<PAGE>
STAGECOACH FUNDS 1995 ANNUAL REPORT
[LOGO]
STAGECOACH
FUNDS-R-
ANNUAL
- ---------
REPORT
- ---------
Asset Allocation Fund
California Tax-Free
Bond Fund
California Tax-Free
Income Fund
Corporate Stock Fund [ART]
Diversified Stock Fund
Ginnie Mae Fund
Growth and Income Fund
Short-Intermediate
U.S. Government
Income Fund
U.S. Government
Allocation Fund
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
PORTFOLIOS OF INVESTMENTS AND MANAGER COMMENTS
Asset Allocation Fund 1
California Tax-Free Bond Fund 25
California Tax-Free Income Fund 45
Corporate Stock Fund 56
Diversified Income Fund 77
Ginnie Mae Fund 88
Growth and Income Fund 95
Short-Intermediate U.S. Government Income Fund 106
U.S. Government Allocation Fund 114
STATEMENT OF ASSETS AND LIABILITIES 123
STATEMENT OF OPERATIONS 126
STATEMENTS OF CHANGES IN NET ASSETS 129
FINANCIAL HIGHLIGHTS 137
NOTES TO THE FINANCIAL STATEMENTS 148
INDEPENDENT AUDITORS' REPORT 157
PROXY VOTING RESULTS 158
LIST OF ABBREVIATIONS 160
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- - ARE NOT FDIC INSURED
- - ARE NOT GUARANTEED BY WELLS FARGO BANK OR BZW [NO FDIC]
BARCLAYS GLOBAL INVESTORS, N.A.
- - ARE NOT DEPOSITS OR OBLIGATIONS OF EITHER WELLS
FARGO BANK OR BARCLAYS
- - INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL
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i
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ii
<PAGE>
LETTER TO SHAREHOLDERS
- -----------------
TO OUR SHAREHOLDERS
A BANNER YEAR FOR STOCKS AND BONDS
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 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 erased much of 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
reoganization 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 issues 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. Yields on money market instruments, however,
closely follow the federal funds target rate and should see decreased yeilds.
Although any decline in interest rates in the months ahead will likely not be as
steep as last year's, 1996 should reward bond investors. We see the Federal
Reserve lowering the federal funds target rate by 0.25 to 1.00% from the
year-end level of 5.50%.
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iii
<PAGE>
LETTER TO SHAREHOLDERS
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 restructuring, mergers and
acquisitions, corporate share repurchase programs, and the continual stream of
contributions into mutual funds, retirement plans and household savings
earmarked 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
We expect the stock and bond markets to continue to benefit from lower interest
rates early in 1996. We also expect modest growth and historically low inflation
to 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.
A COMMITMENT TO INVESTMENT QUALITY
We believe a conservative, straightforward 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 from the investment advisors and
Portfolio managers 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
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iv
<PAGE>
LETTER TO SHAREHOLDERS
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 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 return. 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.
---------------------
v
<PAGE>
ASSET ALLOCATION FUND
- ---------
INVESTMENT
ADVISORS
FUND OBJECTIVE
To seek a high level of long-term total return consistent with reasonable risk.
[PHOTO] JANICE DERINGER has co-managed the Asset Allocation Fund
since August 1988. She received her B.S. in Economics and
Political Science from Willamette University and an M.B.A.
in Finance from the University of California at Berkeley.
Janice is responsible for the over-all implementation of
asset allocation strategies and also co-manages the U.S.
Government Allocation Fund.
[PHOTO] ROSS SAKAMOTO has co-managed the Asset Allocation Fund since
January 1991 after service as a mutual fund accountant. He
received his B.S. in Business Administration from the
University of California at Berkeley. He is responsible for
the daily implementation of the asset allocation strategy.
Ross also co-manages the U.S. Government Allocation Fund.
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1
<PAGE>
ASSET ALLOCATION FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE ONE-YEAR TOTAL RETURN FOR THE ASSET ALLOCATION FUND IN 1995?
The Fund finished the year posting a 29.18% total return for Class A shares, a
significant improvement over 1994's total return of -2.82%. (Return figures
exclude sales charges.)
WHAT BROUGHT ABOUT THIS CHANGE?
The Fund pursues an investment strategy which allocates assets between bonds,
the S&P 500 stock index, and money market instruments as economic conditions
warrant. In 1994, the returns of both the stock and the bond markets were
disappointing, leaving little opportunity to add value. In 1995, the return for
the S&P 500 was at its highest level since 1958, and the bond market posted very
strong results, so there were opportunities available to capture strong returns.
THE FEDERAL RESERVE LOWERED THE FEDERAL FUNDS TARGET RATE BY 0.25% IN JULY AND
BY ANOTHER 0.25% IN DECEMBER, YET THE FUND SIGNIFICANTLY INCREASED ITS MONEY
MARKET HOLDINGS. WHY?
When the Fed lowered the federal funds target rate after a series of increases
throughout 1994 and into 1995, long-term rates followed. Typically, as returns
on new bonds decrease, the value of existing, higher-paying bonds increases,
making it more attractive to sell these bonds and realize a profit. The bond
market began to rally early in the year in anticipation of the rate cut which
finally came in July. The Fund, which began 1995 with approximately 60% of its
assets invested in bonds, reduced the bond allocation in March and again in May
in order to capture profits.
Money market yields fell as well, but these yields were more attractive when
balanced against the yields and risks of bonds. In the asset allocation model,
the allocation between bonds and cash is determined by the difference between
the yield available on bonds and the yield available on money market
instruments. This is known as the YIELD SPREAD. While long-term bond rates
usually fall in response to a decline in the federal funds target rate, in 1995
long-term rates fell at a greater pace. As a result, the yield spread narrowed
to 1.10% by the end of the year after beginning the year at 2.20%. So while cash
became less attractive in an ABSOLUTE sense, it became more attractive RELATIVE
to bonds.
In addition, the Fund's investment model did not expect the return on stocks to
be high enough to fully offset their risks. Therefore, most of the proceeds from
the bond sales were invested in money markets. The Fund ended the year with an
approximate allocation of 52% stocks, 20% bonds and 28% money markets. If the
Fed continues to indicate a belief that the threat of inflation has been reduced
and continues to lower rates, but long-term bond rates remain steady, the Fund
- ---------------------
2
<PAGE>
ASSET ALLOCATION FUND
will reduce its money market holdings and increase its bond and/or stock
allocations.
ALLOCATION MIX 12/31/94
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Bonds 60%
Stocks 40%
</TABLE>
ALLOCATION MIX 12/31/95
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 52%
Bonds 20%
Cash 28%
</TABLE>
WHEN THE MODEL SIGNALS IT IS TIME TO BUY STOCKS, THE FUND BUYS ACCORDING TO THE
S&P 500 INDEX. WHY?
The S&P 500 is a diversified sample of a broad number of U.S. company and
industry sector stocks. By investing in such a portfolio, the Fund reduces the
risk of a single company having an unduly high influence on the Fund's return
while guaranteeing broad participation in the equity market. This is part of our
strategy to add value and control risk through asset allocation.
INDUSTRY SECTOR BREAKDOWN FOR S&P 500 AS OF 12/31/95
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Industries 7.85%
Capital Goods -
Tech 12.56%
Capital Goods 2.76%
Consumer Goods 37.59%
Credit Cyclical 3.98%
Transportation 1.50%
Energy 9.35%
Finance 11.75%
Utilities 12.66%
</TABLE>
DOES THE MODEL INDICATE A CORRECTION IN THE SECURITIES MARKETS DURING 1996?
Our investment model does not attempt to make short-term predictions, but
instead to identify long-term value across the stock and bond markets. We do not
attempt to determine exactly when or even how a market correction will occur.
The model is designed to recognize when markets are relatively over- or
undervalued in order to be properly positioned if a correction does occur.
Today the model is telling us that the stock market is fairly valued with
respect to bonds and cash, although stocks and bonds are currently offering
lower returns than they have averaged over the past ten years. The model's
underweighting in bonds and overweighting in money market instruments indicates
that yields on long-term bonds are not compensating investors adequately for the
interest rate risk in bonds.
---------------------
3
<PAGE>
ASSET ALLOCATION FUND
IN DECEMBER, SHAREHOLDERS APPROVED A PROPOSAL TO ALLOW THE USE OF FUTURES
CONTRACTS. HOW WILL THEY HELP THE FUND ACHIEVE ITS INVESTMENT OBJECTIVES?
A portion of the Fund's assets are generally held in liquid money market
instruments in order to facilitate redemption requests. This means that when the
recommended mix includes only stocks and bonds, the Fund cannot fully implement
its investment strategy. Money market instruments generally do not provide
returns comparable to the returns of stocks and bonds. In this example, if the
stock market rallies, the money market reserve will likely not increase in value
on pace with the stock allocation, holding down the Fund's performance. The use
of futures contracts, set to begin in May, is intended to limit the performance
impact of money market holdings and allow the Fund to more fully realize its
investment objectives.
In addition, futures will help ensure efficient trading by enabling the Fund to
more closely mirror the performance of the S&P 500 until enough money has come
into the Fund to make cost-effective, larger-block trades. The Fund does not
intend to use futures to introduce leverage into the portfolio by buying
securities on margin, or to use them as anything other than as described above.
SHAREHOLDERS ALSO APPROVED A REORGANIZATION TO A "MASTER/FEEDER" STRUCTURE. WHAT
DOES THIS MEAN AND WHAT IS THE BENEFIT?
"Master/feeder" is a mutual fund structure whereby a fund (the "feeder") invests
in another fund (the "master") with the same investment objective as the feeder,
instead of investing directly in a portfolio of securities. In the
reorganization anticipated for later this year, all investments currently held
by the Fund will be contributed to the newly created Master Portfolio. This
transfer of the Fund's investments will be done without cost or tax implications
to the shareholders.
The benefit of a master/feeder structure is that one master portfolio can have
multiple feeder funds. This allows the Master Portfolio to have a larger asset
base. The Master Portfolio should be able to be run more efficiently and better
pursue the investment strategy. Furthermore, certain fixed costs can be spread
across the larger asset base which should eventually reduce expenses.
HOW WILL THE CHANGE TO BZW BARCLAYS GLOBAL FUND ADVISORS ("BGFA") FROM WELLS
FARGO NIKKO INVESTMENT ADVISORS AFFECT THE MANAGEMENT OF THE FUND?
Barclays PLC, the parent company of BGFA, has advised the Stagecoach Funds Board
of Directors that BGFA intends to continue providing sub-advisory services to
the Fund using the same management team, investment professionals and resources
as before the change. They have further advised the Board that they do not
anticipate material changes to the Fund's investment philosophy, policies or
strategies.
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4
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ASSET ALLOCATION FUND
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5
<PAGE>
ASSET ALLOCATION FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 11/13/86
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
With 4.5% Maximum Sales Charge 23.36% 11.29% 12.49% 11.05%
- ----------------------------------------------------------------------------------------
Without Sales Charge 29.18% 13.00% 13.53% 11.61%
- ----------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR
1/1/95
AVERAGE ANNUAL TOTAL RETURNS INCEPTION
<S> <C>
- -------------------------------------------------------------------------------------
With Maximum 3.0% Contingent Deferred Sales Charge1 24.72%
- -------------------------------------------------------------------------------------
Without Contingent Deferred Sales Charge 27.72%
- -------------------------------------------------------------------------------------
1Assumes redemption on 12/29/95.
</TABLE>
SHARE PRICES AT NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/95 12/31/95
<S> <C> <C>
- --------------------------------------------------------------------------------------
Class A Shares $16.73 $20.74
- --------------------------------------------------------------------------------------
Class B Shares $10.00 $12.50
- --------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTIONS PAID PER SHARE IN 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Class A Shares $0.737 $0.053 $0.003
- ---------------------------------------------------------------------------------------
Class B Shares $0.224 $0.032 $0.000
- ---------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
The Asset Allocation Fund commenced operations on January 1, 1992 as successor
to the Asset Allocation Fund of the Wells Fargo Investment Trust for Retirement
Programs. The predecessor Fund's date of inception was November 13, 1986. The
performance figures shown include the performance of the predecessor Fund which
had the same investment objectives and strategies. Certain of the investment
restrictions of the Stagecoach Asset Allocation Fund differ somewhat from those
of the predecessor fund.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ------------------------
6
<PAGE>
ASSET ALLOCATION FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Inception
SC Asset Alloc -
Lehman T-Bond A IBC Money Avg S & P 500
<S> <C> <C> <C> <C>
Nov-86 $ 10,000 $9,550 $ 10,000 $ 10,000
Dec-86 $ 9,990 $9,617 $ 10,045 $ 9,745
Jan-87 $ 10,166 $10,037 $ 10,091 $ 11,057
Feb-87 $ 10,301 $10,285 $ 10,136 $ 11,494
Mar-87 $ 10,108 $10,285 $ 10,182 $ 11,826
Apr-87 $ 9,622 $9,951 $ 10,228 $ 11,721
May-87 $ 9,509 $9,894 $ 10,278 $ 11,822
Jun-87 $ 9,616 $10,113 $ 10,329 $ 12,419
Jul-87 $ 9,447 $10,094 $ 10,381 $ 13,048
Aug-87 $ 9,292 $10,056 $ 10,433 $ 13,535
Sep-87 $ 8,885 $9,693 $ 10,487 $ 13,238
Oct-87 $ 9,529 $10,362 $ 10,544 $ 10,387
Nov-87 $ 9,532 $10,094 $ 10,601 $ 9,531
Dec-87 $ 9,723 $10,438 $ 10,659 $ 10,256
Jan-88 $ 10,313 $11,002 $ 10,717 $ 10,688
Feb-88 $ 10,424 $11,231 $ 10,772 $ 11,186
Mar-88 $ 10,108 $10,897 $ 10,826 $ 10,840
Apr-88 $ 9,931 $10,772 $ 10,881 $ 10,960
May-88 $ 9,781 $10,734 $ 10,938 $ 11,055
Jun-88 $ 10,193 $11,183 $ 10,998 $ 11,563
Jul-88 $ 9,992 $11,021 $ 11,060 $ 11,519
Aug-88 $ 10,034 $10,868 $ 11,126 $ 11,128
Sep-88 $ 10,406 $11,221 $ 11,195 $ 11,602
Oct-88 $ 10,722 $11,422 $ 11,265 $ 11,925
Nov-88 $ 10,482 $11,355 $ 11,337 $ 11,755
Dec-88 $ 10,617 $11,460 $ 11,413 $ 11,960
Jan-89 $ 10,841 $11,622 $ 11,493 $ 12,836
Feb-89 $ 10,616 $11,632 $ 11,574 $ 12,516
Mar-89 $ 10,729 $11,727 $ 11,660 $ 12,808
Apr-89 $ 11,002 $11,871 $ 11,749 $ 13,473
May-89 $11,407 $12,004 $ 11,838 $ 14,018
Jun-89 $ 12,058 $12,062 $ 11,927 $ 13,939
Jul-89 $ 12,344 $12,339 $ 12,013 $ 15,197
Aug-89 $ 12,014 $12,453 $ 12,096 $ 15,494
Sep-89 $ 12,049 $12,501 $ 12,179 $ 15,431
Oct-89 $ 12,534 $12,577 $ 12,262 $ 15,073
Nov-89 $ 12,649 $12,692 $ 12,344 $ 15,380
Dec-89 $ 12,626 $12,816 $ 12,426 $ 15,750
Jan-90 $ 12,171 $12,702 $ 12,506 $ 14,692
Feb-90 $ 12,136 $12,778 $ 12,586 $ 14,881
Mar-90 $ 11,797 $12,854 $ 12,666 $ 15,276
Apr-90 $ 12,345 $12,854 $ 12,747 $ 14,895
May-90 $ 12,086 $13,189 $ 12,828 $ 16,347
Jun-90 $ 12,629 $13,265 $ 12,910 $ 16,237
Jul-90 $ 12,749 $13,341 $ 12,992 $ 16,184
Aug-90 $ 12,211 $13,122 $ 13,074 $ 14,722
Sep-90 $ 12,352 $13,084 $ 13,155 $ 14,005
Oct-90 $ 12,635 $13,227 $ 13,237 $ 13,945
Nov-90 $ 13,162 $13,609 $ 13,318 $ 14,847
Dec-90 $ 13,423 $13,800 $ 13,398 $ 15,260
Jan-91 $ 13,581 $14,163 $ 13,475 $ 15,925
Feb-91 $ 13,641 $14,459 $ 13,547 $ 17,064
Mar-91 $ 13,695 $14,583 $ 13,615 $ 17,477
Apr-91 $ 13,869 $14,717 $ 13,682 $ 17,519
May-91 $ 13,857 $14,888 $ 13,745 $ 18,275
Jun-91 $ 13,754 $14,564 $ 13,808 $ 17,437
Jul-91 $ 13,959 $14,927 $ 13,871 $ 18,250
Aug-91 $ 14,441 $15,404 $ 13,933 $ 18,682
Sep-91 $ 14,896 $15,710 $ 13,994 $ 18,370
Oct-91 $ 14,928 $15,758 $ 14,052 $ 18,617
Nov-91 $ 15,012 $15,643 $ 14,108 $ 17,867
Dec-91 $ 15,907 $16,856 $ 14,162 $ 19,910
Jan-92 $ 15,407 $16,359 $ 14,211 $ 19,539
Feb-92 $ 15,498 $16,455 $ 14,256 $ 19,792
Mar-92 $ 15,328 $16,238 $ 14,300 $ 19,407
Apr-92 $ 15,312 $16,364 $ 14,344 $ 19,977
May-92 $ 15,738 $16,683 $ 14,386 $ 20,075
Jun-92 $ 15,966 $16,756 $ 14,427 $ 19,776
Jul-92 $ 16,630 $17,471 $ 14,466 $ 20,584
Aug-92 $ 16,745 $17,412 $ 14,503 $ 20,163
Sep-92 $ 17,010 $17,650 $ 14,538 $ 20,400
Oct-92 $ 16,653 $17,402 $ 14,572 $ 20,470
Nov-92 $ 16,716 $17,630 $ 14,605 $ 21,167
Dec-92 $ 17,174 $18,036 $ 14,640 $ 21,427
Jan-93 $ 17,663 $18,409 $ 14,674 $ 21,606
Feb-93 $ 18,253 $18,923 $ 14,707 $ 21,900
Mar-93 $ 18,299 $19,054 $ 14,740 $ 22,362
Apr-93 $ 18,440 $18,963 $ 14,773 $ 21,822
May-93 $ 18,501 $19,207 $ 14,805 $ 22,406
Jun-93 $ 19,283 $19,705 $ 14,837 $ 22,471
Jul-93 $ 19,594 $19,880 $ 14,870 $ 22,381
Aug-93 $ 20,381 $20,663 $ 14,903 $ 23,230
Sep-93 $ 20,453 $20,579 $ 14,936 $ 23,052
Oct-93 $ 20,600 $20,881 $ 14,969 $ 23,529
Nov-93 $ 20,073 $20,559 $ 15,002 $ 23,305
Dec-93 $ 20,137 $20,731 $ 15,036 $ 23,586
Jan-94 $ 20,620 $21,359 $ 15,070 $ 24,388
Feb-94 $ 19,775 $20,665 $ 15,104 $ 23,726
Mar-94 $ 18,907 $19,856 $ 15,141 $ 22,692
Apr-94 $ 18,683 $19,800 $ 15,179 $ 22,983
May-94 $ 18,560 $19,878 $ 15,222 $ 23,360
Jun-94 $ 18,384 $19,533 $ 15,268 $ 22,788
Jul-94 $ 19,007 $20,162 $ 15,316 $ 23,536
Aug-94 $ 18,866 $20,488 $ 15,366 $ 24,501
Sep-94 $ 18,272 $19,894 $ 15,419 $ 23,902
Oct-94 $ 18,208 $20,053 $ 15,475 $ 24,439
Nov-94 $ 18,316 $19,837 $ 15,535 $ 23,549
Dec-94 $ 18,598 $20,146 $ 15,600 $ 23,898
Jan-95 $ 19,075 $20,664 $ 15,668 $ 24,517
Feb-95 $ 19,615 $21,314 $ 15,739 $ 25,472
Mar-95 $ 19,785 $21,694 $ 15,811 $ 26,222
Apr-95 $ 20,138 $22,169 $ 15,884 $ 26,994
May-95 $ 21,683 $23,315 $ 15,957 $ 28,071
Jun-95 $ 21,935 $23,675 $ 16,030 $ 28,722
Jul-95 $ 21,585 $23,983 $ 16,101 $ 29,674
Aug-95 $ 22,064 $24,143 $ 16,172 $ 29,749
Sep-95 $ 22,469 $24,771 $ 16,243 $ 31,003
Oct-95 $ 23,098 $24,895 $ 16,313 $ 30,893
Nov-95 $ 23,676 $25,602 $ 16,385 $ 32,247
Dec-95 $ 24,305 $26,025 $ 16,456 $ 32,869
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE ASSET ALLOCATION FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Asset
Allocation Fund Class A shares since the inception of the predecessor Fund with
the S&P 500 Index, the Lehman Brothers U.S. Treasury Bond Index, and the
IBC/Donoghue Money Fund Average. The chart assumes a hypothetical $10,000
initial investment in the Fund and reflects all operating expenses and assumes
the maximum initial sales charge of 4.5%. The S&P 500 Index is an unmanaged
index of 500 widely held common stocks representing, among others, industrial,
financial, utility and transportation companies listed or traded on national
exchanges or over-the-counter markets. The Lehman Brothers U.S. Treasury Bond
Index is an unmanaged index composed of U.S. Treasury bonds with 10-year or
longer maturities. The IBC/Donoghue Money Fund Average is an average of 700
taxable money market funds. Please note that the Fund is a professionally
managed mutual fund. The indexes presented here are not managed, do not incur
expenses and are not available directly for investment. Had these indexes
incurred operating expenses, their performances would have been lower.
