finance Corp++ 5.66 02/13/96 49,661,972
50,000,000 Ciesco LP++ 5.47 03/27/96 49,346,639
50,000,000 Corporate Receivables Corp++ 5.50 03/22/96 49,381,250
30,000,000 Corporate Receivables Corp++ 5.65 02/26/96 29,736,333
47,600,000 Corporate Receivables Corp++ 5.72 01/30/96 47,380,670
50,000,000 Daimler-Benz North America Corp 5.46 03/22/96 49,385,750
15,000,000 Daimler-Benz North America Corp 5.50 03/28/96 14,800,625
50,000,000 Daimler-Benz North America Corp 5.70 01/25/96 49,810,000
60,000,000 Daimler-Benz North America Corp 5.72 01/31/96 59,714,000
110,000,000 Den Danske Corp Inc 5.67 02/09/96 109,324,325
50,000,000 Glaxo Wellcome Plc++ 5.70 01/12/96 49,912,917
77,770,000 Greenwich Funding Corp++ 5.62 03/21/96 76,798,739
50,739,000 Greenwich Funding Corp++ 5.75 01/04/96 50,714,688
55,000,000 Hanson Finance Plc++ 5.65 02/27/96 54,507,979
43,000,000 Hanson Finance Plc++ 5.65 03/06/96 42,561,340
20,000,000 Hanson Finance Plc++ 5.66 02/15/96 19,858,500
25,000,000 Heinz (H J) Co++ 5.58 03/15/96 24,717,361
50,000,000 Household Finance Corp 5.69 01/24/96 49,818,236
50,000,000 Household Finance Corp 5.72 01/25/96 49,809,333
40,000,000 Morgan (J P) & Co Inc 5.58 03/13/96 39,553,600
100,000,000 National Australia Funding Inc 5.57 03/15/96 98,855,056
50,000,000 New Center Asset Funding++ 5.60 03/15/96 49,424,444
48,000,000 Penney (J C) Co Inc 5.66 02/14/96 47,667,947
18,625,000 Preferred Receivables Funding Corp 5.67 02/14/96 18,495,929
26,715,000 Sheffield Receivables Corp++ 5.53 03/01/96 26,468,777
50,000,000 Sheffield Receivables Corp++ 5.67 02/15/96 49,645,625
21,040,000 Sony Capital Corp++ 5.47 03/20/96 20,781,893
</TABLE>
- ------------------------
20
<PAGE>
MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
YIELD TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
$38,000,000 Sony Capital Corp++ 5.68 % 02/12/96 $ 37,748,187
25,000,000 Sony Capital Corp++ 5.71 01/30/96 24,885,007
37,000,000 Student Loan Corp 5.69 01/18/96 36,900,583
30,750,000 Sweden (Kingdom of) 5.70 01/11/96 30,701,227
50,000,000 Swedish Export Credit Corp 5.46 03/20/96 49,400,917
25,000,000 Swedish Export Credit Corp 5.70 01/18/96 24,932,708
50,000,000 WCP Funding Corp++ 5.95 01/02/96 49,991,736
--------------
TOTAL COMMERCIAL PAPER $1,840,065,838
SHORT TERM FEDERAL AGENCIES - 2.84%
$50,000,000 Federal Home Loan Bank 5.50 % 01/31/96 $ 49,770,833
50,000,000 Federal Home Loan Mortgage Corp 5.50 01/31/96 49,770,833
--------------
TOTAL SHORT TERM FEDERAL AGENCIES $ 99,541,666
U.S. TREASURY BILLS - 18.81%
$680,000,000 U.S. Treasury Bills 5.19 % 07/25/96 $ 660,516,978
</TABLE>
---------------------
21
<PAGE>
MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSITS - 0.71%
$25,000,000 Banque Nationale de Paris 5.81 % 01/30/96 $ 25,000,000
CORPORATE MEDIUM TERM NOTES - 0.71%
$25,000,000 FCC National Bank 5.74 % 03/27/96 $ 25,000,000
VARIABLE AND FLOATING RATE BONDS - 21.35%
$60,000,000 Boatmen's Bancshares Inc 6.91 % 06/19/96 $ 59,994,533
30,000,000 Chemical Banking Corp 6.08 08/19/96 30,039,625
50,000,000 Colorado National Bank of Denver 5.91 04/17/96 50,000,000
100,000,000 Comerica Inc 5.78 11/08/96 99,941,840
50,000,000 Comerica Inc 5.84 10/30/96 49,970,920
135,000,000 FCC National Bank 5.59 10/31/96 134,934,903
25,000,000 Household Finance Corp 5.88 09/16/96 25,016,052
100,000,000 International Business Machines Credit Corp 5.79 11/06/96 99,913,570
100,000,000 PNC Bank Corp 5.64 07/29/96 99,970,810
50,000,000 PNC Bank Corp 5.97 09/03/96 49,979,850
50,000,000 Student Loan Marketing Assoc 5.68 04/11/96 50,000,000
--------------
TOTAL VARIABLE AND FLOATING RATE BONDS $ 749,762,103
REPURCHASE AGREEMENTS - 3.59%
$125,955,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 125,955,000
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $3,525,841,585)* (Note 1) 100.41% $3,525,841,585
Other Assets and Liabilities, Net (0.41) (14,322,049)
------ -------------
TOTAL NET ASSETS 100.00% $3,511,519,536
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
++ THESE SECURITIES ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933.