---------------------
7
<PAGE>
ASSET ALLOCATION FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 52.23%
99,295 Abbott Laboratories $ 2,978,052 $ 4,145,566
13,190 Advanced Micro Devices+ 350,768 217,635
14,274 Aetna Life & Casualty Co 855,482 988,475
14,781 Ahmanson (H F) & Co 277,246 391,697
14,081 Air Products & Chemicals Inc 630,570 742,773
62,198 Airtouch Communications+ 1,458,655 1,757,094
3,518 Alberto-Culver Co Class B 81,141 120,931
31,984 Albertson's Inc 875,086 1,051,474
28,292 Alcan Aluminium Ltd 622,321 880,589
13,992 Alco Standard Corp 381,237 638,385
5,369 Alexander & Alexander Services 116,905 102,011
8,115 Allergan Inc 194,321 263,738
35,652 Allied Signal Inc 1,328,768 1,693,470
56,357 Allstate Corp 1,595,267 2,317,682
23,770 Alltel Corp 723,185 701,215
22,416 Aluminum Co of America 816,102 1,185,246
10,331 ALZA Corp+ 251,037 255,692
14,570 Amdahl Corp+ 93,657 123,845
11,694 Amerada Hess Corp 590,704 619,782
22,743 American Brands Inc 785,512 1,014,906
23,420 American Electric Power Inc 862,563 948,510
60,875 American Express Corp 1,785,821 2,518,703
25,758 American General Corp 809,211 898,310
9,369 American Greetings Corp Class A 286,544 258,819
39,336 American Home Products Corp 2,596,139 3,815,592
59,632 American International Group Inc 3,773,840 5,515,960
18,697 American Stores Co 416,473 500,145
69,742 Ameritech Corp 2,902,173 4,114,778
33,246 Amgen Inc+ 785,945 1,973,981
62,451 Amoco Corp 3,551,777 4,488,666
27,384 AMP Inc 904,774 1,050,861
9,621 AMR Corp+ 648,175 714,359
4,876 Andrew Corp+ 109,787 186,507
32,101 Anheuser-Busch Inc 1,605,103 2,146,754
</TABLE>
- ------------------------
8
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
15,285 Apple Computer Inc $ 466,938 $ 487,209
22,186 Applied Materials Inc+ 616,024 873,574
66,634 Archer-Daniels-Midland Co 988,829 1,199,412
13,591 Armco Inc+ 88,955 79,847
4,711 Armstrong World Industries Inc 210,736 292,082
5,212 ASARCO Inc 108,015 166,784
7,992 Ashland Inc 271,834 280,719
200,194 AT & T Corp 11,310,476 12,962,562
20,177 Atlantic Richfield Corp 2,258,855 2,234,603
5,962 Autodesk Inc 155,826 204,199
18,080 Automatic Data Processing 985,357 1,342,440
6,746 Avery Dennison Corp 203,809 338,143
8,636 Avon Products Inc 465,226 650,939
17,743 Baker Hughes Inc 407,239 432,486
3,782 Ball Corp 111,465 104,005
6,141 Bally Entertainment Corp+ 56,546 85,974
18,591 Baltimore Gas & Electric Co 474,040 529,844
49,151 Banc One Corp 1,691,594 1,855,450
14,081 Bank of Boston Corp 362,102 651,246
25,122 Bank of New York Inc 862,155 1,224,698
46,449 BankAmerica Corp 2,117,598 3,007,573
9,847 Bankers Trust N Y Corp 731,676 654,826
6,905 Bard (C R) Inc 173,618 222,686
12,234 Barnett Banks Inc 531,072 721,806
44,478 Barrick Gold Corp 1,260,543 1,173,107
7,295 Bausch & Lomb Inc 341,858 289,064
34,845 Baxter International Inc 922,009 1,459,134
8,245 Becton Dickinson & Co 337,437 618,375
54,915 Bell Atlantic Corp 3,274,105 3,672,441
124,916 BellSouth Corp 3,720,428 5,433,846
6,361 Bemis Co Inc 148,614 163,001
6,687 Beneficial Corp 258,986 311,781
13,811 Bethlehem Steel Corp+ 246,059 193,354
12,176 Beverly Enterprises+ 144,215 129,370
14,643 Biomet Inc+ 164,755 261,744
10,773 Black & Decker Corp 239,048 379,748
13,187 Block (H & R) Inc 544,398 534,074
</TABLE>
---------------------
9
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
15,866 Boatmen's Bancshares Inc $ 482,796 $ 648,523
43,060 Boeing Co 1,796,787 3,374,828
6,041 Boise Cascade Corp 157,458 209,170
20,342 Boston Scientific Corp+ 470,459 996,758
3,805 Briggs & Stratton Corp 146,417 165,042
63,773 Bristol-Myers Squibb Co 3,760,859 5,476,506
2,363 Brown Group Inc 77,409 33,673
8,764 Brown-Forman Corp Class B 241,274 319,886
26,795 Browning-Ferris Industries Inc 747,095 790,453
12,042 Brunswick Corp 206,547 289,008
17,892 Burlington Northern Santa Fe 900,860 1,395,576
15,942 Burlington Resources Inc 701,281 625,724
8,962 Cabletron Systems Inc+ 477,397 725,922
31,433 Campbell Soup Co 1,329,349 1,885,980
19,391 Capital Cities/ABC Inc 1,275,687 2,392,365
19,591 Carolina Power & Light Co 601,818 675,890
25,037 Caterpillar Inc 1,143,485 1,470,924
3,539 Centex Corp 134,287 122,980
24,082 Central & South West Corp 732,043 671,286
8,299 Ceridian Corp+ 231,395 342,334
12,140 Champion International Corp 415,839 509,880
13,191 Charming Shoppes Inc 149,844 37,924
22,543 Chase Manhattan Corp 797,062 1,366,669
31,689 Chemical Banking Corp Class A 1,315,604 1,861,729
82,029 Chevron Corp 3,842,541 4,306,523
48,070 Chrysler Corp 2,382,755 2,661,876
10,941 Chubb Corp 914,950 1,058,542
9,507 CIGNA Corp 652,541 981,598
4,189 Cincinnati Milacron Inc 95,502 109,961
19,614 Cinergy Corp 473,617 600,679
12,228 Circuit City Stores Inc 309,163 337,799
34,377 Cisco Systems Inc+ 1,200,014 2,565,384
53,494 Citicorp 2,152,207 3,597,472
6,644 Clorox Co 363,117 475,877
13,184 Coastal Corp 370,572 491,104
157,751 Coca-Cola Co 7,317,318 11,713,012
18,273 Colgate-Palmolive Co 1,075,068 1,283,678
</TABLE>
- ------------------------
10
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,343 Columbia Gas System Inc+ $ 162,280 $ 278,299
55,752 Columbia HCA Healthcare Corp 2,333,629 2,829,414
30,132 Comcast Corp Class A 633,615 548,026
14,411 Comerica Inc 538,890 578,241
5,566 Community Psychiatric Centers+ 72,290 68,184
33,236 Compaq Computer Corp+ 850,751 1,595,328
30,180 Computer Associates International Inc 835,260 1,716,488
6,991 Computer Sciences Corp+ 254,742 491,118
29,963 ConAgra Inc 825,308 1,235,974
9,796 Conrail Inc 569,689 685,720
29,585 Consolidated Edison Co 986,343 946,720
5,276 Consolidated Freightways 112,291 139,814
11,728 Consolidated Natural Gas Co 558,373 532,158
13,570 Cooper Industries Inc 642,358 498,698
10,523 Cooper Tire & Rubber Co 265,297 259,129
4,720 Coors (Adolph) Co Class B 87,561 104,430
17,591 CoreStates Financial Corp 493,327 666,259
28,919 Corning Inc 878,529 925,408
18,387 CPC International Inc 897,416 1,261,808
3,876 Crane Co 109,173 142,928
3,000 Cray Research Inc+ 73,089 74,250
11,389 Crown Cork & Seal Co+ 440,723 475,491
26,498 CSX Corp 1,063,285 1,208,971
21,963 CUC International Inc+ 581,196 749,487
5,036 Cummins Engine Co Inc 235,834 186,332
11,740 Cyprus Amax Minerals 315,016 306,708
12,765 Dana Corp 351,456 373,376
19,732 Darden Restaurants Inc+ 217,520 234,318
4,772 Data General Corp+ 42,052 65,615
9,076 Dayton-Hudson Corp 623,745 680,700
21,234 Dean Witter Discover & Co 851,231 997,998
32,722 Deere & Co 820,340 1,153,451
6,381 Delta Air Lines Inc 363,690 471,396
10,475 Deluxe Corp 362,556 303,775
18,513 Detroit Edison Co 596,158 638,699
11,777 Dial Corp 250,922 348,894
18,891 Digital Equipment Corp+ 693,210 1,211,385
</TABLE>
---------------------
11
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
14,334 Dillard Department Stores Inc Class A $ 501,949 $ 408,519
65,457 Disney (Walt) Co 2,924,193 3,861,963
21,858 Dominion Resources Inc 979,915 901,643
19,269 Donnelley (R R) & Sons Co 602,473 758,717
14,304 Dover Corp 413,298 527,460
32,923 Dow Chemical Co 1,999,764 2,316,956
12,152 Dow Jones & Co Inc 434,824 484,561
22,940 Dresser Industries Inc 498,170 559,163
14,459 DSC Communications Corp+ 468,329 533,176
25,762 Duke Power Co 1,079,010 1,220,475
21,302 Dun & Bradstreet Corp 1,319,245 1,379,305
69,814 DuPont (E I) de Nemours 3,663,925 4,878,253
2,626 Eastern Enterprises 70,402 92,567
10,213 Eastman Chemical Co 525,484 639,589
42,992 Eastman Kodak Co 2,100,667 2,880,464
9,801 Eaton Corp 511,336 525,579
7,528 Echlin Inc 240,289 274,772
14,218 Echo Bay Mines Ltd 168,829 147,512
8,116 Ecolab Inc 186,206 243,480
6,689 EG & G Inc 119,111 162,208
28,219 Emerson Electric Co 1,717,848 2,306,903
18,086 Engelhard Corp 328,132 393,371
31,680 Enron Corp 1,061,730 1,207,800
8,530 Enserch Corp 159,673 138,613
28,636 Entergy Corp 964,516 837,603
155,955 Exxon Corp 10,203,360 12,495,894
7,048 Federal Express Corp+ 465,023 520,671
22,760 Federal Home Loan Mortgage Corp 1,211,148 1,900,460
34,279 Federal National Mortgage Assoc 2,717,734 4,254,881
5,793 Federal Paper Board Co 140,354 300,512
25,530 Federated Department Stores Inc+ 693,312 702,075
16,270 First Bank System Inc 844,138 807,399
39,916 First Chicago NBD Corp 1,140,947 1,576,682
28,024 First Data Corp 1,594,453 1,874,105
10,065 First Fidelity Bancorp 452,403 758,649
9,594 First Interstate Bancorp 639,973 1,309,581
21,636 First Union Corp 932,410 1,203,503
</TABLE>
- ------------------------
12
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
30,913 Fleet Financial Group Inc $ 925,497 $ 1,259,705
5,830 Fleetwood Enterprises Inc 133,012 150,123
4,764 Fleming Co Inc 138,492 98,258
10,454 Fluor Corp 454,301 689,964
4,623 FMC Corp+ 234,666 312,630
135,109 Ford Motor Co 3,929,788 3,918,161
5,026 Foster Wheeler Corp 181,516 213,605
23,325 FPL Group Inc 895,238 1,081,697
25,573 Freeport McMoRan Copper & Gold Inc Class B 696,732 719,241
9,594 Fruit of the Loom Inc Class A+ 259,207 233,854
17,608 Gannett Co Inc 926,838 1,080,691
18,128 Gap Inc 611,878 761,376
7,953 General Dynamics Corp 359,635 470,221
210,057 General Electric Co 10,662,103 15,124,104
19,932 General Mills Inc 1,020,050 1,151,073
93,979 General Motors Corp 4,598,857 4,969,140
14,665 General Public Utilities 435,994 498,610
10,300 General Re Corp 1,254,582 1,596,500
6,033 General Signal Corp 209,474 195,318
15,423 Genuine Parts Co 581,817 632,343
11,463 Georgia-Pacific Corp 784,469 786,648
7,442 Giant Food Inc Class A 176,015 234,423
4,396 Giddings & Lewis Inc 99,659 72,534
55,764 Gillette Co 1,783,988 2,906,699
7,344 Golden West Financial 302,707 405,756
3,232 Goodrich (B F) Co 145,998 220,180
19,190 Goodyear Tire & Rubber Co 812,177 870,746
11,935 Grace (W R) & Co 492,537 705,657
6,346 Grainger (W W) Inc 368,636 420,423
4,875 Great Atlantic & Pacific Tea Co 126,955 112,125
8,173 Great Lakes Chemical Corp 582,926 588,456
17,059 Great Western Financial Corp 313,255 435,005
121,999 GTE Corp 4,465,010 5,367,956
14,425 Halliburton Co 517,278 730,266
4,304 Handleman Co 49,964 24,748
9,167 Harcourt General Inc 355,106 383,868
3,919 Harland (John H) Co 98,275 81,809
</TABLE>
---------------------
13
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,092 Harnischfeger Industries Inc $ 152,044 $ 202,559
12,919 Harrah's Entertainment Inc+ 419,595 313,286
4,804 Harris Corp 213,375 262,419
11,105 Hasbro Inc 399,067 344,255
45,975 Heinz (H J) Co 1,159,230 1,522,922
3,126 Helmerich & Payne Inc 95,765 92,999
13,981 Hercules Inc 508,912 788,179
9,763 Hershey Foods Corp 503,285 634,595
64,298 Hewlett Packard Co 2,773,325 5,384,958
6,087 Hilton Hotels Corp 330,753 374,351
59,912 Home Depot Inc 2,450,895 2,868,287
17,418 Homestake Mining Co 335,252 272,156
16,005 Honeywell Inc 570,013 778,243
12,268 Household International Inc 473,303 725,346
33,156 Houston Industries Inc 750,682 804,033
20,312 Humana Inc+ 568,783 556,041
14,775 Illinois Tool Works Inc 605,548 871,725
14,960 Inco Ltd 354,083 497,420
13,290 Ingersoll-Rand Co 480,310 466,811
6,215 Inland Steel Industries Inc 195,230 156,152
103,586 Intel Corp 3,536,687 5,878,506
5,843 Intergraph Corp+ 65,554 92,027
71,487 International Business Machines Corp 4,005,264 6,558,932
13,969 International Flavors & Fragrances 557,449 670,512
31,992 International Paper Co 1,068,439 1,211,697
9,759 Interpublic Group Cos Inc 309,467 423,297
14,555 ITT Corp+ 561,232 771,415
14,555 ITT Hartford Group Inc+ 543,262 704,098
14,555 ITT Industries Inc 241,910 349,320
10,416 James River Corp 208,942 251,286
8,910 Jefferson-Pilot Corp 312,444 414,315
81,399 Johnson & Johnson 3,760,466 6,969,789
5,127 Johnson Controls Inc 279,610 352,481
4,862 Jostens Inc 94,547 117,904
57,782 K Mart Corp 1,215,270 418,920
4,254 Kaufman & Broad Home Corp 80,044 63,278
27,309 Kellogg Co 1,526,729 2,109,620
</TABLE>
- ------------------------
14
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,554 Kerr-McGee Corp $ 328,459 $ 416,179
29,826 KeyCorp 936,898 1,081,193
34,956 Kimberly-Clark Corp 1,456,456 2,892,609
4,639 King World Productions+ 179,805 180,341
6,202 Knight-Ridder Inc 346,588 387,625
15,383 Kroger Co+ 358,002 576,863
36,982 Laidlaw Inc Class B 329,811 379,066
69,306 Lilly (Eli) & Co 1,972,704 3,898,463
44,985 Limited Inc 935,719 781,614
13,083 Lincoln National Corp 579,065 703,211
9,303 Liz Claiborne Inc 184,336 258,158
25,211 Lockheed Martin Corp 1,173,680 1,991,669
14,774 Loews Corp 817,345 1,157,912
2,601 Longs Drug Stores Corp 87,305 124,523
21,562 Loral Corp 384,955 762,756
4,206 Louisiana Land & Exploration Co 180,533 180,332
13,530 Louisiana-Pacific Corp 469,043 328,103
20,198 Lowe's Co Inc 537,616 676,633
16,084 LSI Logic Corp+ 585,315 526,751
2,917 Luby's Cafeterias Inc 65,940 64,903
9,598 Mallinckrodt Group Inc 318,258 349,127
7,919 Manor Care Inc 197,405 277,165
15,752 Marriott International 453,258 602,514
9,123 Marsh & McLennan Companies Inc 771,635 809,666
19,974 Masco Corp 623,018 626,684
27,962 Mattel Inc 569,142 859,832
31,254 May Co Department Stores Co 1,288,204 1,320,482
13,362 Maytag Corp 222,986 270,581
18,645 MBNA Corp 448,384 687,534
6,698 McDermott International Inc 186,915 147,356
87,347 McDonald's Corp 2,595,479 3,941,533
14,255 McDonnell Douglas Corp 523,149 1,311,460
6,241 McGraw-Hill Inc 439,224 543,747
85,227 MCI Communications 2,177,425 2,226,555
6,760 Mead Corp 310,447 353,210
29,020 Medtronic Inc 623,971 1,621,493
17,786 Mellon Bank Corp 663,433 955,998
</TABLE>
---------------------
15
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
13,251 Melville Corp $ 550,076 $ 407,468
4,658 Mercantile Stores Co Inc 168,254 215,433
155,160 Merck & Co Inc 5,568,491 10,201,770
3,478 Meredith Corp 72,028 145,641
22,164 Merrill Lynch & Co Inc 1,017,360 1,130,364
25,874 Micron Technology Inc 593,849 1,025,257
74,489 Microsoft Corp+ 4,368,044 6,536,410
5,714 Millipore Corp 114,665 234,988
52,871 Minnesota Mining & Manufacturing Co 2,830,616 3,502,704
49,721 Mobil Corp 4,052,577 5,568,752
14,531 Monsanto Co 1,042,297 1,780,048
12,546 Moore Corp Ltd 245,093 233,669
23,615 Morgan (J P) & Co Inc 1,666,901 1,895,104
9,637 Morgan Stanley Group 959,733 776,983
18,686 Morton International Inc 561,977 670,360
74,179 Motorola Inc 3,761,629 4,228,203
1,132 NACCO Industries Inc Class A 53,423 62,826
8,571 Nalco Chemical Co 300,482 258,201
18,524 National City Corp 516,736 613,608
15,637 National Semiconductor+ 272,744 347,923
6,080 National Service Industries Inc 155,746 196,840
34,134 NationsBank 1,683,892 2,376,580
9,618 Navistar International Corp+ 212,951 100,989
12,123 New York Times Co Class A 299,376 359,144
19,863 Newell Co 406,173 513,955
11,829 Newmont Mining Corp 495,461 535,262
17,831 Niagara Mohawk Power Corp 369,121 171,623
6,351 NICOR Inc 176,543 174,653
18,010 Nike Inc Class B 494,741 1,253,946
15,622 NorAm Energy Corp 122,673 138,645
10,362 Nordstrom Inc 354,088 419,661
16,454 Norfolk Southern Corp 1,126,002 1,306,036
8,547 Northern States Power Co 381,945 419,871
31,876 Northern Telecom Ltd 950,766 1,370,668
6,221 Northrop Grumman Corp 240,756 398,144
44,364 Norwest Corp 1,171,899 1,464,012
46,379 Novell Inc+ 910,039 660,901
</TABLE>
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16
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
10,989 Nucor Corp $ 570,110 $ 627,747
53,787 NYNEX Corp 2,301,100 2,904,498
40,070 Occidental Petroleum Corp 796,689 856,496
6,100 Ogden Corp 138,545 130,388
19,325 Ohio Edison Co 449,882 454,138
3,372 ONEOK Inc 69,049 77,135
54,526 Oracle Systems Corp+ 1,254,834 2,310,539
13,160 Oryx Energy Co+ 263,261 176,015
2,541 Outboard Marine Corp 49,257 51,773
6,347 Owens Corning Fiberglass+ 267,744 284,822
4,809 PACCAR Inc 255,861 202,579
10,666 Pacific Enterprises 272,230 301,315
53,404 Pacific Gas & Electric Co 1,789,478 1,515,339
53,839 Pacific Telesis Group 1,717,769 1,810,336
35,749 PacifiCorp 692,447 759,666
14,428 Pall Corp 283,181 387,753
18,808 Panhandle Eastern Corp 437,525 524,273
9,211 Parker Hannifin Corp 224,677 315,477
27,872 PECO Energy Co 834,716 839,644
28,623 Penney (J C) Co Inc 1,393,727 1,363,170
5,851 Pennzoil Co 338,167 247,205
4,428 Peoples Energy Corp 135,611 140,589
7,730 Pep Boys-Manny Moe & Jack 205,490 198,081
99,051 Pepsico Inc 3,964,278 5,534,475
5,237 Perkin-Elmer Corp 174,535 197,697
79,688 Pfizer Inc 2,741,867 5,020,344
63,152 Pharmacia and Upjohn Inc+ 1,803,448 2,447,140
8,721 Phelps Dodge Corp 414,697 542,882
105,618 Philip Morris Co Inc 5,882,835 9,558,429
32,947 Phillips Petroleum Co 1,062,724 1,124,316
10,550 Pioneer Hi Bred International Inc 385,093 586,844
19,096 Pitney Bowes Inc 768,781 897,512
5,261 Pittston Services Group 131,744 165,064
30,046 Placer Dome Inc 693,295 724,860
28,950 PNC Bank Corp 828,591 933,638
5,702 Polaroid Corp 203,702 270,132
3,654 Potlatch Corp 159,310 146,160
</TABLE>
---------------------
17
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
19,864 PP & L Resources Inc $ 514,753 $ 496,600
24,617 PPG Industries Inc 878,436 1,126,228
17,413 Praxair Inc 307,830 585,512
8,003 Premark International Inc 304,509 405,152
24,522 Price/Costco Inc+ 439,142 373,961
86,142 Procter & Gamble Co 4,881,657 7,149,786
12,017 Providian Corp 472,438 489,693
30,739 Public Services Enterprise Group 1,006,740 941,382
3,408 Pulte Corp 116,344 114,594
16,834 Quaker Oats Co 577,371 580,773
13,118 Ralston-Purina Group 522,982 818,235
5,458 Raychem Corp 214,650 310,424
30,690 Raytheon Co 994,773 1,450,103
9,874 Reebok International Ltd 287,741 278,941
7,094 Republic New York Corp 416,501 440,715
8,022 Reynolds Metals Co 380,216 454,246
10,636 Rite Aid Corp 209,796 364,283
4,813 Roadway Services Inc 289,165 235,235
27,350 Rockwell International Corp 1,017,622 1,446,131
8,467 Rohm & Haas Co 452,755 545,063
10,774 Rowan Co Inc+ 93,545 106,393
67,350 Royal Dutch Petroleum Co 7,181,517 9,504,769
19,874 Rubbermaid Inc 677,405 506,787
4,894 Russell Corp 137,529 135,809
7,079 Ryan's Family Steak House+ 57,277 49,553
9,818 Ryder System Inc 243,657 242,996
15,838 SAFECO Corp 467,684 546,411
7,341 Safety-Kleen Corp 114,792 114,703
13,381 Salomon Inc 596,053 475,026
11,526 Santa Fe Energy Resources Inc+ 113,877 110,938
16,399 Santa Fe Pacific Gold Corp 241,645 198,838
60,355 Sara Lee Corp 1,593,957 1,923,816
76,672 SBC Communication Inc 3,285,932 4,408,640
56,094 SCEcorp 1,185,580 995,669
46,144 Schering-Plough Corp 1,563,373 2,526,384
30,415 Schlumberger Ltd 1,885,498 2,106,239
9,539 Scientific-Atlanta Inc 174,541 143,099
</TABLE>
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18
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
46,789 Seagram Co Ltd $ 1,338,081 $ 1,620,069
49,029 Sears Roebuck & Co 1,430,585 1,912,131
13,067 Service Corp International 356,294 574,948
2,899 Shared Medical System Corp 76,071 157,633
10,803 Sherwin Williams Co 374,945 440,222
5,283 Shoney's Inc+ 103,519 54,151
6,307 Sigma-Aldrich Corp 235,697 312,197
19,922 Silicon Graphics Inc+ 682,230 547,855
5,128 Snap-On Inc 201,372 232,042
10,889 Sonat Inc 342,556 387,921
83,750 Southern Co 1,834,495 2,062,344
18,064 Southwest Airlines Co 477,470 419,988
2,567 Springs Industries Inc Class A 96,144 106,210
43,828 Sprint Corp 1,518,521 1,747,642
8,822 St Jude Medical Inc+ 190,899 379,346
10,627 St Paul Co Inc 493,171 591,127
5,537 Stanley Works 232,290 285,156
11,983 Stone Container Corp+ 166,160 172,256
6,379 Stride Rite Corp 96,917 47,843
9,388 Sun Co Inc 283,547 256,997
24,012 Sun Microsystems Inc+ 330,448 1,095,548
14,378 SunTrust Banks Inc 663,747 984,893
8,565 Super Value Inc 286,096 269,798
22,929 Sysco Corp 647,353 745,193
14,649 Tandem Computers Inc+ 175,930 155,646
8,194 Tandy Corp 357,725 340,051
4,231 Tektronix Inc 121,312 207,848
82,098 Tele-Communication Inc Class A+ 1,577,825 1,631,698
7,094 Teledyne Inc 175,239 181,784
11,125 Tellabs Inc+ 531,320 411,625
7,102 Temple-Inland Inc 316,070 313,376
25,149 Tenet Healthcare Corp+ 335,287 521,842
22,727 Tenneco Inc 1,166,380 1,127,827
33,237 Texaco Inc 2,195,812 2,609,105
23,684 Texas Instruments Inc 870,301 1,225,647
28,408 Texas Utilities Co 1,245,849 1,168,279
10,698 Textron Inc 605,422 722,115
</TABLE>
---------------------
19
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
2,427 Thomas & Betts Corp $ 151,802 $ 178,991
48,580 Time Warner Inc 2,021,426 1,839,968
13,953 Times Mirror Co Class A 319,644 472,658
3,968 Timken Co 131,552 151,776
9,296 TJX Companies Inc 247,599 175,462
9,059 Torchmark Corp 442,598 409,920
34,857 Toys R Us Inc+ 1,267,961 758,140
8,618 Transamerica Corp 491,939 628,037
40,162 Travelers Inc 1,541,485 2,525,186
8,182 Tribune Co 450,769 500,125
3,617 Trinova Corp 108,800 103,537
8,140 TRW Inc 547,790 630,850
19,212 Tyco International Inc 475,387 684,428
19,029 U.S. Bancorp 555,946 639,850
19,407 U.S. Healthcare Inc 901,821 902,426
4,330 U.S. Life Corp 116,489 129,359
59,242 U.S. West Inc 1,607,672 2,117,902
59,242 U.S. West Media Group+ 1,097,749 1,125,598
26,957 Unicom Corp 773,538 882,842
20,091 Unilever NV 2,299,225 2,827,808
8,863 Union Camp Corp 409,138 422,100
17,244 Union Carbide Corp 397,551 646,650
12,836 Union Electric Co 525,085 535,903
25,796 Union Pacific Corp 1,587,907 1,702,536
21,589 Unisys Corp+ 243,918 121,438
21,785 United Healthcare Corp 1,007,790 1,426,918
7,108 United States Surgical 167,180 151,934
15,485 United Technologies Corp 965,135 1,469,139
31,013 Unocal Corp 889,115 903,254
9,187 UNUM Corp 510,133 505,285
7,516 USAir Group Inc+ 94,855 99,587
14,050 USF & G Corp 222,467 237,094
24,592 UST Inc 690,577 820,758
36,093 USX - Marathon Group 672,644 703,814
10,334 USX - US Steel Group 368,183 317,771
5,211 Varity Corp+ 214,470 193,458
8,059 VF Corp 364,695 425,112
</TABLE>
- ------------------------
20
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
45,370 Viacom Inc Class B+ $ 1,847,239 $ 2,149,404
21,497 Wachovia Corp 799,867 983,488
288,919 Wal Mart Stores Inc 7,492,472 6,464,563
30,934 Walgreen Co 652,699 924,153
16,960 Warner Lambert Co 1,200,419 1,647,240
6,064 Wells Fargo & Co 797,816 1,309,824
12,978 Wendy's International Inc 210,116 275,783
6,726 Western Atlas Inc+ 261,586 339,663
49,314 Westinghouse Electric Corp 720,947 813,681
12,775 Westvaco Corp 306,601 354,506
25,537 Weyerhaeuser Co 1,056,670 1,104,475
9,269 Whirlpool Corp 577,019 493,574
13,127 Whitman Corp 212,381 305,203
6,952 Willamette Industries Inc 475,976 391,050
12,812 Williams Co Inc 377,138 562,127
19,032 Winn-Dixie Stores Inc 544,971 701,805
61,008 WMX Technologies Inc 1,693,437 1,822,614
16,346 Woolworth Corp 375,563 212,498
11,326 Worthington Industries Inc 222,954 235,722
14,562 Wrigley (Wm) Jr Co 634,536 764,505
13,515 Xerox Corp 1,204,112 1,851,511
3,563 Yellow Corp 81,253 44,092
------------ --------------
TOTAL COMMON STOCKS $447,701,789 $ 576,728,462
</TABLE>
---------------------
21
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 20.57%
$13,800,000 U.S. Treasury Bonds 6.25 % 08/15/23 $ 14,183,806
3,000,000 U.S. Treasury Bonds 6.88 08/15/25 3,384,375
12,300,000 U.S. Treasury Bonds 7.13 02/15/23 14,048,888
19,983,000 U.S. Treasury Bonds 7.25 05/15/16 22,818,088
7,700,000 U.S. Treasury Bonds 7.25 08/15/22 8,915,152
1,000,000 U.S. Treasury Bonds 7.50 11/15/24 1,201,250
7,900,000 U.S. Treasury Bonds 7.63 11/15/22 9,541,715
6,100,000 U.S. Treasury Bonds 7.88 02/15/21 7,508,710
20,500,000 U.S. Treasury Bonds 8.00 11/15/21 25,657,001
11,249,000 U.S. Treasury Bonds 8.13 08/15/19 14,145,618
7,000,000 U.S. Treasury Bonds 8.13 05/15/21 8,859,375
6,050,000 U.S. Treasury Bonds 8.13 08/15/21 7,664,594
10,700,000 U.S. Treasury Bonds 8.50 02/15/20 13,986,890
15,082,000 U.S. Treasury Bonds 8.75 05/15/17 19,950,636
11,125,000 U.S. Treasury Bonds 8.75 08/15/20 14,924,866
9,815,000 U.S. Treasury Bonds 8.88 02/15/19 13,241,034
4,449,000 U.S. Treasury Bonds 9.00 11/15/18 6,063,146
4,850,000 U.S. Treasury Bonds 9.13 05/15/18 6,664,196
5,624,000 U.S. Treasury Bonds 9.25 02/15/16 7,734,749
4,610,000 U.S. Treasury Bonds 9.88 11/15/15 6,674,413
--------------
TOTAL U.S. TREASURY SECURITIES $ 227,168,502
(Cost $191,703,401)
</TABLE>
- ------------------------
22
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
YIELD
TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 27.68%
$ 517,000 U.S. Treasury Bills 4.06 % 01/11/96 $ 516,178
14,801,000 U.S. Treasury Bills 4.54 01/18/96 14,763,128
194,255,000 U.S. Treasury Bills 4.74 02/08/96 193,167,906
1,995,000 U.S. Treasury Bills 4.81 02/22/96 1,981,398
49,067,000 U.S. Treasury Bills 5.03 03/07/96 48,635,505
47,000,000 U.S. Treasury Bills 5.06 03/14/96 46,536,533
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 305,600,648
(Cost $305,568,218)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $944,973,408)* (Notes 1 and 3) 100.48% $1,109,497,612
Other Assets and Liabilities, Net (0.48) (5,291,729)
------ -------------
TOTAL NET ASSETS 100.00% $1,104,205,883
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $174,956,849
Gross Unrealized Depreciation (10,432,645)
------------
NET UNREALIZED APPRECIATION $164,524,204
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
23
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
24
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
- ---------
INVESTMENT
ADVISORS
FUND OBJECTIVE
To seek a high level of income exempt from federal income and California
personal income taxes, while preserving capital, by investing in medium- to
long-term, investment-grade municipal securities.
[PHOTO] DAVID KLUG assumed management of the California Tax-Free
Bond Fund in June of 1995, after having co-managed the Fund
since its inception in 1992. He has over twenty years
experience in tax-exempt, fixed-income portfolio analysis
and management. David holds an M.B.A. from the University of
Chicago and is a member of the National Federation of
Municipal Analysts.
[PHOTO] LAURA MILNER, the portfolio manager for the California
Tax-Free Income Fund, assists in the management of tax-free
municipal securities.
---------------------
25
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE ONE-YEAR TOTAL RETURN FOR THE CALIFORNIA TAX-FREE BOND FUND IN
1995?
The Fund posted an 18.24% total return for Class A shares, a significant
improvement over 1994's return of -7.27%. (Return figures exclude sales charge.)
WHAT BROUGHT ABOUT THIS CHANGE?
The most significant factor contributing to 1995's total return was a sharp
decline in interest rates. As interest rates fell, the market price of the
individual bonds in the Fund's portfolio rose. More than half of the Fund's 1995
total return came from price appreciation during this year. Moreover, by easing
rates, the Federal Reserve signaled its belief that the economy's growth and
inflation had slowed -- both good news for fixed-income instruments like
municipal bonds. We anticipate that the Fed will further ease rates in 1996,
which would likely further the portfolio's price appreciation. In contrast, 1994
saw a series of rate increases that had an adverse effect on the value of
securities in the Fund's portfolio.
PLEASE DESCRIBE HOW YOU SELECT THE SECURITIES FOR THIS FUND AND TELL US ABOUT A
COUPLE OF SECURITIES IN THE PORTFOLIO.
We analyze securities using a number of criteria including credit quality, call
protection, liquidity and relative value. CREDIT QUALITY is the ability of the
issuer to repay as measured by national credit rating agencies such as Moody's
and Standard & Poor's. CALL PROTECTION, or the length of time during which a
security cannot be redeemed by the issuer, allows us to better compare bonds
paying similar interest rates. RELATIVE VALUE is the attractiveness of a given
bond based on current prices and interest rates. For example, we recently
purchased a AAA rated, insured San Diego Sewer Revenue bond paying 5.00% due on
May 15, 2015. We found this bond attractive because it offered the potential for
price appreciation if interest rates continue to drop, high credit quality, good
LIQUIDITY (a narrow spread between bid and ask prices) and call protection until
May 15, 2005. Another recent purchase was an A rated California Educational
Facilities Authority (St. Mary's College) bond paying a rate of 4.75%. In this
situation, we believe that the upside price potential of this bond is very
appealing since we bought it for less than $870 for each $1,000 we would receive
at its maturity on October 1, 2020.
WHAT IMPACT WOULD A FLAT TAX HAVE ON THE FUND?
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 it would likely be phased in, allowing
muni investors to benefit from tax-free yields for several more years. If a new
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
- ---------------------
26
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
now, however, it is important to remember that the benefits which attract
investors to municipal securities still exist.
WHAT DO YOU SEE HAPPENING TO THE CALIFORNIA ECONOMY IN 1996 AND HOW WILL THIS
AFFECT THE FUND?
Current 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. Securities issued by California
municipalities will benefit from improvements in the state's economy, including
the tax allocation and lease revenue bonds in the Fund's portfolio.
WHAT LINGERING EFFECT DO YOU SEE FROM LAST YEAR'S FINANCIAL TROUBLE IN ORANGE
COUNTY?
The Fund does not hold any Orange County obligations 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. However, 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 YOUR STRATEGY AS 1996 BEGINS?
If current economic conditions prevail, we expect interest rate declines in
1996. Therefore, we will emphasize call protection for all new purchases. By the
same token, we will reduce our current holdings of bonds which have poor call
protection.
---------------------
27
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR SINCE 1/1/92
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
With Maximum 4.5% Sales Charge 12.96% 6.02% 7.09%
- ---------------------------------------------------------------------------------------
Without Sales Charge 18.24% 7.66% 8.33%
- ---------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR
1/1/95
AVERAGE ANNUAL TOTAL RETURNS INCEPTION
<S> <C>
- -------------------------------------------------------------------------------------
With Maximum 3.0% Contingent Deferred Sales Charge1 14.72%
- -------------------------------------------------------------------------------------
Without Contingent Deferred Sales Charge 17.72%
- -------------------------------------------------------------------------------------
1Assumes redemption on 12/29/95.
</TABLE>
SHARE PRICES AT NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/95 12/31/95
<S> <C> <C>
- --------------------------------------------------------------------------------------
Class A Shares $9.84 $11.05
- --------------------------------------------------------------------------------------
Class B Shares $10.00 $11.26
- --------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTIONS PAID PER SHARE IN 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDENDS
<S> <C>
- -------------------------------------------------------------------------------------
Class A Shares $0.548
- -------------------------------------------------------------------------------------
Class B Shares $0.482
- -------------------------------------------------------------------------------------
</TABLE>
30-DAY YIELDS AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAXABLE
SEC YIELD EQUIVALENT
<S> <C> <C>
- --------------------------------------------------------------------------------------
Class A Shares 4.54% 7.88%
- --------------------------------------------------------------------------------------
Class B Shares 4.09% 7.10%
- --------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
Yields, calculated as required by the SEC, are based on earnings of the Fund's
portfolio, less expenses, during the 30 days ending December 31, 1995.
Calculations of taxable equivalent yields are based on a combined federal and
California State tax bracket of 42.4%. While the Fund principally invests in
obligations exempt from federal income taxes, a portion of the Fund's
distributions may be subject to these state and local taxes or the alternative
minimum tax (AMT).
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns and yields would have been lower.
- ---------------------
28
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH CALIFORNIA
TAX-FREE LEHMAN BROTHERS
Bond Fund Class A Shares Municipal Bond Index
<S> <C> <C>
Inception $9,550 $10,000
Jan-92 $9,561 $10,023
Feb-92 $9,605 $10,026
Mar-92 $9,605 $10,030
Apr-92 $9,723 $10,119
May-92 $9,862 $10,239
Jun-92 $10,070 $10,411
Jul-92 $10,447 $10,723
Aug-92 $10,262 $10,618
Sep-92 $10,324 $10,687
Oct-92 $10,027 $10,582
Nov-92 $10,397 $10,772
Dec-92 $10,539 $10,882
Jan-93 $10,670 $11,008
Feb-93 $11,184 $11,406
Mar-93 $11,008 $11,285
Apr-93 $11,148 $11,399
May-93 $11,228 $11,463
Jun-93 $11,452 $11,655
Jul-93 $11,418 $11,670
Aug-93 $11,747 $11,912
Sep-93 $11,911 $12,048
Oct-93 $11,939 $12,071
Nov-93 $11,734 $11,965
Dec-93 $11,996 $12,217
Jan-94 $12,153 $12,357
Feb-94 $11,813 $12,037
Mar-94 $11,216 $11,547
Apr-94 $11,256 $11,645
May-94 $11,395 $11,746
Jun-94 $11,292 $11,675
Jul-94 $11,563 $11,888
Aug-94 $11,582 $11,930
Sep-94 $11,355 $11,754
Oct-94 $11,118 $11,545
Nov-94 $10,867 $11,336
Dec-94 $11,123 $11,586
Jan-95 $11,538 $11,917
Feb-95 $11,882 $12,263
Mar-95 $11,996 $12,404
Apr-95 $11,976 $12,419
May-95 $12,398 $12,815
Jun-95 $12,188 $12,703
Jul-95 $12,273 $12,823
Aug-95 $12,431 $12,986
Sep-95 $12,532 $13,068
Oct-95 $12,749 $13,258
Nov-95 $12,990 $13,478
Dec-95 $13,151 $13,608
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE CALIFORNIA TAX-FREE BOND FUND WILL VARY
FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach California
Tax-Free Bond Fund Class A shares since its inception with the Lehman Brothers
Municipal Bond Index. The chart assumes a hypothetical $10,000 initial
investment in the Fund and reflects all operating expenses and assumes the
maximum initial sales charge of 4.5%. The Lehman Brothers Municipal Bond Index
is an unmanaged, broad-based index of municipal bonds. Please note that the Fund
is a professionally managed mutual fund. The index presented here is not
managed, does not incur expenses and is not available directly for investment.
Had this index incurred typical operating expenses, its performance would have
been lower.
---------------------
29
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 96.32%
$ 3,000,000 ABAG Finance Authority for Nonprofit Corp CA
Stanford University Hospital 5.50 % 11/01/13 $ 2,972,040
1,000,000 Alameda CA USD AMBAC Insured 5.95 07/01/09 1,058,850
1,000,000 Alameda CA USD AMBAC Insured 6.05 07/01/11 1,062,140
5,000,000 Alameda CA USD MBIA Insured 5.70 12/01/14 5,099,700
1,000,000 Alameda County CA Public Facilities Corp COP 6.25 06/01/06 1,059,690
3,620,000 Antioch CA Public FA Water Revenue Water
Treatment Plant Project MBIA Insured 5.63 07/01/14 3,677,739
1,330,000 Arcadia CA USD Capital Appreciation Series A
MBIA Insured 6.45 (F) 09/01/06 790,592
1,430,000 Arcadia CA USD Capital Appreciation Series A
MBIA Insured 6.41 (F) 09/01/07 795,895
250,000 Bakersfield CA City School District Series D
FGIC Insured 6.60 08/01/16 273,108
120,000 Belmont CA RDFA Tax Allocation Los Costanos
Community Development Series A 6.00 08/01/04 127,024
180,000 Belmont CA RDFA Tax Allocation Los Costanos
Community Development Series A 6.05 08/01/05 189,936
250,000 Big Bear Lake CA Water Revenue FGIC Insured 6.25 04/01/12 267,545
2,545,000 Bonita CA USD COP MBIA Insured 5.63 05/01/10 2,633,337
1,300,000 Burbank Glendale Pasadena Airport Authority CA
Airport Revenue AMBAC Insured 6.40 06/01/10 1,391,897
400,000 California State DWR Central Valley Project
Revenue Series F 6.00 12/01/11 407,492
1,830,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/13 1,884,369
1,000,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/14 1,029,710
</TABLE>
- ------------------------
30
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 680,000 California State EDFA Revenue Mills College 6.70 % 09/01/05 $ 760,220
50,000 California State EDFA Revenue Pomona College 6.13 02/15/08 53,625
4,435,000 California State EDFA Revenue St Mary's College 4.75 10/01/20 3,938,324
750,000 California State EDFA Revenue University of San
Diego Project 6.50 10/01/08 820,703
1,000,000 California State EDFA Revenue University of San
Francisco 6.30 10/01/07 1,088,970
1,000,000 California State GO 4.75 09/01/11 929,320
50,000 California State HFA Home Mortgage Revenue
Series B FHA Collateralized 6.90 08/01/16 51,294
200,000 California State HFA Home Mortgage Revenue
Series B MBIA Insured 6.90 08/01/16 205,164
300,000 California State HFA Home Mortgage Revenue
Series G AMT Multiple Credit Enhancements 6.95 08/01/11 323,256
500,000 California State HFA Home Multi Unit Rental
Mortgage Revenue Series B-II 6.70 08/01/15 531,215
500,000 California State HFA Home Multi-Unit Rental
Mortgage Revenue Series C-II AMT 6.85 08/01/15 531,015
1,250,000 California State HFA Multi-Unit Rental Housing
Revenue Series A AMT 5.50 08/01/15 1,197,613
1,500,000 California State HFFA Revenue Kaiser Permanente
Series A 6.25 03/01/21 1,573,710
1,000,000 California State HFFA Revenue Kaiser Permanente
Series A 6.50 03/01/11 1,052,890
600,000 California State HFFA Revenue Small Insured
Health Facilities Series A 6.70 03/01/11 642,684
1,000,000 California State HFFA San Diego Hospital
Association MBIA Insured 6.20 08/01/12 1,058,660
1,795,000 California State HFFA Scripps Memorial Hospital
Series A MBIA Insured 6.25 10/01/13 1,897,369
2,500,000 California State PCFA Pacific Gas & Electric Co
AMT 6.35 06/01/09 2,659,800
</TABLE>
---------------------
31
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,445,000 California State PCFA Pacific Gas & Electric Co
AMT 6.63 % 06/01/09 $ 1,560,759
1,000,000 California State Public Works Board Lease
Revenue University Of California Project
Series A AMBAC Insured 6.00 12/01/12 1,050,060
1,755,000 California State Public Works Board Lease
Revenue University Of California Project
Series A AMBAC Insured 6.30 12/01/09 1,900,981
1,500,000 California Statewide CDA Lease Revenue Oakland
Convention Centers Project AMBAC Insured 5.50 10/01/14 1,504,680
6,800,000 California Statewide CDA Lease Revenue Oakland
Convention Centers Project AMBAC Insured 6.00 10/01/10 7,208,340
1,000,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.20 01/01/11 991,550
1,750,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/12 1,734,705
500,000 California Statewide CDA Revenue COP Health
Facilities Barton Memorial Hospital LOC -
Banque Nationale de Paris 6.40 12/01/05 537,760
1,810,000 California Statewide CDA Revenue COP Hospital
Cedars Sinai Medical Center 6.50 08/01/12 1,996,394
1,500,000 California Statewide CDA Revenue COP Sutter
Health Obligated Group AMBAC Insured 6.00 08/15/09 1,578,360
1,935,000 California Statewide CDA Water Revenue Series A 6.00 07/01/10 2,033,298
200,000 Capitol Area Development Authority Sacramento
CA Lease Revenue Series A MBIA Insured 6.50 04/01/12 217,796
300,000 Center CA USD Series A MBIA Insured 6.63 09/01/17 325,269
</TABLE>
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32
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,500,000 Cerritos CA PFA Redevelopment Los Cerritos
Redevelopment Project Revenue 6.05 % 11/01/20 $ 1,521,270
595,000 Chula Vista CA COP Town Centre II Package
Project RDA 5.80 09/01/05 620,127
400,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/07 418,264
735,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/08 762,945
820,000 Chula Vista CA COP Town Centre II Package
Project Redevelopment Agency 6.00 09/01/10 848,060
2,000,000 Coachella CA Water Revenue COP FSA Insured 6.10 03/01/22 2,092,740
1,000,000 Coachella Valley CA Water District Improvement
District 71 Storm Water District Flood
Control 6.60 10/01/06 1,086,720
985,000 Coachella Valley CA Water District Improvement
District Seven Storm Water District Flood
Control Project 6.45 10/01/05 1,069,749
2,500,000 Concord CA RDFA Tax Allocation 5.75 07/01/10 2,451,125
1,500,000 Contra Costa County CA COP Public Facilities
Merrithew Memorial Hospital Replacement 6.60 11/01/12 1,604,820
1,000,000 Contra Costa County CA Water Treatment Revenue
Series A FGIC Insured 5.60 10/01/10 1,028,590
1,045,000 Corona CA PFA Public Improvement Revenue 5.95 07/01/07 1,049,943
1,075,000 Cotati CA Facilities Financing Authority Tax
Allocation Series A 5.60 09/01/12 1,040,751
1,250,000 Cucamonga County CA Water District COP
Refinancing Facilities FGIC Insured 6.30 09/01/12 1,338,775
15,000 Culver City CA RDFA AMBAC Insured 6.75 11/01/15 16,140
5,000,000 Cupertino CA Series A AMBAC Insured 5.75 07/01/16 5,087,800
1,450,000 Cupertino CA Series B 6.25 07/01/10 1,512,176
1,045,000 Danville CA Improvement Board Sycamore Valley
Reassessment District 93-2 5.90 09/02/05 1,073,539
</TABLE>
---------------------
33
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,855,000 Duarte CA COP City of Hope National Medical
Center 6.13 % 04/01/13 $ 1,850,789
4,685,000 East Bay CA MUD Wastewater Treatment System
Revenue 6.00 06/01/12 4,938,740
1,500,000 East Bay CA MUD Wastewater Treatment System
Revenue AMBAC Insured 6.00 06/01/09 1,592,580
3,195,000 East Bay CA Regional Park District Series B 5.75 09/01/14 3,249,986
1,850,000 East Bay CA Regional Park District Series B 6.38 09/01/10 1,991,192
495,000 Eastern Municipal Water District CA Water &
Sewer Revenue Certificates FGIC Insured 6.30 07/01/20 519,720
5,000,000 Elsinore Valley CA Municipal Water District COP
Series A FGIC Insured 5.75 07/01/19 5,104,800
1,000,000 Elsinore Valley CA Municipal Water District COP
Series A FGIC Insured 6.00 07/01/12 1,084,290
1,045,000 Emeryville CA HFA 6.20 09/01/15 1,074,803
3,000,000 Emeryville CA PFA Housing Increment Revenue
Series A 6.35 05/01/10 3,147,990
2,000,000 Escondido CA PFA Lease Revenue Escondido Civic
Center Project Series B AMBAC Insured 6.13 09/01/11 2,205,180
1,200,000 Escondido CA USD COP Series A 5.90 07/01/11 1,200,216
1,110,000 Folsom CA PFA Revenue AMBAC Insured 6.00 10/01/12 1,168,652
1,000,000 Foothill CA De Anza Community College Connie
Lee Insured 5.25 09/01/21 957,880
1,000,000 Foster City CA PFA 6.00 09/01/13 1,012,800
1,270,000 Fremont CA USD Alameda County Series E FGIC
Insured 5.90 09/01/15 1,331,684
2,000,000 Fresno CA Joint Powers Financing Authority
Street Light Acquisition Project Series A 5.50 08/01/12 1,961,160
1,500,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.50 12/01/09 1,536,045
1,000,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.50 12/01/11 1,020,140
50,000 Hayward CA COP Capital Improvement Projects 6.80 08/01/17 52,191
</TABLE>
- ------------------------
34
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 575,000 Huntington Beach CA PFA Revenue Bond 6.55 % 08/01/01 $ 567,462
1,000,000 Indian Wells CA RDFA Tax Allocation Whitewater
Project MBIA Insured 6.00 12/01/14 1,046,440
1,000,000 Industry CA GO MBIA Insured 5.50 07/01/11 1,025,850
200,000 Industry CA Urban Development Agency 6.85 11/01/04 218,482
1,270,000 Industry CA Urban Development Agency Tax
Allocation MBIA Insured 5.80 05/01/09 1,322,540
1,000,000 Industry CA Urban Development Agency Tax
Allocation MBIA Insured 6.00 05/01/15 1,046,430
1,350,000 Jackson CA COP Water System Acquisition Project 6.80 09/01/23 1,401,948
270,000 Jamul-Dulzura CA USD 6.40 08/01/16 285,560
1,185,000 La Verne CA COP Capital Improvements Projects 5.70 06/01/15 1,164,322
500,000 Lemon Grove CA CDA Lemon Grove Redevelopment
Project 6.65 08/01/06 531,560
300,000 Long Beach CA Harbor Revenue Series A AMT 7.25 05/15/19 324,810
1,000,000 Long Beach CA USD 6.20 12/01/07 1,078,010
1,000,000 Los Angeles CA Community College District COP
Series A CGIC Insured 5.90 08/15/07 1,065,020
1,750,000 Los Angeles CA DW&P Electric Plant Revenue 5.70 09/01/11 1,781,938
200,000 Los Angeles CA DW&P Electric Plant Revenue 6.38 02/01/20 213,012
2,000,000 Los Angeles CA DW&P Electric Plant Revenue
Second Issue 5.75 08/15/11 2,039,800
3,000,000 Los Angeles CA DW&P Waterworks Revenue 5.70 04/15/09 3,097,080
340,000 Los Angeles CA Municipal Improvement Corp Lease
Revenue Central Library Project Series A 6.30 06/01/16 349,370
1,300,000 Los Angeles CA Wastewater System Revenue Series
A MBIA Insured 5.70 06/01/13 1,334,489
250,000 Los Angeles CA Wastewater System Revenue Series
C 7.10 06/01/18 278,225
</TABLE>
---------------------
35
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Los Angeles CA Wastewater System Revenue Series
C MBIA Insured 5.50 % 06/01/13 $ 1,008,190
7,000,000 Los Angeles CA Wastewater System Revenue Series
D FGIC Insured 5.20 11/01/21 6,825,490
1,840,000 Los Angeles County CA COP Correctional
Facilities Project MBIA Insured 6.50 09/01/13 1,970,658
1,975,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
Series A 5.50 07/01/13 1,968,107
1,370,000 Madera CA RDFA Tax Allocation Revenue CGIC
Insured 5.75 09/01/11 1,417,443
1,400,000 Martinez CA USD 6.00 08/01/11 1,445,528
2,000,000 Martinez CA USD 6.00 08/01/12 2,050,560
200,000 Menlo Park CA CDA Tax Allocation Las Pulgas
Community Project AMBAC Insured 6.70 10/01/22 219,196
2,485,000 Merced County CA COP Construction & Equipment
Project Lease Revenue FSA Insured 6.00 10/01/12 2,593,768
1,545,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 5.70 09/01/14 1,544,058
705,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 6.30 07/01/11 746,849
750,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 6.35 07/01/12 794,430
1,000,000 Modesto CA Irrigation District Financing
Authority Domestic Water Project Revenue
Series A AMBAC Insured 6.00 09/01/09 1,063,190
975,000 Montclair CA RDFA Lease Revenue Series A 5.80 11/01/10 1,010,685
100,000 Montclair CA RDFA Lease Revenue Series A 6.63 11/01/11 105,124
2,055,000 Mountain View CA Shoreline Regional Park
Community Tax Allocation Series A 5.60 08/01/09 2,027,340
200,000 MSR Public Power Agency CA San Juan Project
Revenue Series C BIG Insured 6.63 07/01/13 207,664
</TABLE>
- ------------------------
36
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 National City CA CDA Tax Allocation Downtown
Redevelopment Project Series A AMBAC Insured 6.25 % 08/01/12 $ 1,069,170
1,230,000 National City CA CDA Tax Allocation Downtown
Redevelopment Project Series B AMT AMBAC
Insured 6.63 08/01/12 1,341,057
720,000 Natomas CA USD Series A MBIA Insured 5.75 09/01/12 744,934
750,000 Nevada County CA Solid Waste Revenue 6.50 10/01/06 806,978
1,000,000 Northern California Power Agency Multiple
Capital Facilities Revenue Series A MBIA
Insured 6.50 08/01/12 1,092,200
7,000,000 Northern California Transmission Revenue
Transmission Project A MBIA Insured 5.50 05/01/14 7,082,320
250,000 Northern California Transmission Revenue
Transmission Project A MBIA Insured 6.50 05/01/16 272,445
1,465,000 Oakland CA FGIC Insured 6.00 06/15/12 1,545,487
500,000 Oceanside CA Community Downtown RDFA 6.10 09/01/18 498,715
2,000,000 Oceanside CA Water Reuse Finance Project A
AMBAC Insured 6.40 10/01/12 2,170,140
800,000 Orange County CA Local Transportation Authority
Sales Tax Revenue First Series Measure M 6.00 02/15/09 829,136
1,000,000 Orange County CA RDFA Tax Allocation Northwest
Redevelopment Project B 5.70 10/01/17 881,870
360,000 Orange County CA Sanitation District COP FGIC
Insured 6.40 08/01/07 387,065
1,240,000 Parlier CA RDFA Tax Allocation Series A 6.95 08/01/23 1,240,434
1,500,000 Pinole CA RDFA Tax Allocation 5.60 08/01/17 1,457,790
250,000 Pleasanton CA USD Series G 6.50 08/01/16 262,873
3,380,000 Port of Oakland CA Special Facilities Revenue
Mitsui OSK Lines Ltd Series A AMT LOC -
Industrial Bank of Japan Ltd 6.80 01/01/19 3,615,924
1,000,000 Poway CA PFA Water Services Capital Improvement
Program AMBAC Insured 5.50 11/01/15 1,005,580
1,050,000 Redding CA Joint Powers Financing Authority
Solid Waste Revenue Series A 5.00 01/01/23 893,057
</TABLE>
---------------------
37
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,325,000 Redding CA Joint Powers Financing Authority
Wastewater Revenue Series A FGIC Insured 6.00 % 12/01/11 $ 1,400,976
1,310,000 Rialto CA RDFA Tax Allocation Series A 5.80 09/01/08 1,336,410
4,000,000 Riverside County CA Asset Leasing Corp Revenue
Riverside County Hospital Project A 6.38 06/01/09 4,184,240
1,045,000 Riverside County CA PFA Special Tax Revenue
Series A MBIA Insured 5.25 09/01/10 1,050,862
1,000,000 Rossmoor CA Community Services District
Improvement Board Landscaping & Assessment
District 91-1 6.10 09/02/12 975,170
1,725,000 Sacramento CA COP Public Facilities Project 6.00 07/01/12 1,764,589
5,000 Sacramento CA Financing Authority Revenue
Prerefunded 6.70 11/01/11 5,377
2,300,000 Sacramento CA Light Rail Transportation Project 6.00 07/01/12 2,355,591
500,000 Sacramento CA MUD Electric Revenue Series C
FGIC Insured 5.75 11/15/08 523,370
6,695,000 Sacramento CA MUD Electric Revenue Series C
MBIA Insured 5.75 11/15/09 6,983,621
200,000 Sacramento CA MUD Electric Revenue Series Y
MBIA Insured 6.75 09/01/19 227,508
50,000 Sacramento CA MUD Electric Revenue Series Z
FGIC Insured 6.45 07/01/10 54,094
1,650,000 Sacramento CA RDFA Tax Allocation Merged
Downtown Project A MBIA Insured 6.50 11/01/13 1,769,889
250,000 Sacramento CA Regional Transit District COP
Series A 6.38 03/01/05 270,828
2,000,000 Sacramento County CA Airport System Revenue
Series A AMT FGIC Insured 6.00 07/01/12 2,074,380
380,000 San Bernardino County CA West Valley Detention
Center MBIA Insured 6.50 11/01/12 413,607
</TABLE>
- ------------------------
38
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 200,000 San Bernardino County CA Transportation
Authority Sales Tax Revenue FGIC Insured 6.00 % 03/01/10 $ 212,722
4,000,000 San Buenaventura CA COP AMBAC Insured 6.00 01/01/12 4,210,760
1,500,000 San Diego CA Community College District COP
Financing Projects 5.38 12/01/14 1,428,720
1,695,000 San Diego CA PFA Sewer Revenue FGIC Insured 5.00 05/15/15 1,637,641
50,000 San Diego County CA COP East Mesa Detention
Facilities Project 7.00 10/01/09 52,828
4,000,000 San Diego County CA Regional Transportation
Community Sales Tax Revenue Series A Escrowed
to Maturity 6.00 04/01/08 4,338,440
1,500,000 San Diego County CA Water Authority Water
Revenue COP Series A 6.40 05/01/08 1,639,980
1,235,000 San Elijo Joint Powers Authority San Diego
County CA Water Pollution Control Facility
FGIC Insured 5.38 03/01/13 1,238,236
300,000 San Francisco CA BART Tax Revenue FGIC Insured 6.60 07/01/12 328,215
200,000 San Francisco CA City & County Public Utilities
Commission Water Revenue Series A 6.50 11/01/09 222,460
700,000 San Francisco CA City & County RDFA Tax
Allocation Capital Appreciation Project MBIA
Insured 6.76 (F) 08/01/08 365,288
1,000,000 San Francisco County CA RDFA 6.50 07/01/08 1,120,570
2,000,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road Revenue Capital Appreciation 4.39 (F) 01/01/10 1,525,220
1,055,000 San Jose CA Airport Revenue AMT FGIC Insured 5.50 03/01/08 1,074,887
500,000 San Jose CA RDFA Tax Allocation Park Center
Project 7.00 10/01/04 527,795
3,000,000 San Jose RDFA Merged Area Project MBIA Insured 5.25 08/01/16 2,951,610
</TABLE>
---------------------
39
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 200,000 San Juan Capistrano CA Open Space Project 6.20 % 02/01/16 $ 208,292
1,200,000 San Mateo CA Joint Powers Financing Authority
Redevelopment Downtown & Shoreline Project A
AMBAC Insured 5.50 08/01/07 1,233,744
4,010,000 Santa Clara CA RDFA Tax Allocation Bayshore
North Project AMBAC Insured 5.75 07/01/14 4,121,518
2,500,000 Santa Clara County CA COP Multiple Facilities
Project AMBAC Insured 6.00 05/15/12 2,618,850
1,000,000 Santa Maria CA RDFA Town Center West Side
Parking Facilities FSA Insured 5.25 06/01/11 996,600
350,000 Shasta CA Dam Area Public Utility District COP 7.25 03/01/12 374,948
1,750,000 Shasta CA Joint Powers Financing Authority
Lease Revenue County Courthouse Improvement
Project Series 6.70 06/01/23 1,832,355
585,000 Solana Beach CA COP City Hall Project 6.30 10/01/12 611,384
4,720,000 South County CA Regional Wastewater Authority
Revenue Capital Improvement FGIC Insured 5.75 08/01/10 4,901,578
500,000 South Gate CA RDFA Tax Allocation Revenue
Prerefunded 7.38 09/01/09 561,865
1,000,000 Southern California State Public Power
Authority 5.50 07/01/12 1,002,410
1,000,000 Southern California State Rapid Transit
District CA COP Workers Compensation MBIA
Insured 6.00 07/01/10 1,054,220
3,000,000 Southern California State Rapid Transit
District Special Benefit Assesment District
A1 AMBAC Insured 6.00 09/01/08 3,200,400
2,000,000 Stanislaus County CA Capital Improvement
Program Series A MBIA Insured 5.25 05/01/14 1,981,080
900,000 Stanislaus County CA COP Series A 6.85 06/01/12 948,294
2,000,000 Stanislaus County CA COP Series B AMBAC Insured 6.13 06/01/12 2,119,300
1,430,000 Temecula CA Community Services Recreational
Center Project 7.13 10/01/12 1,544,457
</TABLE>
- ------------------------
40
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 2,000,000 Three Valleys CA Municipal Water District
Revenue COP FGIC Insured 5.25 % 11/01/10 $ 2,009,540
1,000,000 Torrance CA COP AMBAC Insured 5.50 04/01/11 1,025,190
1,000,000 Torrance CA COP AMBAC Insured 5.75 04/01/16 1,029,550
1,075,000 Tri-Cities CA Municipal Water District 6.40 12/01/10 1,031,721
2,000,000 Tulare County CA COP Public Facilities
Corporation Series A MBIA Insured 6.10 11/15/07 2,162,060
1,250,000 Twentynine Palms CA Water District CA COP 7.00 08/01/17 1,319,188
1,000,000 Union City CA Community RDFA Tax Allocation
Revenue Community Redevelopment Project AMBAC
Insured 5.65 10/01/14 1,015,880
1,645,000 University of California Revenue Housing System
Series A AMBAC Insured 5.50 11/01/11 1,677,851
6,900,000 University of California Revenue Multiple
Purpose Project C AMBAC Insured 5.25 09/01/11 6,906,417
3,950,000 University of California Revenue Seismic Safety
Project MBIA Insured 5.50 11/01/10 4,044,168
2,000,000 Ventura CA COP Public Facilities Corporation IV 5.75 12/01/07 2,072,300
2,000,000 West & Central Basin CA Financing Authority
Redevelopment AMBAC Insured 6.13 08/01/12 2,114,160
1,170,000 West Sacramento CA Financing Authority Revenue
Water System Improvement Project FGIC Insured 5.50 08/01/15 1,178,822
1,200,000 Westminster CA RDFA AMT 6.50 08/01/10 1,235,800
1,000,000 Whittier CA Educational Facilities Revenue
Whittier College Connie Lee Insured 5.40 12/01/18 985,750
1,340,000 Yolo County CA Library Special Tax Community
Facilities 6.25 12/01/22 1,372,227
--------------
TOTAL CALIFORNIA MUNICIPAL BONDS $ 311,426,826
(Cost $297,513,691)
</TABLE>
---------------------
41
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 3.70%
CALIFORNIA MUNICIPAL VARIABLE RATE SECURITIES+ - 3.52%
$ 900,000 California State PCFA Southern California
Edison V/R Series A 5.40 % 02/28/08 $ 900,000
1,075,000 California State PCFA Stanislaus Project V/R
AMT LOC - Swiss Bank 6.00 12/01/17 1,075,000
1,570,000 Irvine CA IDA Improvement Bond V/R LOC -
National Westminster Bank Plc 5.80 09/02/15 1,570,000
400,000 Irvine Ranch CA Water District V/R LOC -
Sumitomo Bank Ltd 5.90 10/01/10 400,000
900,000 Los Angeles County CA IDA Lee & Macho Realty
Partnership V/R LOC - Dai-Ichi Kangyo Bank
Ltd 6.25 12/01/05 900,000
1,000,000 Los Angeles County CA IDA Walter & Howard V/R
AMT LOC - Dai-Ichi Kangyo Bank Ltd 6.25 12/01/06 1,000,000
1,534,000 Orange County CA Improvement Bond V/R Multiple
LOC's 6.50 09/02/18 1,534,000
3,000,000 Orange County CA Office & Courthouse Projects
V/R LOC - Dai-Ichi Kangyo Bank 5.90 12/01/15 3,000,000
1,000,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 5.90 08/01/15 1,000,000
--------------
$ 11,379,000
MONEY MARKET FUNDS - 0.18%
$ 550,520 Arbor Fund CA Tax-Exempt Portfolio $ 550,520
27,624 Nuveen Institutional CA Tax-Exempt Fund 27,624
--------------
$ 578,144
TOTAL SHORT-TERM INSTRUMENTS $ 11,957,144
(Cost $11,957,144)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH REDUCES
THE REMAINING MATURITY.