RULE 144A UNDER THAT ACT PERMITS THESE SECURITIES TO BE RESOLD IN
TRANSACTIONS EXEMPT FROM REGISTRATION TO QUALIFIED INSTITUTIONAL
BUYERS. THESE SECURITIES WERE DEEMED LIQUID BY THE INVESTMENT ADVISER
IN ACCORDANCE WITH PROCEDURES APPROVED BY THE FUND'S BOARD OF
DIRECTORS.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
- ------------------------
22
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALIFORNIA
TAX-FREE
MONEY MONEY
MARKET MARKET
MUTUAL FUND MUTUAL FUND
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value
(see cost below) $ 1,045,925,624 $ 3,525,841,585
Cash 793,865 40,664
Receivables:
Interest 8,976,936 5,783,710
Organization expenses, net of amortization 5,128 42,895
Prepaid expenses 128,628 93,897
TOTAL ASSETS 1,055,830,181 3,531,802,751
LIABILITIES
Payables:
Investment securities purchased 20,661,375 0
Distribution to shareholders 2,895,531 14,735,673
Due to sponsor and distributor (Note 2) 315,630 1,480,969
Due to adviser (Note 2) 936,156 4,025,202
Other 17,792 41,371
TOTAL LIABILITIES 24,826,484 20,283,215
TOTAL NET ASSETS
$ 1,031,003,697 $ 3,511,519,536
NET ASSETS CONSIST OF:
Paid-in capital - Class A(1) $ 1,031,103,590 $ 2,893,688,621
Paid-in capital - Class S N/A $ 619,098,223
Undistributed net realized gain (loss)
on investments (99,893) (1,267,308)
TOTAL NET ASSETS $ 1,031,003,697 $ 3,511,519,536
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE
Net assets - Class A(1) $ 1,031,003,697 $ 2,892,620,765
Shares outstanding - Class A(1) 1,031,103,590 2,893,688,621
Net asset value per share - Class A(1) $ 1.00 $ 1.00
Net assets - Class S N/A $ 618,898,771
Shares outstanding - Class S N/A 619,098,223
Net asset value per share - Class S N/A $ 1.00
INVESTMENTS AT COST (NOTE 3) $ 1,045,925,624 $ 3,525,841,585
- ----------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
---------------------
23
<PAGE>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALIFORNIA
TAX-FREE
MONEY MONEY
MARKET MARKET
MUTUAL FUND MUTUAL FUND
<S> <C> <C>
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 37,329,982 $ 189,686,272
TOTAL INVESTMENT INCOME 37,329,982 189,686,272
EXPENSES (NOTE 2):
Advisory fees 4,867,523 12,729,506
Administration fees 292,095 954,713
Custody 170,221 537,886
Shareholder servicing fees 2,920,955 9,399,920
Portfolio accounting fees 256,736 698,002
Transfer agency fees 695,960 1,100,155
Distribution fees 322,069 2,898,662
Amortization of organization expenses 5,207 14,420
Legal and audit fees 87,625 283,256
Registration fees 33,999 257,244
Directors' fees 5,042 5,000
Shareholder reports 107,658 154,384
Other 84,948 58,909
TOTAL EXPENSES 9,850,038 29,092,057
Less:
Waived fees and reimbursed expenses
(Note 2) (3,521,116) (3,193,347)
Net Expenses 6,328,922 25,898,710
NET INVESTMENT INCOME 31,001,060 163,787,562
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments (20,985) (1,181,926)
NET LOSS ON INVESTMENTS (20,985) (1,181,926)
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 30,980,075 $ 162,605,636
- ----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ------------------------
24
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
--------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 31,001,060 $ 18,657,132
Net realized gain (loss) on sale of
investments (20,985) (73,261)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 30,980,075 18,583,871
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A(1) (31,001,060) (18,657,132)
CLASS S N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 743,403,372 1,062,139,556
Reinvestment of dividends - Class A(1) 29,943,332 16,445,769
Cost of shares redeemed - Class A(1) (612,067,361) (1,002,187,039)
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS - CLASS A(1) 161,279,343 76,398,286
Proceeds from shares sold - Class S N/A N/A
Reinvestment of dividends - Class S N/A N/A
Cost of shares redeemed - Class S N/A N/A
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS - CLASS S N/A N/A
INCREASE (DECREASE) IN NET ASSETS 161,258,358 76,325,025
NET ASSETS:
Beginning net assets 869,745,339 793,420,314
ENDING NET ASSETS $ 1,031,003,697 $ 869,745,339
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 743,403,372 1,062,139,556