- ------------------------
42
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $309,470,835)* (Notes 1 and 3) 100.02% $ 323,383,970
Other Assets and Liabilities, Net (0.02) (51,016)
------ -------------
TOTAL NET ASSETS 100.00% $ 323,332,954
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 14,284,975
Gross Unrealized Depreciation (371,840)
------------
NET UNREALIZED APPRECIATION $ 13,913,135
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
43
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
44
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
- ---------
INVESTMENT
ADVISORS
FUND OBJECTIVE
To seek a high level of income exempt from federal income and California
personal income taxes, while preserving capital, by investing in short- and
intermediate-term, investment-grade municipal securities.
[PHOTO] LAURA MILNER assumed responsibility for the day-to-day
management of the California Tax-Free Income Fund on June 1,
1995 after having been co-manager since the Fund's inception
in November 1992. Her background includes ten years'
experience specializing in short- and long-term municipal
securities. Laura is a member of the National Federation of
Municipal Analysts and its California chapter.
[PHOTO] DAVID KLUG, the portfolio manager of the California Tax-Free
Bond Fund, assists in the management of the tax-free
municipal securities.
---------------------
45
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE ONE-YEAR TOTAL RETURN FOR THE CALIFORNIA TAX-FREE INCOME FUND IN
1995?
The Fund posted a 9.14% total return, a significant improvement over 1994's
return of -1.10%. (Return figures exclude sales charge.)
WHAT BROUGHT ABOUT THIS CHANGE?
The Federal Reserve reduced the federal funds target rate by 0.25% in July, and
again by 0.25% in December. As interest rates fell in response, the market price
of the individual securities in the Fund's portfolio rose. In easing rates, the
Fed signaled its belief that the economy's growth and inflation had slowed--both
good news for fixed-income instruments like municipal securities. We currently
anticipate that the Fed will further ease rates in 1996, which will likely
further the portfolio's price appreciation. In contrast, 1994 saw a series of
rate increases that had an adverse effect on the prices of securities in the
Fund's portfolio.
WHAT IMPACT WOULD A FLAT TAX HAVE ON THE FUND?
We do not think that a flat tax is likely to be implemented over the next couple
of years, and even if it were to become enacted it would likely be phased in,
allowing muni investors to benefit from tax-free yields for several more years.
If a new 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.
WHAT DO YOU SEE HAPPENING TO THE CALIFORNIA ECONOMY IN 1996 AND HOW WILL THIS
AFFECT THE FUND?
Current 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. Issues of California municipalities
will benefit from improvements in the state's economy, including the tax
allocation and lease revenue bonds in the Fund's portfolio.
WHAT LINGERING EFFECTS DO YOU SEE FROM LAST YEAR'S FINANCIAL TROUBLE IN ORANGE
COUNTY?
The Fund does not hold any Orange County obligations 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. However, Orange
County has filed a reorganization plan with the bankruptcy court and expects to
restructure some of its outstanding obligations.
- ---------------------
46
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
If all goes according to the plan, the County expects to emerge from bankruptcy
by June 30, 1996.
PLEASE DESCRIBE HOW YOU SELECT THE SECURITIES FOR THIS FUND.
Among the most important criteria we look at in selecting securities for the
portfolio is the DURATION, which is an indicator of the risk associated with a
particular security posed by changes in interest rates. We also consider the
ability of the issuer to repay its obligations as measured by national credit
rating agencies such as Moody's and Standard & Poor's. When interest rates fall,
as they did throughout 1995, we look for longer-term securities that have more
upside price potential.
WHAT WAS THE WEIGHTED AVERAGE MATURITY OF THE PORTFOLIO AT YEAR-END AND WHY IS
THIS IMPORTANT?
The WEIGHTED AVERAGE MATURITY is the average length of time before the
securities in a portfolio mature weighted by the dollar values. Since the resale
prices of fixed-income securities generally rise when interest rates fall, we
extend the portfolio's average maturity in order to take advantage of potential
price appreciation. The weighted average maturity as of December 31, 1995 was
3.93 years. In contrast, during 1994, while interest rates rose, we kept the
Fund's average maturity relatively short, finishing the year at 3.14 years.
WHERE DO YOU EXPECT TO KEEP THE FUND'S AVERAGE MATURITY AS 1996 BEGINS?
We expect to maintain the average maturity between 4.3 and 4.75 years as long as
current economic conditions prevail and we continue to anticipate further
interest rate declines.
---------------------
47
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
- ---------------------
PERFORMANCE AT A GLANCE
PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR SINCE 11/18/92
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
With Maximum 3.0% Sales Charge 5.91% 3.89% 4.01%
- ---------------------------------------------------------------------------------------
Without Sales Charge 9.14% 4.95% 5.03%
- ---------------------------------------------------------------------------------------
</TABLE>
SHARE PRICES AT NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/95 12/31/95
<S> <C> <C>
- --------------------------------------------------------------------------------------
$9.84 $10.35
- --------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTIONS PAID PER SHARE IN 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDENDS
<S> <C>
- -------------------------------------------------------------------------------------
$0.376
- -------------------------------------------------------------------------------------
</TABLE>
30-DAY YIELDS AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAXABLE
SEC YIELD EQUIVALENT
<S> <C> <C>
- --------------------------------------------------------------------------------------
3.55% 6.16%
- --------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
Yields, calculated as required by the SEC, are based on earnings of the Fund's
portfolio, less expenses, during the 30 days ending December 31, 1995.
Calculations of taxable equivalent yields are based on a combined federal and
California State tax bracket of 42.4%. While the Fund principally invests in
obligations exempt from federal income taxes, a portion of the Fund's
distributions may be subject to these or state and local taxes or the
alternative minimum tax (AMT).
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns and yields would have been lower.
- ---------------------
48
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH CALIFORNIA LEHMAN BROTHERS MUNICIPAL
Tax-Free Income Fund Bond 3-Year Index
<S> <C> <C>
Inception $9,700 $10,000
Nov-92 $9,708 $10,070
Dec-92 $9,782 $10,130
Jan-93 $9,871 $10,206
Feb-93 $10,077 $10,367
Mar-93 $9,994 $10,336
Apr-93 $10,047 $10,395
May-93 $10,062 $10,424
Jun-93 $10,153 $10,490
Jul-93 $10,128 $10,496
Aug-93 $10,270 $10,593
Sep-93 $10,351 $10,640
Oct-93 $10,373 $10,662
Nov-93 $10,343 $10,648
Dec-93 $10,477 $10,760
Jan-94 $10,551 $10,847
Feb-94 $10,400 $10,746
Mar-94 $10,283 $10,616
Apr-94 $10,317 $10,679
May-94 $10,353 $10,729
Jun-94 $10,337 $10,732
Jul-94 $10,435 $10,821
Aug-94 $10,451 $10,860
Sep-94 $10,414 $10,833
Oct-94 $10,377 $10,807
Nov-94 $10,308 $10,788
Dec-94 $10,361 $10,834
Jan-95 $10,478 $10,924
Feb-95 $10,624 $11,039
Mar-95 $10,714 $11,138
Apr-95 $10,734 $11,176
May-95 $10,886 $11,347
Jun-95 $10,889 $11,374
Jul-95 $10,984 $11,494
Aug-95 $11,062 $11,584
Sep-95 $11,107 $11,617
Oct-95 $11,173 $11,673
Nov-95 $11,251 $11,747
Dec-95 $11,308 $11,796
</TABLE>
The accompanying chart compares the performance of the Stagecoach California Tax
Free Income Fund since its inception with the Lehman Brothers Municipal Bond
3-Year Index. The chart assumes a hypothetical $10,000 initial investment in the
Fund and reflects all the Fund expenses and assumes the maximum initial sales
charge of 3.0%. The Lehman Brothers Municipal Bond 3-Year Index is an unmanaged
index of municipal bonds with an approximately three year average maturity.
Please note that the Fund is a professionally managed mutual fund. The index
presented here is not managed, does not incur expenses and is not available
directly for investment. Had this index incurred typical operating expenses, its
performance would have been lower.
---------------------
49
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 94.69%
$ 500,000 ABAG Finance Authority for Nonprofit Corp CA
Stanford University Hospital 4.30 % 11/01/99 $ 492,185
1,700,000 Anaheim CA Electric Revenue 4.75 10/01/01 1,725,075
2,425,000 California State DWR Central Valley Project
Revenue 8.50 12/01/98 2,720,947
4,625,000 California State DWR Central Valley Project
Revenue Series H Prerefunded 6.90 12/01/25 5,180,278
1,500,000 California State DWR Central Valley Project
Revenue Series H Prerefunded 8.50 12/01/02 1,858,095
2,000,000 California State DWR Central Valley Project
Revenue Series L 8.00 12/01/01 2,376,220
500,000 California State HFFA Kaiser Permanente Series
A 6.50 10/01/96 509,555
1,750,000 California State HFFA Revenue Childrens
Hospital Los Angeles Series A Prerefunded 7.13 06/01/21 2,009,438
2,135,000 California State Maritime Infrastructure
Authority Port of San Diego Revenue AMBAC
Insured 5.00 11/01/02 2,172,960
500,000 California State Public Works Board High
Technology Facilities Lease Revenue
Department of Correction 7.10 11/01/97 521,050
250,000 California State Veterans Bonds 8.10 10/01/98 275,793
1,500,000 California Statewide CDA Revenue COP Saint
Joseph Health System 4.30 07/01/98 1,495,080
200,000 California Statewide CDA Revenue COP Sutter
Health Obligated Group AMBAC Insured 5.00 08/15/98 204,558
250,000 Carlsbad CA USD COP Phase III 6.70 11/01/99 268,473
305,000 Culver City CA RDFA Escrowed to Maturity 6.70 11/01/98 326,347
195,000 Culver City CA RDFA Revenue Series A AMBAC
Insured 6.70 11/01/98 208,272
750,000 Cupertino CA Series A 4.50 01/01/98 748,725
</TABLE>
- ------------------------
50
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,700,000 Desert Sands CA USD Capital Appreciation Series
E FSA Insured 5.34 %(F) 03/01/04 $ 1,141,363
2,000,000 Desert Sands CA USD COP Series C 4.30 08/01/98 1,980,380
5,000,000 East Bay CA MUD Water System Revenue MBIA
Insured 7.50 06/01/18 5,740,700
500,000 Emeryville CA PFA Housing Increment Revenue
Series A 5.40 05/01/98 507,585
600,000 Encinitas CA USD COP Measure B Capital Projects 4.38 09/01/98 598,998
1,350,000 Foothill CA De Anza Community College
Prerefunded 8.25 07/01/98 1,518,021
820,000 Foster City CA PFA 4.70 09/01/98 820,558
685,000 Foster City CA PFA 5.40 09/01/01 705,276
1,700,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.00 12/01/01 1,753,040
500,000 Imperial Irrigation District CA Electrical
System Project 5.75 05/01/98 516,175
255,000 Industry CA GO FGIC Insured 8.00 07/01/99 286,429
500,000 Industry CA GO MBIA Insured 8.00 07/01/99 561,625
500,000 Lake Arrowhead CA Community Services FGIC
Insured 5.30 06/01/97 509,345
100,000 Las Virgenes CA MUD Capital Improvement Project
MBIA Insured 9.00 11/01/99 116,327
1,320,000 Long Beach CA Harbor Revenue AMT Series A 4.50 05/15/97 1,325,834
480,000 Long Beach CA Harbor Revenue Series A 7.00 05/15/97 500,458
500,000 Los Angeles CA Community RDFA Central Business
District Project Series G 6.20 07/01/97 509,525
2,500,000 Los Angeles CA DWP Electrical Plant Revenue 6.63 10/01/31 2,801,550
2,000,000 Los Angeles CA DWP Electrical Plant Revenue 6.75 04/01/32 2,252,600
725,000 Los Angeles CA Judgement Obligation Bonds
Series A 4.70 08/01/98 735,679
1,300,000 Los Angeles CA Waste Water System Revenue
Series A MBIA Insured 8.50 06/01/03 1,616,316
</TABLE>
---------------------
51
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Los Angeles CA Waste Water System Revenue
Series D Prerefunded 6.70 % 12/01/21 $ 1,126,100
100,000 Los Angeles County CA Capital Asset Leasing
Corp Leasehold Revenue AMBAC Insured 4.70 12/01/97 101,417
300,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series A 6.10 07/01/99 319,032
500,000 Milpitas CA RDFA Tax Allocation Project Number
One MBIA Insured 4.20 01/15/96 500,043
500,000 Morgan Hill CA RDFA Tax Allocation Ojo De Agua
Community Development Project 5.60 03/01/00 510,830
305,000 Mountain View CA Shoreline Regional Park
Community Tax Allocation Series A 4.25 08/01/97 302,383
1,000,000 Riverside County CA Asset Leasing Corp Revenue
Riverside County Hospital Project Series A
Prerefunded 7.40 06/01/14 1,119,630
1,000,000 Riverside County CA Transportation Sales Tax
Revenue Series A 6.40 06/01/99 1,072,140
300,000 Sacramento CA Light Rail Transportation Project 6.30 07/01/00 322,119
485,000 Sacramento CA MUD Electric Revenue Series D 4.30 11/15/97 487,391
2,000,000 Sacramento CA MUD Revenue Series D FSA Insured 4.90 11/15/01 2,051,700
2,275,000 San Diego County CA Regional Transportation
Commission Sales Tax Revenue Series A FGIC
Insured 5.25 04/01/02 2,367,706
1,000,000 San Diego County CA Regional Transportation
Commission Sales Tax Revenue Series A FGIC
Insured 6.25 04/01/02 1,094,680
1,000,000 San Diego County CA Regional Transportation
Commission Sales Tax Revenue Series A
Prerefunded 7.38 04/01/06 1,114,290
600,000 San Francisco CA City & County Airport Revenue
Second Series Issue One MBIA Insured 6.35 05/01/98 629,904
</TABLE>
- ------------------------
52
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 San Francisco CA City & County RDFA Lease
Revenue George R Moscone Center AMBAC Insured 6.20 % 10/01/00 $ 1,088,380
200,000 San Jose CA Airport Revenue MBIA Insured 5.00 03/01/99 204,556
500,000 San Jose CA Financing Authority Revenue
Convention Center Series C 5.75 09/01/97 510,085
2,750,000 San Jose CA RDFA MBIA Insured 4.20 08/01/98 2,758,580
1,100,000 Southern California State Public Power
Authority 6.75 07/01/00 1,210,517
1,155,000 Stanislaus County CA Capital Improvement
Program Series A MBIA Insured 4.90 05/01/05 1,160,348
520,000 Templeton CA USD COP Measure C Capital Projects
Series A Phase III 4.00 03/01/98 512,372
1,245,000 University of California at Los Angeles Central
Chiller - Cogeneration Facilties 10.75 11/01/98 1,448,742
1,000,000 University of California Multiple Projects
Revenue Series A MBIA Insured 6.00 09/01/02 1,088,950
1,000,000 West Basin CA Municipal Water District COP
Prerefunded 7.00 08/01/11 1,131,930
--------------
TOTAL CALIFORNIA MUNICIPAL BONDS $ 73,824,660
(Cost $73,091,691)
SHORT-TERM INSTRUMENTS - 7.49%
CALIFORNIA MUNICIPAL VARIABLE RATE SECURITIES + - 7.18%
$ 1,600,000 California State HFFA Catholic Healthcare
Series C V/R 4.85 % 07/01/20 $ 1,600,000
800,000 California Statewide CDA Sutter Health Group
V/R AMBAC Insured 5.90 07/01/15 800,000
3,220,000 Los Angeles CA Department of General Services
Lease Revenue Series A V/R 4.50 05/01/00 3,197,041
--------------
$ 5,597,041
</TABLE>
---------------------
53
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS (CONTINUED)
MONEY MARKET FUNDS - 0.31%
6,000 Arbor Fund CA Tax-Exempt Portfolio $ 6,000
238,000 Dreyfus General CA Municipal Money Market Fund 238,000
--------------
$ 244,000
TOTAL SHORT-TERM INSTRUMENTS $ 5,841,041
(Cost $5,845,045)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $78,936,736)* (Notes 1 and 3) 102.18% $ 79,665,701
Other Assets and Liabilities, Net (2.18) (1,700,265)
------ -------------
TOTAL NET ASSETS 100.00% $ 77,965,436
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
+ THESE VARIABLE RATE SECURITIES 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 AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 766,675
Gross Unrealized Depreciation (37,710)
------------
NET UNREALIZED APPRECIATION $ 728,965
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
54
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
---------------------
55
<PAGE>
CORPORATE STOCK FUND
- ---------
INVESTMENT
ADVISOR
FUND OBJECTIVE
To seek to approximate to the extent practicable the total rate of return of
stocks composing the Standard & Poor's 500 Index.
[PHOTO] THOMAS SETO is the team leader responsible for all equity
index funds. He has managed the Corporate Stock Fund since
November 1991. Thomas received an M.B.A. from the University
of Chicago and a B.S. from the University of Washington.
- ---------------------
56
<PAGE>
CORPORATE STOCK FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE ONE YEAR TOTAL RETURN FOR THE CORPORATE STOCK FUND IN 1995?
The Fund posted a 35.99% total return, a significant improvement over 1994's
return of 0.42%. (This Fund has no sales charge.)
WHAT BROUGHT ABOUT THIS CHANGE?
There were several factors. Long-term rates, as measured by 30-year U.S.
Treasury bonds, rose sharply in 1994, then declined to 5.95% by the end of 1995,
or 1.50% lower than the previous year. Reduced bond yields made equities a
relatively more attractive investment, drawing money into the equity market.
Corporate profits also rose with technology stocks performing especially well.
Some of the technology companies in the Corporate Stock Fund which did well were
Intel (which was up 78%), Cisco Systems (up 112%), Microsoft (up 44%) and Micron
Technology (up 81%). Overall, the technology sector gained an average of 40%
during 1995, fueling much of the S&P 500's gain.
WITH THE STOCK MARKET AT OR NEAR HISTORIC HIGHS AS MEASURED BY THE S&P 500,
WOULD IT BE WISE FOR INVESTORS TO TAKE THEIR PROFITS NOW?
The decision whether or not to "take profits" depends on the goals of the
individual investor. We do believe that long-term investors will continue to
benefit from the potentially superior returns from common stocks, which have
averaged approximately 10% annually since 1926. Stocks are volatile, however,
and no one should expect 1996 to match 1995's returns. As always, an investor's
expectations should be based more on long-term averages rather than on a single
year's returns.
WHAT IS THE ADVANTAGE TO AN INVESTOR IN CHOOSING AN S&P 500 INDEX FUND?
When investors choose a fund that invests in the S&P 500 Index, they get a
broadly diversified portfolio that represents over 70% of the value of all
publicly traded U.S. stocks. Investors participate in the total value of 500
large companies spread across all major sectors of the economy, from
telecommunications and consumer goods (such as AT&T and Proctor & Gamble), to
energy and capital goods (Exxon and General Electronic). In addition, the S&P
500 has over time outperformed 75% of all equity mutual funds. (The S&P 500
Index is
INDUSTRY SECTOR BREAKDOWN FOR S&P 500 AS OF 12/31/95
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Industries 7.85%
Capital Goods -
Tech 12.56%
Capital Goods 2.76%
Consumer Goods 37.59%
Credit Cyclical 3.98%
Transportation 1.50%
Energy 9.35%
Finance 11.75%
Utilities 12.66%
</TABLE>
---------------------
57
<PAGE>
CORPORATE STOCK FUND
unmanaged, is not directly available for investment, and does not incur
expenses. Mutual funds typically incur expenses which reduce returns.)
WERE THERE ANY ADDITIONS OR DELETIONS TO THE S&P 500?
There were no surprising additions or deletions from the index during 1995
although over 30 new stocks were added and consequently over 30 were dropped.
Standard & Poor's Index Committee does not simply list the 500 largest companies
in the United States. While assets and trading volumes are important, the
Committee is trying to ensure that the index is reasonably representative of the
economy as a whole. Typically, the companies deleted had been on the index for a
long time but had not grown sufficiently and no longer contributed to the
accurate representation of the economy.
IN DECEMBER, SHAREHOLDERS APPROVED THE PROPOSAL TO ALLOW THE USE OF FUTURES
CONTRACTS. HOW WILL THEY HELP THE FUND ACHIEVE ITS INVESTMENT OBJECTIVES?
Beginning in May, futures contracts can be used by the Fund as a substitute for
a small portion of the Fund's stock holdings. Presently the Fund holds a small
money market reserve to meet shareholder redemptions. With S&P 500 futures
contracts, this money market reserve can earn a rate of return approximately
equal to that of the S&P 500 Index, permitting the Fund to more closely match
the performance of the S&P 500. In this way, the use of futures will allow the
Fund to more fully implement its investment strategy.
In addition, futures contracts will help ensure efficient trading by enabling
the Fund to more closely mirror the performance of the S&P 500 until enough
money has come into the Fund to make cost-effective, larger-block trades.
Futures will not be used to introduce leverage to the portfolio (such as by
buying securities on margin) nor as part of any "arbitrage" strategy (which
involves the simultaneous buying and selling of securities to take advantage of
price differentials) nor does the Fund intend to use futures in other than the
manner described.
SHAREHOLDERS ALSO APPROVED A REORGANIZATION TO A "MASTER/FEEDER" STRUCTURE. WHAT
DOES THIS MEAN AND WHAT IS THE BENEFIT?
"Master/feeder" is a mutual fund structure whereby a fund ( the "feeder")
invests in another fund (the "master") with the same investment objective as the
Feeder, instead of investing directly in a portfolio of securities. In the
reorganization anticipated for later this year, all investments currently held
by the Fund will be contributed to the newly created Master Portfolio. This
transfer of the fund investments will be done without cost or tax implications
to the shareholders.
The benefit of a master/feeder structure is that one master portfolio can have
multiple feeder funds. This allows the Master Portfolio to have a larger asset
base. The Master Portfolio should be able
- ---------------------
58
<PAGE>
CORPORATE STOCK FUND
to be run more efficiently and better pursue the investment strategy.
Furthermore, certain fixed costs can be spread across the larger asset base
which should eventually reduce expenses for all feeder funds.
HOW WILL THE CHANGE TO BZW BARCLAYS GLOBAL FUND ADVISORS ("BGFA") FROM WELLS
FARGO NIKKO INVESTMENT ADVISORS AFFECT THE MANAGEMENT OF THE FUND?
Barclays PLC, the parent company of BGFA, has advised the Stagecoach Board of
Directors that BGFA intends to continue providing sub-advisory services to the
Fund using the same management team, investment professionals and resources as
before the sale. They have further advised the Board that they do not anticipate
material changes to the Fund's investment philosophy, policies or strategies.
---------------------
59
<PAGE>
CORPORATE STOCK FUND
- ---------------------
PERFORMANCE AT A GLANCE
PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/25/84
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
This Fund has no sales charge 35.99% 14.15% 15.33% 14.10%
- ----------------------------------------------------------------------------------------
</TABLE>
SHARE PRICES AT NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
This Fund has no sales charge 01/01/95 12/31/95
<S> <C> <C>
- --------------------------------------------------------------------------------------
$31.42 $41.45
- --------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTIONS PAID PER SHARE IN 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
$0.591 $0.005 $0.621
- ---------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
The Corporate Stock Fund commenced operations on January 1, 1992 as successor to
the Corporate Stock Fund of the Wells Fargo Investment Trust for Retirement
Programs. The predecessor Fund's date of inception was January 25, 1984. The
performance figures shown include the performance of the predecessor Fund which
had the same investment objectives and strategies.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
The S&P 500 Index is an unmanaged index of stocks comprised of 500 industrial,
financial, utility and transportation companies. "Standard & Poor's", "S&P",
Standard & Poor's 500" and "500" are trademarks of McGraw-Hill, Inc. The Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's. Standard &
Poor's makes no representation regarding the advisability of investing in the
Fund.
- ---------------------
60
<PAGE>
CORPORATE STOCK FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH CORPORATE S & P 500
Stock Fund Index
<S> <C> <C>
Jan-84 $10,000 $10,000
Feb-84 $10,000 $9,648
Mar-84 $10,000 $9,815
Apr-84 $10,000 $9,908
May-84 $10,000 $9,360
Jun-84 $10,000 $9,563
Jul-84 $10,000 $9,444
Aug-84 $10,000 $10,488
Sep-84 $10,430 $10,490
Oct-84 $10,450 $10,531
Nov-84 $10,330 $10,413
Dec-84 $10,560 $10,687
Jan-85 $11,270 $11,520
Feb-85 $11,440 $11,661
Mar-85 $11,490 $11,668
Apr-85 $11,420 $11,657
May-85 $12,090 $12,331
Jun-85 $12,260 $12,524
Jul-85 $12,220 $12,506
Aug-85 $12,100 $12,399
Sep-85 $11,700 $12,011
Oct-85 $12,200 $12,566
Nov-85 $13,020 $13,428
Dec-85 $13,640 $14,078
Jan-86 $13,680 $14,156
Feb-86 $14,680 $15,214
Mar-86 $15,410 $16,063
Apr-86 $15,200 $15,882
May-86 $16,000 $16,727
Jun-86 $16,250 $17,010
Jul-86 $15,340 $16,059
Aug-86 $16,470 $17,249
Sep-86 $15,230 $15,823
Oct-86 $15,970 $16,736
Nov-86 $15,960 $17,143
Dec-86 $15,930 $16,705
Jan-87 $17,910 $18,955
Feb-87 $18,590 $19,704
Mar-87 $19,040 $20,272
Apr-87 $18,820 $20,092
May-87 $18,990 $20,266
Jun-87 $19,920 $21,290
Jul-87 $20,860 $22,368
Aug-87 $21,630 $23,203
Sep-87 $21,150 $22,694
Oct-87 $16,650 $17,807
Nov-87 $15,310 $16,339
Dec-87 $16,440 $17,582
Jan-88 $17,110 $18,322
Feb-88 $17,880 $19,176
Mar-88 $17,320 $18,583
Apr-88 $17,490 $18,789
May-88 $17,620 $18,952
Jun-88 $18,400 $19,821
Jul-88 $18,310 $19,746
Aug-88 $17,690 $19,076
Sep-88 $18,420 $19,889
Oct-88 $18,900 $20,442
Nov-88 $18,630 $20,151
Dec-88 $18,930 $20,503
Jan-89 $20,280 $22,004
Feb-89 $19,770 $21,456
Mar-89 $20,200 $21,956
Apr-89 $21,220 $23,096
May-89 $22,040 $24,031
Jun-89 $21,910 $23,894
Jul-89 $23,820 $26,052
Aug-89 $24,250 $26,561
Sep-89 $24,130 $26,453
Oct-89 $23,560 $25,839
Nov-89 $24,020 $26,366
Dec-89 $24,570 $26,999
Jan-90 $22,920 $25,186
Feb-90 $23,190 $25,511
Mar-90 $23,790 $26,187
Apr-90 $23,180 $25,533
May-90 $25,400 $28,023
Jun-90 $25,210 $27,834
Jul-90 $25,120 $27,745
Aug-90 $22,840 $25,237
Sep-90 $21,730 $24,008
Oct-90 $21,620 $23,906
Nov-90 $22,980 $25,451
Dec-90 $23,600 $26,161
Jan-91 $24,590 $27,300
Feb-91 $26,310 $29,952
Mar-91 $26,900 $29,961
Apr-91 $26,940 $30,032
May-91 $28,040 $31,327
Jun-91 $26,760 $29,892
Jul-91 $27,970 $31,286
Aug-91 $28,600 $32,027
Sep-91 $28,100 $31,491
Oct-91 $28,460 $31,914
Nov-91 $27,310 $30,628
Dec-91 $30,380 $34,131
Jan-92 $29,790 $33,495
Feb-92 $30,150 $33,929
Mar-92 $29,549 $33,269
Apr-92 $30,383 $34,246
May-92 $30,503 $34,414
Jun-92 $30,035 $33,902
Jul-92 $31,228 $35,287
Aug-92 $30,571 $34,564
Sep-92 $30,902 $34,970
Oct-92 $30,984 $35,091
Nov-92 $32,009 $36,286
Dec-92 $32,383 $36,731
Jan-93 $32,620 $37,038
Feb-93 $33,043 $37,543
Mar-93 $33,704 $38,335
Apr-93 $32,876 $37,409
May-93 $33,715 $38,409
Jun-93 $33,785 $38,522
Jul-93 $33,618 $38,367
Aug-93 $34,857 $39,823
Sep-93 $34,565 $39,517
Oct-93 $35,244 $40,335
Nov-93 $34,878 $39,951
Dec-93 $35,268 $40,434
Jan-94 $36,433 $41,808
Feb-94 $35,428 $40,674
Mar-94 $33,865 $38,900
Apr-94 $34,273 $39,399
May-94 $34,799 $40,045
Jun-94 $33,934 $39,064
Jul-94 $35,013 $40,347
Aug-94 $36,405 $42,001
Sep-94 $35,501 $40,974
Oct-94 $36,260 $41,895
Nov-94 $34,926 $40,369
Dec-94 $35,415 $40,968
Jan-95 $36,294 $42,029
Feb-95 $37,680 $43,666
Mar-95 $38,754 $44,952
Apr-95 $39,852 $46,275
May-95 $41,402 $48,121
Jun-95 $42,319 $49,238
Jul-95 $43,683 $50,870
Aug-95 $43,762 $50,997
Sep-95 $45,552 $53,148
Oct-95 $45,370 $52,958
Nov-95 $47,298 $55,281
Dec-95 $48,162 $56,345
</TABLE>
The accompanying chart compares the performance of the Stagecoach Corporate
Stock Fund since the inception of the predecessor Fund with the S&P 500 Index.
The charts assume a hypothetical $10,000 initial investment in the Fund and
reflects all the Fund expenses. The S&P 500 Stock Index is an unmanaged index of
500 widely held common stock representing, among others, industrial, financial,
utility and transportation companies listed or traded on national exchanges or
over-the-counter markets. Please note that the Fund is a professionally managed
mutual fund. The index presented here is not managed, does not incur expenses
and is not available directly for investment. Had this index incurred typical
operating expenses, its performance would have been lower.
---------------------
61
<PAGE>
CORPORATE STOCK FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 100.01%
56,358 Abbott Laboratories $ 1,019,272 $ 2,352,947
7,387 Advanced Micro Devices+ 154,088 121,886
8,110 Aetna Life & Casualty Co 452,260 561,618
8,323 Ahmanson (H F) & Co 161,858 220,560
7,992 Air Products & Chemicals Inc 210,794 421,578
35,263 Airtouch Communications+ 552,077 996,180
1,984 Alberto-Culver Co Class B 35,915 68,200
18,088 Albertson's Inc 211,803 594,643
16,030 Alcan Aluminium Ltd 301,253 498,934
8,044 Alco Standard Corp 151,411 367,008
3,100 Alexander & Alexander Services 80,993 58,900
4,550 Allergan Inc 119,123 147,875
20,178 Allied Signal Inc 462,851 958,455
31,956 Allstate Corp 676,976 1,314,191
13,490 Alltel Corp 415,986 397,955
12,694 Aluminum Co of America 356,664 671,195
5,903 ALZA Corp+ 161,631 146,099
8,360 Amdahl Corp+ 128,909 71,060
6,653 Amerada Hess Corp 257,068 352,609
12,958 American Brands Inc 385,882 578,251
13,282 American Electric Power Inc 384,577 537,921
34,672 American Express Corp 927,497 1,434,554
14,546 American General Corp 298,219 507,292
5,350 American Greetings Corp Class A 98,940 147,794
22,291 American Home Products Corp 1,141,387 2,162,227
33,845 American International Group Inc 1,071,403 3,130,663
10,540 American Stores Co 180,282 281,945
39,552 Ameritech Corp 1,037,070 2,333,568
19,000 Amgen Inc+ 678,695 1,128,125
35,390 Amoco Corp 1,526,829 2,543,656
15,495 AMP Inc 418,083 594,621
5,448 AMR Corp+ 331,765 404,514
2,760 Andrew Corp+ 15,529 105,570
18,136 Anheuser-Busch Inc 692,334 1,212,845
</TABLE>
- ------------------------
62
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,670 Apple Computer Inc $ 331,781 $ 276,356
12,752 Applied Materials Inc+ 350,210 502,110
37,779 Archer-Daniels-Midland Co 330,454 680,022
7,463 Armco Inc+ 66,438 43,845
2,677 Armstrong World Industries Inc 93,290 165,974
3,037 ASARCO Inc 76,480 97,184
4,550 Ashland Inc 164,508 159,819
113,496 AT & T Corp 4,052,159 7,348,866
11,420 Atlantic Richfield Corp 1,019,258 1,264,765
3,300 Autodesk Inc 65,101 113,025
10,254 Automatic Data Processing 313,790 761,360
3,800 Avery Dennison Corp 82,180 190,475
4,854 Avon Products Inc 183,974 365,870
10,071 Baker Hughes Inc 207,297 245,481
2,191 Ball Corp 71,009 60,253
3,385 Bally Entertainment Corp+ 43,632 47,390
10,485 Baltimore Gas & Electric Co 219,872 298,823
28,081 Banc One Corp 795,966 1,060,058
7,960 Bank of Boston Corp 202,615 368,150
14,287 Bank of New York Inc 490,870 696,491
26,406 BankAmerica Corp 898,775 1,709,789
5,617 Bankers Trust N Y Corp 286,700 373,531
4,012 Bard (C R) Inc 87,964 129,387
6,911 Barnett Banks Inc 256,537 407,749
25,157 Barrick Gold Corp 749,891 663,516
4,068 Bausch & Lomb Inc 121,023 161,195
19,750 Baxter International Inc 452,829 827,031
4,708 Becton Dickinson & Co 150,283 353,100
31,178 Bell Atlantic Corp 1,253,311 2,085,029
70,808 BellSouth Corp 1,574,069 3,080,148
3,744 Bemis Co Inc 45,267 95,940
3,806 Beneficial Corp 111,226 177,455
8,021 Bethlehem Steel Corp+ 126,357 112,294
7,019 Beverly Enterprises+ 87,648 74,577
8,250 Biomet Inc+ 77,285 147,469
6,076 Black & Decker Corp 127,371 214,179
7,494 Block (H & R) Inc 148,496 303,507
</TABLE>
---------------------
63
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
9,253 Boatmen's Bancshares Inc $ 228,787 $ 378,216
24,469 Boeing Co 775,030 1,917,758
3,354 Boise Cascade Corp 123,938 116,132
11,545 Boston Scientific Corp+ 257,895 565,705
2,152 Briggs & Stratton Corp 39,965 93,343
36,149 Bristol-Myers Squibb Co 1,796,725 3,104,295
1,235 Brown Group Inc 43,098 17,599
4,958 Brown-Forman Corp Class B 101,898 180,967
15,158 Browning-Ferris Industries Inc 418,278 447,161
6,869 Brunswick Corp 125,775 164,856
10,108 Burlington Northern Santa Fe 338,327 788,424
9,048 Burlington Resources Inc 411,872 355,134
5,121 Cabletron Systems Inc+ 271,260 414,801
17,814 Campbell Soup Co 406,188 1,068,840
11,000 Capital Cities/ABC Inc 429,991 1,357,125
11,100 Carolina Power & Light Co 255,154 382,950
14,206 Caterpillar Inc 369,517 834,603
1,954 Centex Corp 36,082 67,902
13,642 Central & South West Corp 262,160 380,271
4,696 Ceridian Corp+ 128,311 193,710
6,898 Champion International Corp 229,985 289,716
7,406 Charming Shoppes Inc 93,828 21,292
12,767 Chase Manhattan Corp 416,198 773,999
17,903 Chemical Banking Corp Class A 625,135 1,051,801
46,546 Chevron Corp 1,414,541 2,443,665
27,310 Chrysler Corp 830,677 1,512,291
6,174 Chubb Corp 295,018 597,335
5,449 CIGNA Corp 337,042 562,609
2,392 Cincinnati Milacron Inc 52,931 62,790
11,171 Cinergy Corp 231,638 342,112
6,900 Circuit City Stores Inc 97,524 190,613
19,564 Cisco Systems Inc+ 673,812 1,459,964
30,289 Citicorp 893,266 2,036,935
3,786 Clorox Co 131,897 271,172
7,482 Coastal Corp 182,229 278,705
89,476 Coca-Cola Co 1,708,278 6,643,593
10,373 Colgate-Palmolive Co 364,316 728,703
</TABLE>
- ------------------------
64
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,598 Columbia Gas System Inc+ $ 148,849 $ 157,862
31,700 Columbia HCA Healthcare Corp 1,134,596 1,608,775
17,114 Comcast Corp Class A 379,878 311,261
8,155 Comerica Inc 304,945 327,219
3,150 Community Psychiatric Centers+ 76,507 38,588
18,935 Compaq Computer Corp+ 267,576 908,880
17,209 Computer Associates International Inc 193,044 978,762
4,014 Computer Sciences Corp+ 91,549 281,984
16,945 ConAgra Inc 350,760 698,981
5,550 Conrail Inc 142,809 388,500
16,764 Consolidated Edison Co 407,377 536,448
3,138 Consolidated Freightways 88,140 83,157
6,699 Consolidated Natural Gas Co 265,519 303,967
7,644 Cooper Industries Inc 276,751 280,917
5,950 Cooper Tire & Rubber Co 72,873 146,519
2,759 Coors (Adolph) Co Class B 56,820 61,043
9,965 CoreStates Financial Corp 206,601 377,424
16,372 Corning Inc 386,198 523,904
10,428 CPC International Inc 309,252 715,622
2,144 Crane Co 38,873 79,060
1,836 Cray Research Inc+ 134,420 45,441
6,472 Crown Cork & Seal Co+ 127,430 270,206
14,910 CSX Corp 309,171 680,269
12,746 CUC International Inc+ 338,325 434,957
2,884 Cummins Engine Co Inc 98,104 106,708
6,593 Cyprus Amax Minerals 173,694 172,242
7,200 Dana Corp 146,761 210,600
11,302 Darden Restaurants Inc+ 72,235 134,211
2,740 Data General Corp+ 66,697 37,675
5,114 Dayton-Hudson Corp 280,430 383,550
12,083 Dean Witter Discover & Co 397,840 567,901
18,691 Deere & Co 284,093 658,858
3,684 Delta Air Lines Inc 222,492 272,156
5,896 Deluxe Corp 209,338 170,984
10,452 Detroit Edison Co 229,898 360,594
6,700 Dial Corp 108,225 198,488
10,765 Digital Equipment Corp+ 1,085,356 690,306
</TABLE>
---------------------
65
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,018 Dillard Department Stores Inc Class A $ 179,702 $ 228,513
37,266 Disney (Walt) Co 880,730 2,198,694
12,340 Dominion Resources Inc 389,741 509,025
10,954 Donnelley (R R) & Sons Co 234,445 431,314
8,104 Dover Corp 131,237 298,835
18,632 Dow Chemical Co 983,692 1,311,227
6,895 Dow Jones & Co Inc 269,269 274,938
13,039 Dresser Industries Inc 222,584 317,826
8,182 DSC Communications Corp+ 82,307 301,711
14,646 Duke Power Co 377,226 693,854
12,032 Dun & Bradstreet Corp 652,720 779,072
39,611 DuPont (E I) de Nemours 1,609,310 2,767,819
1,464 Eastern Enterprises 40,702 51,606
5,806 Eastman Chemical Co 235,283 363,601
24,376 Eastman Kodak Co 935,439 1,633,192
5,588 Eaton Corp 183,540 299,657
4,271 Echlin Inc 79,858 155,892
9,000 Echo Bay Mines Ltd 126,691 93,375
4,600 Ecolab Inc 67,006 138,000
3,726 EG & G Inc 70,052 90,356
16,032 Emerson Electric Co 662,939 1,310,616
10,172 Engelhard Corp 83,436 221,241
17,932 Enron Corp 284,041 683,658
4,829 Enserch Corp 97,628 78,471
16,184 Entergy Corp 361,559 473,382
88,536 Exxon Corp 4,121,743 7,093,947
3,978 Federal Express Corp+ 236,356 293,875
12,850 Federal Home Loan Mortgage Corp 591,618 1,072,975
19,500 Federal National Mortgage Assoc 698,584 2,420,438
3,360 Federal Paper Board Co 79,931 174,300
14,353 Federated Department Stores Inc+ 389,766 394,708
9,301 First Bank System Inc 482,553 461,562
22,894 First Chicago NBD Corp 496,485 904,313
15,913 First Data Corp 901,611 1,064,182
5,800 First Fidelity Bancorp 220,301 437,175
5,415 First Interstate Bancorp 282,645 739,148
12,200 First Union Corp 407,490 678,625
</TABLE>
- ------------------------
66
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
17,495 Fleet Financial Group Inc $ 472,581 $ 712,921
3,246 Fleetwood Enterprises Inc 49,764 83,585
2,650 Fleming Co Inc 79,714 54,656
5,926 Fluor Corp 155,829 391,116
2,567 FMC Corp+ 83,844 173,593
76,601 Ford Motor Co 1,644,168 2,221,429
2,832 Foster Wheeler Corp 62,998 120,360
13,137 FPL Group Inc 430,023 609,228
14,519 Freeport McMoRan Copper & Gold Inc Class B 395,517 408,347
5,419 Fruit of the Loom Inc Class A+ 146,408 132,088
9,949 Gannett Co Inc 443,537 610,620
10,292 Gap Inc 197,788 432,264
4,528 General Dynamics Corp 99,320 267,718
119,178 General Electric Co 3,591,586 8,580,816
11,302 General Mills Inc 338,306 652,691
53,332 General Motors Corp 2,192,469 2,819,930
8,527 General Public Utilities 256,591 289,918
5,900 General Re Corp 406,020 914,500
3,368 General Signal Corp 91,071 109,039
8,787 Genuine Parts Co 228,861 360,267
6,535 Georgia-Pacific Corp 314,323 448,464
4,200 Giant Food Inc Class A 93,509 132,300
2,450 Giddings & Lewis Inc 54,550 40,425
31,608 Gillette Co 445,193 1,647,567
4,150 Golden West Financial 103,436 229,288
1,866 Goodrich (B F) Co 88,994 127,121
10,876 Goodyear Tire & Rubber Co 302,350 493,499
6,930 Grace (W R) & Co 232,839 409,736
3,592 Grainger (W W) Inc 111,419 237,970
2,743 Great Atlantic & Pacific Tea Co 98,636 63,089
4,600 Great Lakes Chemical Corp 252,986 331,200
9,688 Great Western Financial Corp 182,775 247,044
69,031 GTE Corp 1,882,283 3,037,364
8,129 Halliburton Co 276,378 411,531
2,479 Handleman Co 34,781 14,254
5,226 Harcourt General Inc 122,772 218,839
2,200 Harland (John H) Co 53,487 45,925
</TABLE>
---------------------
67
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,466 Harnischfeger Industries Inc $ 83,563 $ 115,245
7,312 Harrah's Entertainment Inc+ 48,539 177,316
2,758 Harris Corp 91,518 150,656
6,255 Hasbro Inc 112,513 193,905
26,289 Heinz (H J) Co 489,847 870,823
1,800 Helmerich & Payne Inc 44,183 53,550
7,906 Hercules Inc 140,981 445,701
5,561 Hershey Foods Corp 172,881 361,465
36,546 Hewlett Packard Co 1,057,609 3,060,728
3,402 Hilton Hotels Corp 162,106 209,223
34,040 Home Depot Inc 619,527 1,629,665
9,890 Homestake Mining Co 151,498 154,531
9,004 Honeywell Inc 198,444 437,820
7,000 Household International Inc 185,267 413,875
18,788 Houston Industries Inc 333,674 455,609
11,528 Humana Inc+ 322,811 315,579
8,414 Illinois Tool Works Inc 198,387 496,426
8,481 Inco Ltd 178,238 281,993
7,734 Ingersoll-Rand Co 160,944 271,657
3,500 Inland Steel Industries Inc 96,637 87,938
58,760 Intel Corp 680,095 3,334,630
3,198 Intergraph Corp+ 73,412 50,369
40,613 International Business Machines Corp 5,130,767 3,726,243
7,963 International Flavors & Fragrances 161,463 382,224
18,128 International Paper Co 495,014 686,598
5,600 Interpublic Group Cos Inc 189,770 242,900
8,269 ITT Corp+ 208,454 438,257
8,269 ITT Hartford Group Inc+ 201,780 400,013
8,269 ITT Industries Inc 89,851 198,456
5,908 James River Corp 172,950 142,531
5,103 Jefferson-Pilot Corp 93,862 237,290
46,153 Johnson & Johnson 1,332,990 3,951,851
2,917 Johnson Controls Inc 99,990 200,544
2,800 Jostens Inc 72,725 67,900
32,860 K Mart Corp 636,999 238,235
2,327 Kaufman & Broad Home Corp 29,501 34,614
15,535 Kellogg Co 553,437 1,200,079
</TABLE>
- ------------------------
68
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,683 Kerr-McGee Corp $ 144,363 $ 233,871
16,872 KeyCorp 537,380 611,610
19,894 Kimberly-Clark Corp 594,554 1,646,229
2,600 King World Productions+ 57,536 101,075
3,538 Knight-Ridder Inc 185,887 221,125
8,770 Kroger Co+ 128,075 328,875
20,964 Laidlaw Inc Class B 185,377 214,881
39,374 Lilly (Eli) & Co 1,077,114 2,214,788
25,430 Limited Inc 528,042 441,846
7,380 Lincoln National Corp 230,273 396,675
5,292 Liz Claiborne Inc 158,200 146,853
14,317 Lockheed Martin Corp 471,919 1,131,043
8,426 Loews Corp 466,153 660,388
1,495 Longs Drug Stores Corp 52,580 71,573
12,268 Loral Corp 135,128 433,981
2,353 Louisiana Land & Exploration Co 87,828 100,885
7,712 Louisiana-Pacific Corp 113,173 187,016
11,410 Lowe's Co Inc 124,060 382,235
9,102 LSI Logic Corp+ 331,229 298,091
1,634 Luby's Cafeterias Inc 31,203 36,357
5,454 Mallinckrodt Group Inc 108,953 198,389
4,401 Manor Care Inc 66,875 154,035
8,904 Marriott International 223,705 340,578
5,250 Marsh & McLennan Companies Inc 382,622 465,938
11,486 Masco Corp 343,213 360,373
15,801 Mattel Inc 191,841 485,881
17,810 May Co Department Stores Co 420,711 752,473
7,668 Maytag Corp 166,796 155,277
10,550 MBNA Corp 138,895 389,031
3,834 McDermott International Inc 91,708 84,348
49,466 McDonald's Corp 771,300 2,232,153
8,063 McDonnell Douglas Corp 193,424 741,796
3,608 McGraw-Hill Inc 231,461 314,347
48,342 MCI Communications 655,037 1,262,935
3,859 Mead Corp 129,578 201,633
16,504 Medtronic Inc 174,523 922,161
10,088 Mellon Bank Corp 326,271 542,230
</TABLE>
---------------------
69
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
7,524 Melville Corp $ 290,217 $ 231,363
2,662 Mercantile Stores Co Inc 109,958 123,118
88,137 Merck & Co Inc 2,291,967 5,795,008
1,996 Meredith Corp 34,497 83,583
12,513 Merrill Lynch & Co Inc 276,545 638,163
14,694 Micron Technology Inc 274,546 582,250
42,255 Microsoft Corp+ 2,345,122 3,707,876
3,200 Millipore Corp 60,361 131,600
29,913 Minnesota Mining & Manufacturing Co 1,103,938 1,981,736