Shares issued in reinvestment of
dividends - Class A(1) 29,943,332 16,445,769
Shares redeemed - Class A(1) (612,067,361) (1,002,187,039)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) 161,279,343 76,398,286
Shares sold - Class S N/A N/A
Shares issued in reinvestment of
dividends - Class S N/A N/A
Shares redeemed - Class S N/A N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS S N/A N/A
- ----------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of the financial statements.
---------------------
25
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET MUTUAL FUND
--------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995(1) DECEMBER 31, 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 163,787,562 $ 42,335,237
Net realized gain (loss) on sale of
investments (1,181,926) (85,382)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 162,605,636 42,249,855
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (150,704,682) (42,335,237)
CLASS S (13,082,880) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 2,284,498,553 2,694,494,544
Reinvestment of dividends - Class A 146,963,258 32,541,176
Cost of shares redeemed - Class A (1,881,800,747) (700,482,027)
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS - CLASS A 549,661,064 2,026,553,693
Proceeds from shares sold - Class S 1,211,993,101 0
Reinvestment of dividends - Class S 10,735,965 0
Cost of shares redeemed - Class S (603,630,843) 0
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS - CLASS S 619,098,223 0
INCREASE (DECREASE) IN NET ASSETS 1,167,577,361 2,026,468,311
NET ASSETS:
Beginning net assets 2,343,942,175 317,473,864
ENDING NET ASSETS $ 3,511,519,536 $ 2,343,942,175
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 2,284,460,229 2,694,494,544
Shares issued in reinvestment of
dividends - Class A 146,963,258 32,541,176
Shares redeemed - Class A (1,881,762,423) (700,482,027)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A 549,661,064 2,026,553,693
Shares sold - Class S 1,211,984,821 0
Shares issued in reinvestment of
dividends - Class S 10,735,964 0
Shares redeemed - Class S (603,622,562) 0
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS S 619,098,223 0
- ----------------------------------------------------------------------------------------
</TABLE>
(1) THE CLASS S SHARES COMMENCED OPERATIONS ON MAY 25, 1995.
The accompanying notes are an integral part of the financial statements.
- ---------------------
26
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL
FUND
------------------------------------------
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) $1,031,004 $869,745 $793,420 $572,906
Number of shares outstanding, end of period
(000) 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>
The accompanying notes are an integral part of the financial statements.
---------------------
27
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
MONEY MARKET MUTUAL FUND
-----------------------------------------------------
CLASS
CLASS A(3) S(4)
------------------------------------------ ---------
YEAR YEAR YEAR PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.04 0.03 0.02 0.03
Net realized and unrealized gain
(loss) on investments 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.04 0.03 0.02 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.04) (0.03) (0.02) (0.03)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.05) (0.04) (0.03) (0.02) (0.03)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 5.34% 3.74% 2.70% 1.50% 2.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $2,892,621 $2,343,942 $317,474 $236,269 $618,899
Number of shares outstanding, end of
period (000) 2,893,689 2,344,028 317,474 236,270 619,098
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 0.75% 0.69% 0.58% 0.20% 1.43%
Ratio of net investment income to
average net assets(2) 5.13% 4.12% 2.67% 2.98% 4.40%
- ---------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 0.83% 0.89% 1.00% 0.94% 1.53%
(2) Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 5.05% 3.92% 2.25% 2.24% 4.30%
- ---------------------------------------------------------------------------------------------
</TABLE>
(3) THE FUND COMMENCED OPERATIONS ON JULY 1, 1992.