28,240 Mobil Corp 1,484,159 3,162,880
8,178 Monsanto Co 394,209 1,001,805
7,100 Moore Corp Ltd 173,870 132,238
13,428 Morgan (J P) & Co Inc 647,091 1,077,597
5,574 Morgan Stanley Group 553,530 449,404
10,556 Morton International Inc 160,122 378,697
42,072 Motorola Inc 862,897 2,398,104
595 NACCO Industries Inc Class A 22,972 33,023
4,850 Nalco Chemical Co 132,131 146,106
10,437 National City Corp 291,132 345,726
8,801 National Semiconductor+ 114,894 195,822
3,427 National Service Industries Inc 85,887 110,949
19,326 NationsBank 713,060 1,345,573
5,397 Navistar International Corp+ 176,884 56,669
6,953 New York Times Co Class A 216,481 205,983
11,300 Newell Co 176,199 292,388
6,682 Newmont Mining Corp 155,402 302,361
10,267 Niagara Mohawk Power Corp 178,464 98,820
3,600 NICOR Inc 74,500 99,000
10,200 Nike Inc Class B 146,360 710,175
8,800 NorAm Energy Corp 166,878 78,100
5,850 Nordstrom Inc 181,670 236,925
9,355 Norfolk Southern Corp 370,715 742,553
4,833 Northern States Power Co 172,773 237,421
18,087 Northern Telecom Ltd 461,858 777,741
3,520 Northrop Grumman Corp 132,591 225,280
25,158 Norwest Corp 411,900 830,214
26,268 Novell Inc+ 639,937 374,319
</TABLE>
- ------------------------
70
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,226 Nucor Corp $ 107,353 $ 355,660
30,520 NYNEX Corp 1,082,039 1,648,080
22,676 Occidental Petroleum Corp 634,817 484,700
3,450 Ogden Corp 86,269 73,744
10,860 Ohio Edison Co 223,107 255,210
1,960 ONEOK Inc 32,832 44,835
31,000 Oracle Systems Corp+ 237,393 1,313,625
7,472 Oryx Energy Co+ 198,205 99,938
1,429 Outboard Marine Corp 41,404 29,116
3,593 Owens Corning Fiberglass+ 88,704 161,236
2,785 PACCAR Inc 92,334 117,318
5,993 Pacific Enterprises 248,508 169,302
30,248 Pacific Gas & Electric Co 741,154 858,287
30,572 Pacific Telesis Group 611,272 1,027,984
20,250 PacifiCorp 386,685 430,313
8,150 Pall Corp 94,211 219,031
10,712 Panhandle Eastern Corp 251,153 298,597
5,203 Parker Hannifin Corp 111,470 178,203
15,818 PECO Energy Co 349,094 476,517
16,138 Penney (J C) Co Inc 445,029 768,572
3,267 Pennzoil Co 221,042 138,031
2,494 Peoples Energy Corp 57,576 79,185
4,400 Pep Boys-Manny Moe & Jack 73,331 112,750
56,214 Pepsico Inc 1,097,358 3,140,957
2,971 Perkin-Elmer Corp 98,164 112,155
45,260 Pfizer Inc 1,017,588 2,851,380
35,967 Pharmacia and Upjohn Inc+ 1,108,654 1,393,721
4,920 Phelps Dodge Corp 135,192 306,270
59,951 Philip Morris Co Inc 2,229,602 5,425,566
18,619 Phillips Petroleum Co 361,032 635,373
6,028 Pioneer Hi Bred International Inc 224,365 335,308
10,776 Pitney Bowes Inc 258,496 506,472
2,983 Pittston Services Group 41,210 93,592
17,063 Placer Dome Inc 260,343 411,645
16,400 PNC Bank Corp 376,773 528,900
3,209 Polaroid Corp 111,008 152,026
2,071 Potlatch Corp 73,527 82,840
</TABLE>
---------------------
71
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
11,276 PP & L Resources Inc $ 292,194 $ 281,900
13,970 PPG Industries Inc 326,229 639,128
9,929 Praxair Inc 151,743 333,863
4,500 Premark International Inc 87,651 227,813
13,884 Price/Costco Inc+ 269,412 211,731
48,906 Procter & Gamble Co 1,503,274 4,059,198
6,740 Providian Corp 155,865 274,655
17,371 Public Services Enterprise Group 466,516 531,987
1,938 Pulte Corp 31,111 65,165
9,580 Quaker Oats Co 227,504 330,510
7,570 Ralston-Purina Group 279,715 472,179
3,100 Raychem Corp 130,918 176,313
17,376 Raytheon Co 347,831 821,016
5,628 Reebok International Ltd 119,204 158,991
4,036 Republic New York Corp 236,772 250,737
4,520 Reynolds Metals Co 200,689 255,945
5,938 Rite Aid Corp 111,483 203,377
2,744 Roadway Services Inc 129,310 134,113
15,474 Rockwell International Corp 406,766 818,188
4,809 Rohm & Haas Co 200,455 309,579
6,139 Rowan Co Inc+ 50,918 60,623
38,246 Royal Dutch Petroleum Co 2,504,178 5,397,467
11,304 Rubbermaid Inc 213,327 288,252
2,770 Russell Corp 58,324 76,868
3,900 Ryan's Family Steak House+ 34,638 27,300
5,656 Ryder System Inc 150,251 139,986
8,966 SAFECO Corp 156,198 309,327
4,100 Safety-Kleen Corp 106,229 64,063
7,568 Salomon Inc 273,068 268,664
6,411 Santa Fe Energy Resources Inc+ 39,779 61,706
9,383 Santa Fe Pacific Gold Corp 163,023 113,769
34,476 Sara Lee Corp 518,474 1,098,923
43,416 SBC Communication Inc 1,028,984 2,496,420
31,812 SCEcorp 561,119 564,663
26,236 Schering-Plough Corp 456,227 1,436,421
17,231 Schlumberger Ltd 804,656 1,193,247
5,496 Scientific-Atlanta Inc 34,139 82,440
</TABLE>
- ------------------------
72
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
26,624 Seagram Co Ltd $ 540,374 $ 921,856
27,791 Sears Roebuck & Co 550,030 1,083,849
7,451 Service Corp International 149,356 327,844
1,662 Shared Medical System Corp 47,469 90,371
6,086 Sherwin Williams Co 115,074 248,005
3,052 Shoney's Inc+ 26,936 31,283
3,512 Sigma-Aldrich Corp 131,156 173,844
11,442 Silicon Graphics Inc+ 384,914 314,655
2,906 Snap-On Inc 98,931 131,497
6,110 Sonat Inc 115,205 217,669
47,482 Southern Co 662,747 1,169,244
10,274 Southwest Airlines Co 293,429 238,871
1,465 Springs Industries Inc Class A 49,682 60,614
24,850 Sprint Corp 841,051 990,894
4,950 St Jude Medical Inc+ 97,824 212,850
6,006 St Paul Co Inc 166,836 334,084
3,155 Stanley Works 109,910 162,483
6,841 Stone Container Corp+ 153,211 98,339
3,550 Stride Rite Corp 56,185 26,625
5,407 Sun Co Inc 174,247 148,017
13,600 Sun Microsystems Inc+ 182,758 620,500
8,150 SunTrust Banks Inc 213,345 558,275
4,852 Super Value Inc 128,611 152,838
12,942 Sysco Corp 175,154 420,615
8,218 Tandem Computers Inc+ 188,553 87,316
4,659 Tandy Corp 195,182 193,349
2,357 Tektronix Inc 72,956 115,788
46,488 Tele-Communication Inc Class A+ 608,673 923,949
3,965 Teledyne Inc 118,605 101,603
6,264 Tellabs Inc+ 299,921 231,768
3,996 Temple-Inland Inc 134,187 176,324
14,310 Tenet Healthcare Corp+ 218,765 296,933
12,714 Tenneco Inc 589,451 630,932
18,792 Texaco Inc 885,595 1,475,172
13,460 Texas Instruments Inc 365,095 696,555
16,112 Texas Utilities Co 564,019 662,606
6,096 Textron Inc 198,180 411,480
</TABLE>
---------------------
73
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,440 Thomas & Betts Corp $ 82,671 $ 106,200
27,512 Time Warner Inc 678,932 1,042,017
7,952 Times Mirror Co Class A 201,185 269,374
2,188 Timken Co 63,479 83,691
5,160 TJX Companies Inc 103,556 97,395
5,100 Torchmark Corp 157,269 230,775
19,650 Toys R Us Inc+ 430,123 427,388
4,865 Transamerica Corp 197,144 354,537
22,758 Travelers Inc 692,690 1,430,909
4,661 Tribune Co 190,421 284,904
2,074 Trinova Corp 57,925 59,368
4,668 TRW Inc 239,373 361,770
10,846 Tyco International Inc 256,141 386,389
10,777 U.S. Bancorp 250,047 362,377
10,925 U.S. Healthcare Inc 512,354 508,013
2,457 U.S. Life Corp 46,896 73,403
33,532 U.S. West Inc 650,141 1,198,769
33,532 U.S. West Media Group+ 443,928 637,108
15,294 Unicom Corp 520,956 500,879
11,365 Unilever NV 776,417 1,599,624
4,982 Union Camp Corp 204,228 237,268
9,729 Union Carbide Corp 122,759 364,838
7,300 Union Electric Co 247,612 304,775
14,666 Union Pacific Corp 580,828 967,956
12,273 Unisys Corp+ 312,986 69,036
12,465 United Healthcare Corp 576,352 816,458
4,050 United States Surgical 391,308 86,569
8,778 United Technologies Corp 450,724 832,813
17,560 Unocal Corp 368,813 511,435
5,227 UNUM Corp 296,084 287,485
4,510 USAir Group Inc+ 143,605 59,758
7,925 USF & G Corp 235,001 133,734
13,940 UST Inc 181,351 465,248
20,422 USX - Marathon Group 489,709 398,229
5,890 USX - US Steel Group 159,625 181,118
2,871 Varity Corp+ 92,441 106,586
4,566 VF Corp 179,012 240,857
</TABLE>
- ------------------------
74
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
25,711 Viacom Inc Class B+ $ 860,062 $ 1,218,059
12,193 Wachovia Corp 477,362 557,830
163,714 Wal Mart Stores Inc 2,169,075 3,663,101
17,480 Walgreen Co 201,538 522,215
9,668 Warner Lambert Co 449,512 939,005
3,427 Wells Fargo & Co 271,721 740,232
7,259 Wendy's International Inc 80,354 154,254
3,801 Western Atlas Inc+ 109,984 191,951
27,840 Westinghouse Electric Corp 721,158 459,360
7,189 Westvaco Corp 142,656 199,495
14,462 Weyerhaeuser Co 462,341 625,482
5,254 Whirlpool Corp 206,860 279,776
7,438 Whitman Corp 87,012 172,934
3,936 Willamette Industries Inc 269,485 221,400
7,228 Williams Co Inc 144,134 317,129
10,736 Winn-Dixie Stores Inc 167,065 395,890
34,536 WMX Technologies Inc 903,267 1,031,763
9,498 Woolworth Corp 242,314 123,474
6,475 Worthington Industries Inc 74,454 134,761
8,310 Wrigley (Wm) Jr Co 122,921 436,275
7,644 Xerox Corp 551,932 1,047,179
1,985 Yellow Corp 63,459 24,564
------------ --------------
TOTAL COMMON STOCKS $188,182,426 $ 327,237,612
</TABLE>
---------------------
75
<PAGE>
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
YIELD
TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 0.37%
$ 85,000 U.S. Treasury Bills 4.74 % 02/08/96 $ 84,524
28,000 U.S. Treasury Bills 4.81 02/22/96 27,809
1,096,000 U.S. Treasury Bills 5.03 03/07/96 1,086,362
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 1,198,695
(Cost $1,198,083)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $189,380,509)* (Notes 1 and 3) 100.38% $ 328,436,307
Other Assets and Liabilities, Net (0.38) (1,228,437)
------ -------------
TOTAL NET ASSETS 100.00% $ 327,207,870
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $146,636,551
Gross Unrealized Depreciation (7,580,753)
------------
NET UNREALIZED APPRECIATION $139,055,798
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
76
<PAGE>
DIVERSIFIED INCOME FUND
- ---------
INVESTMENT
ADVISOR
FUND OBJECTIVE
To seek current income and a growing stream of income over time, consistent with
preservation of capital.
[PHOTO] BRIAN MULLIGAN assumed responsibility for the management of
the Diversified Income Fund on October 1, 1995. He is vice
president and manager of the San Francisco Investment Office
and co-manager of the Wells Fargo Core Equities Group. He
graduated from Skidmore College with a B.S. in Business
Management. Brian 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 Analyst
Society. He is also manager of the Growth and Income Fund.
---------------------
77
<PAGE>
DIVERSIFIED INCOME FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE ONE YEAR TOTAL RETURN FOR THE DIVERSIFIED INCOME FUND IN 1995?
The Fund posted a 30.17% total return for Class A shares, a significant
improvement over 1994's return of 0.08%. (Return figures exclude sales charge.)
WHAT BROUGHT ABOUT THIS CHANGE?
The stock market had a very strong year fueled in part by strong corporate
earnings, and by the bond market. Bonds experienced strong price increases as
long-term interest rates declined from approximately 8% to 6%, as measured by
30-year Treasury bonds. Inflation remained low throughout the year and many
companies took advantage of the conditions to pursue growth. In contrast, the
stock market was hurt in 1994 as interest rates increased rapidly and price-
to-earnings ratios shrank.
THE FEDERAL RESERVE LOWERED THE FEDERAL FUNDS TARGET RATE BY 0.25% IN JULY AND
BY ANOTHER 0.25% IN DECEMBER. HOW DID THIS AFFECT THE FUND'S PERFORMANCE?
The two decreases in the federal funds target rate in the second half of 1995
were a strong positive for the stock market which traditionally does well in
response to falling rates. We currently expect rate decreases to continue in the
first half of 1996.
WHAT'S YOUR OUTLOOK FOR THE STOCK MARKET IN THE COMING YEAR?
We certainly do not expect a repeat of 1995's equity performance, but we do
believe that the economy is still moving forward enough to realize approximately
a 10% rise in S&P 500 estimated earnings. The interest rate environment will be
a key factor again. As long as the Fed is lowering short-term rates, and
long-term rates remain in the 6% range or lower, this should be a positive
backdrop for stocks. We do expect to see profit growth slow during 1996 and to
see more earnings disappointments among cyclical companies sensitive to consumer
spending, such as the housing and automotive industries. In response we expect
to invest in more stable growth companies.
WHAT SIGNIFICANT CHANGES DID YOU MAKE TO THE FUND'S PORTFOLIO?
While there were significant changes made in the Fund on an issue-by-issue basis
during 1995, the basic approach to managing the Fund remained unchanged. We have
continued to emphasize financial stocks because they have traditionally done
well in response to lower interest rates. We have de-emphasized utilities
because we feel they have weak growth potential and we expect the regulatory
environment to be difficult for them. We believe Real Estate Investment Trusts
(REIT's), such as
- ---------------------
78
<PAGE>
DIVERSIFIED INCOME FUND
Spieker Properties, Inc., will offer relatively higher yields than utilities and
better returns for the future.
HOW DO YOU CHOOSE STOCKS FOR THIS PORTFOLIO?
There are several criteria involved. We focus on companies with strong
management teams, corporations that have grown earnings and dividends
consistently, and businesses that appear to have a competitive edge. In
addition, we consider current stock yields, projected price-earnings ratio and
projected growth to find companies which have a reasonable upside potential
based on their intrinsic value in comparison to the current stock price.
HOW WOULD A POTENTIAL CORRECTION IN THE STOCK MARKET AFFECT YOUR STRATEGY FOR
MANAGING THE FUND?
Certainly corrections can occur at any time. In recent years, however,
corrections have been occurring in specific sectors rather than in the overall
market. Our disciplined valuation approach has limited our exposure to sectors
that have become overvalued. Selecting companies with high quality, consistent
growth and dividends should limit the downside exposure. If we become more
cautious about the market, we will increase our cash reserves.
---------------------
79
<PAGE>
DIVERSIFIED INCOME FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 11/18/92
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR INCEPTION
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
With Maximum 4.5% Sales Charge 24.28% 11.82% 12.41%
- ---------------------------------------------------------------------------------------
Without Sales Charge 30.17% 13.53% 14.07%
- ---------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR
1/1/95
AVERAGE ANNUAL TOTAL RETURNS INCEPTION
<S> <C>
- -------------------------------------------------------------------------------------
With Maximum 3.0% Contingent Deferred Sales Charge1 26.64%
- -------------------------------------------------------------------------------------
Without Contingent Deferred Sales Charge 29.64%
- -------------------------------------------------------------------------------------
1Assumes redemption on 12/29/95.
</TABLE>
SHARE PRICES AT NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/95 12/31/95
<S> <C> <C>
- --------------------------------------------------------------------------------------
Class A Shares $10.76 $13.34
- --------------------------------------------------------------------------------------
Class B Shares $10.00 $12.49
- --------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTIONS PAID PER SHARE IN 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Class A Share $0.350 $0.181 $0.100
- ---------------------------------------------------------------------------------------
Class B Share $0.195 $0.169 $0.093
- ---------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
80
<PAGE>
DIVERSIFIED INCOME FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 STAGECOACH DIVERSIFIED
Index Fund Income Fund Class A Shares
<S> <C> <C>
Inception $10,000 $9,550
Nov-92 $10,000 $9,636
Dec-92 $10,123 $9,847
Jan-93 $10,207 $9,952
Feb-93 $10,346 $9,962
Mar-93 $10,565 $10,213
Apr-93 $10,309 $10,068
May-93 $10,585 $10,357
Jun-93 $10,616 $10,370
Jul-93 $10,574 $10,419
Aug-93 $10,975 $10,835
Sep-93 $10,891 $10,747
Oct-93 $11,116 $11,089
Nov-93 $11,010 $10,884
Dec-93 $11,143 $11,062
Jan-94 $11,522 $11,421
Feb-94 $11,209 $11,211
Mar-94 $10,720 $10,708
Apr-94 $10,858 $10,849
May-94 $11,036 $11,050
Jun-94 $10,766 $10,862
Jul-94 $11,119 $11,207
Aug-94 $11,575 $11,602
Sep-94 $11,292 $11,392
Oct-94 $11,546 $11,351
Nov-94 $11,125 $10,943
Dec-94 $11,290 $11,070
Jan-95 $11,583 $11,142
Feb-95 $12,034 $11,616
Mar-95 $12,388 $11,960
Apr-95 $12,753 $12,249
May-95 $13,262 $12,570
Jun-95 $13,569 $12,690
Jul-95 $14,019 $12,993
Aug-95 $14,054 $13,087
Sep-95 $14,647 $13,558
Oct-95 $14,595 $13,411
Nov-95 $15,235 $14,115
Dec-95 $15,528 $14,410
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE DIVERSIFIED INCOME FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Diversified
Income Fund Class A shares since its inception with the S&P 500 Index. The chart
assumes a hypothetical $10,000 initial investment in the Fund and reflects all
expenses and assumes the maximum initial sales charge of 4.5%. The S&P 500 Index
is an unmanaged index of 500 widely held common stocks representing, among
others, industrial, financial, utility and transportation companies listed or
traded on national exchanges or over-the-counter markets. Please note that the
Fund is a professionally managed mutual fund. The index presented here is not
managed, does not incur expenses and is not available directly for investment.
Had this index incurred operating expenses, its performance would have been
lower.
---------------------
81
<PAGE>
DIVERSIFIED INCOME FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 92.76%
AUTOMOBILE & RELATED - 5.42%
72,000 Dana Corp $ 1,864,823 $ 2,106,000
86,777 Ford Motor Co 2,459,974 2,516,533
------------ --------------
$ 4,324,797 $ 4,622,533
BASIC INDUSTRIES - 12.60%
17,000 Dow Chemical Co $ 1,078,205 $ 1,196,375
29,000 Kimberly-Clark Corp 1,430,287 2,399,750
72,000 McDermott International Inc 1,238,324 1,584,000
24,000 Olin Corp 1,613,272 1,782,000
25,000 Tecumseh Products Co Class A 1,270,938 1,293,750
120,000 Worthington Industries Inc 2,252,695 2,497,500
------------ --------------
$ 8,883,721 $ 10,753,375
COMPUTER SYSTEMS - 2.69%
25,000 International Business Machines Corp $ 2,303,175 $ 2,293,750
CONGLOMERATES - 2.45%
29,000 General Electric Co $ 1,411,847 $ 2,088,000
ELECTRICAL EQUIPMENT - 6.11%
55,000 AMP Inc $ 2,015,781 $ 2,110,625
20,000 Motorola Inc 1,140,350 1,140,000
38,000 Texas Instruments Inc 2,099,290 1,966,500
------------ --------------
$ 5,255,421 $ 5,217,125
ENERGY & RELATED - 9.01%
18,000 Atlantic Richfield Corp $ 1,954,333 $ 1,993,500
11,500 Royal Dutch Petroleum Co 1,158,636 1,622,938
60,000 Sonat Inc 1,711,692 2,137,500
75,200 Ultramar Corp 1,891,909 1,936,400
------------ --------------
$ 6,716,570 $ 7,690,338
</TABLE>
- ------------------------
82
<PAGE>
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
FINANCE & RELATED - 16.83%
25,000 Advanta Corp+ $ 925,000 $ 959,375
30,000 American Health Properties Inc 627,112 645,000
20,250 Aon Corp 734,916 1,009,969
34,000 Bankers Trust N Y Corp 2,295,658 2,261,000
50,913 Bear Stearns & Co Inc 810,130 1,011,896
54,000 Block (H & R) Inc 2,027,078 2,187,000
60,000 Household International Inc 2,571,385 3,547,500
70,000 Mercury Financial Corp 932,953 927,500
20,000 Post Properties Inc 626,600 637,500
30,000 Smith (Chars E) Residential Realty Inc 757,400 708,750
18,500 Spieker Properties Inc 374,715 464,810
------------ --------------
$ 12,682,947 $ 14,360,300
FOOD & RELATED - 6.37%
10,000 Anheuser-Busch Inc $ 604,938 $ 668,750
64,500 Heinz (H J) Co 1,851,428 2,136,563
15,000 Philip Morris Co Inc 819,010 1,357,500
38,000 UST Inc 1,135,553 1,268,266
------------ --------------
$ 4,410,929 $ 5,431,079
MANUFACTURING PROCESSING - 4.44%
32,000 Eastman Kodak Co $ 1,567,713 $ 2,144,000
35,000 Pitney Bowes Inc 1,149,606 1,645,000
------------ --------------
$ 2,717,319 $ 3,789,000
PHARMACEUTICALS - 4.55%
20,000 American Home Products Corp $ 1,289,524 $ 1,940,000
20,000 Warner Lambert Co 1,806,000 1,942,500
------------ --------------
$ 3,095,524 $ 3,882,500
</TABLE>
---------------------
83
<PAGE>
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
PUBLISHING & MEDIA - 4.05%
15,000 McGraw-Hill Inc $ 1,151,504 $ 1,306,875
42,000 Readers Digest Association Class A 1,772,303 2,152,500
------------ --------------
$ 2,923,807 $ 3,459,375
RETAIL & RELATED - 4.45%
25,500 Avon Products Inc $ 1,515,653 $ 1,922,063
20,000 Intimate Brands Inc+ 340,000 300,000
33,000 Penney (J C) Co Inc 1,538,140 1,571,625
------------ --------------
$ 3,393,793 $ 3,793,688
TELECOMMUNICATIONS - 8.14%
80,000 Alltel Corp $ 1,986,089 $ 2,360,000
80,000 Comsat Corp 1,510,074 1,490,000
55,000 GTE Corp 1,736,150 2,420,000
20,000 Pacific Telesis Group 633,950 672,500
------------ --------------
$ 5,866,263 $ 6,942,500
TRANSPORTATION - 2.71%
35,000 Union Pacific Corp $ 2,158,340 $ 2,310,000
UTILITIES - 2.94%
22,000 Duke Power Co $ 885,128 $ 1,042,250
40,400 Royal PTT Nederland ADR+ 1,430,564 1,464,500
------------ --------------
$ 2,315,692 $ 2,506,750
TOTAL COMMON STOCKS $ 68,460,145 $ 79,140,313
</TABLE>
- ------------------------
84
<PAGE>
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
PREFERRED STOCKS - 2.62%
CONVERTIBLES - 2.62%
20,000 Atlantic Richfield Co expires 9/15/1997 $ 459,100 $ 470,000
35,000 Browning-Ferris Industries Inc expires 06/30/1998+ 1,279,050 1,098,125
16,000 First Chicago NBD Corp expires 02/15/1997 299,280 288,000
10,000 Sprint Corp expires 03/31/2000 318,750 380,000
------------ --------------
TOTAL PREFERRED STOCKS $ 2,356,180 $ 2,236,125
</TABLE>
---------------------
85
<PAGE>
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 5.10%
U.S. TREASURY BILLS - 2.32%
$ 2,000,000 U.S. Treasury Bills 5.06 %(F) 03/14/96 $ 1,980,280
REPURCHASE AGREEMENTS - 2.78%
$ 2,373,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 2,373,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 4,353,280
(Cost $4,351,704)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $75,168,029)* (Notes 1 and 3) 100.48% $ 85,729,718
Other Assets and Liabilities, Net (0.48) (413,679)
------ -------------
TOTAL NET ASSETS 100.00% $ 85,316,039
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 11,197,586
Gross Unrealized Depreciation (635,897)
------------
NET UNREALIZED APPRECIATION $ 10,561,689
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
86
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
---------------------
87
<PAGE>
GINNIE MAE FUND
- ---------
INVESTMENT
ADVISORS
FUND OBJECTIVE
To seek long-term total return through preserving capital and earning high
interest income.
[PHOTO] PAUL SINGLE assumed responsibility for co-management of the
Ginnie Mae Fund on May 1, 1995. He has managed taxable bond
portfolios for over a decade and has specific experience in
mortgage-backed securities. Paul has a B.S. from Springfield
College.