(4) THE CLASS S SHARES COMMENCED OPERATIONS ON MAY 25, 1995.
The accompanying notes are an integral part of the financial statements.
- ---------------------
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The California Tax-Free Money Market Mutual and the Money Market Mutual Funds
(the "Funds") are two series of Stagecoach Funds, Inc. (the "Company"), which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end investment company. The Company commenced operations on
January 1, 1992, and consists of eight separate diversified funds: the Asset
Allocation, Corporate Stock, Diversified Income, Ginnie Mae, Growth and Income,
Money Market Mutual, Short-Intermediate U.S. Government Income and U.S.
Government Allocation Funds; and three non-diversified funds: the California
Tax-Free Bond, California Tax-Free Income and California Tax-Free Money Market
Mutual Funds. The Company formerly offered the Variable Rate Government Fund,
which was combined into the Short-Intermediate U.S. Government Fund in August of
1995. These financial statements represent the California Tax-Free Money Market
Mutual and the Money Market Mutual Funds.
The following significant accounting policies are consistently followed by the
Funds in the preparation of their financial statements, and such policies are in
conformity with Generally Accepted Accounting Principles for investment
companies.
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
The Funds invest in securities with remaining maturities not exceeding 397 days
(thirteen months), including obligations of the U.S. Government, bankers
acceptances, commercial paper and certain floating- and variable-rate
instruments. Certain of these floating- and variable-rate instruments may carry
a demand feature that would permit the holder to tender them back to the issuer
at par value prior to maturity.
Each Fund uses the amortized cost method to value its portfolio securities and
seeks to maintain a constant net asset value of $1.00 per share; however, there
can be no assurance that the Funds will meet this goal. The amortized cost
method involves valuing a security at its cost plus accretion of discount or
minus premium amortized over the period until maturity, which approximates
market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are accounted for on the date the securities are
purchased or sold (trade date). Interest income is accrued daily. Realized gains
or losses are reported on the basis of identified cost of
---------------------
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
securities delivered. Bond discounts and premiums are accreted or amortized as
required by the Internal Revenue Code.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
("repurchase agreements") are treated as collateralized financing transactions
and are recorded at their contracted resale amounts. These repurchase
agreements, if any, are detailed in each Fund's Portfolio of Investments. The
Funds' adviser pools the Funds' cash and invests in repurchase agreements
entered into by the Funds. The repurchase agreement must be fully collateralized
based on values that are marked to market daily. The collateral is held by an
agent bank under a tri-party agreement. It is the adviser's responsibility to
value collateral daily and to obtain additional collateral as necessary to
maintain market value equal to or greater than the resale price. The repurchase
agreements held in the Funds at December 31, 1995, were collateralized by U.S.
Government obligations. The repurchase agreements were entered into on December
29, 1995.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Funds are declared
daily and distributed monthly. Any distributions to shareholders from net
realized capital gains are declared and distributed annually.
FEDERAL INCOME TAXES
Each Fund's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute
substantially all a Fund's net investment income and any net realized capital
gains to its shareholders. Therefore, no federal or state income tax provision
is required. The California Tax-Free Money Market Mutual Fund has net capital
loss carryforwards of $148 that will expire in the year 2001, $73,261 that will
expire in the year 2002 and $20,985 which will expire in the year 2003. The
Money Market Mutual Fund has a net capital loss carryforward of $85,382 that
will expire in the year 2002 and $1,181,926 which will expire in the year 2003.
The Board intends to offset net capital gains with each capital loss
carryforward until each carryforward has been fully utilized or expires. No
capital gain distribution shall be made until the capital loss carryforward has
been fully utilized or has expired.
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Funds' administrator and distributor, has
charged the Funds for expenses incurred in connection with the organization and
initial registration, including Class S shares of the Money Market Mutual Fund.
Such expenses are being amortized by each Fund on a straightline basis over 60
months from the date the Fund or share classes commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into separate advisory contracts on behalf of each Fund
with Wells Fargo Bank, N.A. ("WFB"). Pursuant to the contracts, WFB has agreed
to furnish to the Funds investment guidance and policy direction in connection
with daily portfolio management. Under the contracts with the California
Tax-Free Money Market Mutual and the Money Market Mutual
- ---------------------
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Funds, WFB is entitled to be paid monthly advisory fees at the annual rates of
0.50% and 0.40% of the average daily net assets of the California Tax-Free Money
Market Mutual and Money Market Mutual Funds, respectively.
The Company has entered into contracts on behalf of the Funds with WFB, whereby
WFB is responsible for providing custody and fund accounting services for the
Funds. For providing custody services, WFB is entitled to be compensated at an
annual rate of 0.0167% of the average daily net assets of each Fund. For
portfolio accounting services, WFB is entitled to a monthly a base fee of $2,000
plus 0.07% for the first $50 million, 0.045% for the next $50 million, and 0.02%
for the net assets over $100 million.
The Company has entered into a contract on behalf of the Funds with WFB, whereby
WFB has agreed to provide transfer agency services for the Funds. Under the
transfer agency agreement, WFB is entitled to be paid a per account fee plus
other related costs with a minimum monthly fee of $3,000 per Fund unless net
assets of the Fund are under $20 million. For as long as the net assets remain
under $20 million, a Fund will not be charged any transfer agency fees by WFB.
The Company has entered into a contract on behalf of the Funds with WFB, whereby
WFB has agreed to provide shareholder services for the Funds. WFB is entitled to
be compensated for these services based on an annual rate not to exceed 0.30% of
each Fund's average daily net assets.
WAIVED FEES
Payment of the following fees was waived by WFB for the year ended December 31,
1995.
<TABLE>
<CAPTION>
WAIVED FEES
FUND BY WFB
<S> <C>
- ------------------------------------------------------------------------------------------------
California Tax-Free Money Market Mutual Fund $ 3,521,116
Money Market Mutual Fund 3,193,347
</TABLE>
Waived Fees continue at the discretion of WFB.
The Company has entered into administration and distribution agreements on
behalf of the Funds with Stephens. Under the agreements, Stephens has agreed to
provide supervisory, administrative and distribution services to the Funds. For
providing supervisory and administrative services, each Fund has agreed to pay
Stephens a monthly fee at the annual rate of 0.03% of each Fund's average daily
net assets.
The Company has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the
"Plan"), whereby each Fund may defray all or part of the cost of preparing,
printing and distributing prospectuses and other promotional materials by paying
on an annual basis up to 0.05%, for the California Tax-Free Money Market
---------------------
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Mutual Fund and the Class A shares of the Money Market Mutual Fund's average
daily net assets. The Company has also adopted a Plan whereby the Company may
pay Stephens, as compensation for distribution-related services, a monthly fee
at an annual rate of 0.75% for Class S shares of the Money Market Mutual Fund's
average daily net assets. Each Fund may participate in joint distribution
activities with any of the other funds, in which event, expenses reimbursed out
of the assets of one Fund may be attributable, in part, to the distribution-
related activities of another fund. Generally, the expenses attributable to
joint distribution activities are allocated among all of the funds in proportion
to their relative net asset sizes.
For the year ended December 31, 1995 the Money Market Mutual Fund paid Stephens
$683,325 in distribution fees for Class A and $2,215,338 in distribution fees
for Class S.
Certain officers and directors of the Company are also officers of Stephens. At
December 31, 1995, Stephens owned 55,144 shares of the California Tax-Free Money
Market Mutual Fund and 11,135 shares of the Money Market Mutual Fund.
3. CAPITAL SHARES TRANSACTIONS
As of December 31, 1995, there were 10 billion shares of $.001 par value capital
stock authorized by the Company. At December 31, 1995, each Fund was authorized
to issue 3 billion shares of $.001 par value capital stock. Transactions in
capital shares for the year ended December 31, 1995 are disclosed in detail in
the Statements of Changes in Net Assets.
4. ORANGE COUNTY CALIFORNIA DEBT OBLIGATIONS
During the past year the Money Market Mutual Fund held obligations issued by
Orange County, California. Orange County filed for protection under Chapter 9 of
the Federal Bankruptcy Code on December 6, 1994 and defaulted on such
obligations on July 10, 1995. The bankruptcy court trustee approved an extension
of the obligations' maturity to June 30, 1996 and modification of certain other
terms, including increasing the interest rate and providing for some portion of
interest to accrue until the maturity date rather than being due and payable
monthly. Concurrent with the default by Orange County, the Company entered into
a Credit Enhancement Agreement (the "Agreement") with WFB, pursuant to which the
Fund was named as a beneficiary of an irrevocable letter of credit issue by Bank
of America National Trust and Savings Association ("Bank of America"). The
Agreement provided support for a portion of the Orange County obligations such
that Bank of America would make certain payments to the Fund under defined
circumstances.