[PHOTO] SCOTT SMITH assumed responsibility for co-management of the
Ginnie Mae Fund on May 1, 1995. He is also the co-manager of
the Short-Intermediate U.S. Government Income Fund. Scott
holds a B.A. from the University of San Diego and is a
Chartered Financial Analyst.
[PHOTO] MARK KRASCHEL 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.
- ---------------------
88
<PAGE>
GINNIE MAE FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE ONE YEAR TOTAL RETURN FOR THE GINNIE MAE FUND IN 1995?
The Fund posted a 17.53% total return for Class A shares, a significant
improvement over 1994's return of -3.23%. (Return figures exclude sales charge.)
WHAT BROUGHT ABOUT THIS CHANGE?
With the decline in interest rates during 1995, we increased the Fund's
duration. DURATION measures a security's sensitivity to interest rates. Since
the price of bonds generally rises as interest rates fall, the longer duration
enabled the Fund to benefit from 1995's falling rates. We also reduced the
Fund's concentration in mortgage-backed securities to decrease its exposure to
PREPAYMENT RISK, which increases as homeowners refinance their mortgages to take
advantage of lower interest rates. At year end, our portfolio was composed of
approximately 77.50% mortgage-backed securities, with most of the remainder in
Treasury securities not subject to prepayment risk. By contrast, during 1994's
rising rate environment, when prepayment risk was lower, we held as much as
approximately 90% of the portfolio in mortgage-backed securities.
HOW DO YOU EXPECT PREPAYMENTS OF MORTGAGES TO AFFECT THE PERFORMANCE OF THE FUND
IN 1996 IF INTEREST RATES CONTINUE TO FALL?
We expect prepayments to increase in 1996. In response, we will continue to
decrease the concentration of mortgage-backed securities in the portfolio to a
level between 65-75%. The mortgage-backed securities we will keep should have
relatively low prepayment risk because the underlying mortgages are either
older, where the homeowners have already lived through a period of low interest
rates and chosen not to refinance, or the mortgages are brand new so that
refinancing would not be economically viable unless interest rates declined
again substantially.
PORTFOLIO COMPOSITION AS OF 12/31/95
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Ginnie Maes (Government National Mortgage Associa-
tion) 71.85%
U.S. Treasury Bonds 21.88%
Fannie Maes (Federal National Mortgage Association) 5.94%
Short-term Instruments 0.33%
</TABLE>
HAS THE FEDERAL BUDGET DEBATE AFFECTED THE GINNIE MAE FUND?
The budget debate has had little or no direct effect on the Fund or impact on
market prices for Government National Mortgage Association Securities (Ginnie
Maes). The United States Government guarantees the payment of interest and the
repayment of principal of Ginnie Maes with its full faith and credit. They are
not obligations of the U.S. Government, however, and are not as sensitive to the
debate as are Treasury-issued securities.
---------------------
89
<PAGE>
GINNIE MAE FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/3/91
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
With Maximum 4.5% Sales Charge 12.24% 5.21% 7.28% 7.28%
- ----------------------------------------------------------------------------------------
Without Sales Charge 17.53% 6.83% 8.27% 8.27%
- ----------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR
1/1/95
AVERAGE ANNUAL TOTAL RETURNS INCEPTION
<S> <C>
- -------------------------------------------------------------------------------------
With Maximum 3.0% Contingent Deferred Sales Charge1 13.69%
- -------------------------------------------------------------------------------------
Without Contingent Deferred Sales Charge 16.69%
- -------------------------------------------------------------------------------------
1Assumes redemption on 12/29/95.
</TABLE>
SHARE PRICES AT NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/95 12/31/95
<S> <C> <C>
- --------------------------------------------------------------------------------------
Class A Shares $10.18 $11.15
- --------------------------------------------------------------------------------------
Class B Shares $10.00 $10.97
- --------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTIONS PAID PER SHARE IN 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDENDS
<S> <C>
- -------------------------------------------------------------------------------------
Class A Shares $0.763
- -------------------------------------------------------------------------------------
Class B Shares $0.659
- -------------------------------------------------------------------------------------
</TABLE>
30-DAY YIELDS AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEC YIELD
<S> <C>
- -------------------------------------------------------------------------------------
Class A Shares 5.80%
- -------------------------------------------------------------------------------------
Class B Shares 5.41%
- -------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
Yields, calculated as required by the SEC, are based on earnings of the Fund's
portfolio, less expenses, during the 30 days ending December 31, 1995.
The Ginnie Mae Fund commenced operations on January 1, 1992 as successor to the
Ginnie Mae Fund of the Wells Fargo Investment Trust for Retirement Programs. The
predecessor Fund's date of inception was January 3, 1991. The performance
figures shown include the performance of the predecessor Fund which had the same
investment objectives and strategies.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns and yields would have been lower.
- ---------------------
90
<PAGE>
GINNIE MAE FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH GINNIE MAE LEHMAN BROTHERS
Fund Class A Shares Ginnie Mae Index
<S> <C> <C>
Inception $9,550 $10,000
Jan-91 $9,712 $10,149
Feb-91 $9,722 $10,233
Mar-91 $9,770 $10,307
Apr-91 $9,808 $10,404
May-91 $9,903 $10,489
Jun-91 $9,903 $10,509
Jul-91 $10,056 $10,689
Aug-91 $10,247 $10,888
Sep-91 $10,419 $11,079
Oct-91 $10,581 $11,262
Nov-91 $10,648 $11,340
Dec-91 $10,916 $11,604
Jan-92 $10,771 $11,460
Feb-92 $10,841 $11,580
Mar-92 $10,773 $11,514
Apr-92 $10,830 $11,620
May-92 $11,034 $11,825
Jun-92 $11,165 $11,969
Jul-92 $11,355 $12,074
Aug-92 $11,487 $12,236
Sep-92 $11,589 $12,345
Oct-92 $11,469 $12,252
Nov-92 $11,510 $12,309
Dec-92 $11,654 $12,465
Jan-93 $11,850 $12,622
Feb-93 $11,914 $12,750
Mar-93 $11,956 $12,820
Apr-93 $11,996 $12,866
May-93 $12,036 $12,955
Jun-93 $12,214 $13,060
Jul-93 $12,286 $13,115
Aug-93 $12,392 $13,147
Sep-93 $12,422 $13,158
Oct-93 $12,452 $13,180
Nov-93 $12,406 $13,162
Dec-93 $12,492 $13,284
Jan-94 $12,596 $13,389
Feb-94 $12,467 $13,322
Mar-94 $12,136 $12,962
Apr-94 $11,995 $12,873
May-94 $12,022 $12,910
Jun-94 $11,969 $12,891
Jul-94 $12,214 $13,142
Aug-94 $12,219 $13,183
Sep-94 $12,050 $12,997
Oct-94 $12,008 $12,976
Nov-94 $11,977 $12,940
Dec-94 $12,088 $13,084
Jan-95 $12,319 $13,355
Feb-95 $12,670 $13,707
Mar-95 $12,723 $13,774
Apr-95 $12,897 $13,978
May-95 $13,280 $14,404
Jun-95 $13,413 $14,502
Jul-95 $13,401 $14,533
Aug-95 $13,554 $14,683
Sep-95 $13,683 $14,826
Oct-95 $13,836 $14,948
Nov-95 $14,015 $15,120
Dec-95 $14,207 $15,313
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE GINNIE MAE FUND WILL VARY FROM THE RESULTS
SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Ginnie Mae
Fund Class A shares since the inception of the predecessor Fund with the Lehman
Brothers Ginnie Mae Index. The chart assumes a hypothetical $10,000 initial
investment in the Fund and reflects all operating expenses and assumes the
maximum initial sales charge of 4.5%. The Lehman Brothers Ginnie Mae Index is an
unmanaged, broad-based index of Ginnie Mae securities. Please note that the Fund
is a professionally managed mutual fund. The index presented here is not
managed, does not incur expenses and is not available directly for investment.
Had this index incurred typical operating expenses, its performance would have
been lower.
---------------------
91
<PAGE>
GINNIE MAE FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST
PRINCIPAL SECURITY NAME RATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 77.51%
$ 5,000,000 Federal National Mortgage Assoc 5.94 % $ 4,995,000
12/12/05
1,450,537 Government National Mortgage Assoc 6.50 1,438,744
05/15/24
5,203,687 Government National Mortgage Assoc 6.75 5,216,643
03/15/22 to 09/15/28
1,609,329 Government National Mortgage Assoc 6.88 1,620,868
01/15/29
11,154,887 Government National Mortgage Assoc 7.00 11,290,718
01/15/29 to 02/15/29
3,322,733 Government National Mortgage Assoc 7.13 3,376,661
01/15/29
4,978,365 Government National Mortgage Assoc 7.50 5,121,493
10/15/25
6,696,093 Government National Mortgage Assoc 8.00 6,978,055
05/15/22 to 11/15/22
4,151,987 Government National Mortgage Assoc 8.43 4,359,587
08/01/27
11,736,423 Government National Mortgage Assoc 8.50 12,329,209
10/15/16 to 04/15/27
4,061,817 Government National Mortgage Assoc 8.75 4,244,598
01/15/28
23,222,790 Government National Mortgage Assoc 9.00 24,777,965
03/15/05 to 01/15/23
4,126,515 Government National Mortgage Assoc 9.50 4,417,708
10/15/09 to 10/15/21
7,211,936 Government National Mortgage Assoc 10.00 7,962,912
11/15/09 to 03/15/21
3,523,306 Government National Mortgage Assoc 10.50 3,941,933
09/15/15 to 08/15/20
13,892,359 Government National Mortgage Assoc II 7.50 14,187,572
11/20/25
</TABLE>
- ------------------------
92
<PAGE>
GINNIE MAE FUND
<TABLE>
<CAPTION>
INTEREST
PRINCIPAL SECURITY NAME RATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES (CONTINUED)
$11,043,625 Government National Mortgage Assoc II 8.00 % $ 11,437,544
03/20/23 to 08/20/25
6,781,466 Government National Mortgage Assoc II 10.00 7,379,049
12/20/13 to 06/20/22
2,833,917 Government National Mortgage Assoc II 11.00 3,180,165
08/20/19 to 08/20/20
--------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 138,256,424
(Cost $137,231,669)
U.S. TREASURY SECURITIES - 21.88%
$ 2,000,000 U.S. Treasury Bonds 6.88 % $ 2,255,620
08/15/25
7,500,000 U.S. Treasury Bonds 7.25 8,564,028
05/15/16
5,000,000 U.S. Treasury Bonds 7.63 6,114,050
02/15/25
3,000,000 U.S. Treasury Notes 6.50 3,195,930
08/15/05
17,000,000 U.S. Treasury Notes 7.25 18,904,510
08/15/04
--------------
TOTAL U.S. TREASURY SECURITIES $ 39,034,138
(Cost $37,619,062)
SHORT-TERM INSTRUMENTS - 0.33%
$ 587,000 Goldman Sachs Pooled Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 5.75 $ 587,000
01/02/96
(Cost $587,000)
</TABLE>
---------------------
93
<PAGE>
GINNIE MAE FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $175,437,731)* (Notes 1 and 3) 99.72% $ 177,877,562
Other Assets and Liabilities, Net 0.28 507,085
------ -------------
TOTAL NET ASSETS 100.00% $ 178,384,647
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 2,735,525
Gross Unrealized Depreciation (295,694)
------------
NET UNREALIZED APPRECIATION $ 2,439,831
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
94
<PAGE>
GROWTH AND INCOME FUND
- ---------
INVESTMENT
ADVISORS
FUND OBJECTIVE
To seek current income and long-term capital appreciation.
[PHOTO] BRIAN MULLIGAN assumed responsibility for the management of
the Growth and Income Fund on October 1, 1995. He is vice
president and manager of the San Francisco Investment Office
and co-manager of the Wells Fargo Core Equities Group. He
graduated from Skidmore College with a B.S. in Business
Management. He 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 Analyst
Society. Brian is also manager of the Diversified Income
Fund.
---------------------
95
<PAGE>
GROWTH AND INCOME FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE ONE YEAR TOTAL RETURN FOR THE GROWTH AND INCOME FUND IN 1995?
The Fund posted a 28.90% total return for Class A shares, a significant
improvement over 1994's return of -0.29%. (Return figures exclude sales
charges.)
WHAT BROUGHT ABOUT THIS CHANGE?
The reduction in interest rates at the beginning of the year marked the
beginning of a generally outstanding period for stocks. Many of the companies
whose stocks the Fund held in the portfolio took advantage of moderate economic
growth and low inflation by expanding their businesses and posted solid gains.
In addition, lower returns on bonds increases investment in the stock market
which added fuel to 1995's market performance.
ON WHAT SECTORS OF THE MARKET DID YOU FOCUS IN 1995?
The technology and financial sectors were both emphasized. Among technology
stocks we held were companies like Intel, Digital Equipment, Compaq Computers
and Ericsson (a telephone equipment provider). In December, as technology shares
pulled back, we took advantage of what we felt were attractive prices to
purchase Cisco Systems, a systems integrator, and Komag, an information storage
company.
Financial stocks also performed well, enjoying the traditional benefit of
interest rate reductions and from a consolidation of financial services. Several
large companies will begin to benefit in 1996 from a national and global
strategy after solidifying their balance sheets during 1993-94. For example,
Household International, our largest position, is reaping big rewards from an
expansion of consumer credit opportunities and an extension of its popular
credit card business.
DO YOU EXPECT TO FOCUS IN THE TECHNOLOGY AND FINANCIAL SERVICES SECTORS AGAIN IN
1996?
Both sectors are currently expected to do well in 1996. We have also added to
our consumer sector by increasing weighting in pharmaceutical, biotechnology and
drug retailing. Energy stocks will likely play a strong role as the cold winter,
higher speed limits (which drive higher fuel consumption), and further
restructuring at major oil firms continue. Special situations will also likely
be a big part of the 1996 portfolio. Diversified companies like CUC
International, Thermo Electron, Danaher and Grace don't fit well into economic
sectors but have attractive earnings, solid management teams and strong industry
fundamentals which make them attractive.
CAN YOU DISCUSS THE INVESTMENT STRATEGY WITH WHICH YOU MANAGE THIS FUND?
This Fund is actively managed using a "core and trading" approach. The core,
about 70% of the Fund, is invested in solid, long-term holdings with good
- ---------------------
96
<PAGE>
GROWTH AND INCOME FUND
earnings outlooks, strong management teams and attractive appreciation
potential. The other 30% is trading-oriented and relies on recognizing those
companies which have a greater value than investors currently realize. We hold
these companies for a shorter time and look for earnings surprises,
announcements about restructuring, new product introductions, or other positive
news to drive up their value. The overall strategy is to expose the Fund to
approximately the same volatility as the S&P 500, but to shoot for greater
long-range appreciation.
WITH THE STOCK MARKET AT OR NEAR HISTORIC HIGHS AS MEASURED BY THE S&P 500,
WOULD IT BE WISE FOR INVESTORS TO TAKE THEIR PROFITS NOW?
While capturing profits from time to time makes sense, as of January 1996, it
appears this bull market may still have a way to go. If current economic
conditions prevail, we believe that the economy is still moving forward strongly
enough to realize approximately a 10% rise in the S&P 500. Rather than being
overvalued, and therefore on the verge of a decline in value, we believe the
stock market is showing what we consider a reasonable expectation of return for
1996. We expect some volatility, and we recognize that economic indicators can
change the investment outlook quickly, but over the course of the year, we
expect that stocks should outperform cash investments.
---------------------
97
<PAGE>
GROWTH AND INCOME FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 8/2/90
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
With Maximum 4.5% Sales Charge 23.14% 10.01% 13.52% 13.00%
- ----------------------------------------------------------------------------------------
Without Sales Charge 28.90% 11.70% 14.56% 13.97%
- ----------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR
1/1/95
AVERAGE ANNUAL TOTAL RETURNS INCEPTION
<S> <C>
- -------------------------------------------------------------------------------------
With Maximum 3.0% Contingent Deferred Sales Charge1 25.47%
- -------------------------------------------------------------------------------------
Without Contingent Deferred Sales Charge 28.47%
- -------------------------------------------------------------------------------------
1Assumes redemption on 12/29/95.
</TABLE>
SHARE PRICES AT NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/95 12/31/95
<S> <C> <C>
- --------------------------------------------------------------------------------------
Class A Shares $14.10 $17.26
- --------------------------------------------------------------------------------------
Class B Shares $10.00 $12.29
- --------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTIONS PAID PER SHARE IN 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Class A Share $0.194 $0.319 $0.387
- ---------------------------------------------------------------------------------------
Class B Share $0.051 $0.227 $0.275
- ---------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
The Growth and Income Fund commenced operations on January 1, 1992 as successor
to the Select Stock Fund of the Wells Fargo Investment Trust for Retirement
Programs. The predecessor Fund's date of inception was August 2, 1990. The
performance figures shown include the performance of the predecessor Fund which
had the same investment objectives and strategies. Certain of the investment
restrictions of the Stagecoach Growth and Income Fund differ somewhat from those
of the predecessor fund.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
98
<PAGE>
GROWTH AND INCOME FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH GROWTH AND S & P 500
Income Fund Class A Shares Index Fund
<S> <C> <C>
Inception $9,550 $10,000
Aug-90 $9,607 $9,096
Sep-90 $9,626 $8,653
Oct-90 $9,674 $8,617
Nov-90 $9,712 $9,174
Dec-90 $9,827 $9,429
Jan-91 $10,199 $2,840
Feb-91 $10,581 $10,543
Mar-91 $10,706 $10,799
Apr-91 $10,744 $10,824
May-91 $11,183 $11,291
Jun-91 $10,639 $10,774
Jul-91 $11,183 $11,276
Aug-91 $11,460 $11,543
Sep-91 $11,345 $11,350
Oct-91 $11,546 $11,503
Nov-91 $11,049 $11,039
Dec-91 $12,262 $12,302
Jan-92 $12,205 $12,073
Feb-92 $12,434 $12,229
Mar-92 $12,189 $11,991
Apr-92 $12,516 $12,343
May-92 $12,680 $12,404
Jun-92 $12,377 $12,219
Jul-92 $12,966 $12,718
Aug-92 $12,715 $12,458
Sep-92 $12,904 $12,604
Oct-92 $13,146 $12,648
Nov-92 $13,641 $13,079
Dec-92 $13,911 $13,239
Jan-93 $14,262 $13,350
Feb-93 $13,961 $13,532
Mar-93 $14,238 $13,817
Apr-93 $13,896 $13,483
May-93 $14,218 $13,844
Jun-93 $13,952 $13,885
Jul-93 $13,851 $13,829
Aug-93 $14,559 $14,353
Sep-93 $14,555 $14,243
Oct-93 $15,052 $14,538
Nov-93 $14,697 $14,399
Dec-93 $15,086 $14,573
Jan-94 $15,669 $15,069
Feb-94 $15,423 $14,660
Mar-94 $14,540 $14,021
Apr-94 $14,715 $14,201
May-94 $14,705 $14,434
Jun-94 $14,371 $14,080
Jul-94 $14,814 $14,542
Aug-94 $15,288 $15,138
Sep-94 $15,096 $14,768
Oct-94 $15,220 $15,100
Nov-94 $14,755 $14,550
Dec-94 $15,041 $14,766
Jan-95 $15,116 $15,149
Feb-95 $15,841 $15,738
Mar-95 $16,179 $16,202
Apr-95 $16,414 $16,679
May-95 $17,174 $17,344
Jun-95 $17,588 $17,747
Jul-95 $18,103 $18,335
Aug-95 $18,383 $18,381
Sep-95 $19,014 $19,156
Oct-95 $18,421 $19,088
Nov-95 $19,154 $19,925
Dec-95 $19,388 $20,309
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE GROWTH AND INCOME FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Growth and
Income Fund Class A shares since the inception of the predecessor Fund with the
S&P 500 Index. The chart assumes a hypothetical $10,000 initial investment in
the Fund and reflects all operating expenses and assumes the maximum initial
sales charge of 4.5%. The S&P 500 Index is an unmanaged index of 500 widely held
common stocks representing, among others, industrial, financial, utility and
transportation companies listed on national exchanges. Please note that the Fund
is a professionally managed mutual fund. The index presented here is not
managed, does not incur expenses and is not directly available for investment.
Had this index incurred operating expenses, its performance would have been
lower.
---------------------
99
<PAGE>
GROWTH AND INCOME FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 97.72%
ADVERTISING - 1.93%
94,800 Omnicom Group $ 1,883,897 $ 3,531,300
AUTOMOBILE & RELATED - 4.46%
100,000 Danaher Corp $ 2,926,379 $ 3,175,000
80,981 Ford Motor Co 1,994,402 2,348,449
50,000 General Motors Corp 2,343,075 2,643,750
------------ --------------
$ 7,263,856 $ 8,167,199
BASIC INDUSTRIES - 8.51%
57,000 Grace (W R) & Co $ 3,425,069 $ 3,370,125
43,570 Kimberly-Clark Corp 2,688,459 3,605,418
27,000 Monsanto Co 2,018,925 3,307,500
81,000 United Healthcare Corp 4,058,126 5,305,500
------------ --------------
$ 12,190,579 $ 15,588,543
BIOTECHNOLOGY - 1.36%
40,000 Genzyme Corp - General Division+ $ 2,381,668 $ 2,495,000
COMMERCIAL SERVICES - 3.23%
60,000 CUC International Inc+ $ 1,987,340 $ 2,047,500
88,000 Service Corp International 3,559,502 3,872,000
------------ --------------
$ 5,546,842 $ 5,919,500
COMPUTER SYSTEMS - 10.89%
61,000 Cisco Systems Inc+ $ 2,999,969 $ 4,552,125
68,800 Compaq Computer Corp+ 2,599,978 3,302,400
40,000 Digital Equipment Corp+ 1,717,548 2,565,000
50,000 Hewlett Packard Co 4,306,696 4,187,500
82,000 Komag Inc+ 5,116,832 3,782,250
40,000 Reynolds & Reynolds Co Class A 1,559,619 1,555,000
------------ --------------
$ 18,300,642 $ 19,944,275
</TABLE>
- ------------------------
100
<PAGE>
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
CONGLOMERATES - 1.78%
56,000 Harsco Corp $ 2,331,065 $ 3,255,000
ELECTRICAL EQUIPMENT - 5.32%
56,000 AMP Inc $ 1,793,740 $ 2,149,000
40,000 Motorola Inc 2,383,200 2,280,000
67,000 Thermedics Inc+ 1,361,880 1,859,250
25,200 Xerox Corp 2,463,595 3,452,400
------------ --------------
$ 8,002,415 $ 9,740,650
ENERGY & RELATED - 9.45%
30,000 Amoco Corp $ 2,151,150 $ 2,156,250
76,000 Anadarko Petroleum Corp 3,302,052 4,113,500
25,000 Mobil Corp 2,187,350 2,800,000
98,700 Sonat Inc 2,982,761 3,516,188
44,000 Texaco Inc 3,012,028 3,454,000
50,000 Union Pacific Resources Group Inc+ 1,050,000 1,268,750
------------ --------------
$ 14,685,341 $ 17,308,688
FINANCE & RELATED - 12.62%
55,000 BankAmerica Corp $ 2,767,155 $ 3,561,250
43,500 Citicorp 1,788,959 2,925,375
102,500 Household International Inc 3,739,481 6,060,313
114,000 MBNA Corp 4,068,393 4,203,750
240,600 Mercury Financial Corp 2,042,418 3,187,950
36,000 Patriot American Hospitality Inc+ 903,496 927,000
20,000 Post Properties Inc 621,600 637,500
80,000 Schwab (Charles) Corp 1,634,640 1,610,000
------------ --------------
$ 17,566,142 $ 23,113,138
</TABLE>
---------------------
101
<PAGE>
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD & RELATED - 5.57%
52,000 Anheuser-Busch Inc $ 3,199,518 $ 3,477,500
90,000 Heinz (H J) Co 2,633,117 2,981,250
41,399 Philip Morris Co Inc 2,674,194 3,746,610
------------ --------------
$ 8,506,829 $ 10,205,360
GENERAL BUSINESS & RELATED - 1.54%
62,000 Alco Standard Corp $ 2,112,700 $ 2,828,750
MANUFACTURING PROCESSING - 4.17%
62,900 Allied Signal Inc $ 2,104,238 $ 2,987,750
38,300 Eastman Kodak Co 1,982,139 2,566,100
40,000 Thermo Electron Corp+ 1,984,140 2,080,000
------------ --------------
$ 6,070,517 $ 7,633,850
MATERIAL MANUFACTURING - 2.47%
127,000 Tyco International Inc $ 2,624,884 $ 4,524,373
PHARMACEUTICALS - 5.16%
90,000 Smithkline Beecham Plc ADR (UK) $ 4,882,086 $ 4,995,000
46,000 Warner Lambert Co 3,690,661 4,467,750
------------ --------------
$ 8,572,747 $ 9,462,750
RETAIL & RELATED - 7.61%
103,400 Lowe's Co Inc $ 3,380,172 $ 3,463,900
170,000 Mattel Inc 4,969,825 5,227,500
153,200 Rite Aid Corp 3,708,593 5,247,100
------------ --------------
$ 12,058,590 $ 13,938,500
SEMICONDUCTORS - 2.79%
90,000 Intel Corp $ 3,444,728 $ 5,107,500
</TABLE>
- ------------------------
102
<PAGE>
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS - 6.70%
91,000 Alltel Corp $ 2,086,944 $ 2,684,500
50,000 AT & T Corp 3,191,300 3,237,500
95,000 Comsat Corp 2,050,074 1,769,375
235,000 Ericsson Telefonaktiebolaget L M Class B ADR 4,755,450 4,582,500
------------ --------------
$ 12,083,768 $ 12,273,875
TRANSPORTATION - 2.16%
60,000 Union Pacific Corp $ 3,761,582 $ 3,960,000
------------ --------------
TOTAL COMMON STOCKS $149,388,792 $ 178,998,251
PREFERRED STOCKS - 0.79%
CONVERTIBLES - 0.79%
80,000 First Chicago NBD Corp expires 02/15/1997 $ 1,535,911 $ 1,440,000
</TABLE>
---------------------
103
<PAGE>
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 0.72%
CONVERTIBLE CORPORATE BONDS - 0.72%
$ 1,300,000 Magna International Inc 5.00 % 10/15/02 $ 1,326,000
(Cost $1,300,000)
SHORT-TERM INSTRUMENTS - 1.09%
REPURCHASE AGREEMENTS - 1.09%
$ 1,998,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 1,998,000
(Cost $1,998,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $154,222,703)* (Notes 1 and 3) 100.32% $ 183,762,251
Other Assets and Liabilities, Net (0.32) (592,229)
------ -------------
TOTAL NET ASSETS 100.00% $ 183,170,022
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 32,357,188
Gross Unrealized Depreciation (2,817,640)
------------
NET UNREALIZED APPRECIATION $ 29,539,548
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
104
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
---------------------
105
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
- ---------
INVESTMENT
ADVISORS
FUND OBJECTIVE
To provide investors with current income while preserving capital, by investing
in short- to intermediate-term securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities.