During the period from September 19, 1995, through October 17, 1995, the Money
Market Mutual Fund sold all of the Orange County obligations. Under the terms of
the Agreement, the sale of such obligations did not result in any payments from
Bank of America to the Money Market Mutual Fund.
- ---------------------
32
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
STAGECOACH FUNDS, INC:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the California Tax-Free Money Market Mutual
Fund and Money Market Mutual Fund (two of the funds comprising Stagecoach Funds,
Inc.) as of December 31, 1995, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and financial highlights for the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1995, by examination and other appropriate audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds of Stagecoach Funds, Inc. as of December 31, 1995,
the results of their operations, the changes in their net assets and their
financial highlights for the periods indicated herein in conformity with
generally accepted accounting principles.
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1996
---------------------
33
<PAGE>
LIST OF ABBREVIATIONS
ABAG -- Association of Bay Area Governments
ADR -- American Depository Receipts
AMBAC -- American Municipal Bond Assurance Corp
AMT -- Alternative Minimum Tax
ARM -- Adjustable Rate Mortgages
BART -- Bay Area Rapid Transit
CDA -- Community Development Authority
CDSC -- Contingent Deferred Sales Charge
CGIC -- Capital Guaranty Insurance Co
CGY -- Capital Guaranty Corp
CMT -- Constant Maturity Treasury
COFI -- Cost of Funds Index
CONNIE LEE -- Connie Lee Insurance Co
COP -- Certificate of Participation
CP -- Commercial Paper
DW&P -- Department of Water & Power
DWR -- Department of Water Resources
EDFA -- Education Finance Authority
FGIC -- Financial Guaranty Insurance Corp
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corp
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance, Inc
GNMA -- Government National Mortgage Assoc
GO -- General Obligation
HFA -- Housing Finance Authority
HFFA -- Health Facilities Financing Authority
IDA -- Industrial Development Authority
LIBOR -- London Interbank Offered Rate
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Assoc
MFHR -- Multi-Family Housing Revenue
MUD -- Municipal Utility District
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Public School Fund Guaranty
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Authority
RDFA -- Redevelopment Finance Authority
R&D -- Research & Development
SFMR -- Single Family Mortgage Revenue
TBA -- To Be Announced
TRAN -- Tax Revenue Anticipation Notes
USD -- Unified School District
V/R -- Variable Rate
- ---------------------
34
<PAGE>
STAGECOACH FUNDS, INC.
SUPPLEMENT DATED JANUARY 2, 1996
TO THE CURRENT PROSPECTUS, AS PREVIOUSLY SUPPLEMENTED, AND STATEMENT OF
ADDITIONAL INFORMATION OF EACH FUND OF
STAGECOACH FUNDS, INC.
As of January 1, 1996, Wells Fargo Bank, N.A. provides investment advisory
services for approximately $33 billion of assets.
Each Fund's current Prospectus, as supplemented, and Statement of Additional
Information are hereby amended accordingly.
<PAGE>
Wells Fargo provides investment advisory services, shareholder services, and
certain other services for the Stagecoach Funds. The Funds are sponsored and
distributed by STEPHENS INC., Member NYSE/SIPC. Wells Fargo is not affiliated
with Stephens Inc.
This report and the financial statements contained herein are submitted for
the general information of the shareholders of the Stagecoach Funds. The
booklet also contains a prospectus supplement inside the back cover. If this
report is used for promotional purposes, distribution of the report must be
accompanied or preceded by a current prospectus. For a prospectus containing
more complete information, including charges and expenses, call
1-800-222-8222. Read the prospectus carefully before you invest or send money.
SC-05-96-001 (02/96)
BULK RATE
STAGECOACH FUNDS-REGISTERED TRADEMARK- U.S. POSTAGE
P.O. Box 7066 PAID
San Francisco, CA 94120-7066 PERMIT NO. 1933
FULLERTON CA
DATED MATERIAL
PLEASE EXPEDITE
[LOGO] PRINTED ON RECYCLED PAPER -C-1995 Stagecach Funds