[PHOTO] MARK KRASCHEL has been responsible for the daily management
of the Short-Intermediate U.S. Government Income Fund since
its inception in October 1993. 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] SCOTT SMITH assumed responsibility for co-management of the
Short- Intermediate U.S. Government Income Fund in 1993.
Scott is also the co-manager of the Ginnie Mae Fund. He
holds a B.A. from the University of San Diego and is a
Chartered Financial Analyst.
- ---------------------
106
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE ONE YEAR TOTAL RETURN FOR THE SHORT-INTERMEDIATE U.S. GOVERNMENT
INCOME FUND IN 1995?
The Fund posted a 12.67% total return, a significant improvement over 1994's
return of -1.42% (Return figures exclude sales charges.)
WHAT BROUGHT ABOUT THIS CHANGE?
A sluggish economy and low inflation fueled a strong rally in the bond market in
1995. Interest rates declined by over 2% for intermediate securities, which had
a positive impact on the Fund's total return because the resale value of U.S.
Government securities generally rises as rates drop. The Fund was well
positioned to capture profits available due to price appreciation by selling
securities. Those profits, as well as the interest earnings from the securities,
resulted in a handsome total return for the year. In contrast, rising interest
rates in 1994 had a negative impact on bond prices.
WHAT WAS THE EFFECT OF THE REORGANIZATION OF THE STAGECOACH VARIABLE RATE
GOVERNMENT FUND'S ASSETS INTO THE FUND?
Shareholders in the Variable Rate Government Fund approved a proposal in August
1995 to combine the Fund's assets with the Short-Intermediate U.S. Government
Income Fund. The reorganization took advantage of the Funds' similar investment
objectives and was completed within a month of approval. The principal effect
for the Short-Intermediate Fund has been that the additional assets have enabled
us to achieve some economies of scale and make larger securities purchases. Some
of the Variable Rate Government Fund's assets were sold shortly after the
reorganization to purchase intermediate term Treasury securities. Other assets,
particularly mortgage-backed securities, were added to the portfolio.
WHAT WILL YOUR STRATEGY BE IN EARLY 1996?
We expect further declines in interest rates. We anticipate having between 25%
and 30% of the portfolio invested in mortgage-backed securities and the balance
in Treasury instruments with maturities of up to four years.
HOW HAS THE FEDERAL BUDGET DEBATE AFFECTED THE SHORT-INTERMEDIATE U.S.
GOVERNMENT INCOME FUND?
The federal budget debate has made investors in long-term government bonds a bit
more cautious. With the perception that these bonds have become more risky,
investors now require an additional yield of about 0.25% to hold long bonds.
However, when compared to the impact of inflation fears -- which generally add a
1% to 2% additional yield to long bonds -- the 0.25% additional yield is
relatively small. Shorter-term obligations, which are the focus of this Fund,
have been much less affected by this perception. We remain convinced that U.S.
Government securities are the benchmark for credit quality. As always, we will
continue to monitor all developments in Washington D.C. that might affect the
Fund.
---------------------
107
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
- ---------------------
PERFORMANCE AT A GLANCE
PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 10/27/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------------------------
With Maximum 3.0% Sales Charge 9.30% 3.72%
- --------------------------------------------------------------------------------------
Without Sales Charge 12.67% 5.20%
- --------------------------------------------------------------------------------------
</TABLE>
SHARE PRICES AT NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/95 12/31/95
<S> <C> <C>
- --------------------------------------------------------------------------------------
$9.39 $10.00
- --------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTIONS PAID PER SHARE IN 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDENDS
<S> <C>
- -------------------------------------------------------------------------------------
$0.552
- -------------------------------------------------------------------------------------
</TABLE>
30-DAY YIELD AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEC YIELD
<S> <C>
- -------------------------------------------------------------------------------------
4.95%
- -------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
Yields, calculated as required by the SEC, are based on earnings of the Fund's
portfolio, less expenses, during the 30 days ending December 31, 1995.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns and yields would have been lower.
- ---------------------
108
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH
SHORT-INTERMEDIATE LEHMAN BROTHERS
U.S. Government Income Fund U.S. Treasury Note Index
<S> <C> <C>
Oct-93 $9,700 $10,000
Nov-93 $9,715 $9,950
Dec-93 $9,745 $9,991
Jan-94 $9,807 $10,090
Feb-94 $9,748 $9,948
Mar-94 $9,695 $9,804
Apr-94 $9,661 $9,741
May-94 $9,689 $9,748
Jun-94 $9,697 $9,750
Jul-94 $9,756 $9,877
Aug-94 $9,753 $9,906
Sep-94 $9,632 $9,824
Oct-94 $9,626 $9,827
Nov-94 $9,570 $9,782
Dec-94 $9,608 $9,813
Jan-95 $9,759 $9,973
Feb-95 $9,937 $10,163
Mar-95 $9,988 $10,219
Apr-95 $10,074 $10,337
May-95 $10,300 $10,629
Jun-95 $10,361 $10,699
Jul-95 $10,364 $10,704
Aug-95 $10,434 $10,790
Sep-95 $10,495 $10,862
Oct-95 $10,597 $10,983
Nov-95 $10,710 $11,117
Dec-95 $10,825 $11,228
</TABLE>
The accompanying chart compares the performance of the Stagecoach
Short-Intermediate U.S. Government Income Fund since its inception with the
Lehman Brothers U.S. Treasury Note Index. The chart assumes a hypothetical
$10,000 initial investment in the Fund and reflects all expenses and assumes the
maximum initial sales charge of 3.0%. The Lehman Brothers U.S. Treasury Note
Index is an unmanaged index of U.S. Treasury 2 - 10 year notes. Please note that
the Fund is a professionally managed mutual fund. The index presented here is
not managed, does not incur expenses and is not available directly for
investment. Had this index incurred typical operating expenses, its performance
would have been lower.
---------------------
109
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 2.58%
$ 1,000,000 Ford Credit Auto Loan Master Trust 6.50 % 08/15/02 $ 1,028,580
(Cost $1,005,925)
U.S. GOVERNMENT AGENCY SECURITIES - 30.95%
ADJUSTABLE RATE MORTGAGES - 13.13%
$ 181,245 FHLMC #390208 (COFI) 6.38 % 07/01/19 $ 182,604
45,186 FHLMC #400177 (CMT) 7.50 12/01/17 46,202
73,489 FHLMC #755102 (CMT) 7.36 06/01/18 74,820
258,376 FHLMC #755163 (CMT) 8.19 10/01/19 267,097
561,928 FHLMC #755188 (CMT) 7.68 09/01/20 578,083
308,732 FNMA #61151 (CMT) 7.84 09/01/26 318,186
141,702 FNMA #70032 (CMT) 7.56 02/01/17 144,447
1,355,982 FNMA #70277 (CMT) 8.05 05/01/19 1,393,272
119,914 FNMA #70381 (COFI) 6.76 08/01/19 120,607
379,394 FNMA #70615 (CMT) 7.48 05/01/19 387,456
103,775 FNMA #70911 (COFI) 6.52 06/01/19 105,202
496,168 FNMA #90031 (CMT) 7.52 01/01/20 506,092
129,885 FNMA #118479 (COFI) 6.39 02/01/19 129,885
958,386 FNMA #190826 (CMT) 7.54 03/01/24 988,930
--------------
$ 5,242,883
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.14%
$ 2,000,000 FNMA Global Bond 6.85 % 05/26/00 $ 2,053,440
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.84%
$ 1,018,078 GNMA #356587 8.00 % 06/15/23 $ 1,060,715
980,000 GNMA #395783 8.00 05/15/25 1,021,033
980,000 GNMA #403212 8.00 09/15/24 1,021,033
1,185,651 GNMA II #234031 8.00 08/20/17 1,223,935
--------------
$ 4,326,716
</TABLE>
- ------------------------
110
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES (CONTINUED)
REAL ESTATE MORTGAGE INVESTMENT CONDUITS - 1.84%
$ 664,496 FHLMC 1554-LA 5.58 % 08/15/08 $ 649,332
87,203 FNMA 1993-G19 7.50 04/25/23 87,666
--------------
$ 736,998
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 12,360,037
(Cost $12,329,796)
U.S. TREASURY SECURITIES - 74.85%
U.S. TREASURY BONDS - 7.77%
$ 3,000,000 U.S. Treasury Bonds 6.25 % 05/31/00 $ 3,100,770
U.S. TREASURY NOTES - 67.08%
$ 5,000,000 U.S. Treasury Notes 5.25 % 12/31/97 $ 5,008,600
5,000,000 U.S. Treasury Notes 5.50 12/31/00 5,025,800
8,000,000 U.S. Treasury Notes 6.38 01/15/00 8,306,240
7,000,000 U.S. Treasury Notes 7.13 09/30/99 7,422,170
1,000,000 U.S. Treasury Notes 7.50 12/31/96 1,021,870
--------------
$ 26,784,680
TOTAL U.S. TREASURY SECURITIES $ 29,885,450
(Cost $29,157,322)
SHORT-TERM INSTRUMENTS - 2.80%
REPURCHASE AGREEMENTS - 2.80%
$ 1,119,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 1,119,000
(Cost $1,119,000)
</TABLE>
---------------------
111
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $43,612,043)* (Notes 1 and 3) 111.18% $ 44,393,067
Other Assets and Liabilities, Net (11.18) (4,464,909)
------ -------------
TOTAL NET ASSETS 100.00% $ 39,928,158
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 816,895
Gross Unrealized Depreciation (35,871)
------------
NET UNREALIZED APPRECIATION $ 781,024
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
112
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
---------------------
113
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- ---------
INVESTMENT
ADVISORS
FUND OBJECTIVE
To seek to achieve over the long-term a high level of total return, including
net realized and unrealized capital gains, consistent with reasonable risk.
[PHOTO] JANICE DERINGER has co-managed the U.S. Government
Allocation Fund since May 1990. She received her B.S. in
Economics and Political Science from Willamette University
and an M.B.A. in Finance from the University of California
at Berkeley. Janice is responsible for the overall
implementation of asset allocation strategies and also
co-manages the Asset Allocation Fund.
[PHOTO] ROSS SAKAMOTO has co-managed the U.S. Government Allocation
Fund since January 1991 after service as a mutual fund
accountant. He received his B.S. in Business Administration
from the University of California at Berkeley. Ross is
responsible for the daily implementation of the asset
allocation strategy. He also co-manages the Asset Allocation
Fund.
- ---------------------
114
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE ONE YEAR TOTAL RETURN FOR THE U.S. GOVERNMENT ALLOCATION FUND IN
1995?
The Fund posted a 14.91% total return for Class A shares, a significant
improvement over 1994's return of -6.99% (Return figures exclude sales charges.)
WHAT BROUGHT ABOUT THIS CHANGE?
The decline in interest rates seen in 1995 had a positive impact on the Fund's
total return during the year because the value of U.S. Government securities
generally rises as rates drop. Price appreciation, along with the interest from
the bonds, resulted in a handsome total return for the year. In contrast, rising
interest rates in 1994 had a negative impact on bond prices.
THE FEDERAL RESERVE LOWERED THE FEDERAL FUNDS TARGET RATE BY 0.25% IN JULY AND
BY ANOTHER 0.25% IN DECEMBER. HOW DID THIS AFFECT THE BOND MARKET?
In early July, the market rallied somewhat after the rate cut of 0.25%. However,
later that same month, the bond market reacted negatively to fears of inflation.
The December rate cut strengthened the bond market decisively and brought the
30-year bond yield to its lowest level in two years.
DID THE RELATIONSHIP BETWEEN LONG-TERM AND SHORT-TERM INTEREST RATES CHANGE
DURING 1995?
The relationship between short and long-term interest rates changed
significantly during the year primarily due to reports of low inflation and
slowing growth. At the start of the year, long-term interest rates were more
than 2% higher than short-term rates. The higher yields for longer-term bonds
reflected investor concerns about higher inflation rates in the future. As these
concerns diminished throughout the first half of the year, longer-term rates
declined more than short-term rates to bring the interest rate difference down
to about 1% where it remained for the remainder of 1995.
HOW DID THE PORTFOLIO'S ALLOCATION CHANGE DURING THE YEAR IN RESPONSE TO CHANGES
IN INTEREST RATES?
The Fund invests in three different maturity classes: U.S. Treasury bills, U.S.
Treasury notes, and U.S. Treasury bonds. At the start of the year, the Fund was
primarily invested in intermediate-term notes, since this sector provided the
most attractive yields when adjusted for risk. As yields began to decline during
1995, the allocation changed to 80% notes and 20% bills. In May, the allocation
shifted to 70% bills and 30% long bonds. Finally, the allocation changed once
more in October to 79% bills and 21% bonds.
HOW HAS THE FEDERAL BUDGET DEBATE AFFECTED CONFIDENCE IN U.S. GOVERNMENT
SECURITIES?
The federal budget debate has made investors in long-term government bonds a bit
more cautious. With the perception that these bonds have become more risky,
investors now require an additional yield of about 0.25% to hold long bonds.
However, when compared to the impact of inflation fears--which generally add a
---------------------
115
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
1% to 2% additional yield to long bonds--the 0.25% additional yield is
relatively small. We remain convinced that U.S. Government securities are the
benchmark for credit quality. We will continue to monitor all developments in
Washington D.C. that might affect the Fund.
WILL THE FUND ALTER ITS INVESTMENT STRATEGY IN 1996 IF RATES SHOULD FALL
FURTHER?
The Stagecoach U.S. Government Allocation Fund is designed to take advantage of
the relative yield differences between long bonds, intermediate notes and money
market securities in relation to their risks. The model seeks to position the
Fund to make the optimal allocation between these securities. If and when rates
decline again in 1996, the Fund should be well positioned to take advantage of
the potential returns while controlling the overall level of risk. The strategy
does not depend on expectations of interest rate increases or decreases in any
given year.
IN DECEMBER, SHAREHOLDERS APPROVED THE PROPOSAL TO ALLOW THE USE OF FUTURES
CONTRACTS. HOW WILL THEY HELP THE FUND ACHIEVE ITS INVESTMENT OBJECTIVES?
A portion of the Fund's assets are generally held in liquid money market
instruments in order to facilitate redemption requests. This means, for example,
that when the recommended mix includes only long-term bonds, the Fund can not
fully implement its investment strategy. In this example, if the bond market
rallies, the money market reserve will not increase in value on pace with bonds,
holding down the Fund's perfomance. The addition of futures contracts, set to
begin in May, is meant to limit the performance impact of money market holdings.
In addition, futures will help ensure efficient trading by enabling the Fund to
more closely mirror bond performance until enough money has come into the Fund
to make cost-effective, larger-block trades.
SHAREHOLDERS ALSO APPROVED A REORGANIZATION TO A "MASTER/FEEDER" STRUCTURE. WHAT
DOES THIS MEAN AND WHAT IS THE BENEFIT?
"Master/feeder" is a mutual fund structure whereby a fund ( the "feeder")
invests in another fund (the "master") with the same investment objective as the
feeder, instead of investing directly in a portfolio of securities. In the
reorganization anticipated for later this year, all investments currently held
by the Fund will be contributed to the newly created Master Portfolio. This
transfer of the Fund's investments will be done without cost or tax implications
to the shareholders.
The benefit of a master/feeder structure is that one master portfolio can have
multiple feeder funds. This allows the Master Portfolio to have a larger asset
base. The Master Portfolio should be able to be run more efficiently and better
pursue the investment strategy. Furthermore, certain fixed costs can be spread
across the larger asset base which should eventually reduce expenses for all
Feeder Funds.
- ---------------------
116
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
HOW WILL THE CHANGE TO BZW BARCLAYS GLOBAL FUND ADVISORS ("BGFA") FROM WELLS
FARGO NIKKO INVESTMENT ADVISORS AFFECT THE MANAGEMENT OF THE FUND?
Barclays PLC, the parent company of BFGA, has advised the Stagecoach Fund Board
of Directors that it intends to continue providing sub-advisory services to the
Fund using the same management team, investment professionals and resources as
before the change. They have further advised the Board that they do not
anticipate material changes to the Fund's investment philosophy, policies or
strategies.
---------------------
117
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 3/31/87
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
With Maximum 4.5% Sales Charge 9.73% 6.23% 8.36% 7.93%
- ----------------------------------------------------------------------------------------
Without Sales Charge 14.91% 7.88% 9.36% 8.50%
- ----------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR
1/1/95
AVERAGE ANNUAL TOTAL RETURNS INCEPTION
<S> <C>
- -------------------------------------------------------------------------------------
With Maximum 3.0% Contingent Deferred Sales Charge1 11.11%
- -------------------------------------------------------------------------------------
Without Contingent Deferred Sales Charge 14.11%
- -------------------------------------------------------------------------------------
1Assumes redemption on 12/29/95.
</TABLE>
SHARE PRICES AT NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
01/01/95 12/31/95
<S> <C> <C>
- --------------------------------------------------------------------------------------
Class A Shares $13.76 $14.98
- --------------------------------------------------------------------------------------
Class B Shares $10.00 $10.91
- --------------------------------------------------------------------------------------
</TABLE>
TOTAL DIVIDENDS PAID PER SHARE IN 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Class A Shares $0.788
- -------------------------------------------------------------------------------------
Class B Shares $0.487
- -------------------------------------------------------------------------------------
</TABLE>
30-DAY YIELDS AS OF 12/31/95
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEC YIELD
<S> <C>
- -------------------------------------------------------------------------------------
Class A Shares 4.24%
- -------------------------------------------------------------------------------------
Class B Shares 3.80%
- -------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
Yields, calculated as required by the SEC, are based on earnings of the Fund's
portfolio, less expenses, during the 30 days ending December 31, 1995.
The U.S. Government Allocation Fund commenced operations on January 1, 1992 as
successor to the Fixed-income Strategy Fund of the Wells Fargo Investment Trust
for Retirement Programs. The predecessor Fund's date of inception was March 31,
1987. The performance figures shown include the performance of the predecessor
Fund whose investment objective was substantially the same except that it was
required to invest at least 65% of its assets in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns and yields would have been lower.
- ---------------------
118
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH U.S. GOVERNMENT LEHMAN BROTHERS IBC/DONOGHUE MONEY LEHMAN BROTHERS
Allocation Fund Class A U.S. Treasury Bond Fund Average U.S. Treasury Note Index
Shares
<S> <C> <C> <C> <C>
Mar-87 $9,550 $10,000 $10,000 $10,000
Apr-87 $9,588 $9,519 $10,046 $9,829
May-87 $9,636 $9,407 $10,094 $2,809
Jun-87 $9,674 $9,513 $10,145 $9,923
Jul-87 $9,607 $9,346 $10,196 $9,944
Aug-87 $9,540 $9,192 $10,247 $9,918
Sep-87 $9,330 $8,790 $10,300 $2,795
Oct-87 $9,731 $9,427 $10,356 $10,087
Nov-87 $9,789 $9,430 $10,412 $10,146
Dec-87 $9,884 $9,618 $10,469 $10,241
Jan-88 $10,285 $10,202 $10,526 $10,493
Feb-88 $10,324 $10,312 $10,580 $10,601
Mar-88 $10,209 $10,000 $10,633 $10,554
Apr-88 $10,113 $9,825 $10,687 $10,537
May-88 $10,075 $9,677 $10,743 $10,486
Jun-88 $10,285 $10,084 $10,802 $10,657
Jul-88 $10,209 $9,885 $10,863 $10,625
Aug-88 $10,228 $9,927 $10,927 $10,635
Sep-88 $10,467 $10,294 $10,995 $10,819
Oct-88 $10,610 $10,607 $11,064 $10,968
Nov-88 $10,515 $10,369 $11,134 $10,873
Dec-88 $10,553 $10,503 $11,209 $10,883
Jan-89 $10,686 $10,725 $11,288 $10,991
Feb-89 $10,591 $10,502 $11,367 $10,942
Mar-89 $10,620 $10,614 $11,452 $10,998
Apr-89 $10,839 $10,884 $11,539 $11,220
May-89 $11,107 $11,284 $11,627 $11,434
Jun-89 $11,470 $11,929 $11,714 $11,727
Jul-89 $11,670 $12,211 $11,798 $11,970
Aug-89 $11,498 $11,885 $11,880 $11,805
Sep-89 $11,536 $11,920 $11,962 $11,859
Oct-89 $11,813 $12,400 $12,043 $12,111
Nov-89 $11,899 $12,513 $12,124 $12,228
Dec-89 $11,928 $12,490 $12,204 $12,264
Jan-90 $11,747 $12,041 $12,283 $12,184
Feb-90 $11,785 $12,006 $12,361 $12,227
Mar-90 $11,766 $11,957 $12,440 $12,240
Apr-90 $11,651 $11,671 $12,519 $12,197
May-90 $11,842 $12,212 $12,600 $12,458
Jun-90 $11,928 $12,493 $12,680 $12,621
Jul-90 $12,014 $12,612 $12,761 $12,797
Aug-90 $12,014 $12,080 $12,840 $12,749
Sep-90 $12,138 $12,220 $12,920 $12,863
Oct-90 $12,262 $12,500 $13,000 $13,044
Nov-90 $12,425 $13,021 $13,080 $13,239
Dec-90 $12,549 $13,279 $13,159 $13,423
Jan-91 $12,673 $13,435 $13,234 $13,561
Feb-91 $12,721 $13,494 $13,305 $13,638
Mar-91 $12,759 $13,548 $13,372 $13,712
Apr-91 $12,883 $13,721 $13,438 $13,853
May-91 $12,940 $13,708 $13,500 $13,929
Jun-91 $12,912 $13,607 $13,562 $13,940
Jul-91 $13,064 $13,809 $13,624 $14,092
Aug-91 $13,399 $14,286 $13,684 $14,359
Sep-91 $13,704 $14,736 $13,744 $14,604
Oct-91 $13,828 $14,768 $13,801 $14,771
Nov-91 $13,895 $14,851 $13,856 $14,944
Dec-91 $14,717 $15,736 $13,909 $15,316
Jan-92 $14,229 $15,242 $13,957 $15,162
Feb-92 $14,259 $15,332 $14,002 $15,209
Mar-92 $14,105 $15,163 $14,045 $15,147
Apr-92 $14,091 $15,148 $14,088 $15,283
May-92 $14,444 $15,569 $14,129 $15,511
Jun-92 $14,602 $15,795 $14,169 $15,736
Jul-92 $15,222 $16,452 $14,208 $16,043
Aug-92 $15,275 $16,566 $14,244 $16,210
Sep-92 $15,486 $16,827 $14,279 $16,438
Oct-92 $15,160 $16,474 $14,312 $16,236
Nov-92 $15,233 $16,537 $14,345 $16,166
Dec-92 $15,634 $16,990 $14,379 $16,378
Jan-93 $16,035 $17,474 $14,412 $16,686
Feb-93 $16,594 $18,057 $14,445 $16,935
Mar-93 $16,578 $18,103 $14,477 $16,996
Apr-93 $16,692 $18,242 $14,509 $17,130
May-93 $16,749 $18,302 $14,541 $17,080
Jun-93 $17,457 $19,076 $14,572 $17,331
Jul-93 $17,769 $19,384 $14,604 $17,364
Aug-93 $18,507 $20,163 $14,637 $17,626
Sep-93 $18,551 $20,233 $14,669 $17,699
Oct-93 $18,745 $20,379 $14,702 $17,741
Nov-93 $18,282 $19,857 $14,734 $17,652
Dec-93 $18,364 $19,921 $14,768 $17,725
Jan-94 $18,736 $20,399 $14,801 $17,900
Feb-94 $18,019 $19,563 $14,835 $17,650
Mar-94 $17,471 $18,704 $14,870 $17,394
Apr-94 $17,225 $18,483 $14,908 $17,282
May-94 $17,183 $18,361 $14,950 $17,295
Jun-94 $17,123 $18,187 $14,995 $17,298
Jul-94 $17,400 $18,803 $15,042 $17,523
Aug-94 $17,437 $18,664 $15,092 $17,574
Sep-94 $17,168 $18,076 $15,144 $17,430
Oct-94 $17,132 $18,013 $15,199 $17,435
Nov-94 $17,025 $18,119 $15,258 $17,355
Dec-94 $17,081 $18,398 $15,322 $17,410
Jan-95 $17,373 $18,870 $15,388 $17,692
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE U.S. GOVERNMENT ALLOCATION FUND WILL VARY
FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach U.S.
Government Allocation Fund Class A shares since the predecessor Fund's inception
with the Lehman Brothers U.S. Treasury Bond Index, the Lehman Brothers U.S.
Treasury Note Index and the IBC/Donoghue Money Fund Average. The chart assumes a
hypothetical $10,000 initial investment in the Fund and reflects all operating
expenses and assumes the maximum initial sales charge of 4.5% for the Class A
shares. The Lehman Brothers U.S. Treasury Bond Index is an unmanaged index
composed of U.S. Treasury bonds with 10 year or longer maturities. The Lehman
Brothers U.S. Treasury Note Index is an unmanaged index of U.S. Treasury notes
with 2 to 10 year maturities. The IBC/Donoghue Money Fund Average is an average
of 700 taxable money market funds. Please note that the Fund is a professionally
managed mutual fund. The indexes presented here are not managed, do not incur
expenses and are not available directly for investment. Had these indexes
incurred operating expenses, their comparative performances would have been
lower.
---------------------
119
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 21.34%
U.S. TREASURY BONDS - 21.34%
$ 1,800,000 U.S. Treasury Bonds 6.88 % 08/15/25 $ 2,030,626
1,300,000 U.S. Treasury Bonds 7.13 02/15/23 1,484,842
3,600,000 U.S. Treasury Bonds 7.25 05/15/16 4,110,750
1,700,000 U.S. Treasury Bonds 7.50 11/15/24 2,042,125
1,600,000 U.S. Treasury Bonds 7.63 11/15/22 1,932,499
2,900,000 U.S. Treasury Bonds 7.88 02/15/21 3,569,714
4,000,000 U.S. Treasury Bonds 8.13 08/15/19 5,030,000
900,000 U.S. Treasury Bonds 8.13 08/15/21 1,140,188
900,000 U.S. Treasury Bonds 8.75 05/15/17 1,190,530
3,200,000 U.S. Treasury Bonds 8.75 08/15/20 4,292,995
800,000 U.S. Treasury Bonds 9.00 11/15/18 1,090,249
1,300,000 U.S. Treasury Bonds 9.88 11/15/15 1,882,156
--------------
TOTAL U.S. TREASURY SECURITIES $ 29,796,674
(Cost $27,206,366)
</TABLE>
- ------------------------
120
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
<TABLE>
<CAPTION>
YIELD
TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 78.78%
U.S. TREASURY BILLS - 78.78%
$27,029,000 U.S. Treasury Bills 4.06 % 01/11/96 $ 26,986,019
13,619,000 U.S. Treasury Bills 4.54 01/18/96 13,584,153
8,731,000 U.S. Treasury Bills 4.74 02/08/96 8,682,139
52,000 U.S. Treasury Bills 4.78 02/29/96 51,601
12,585,000 U.S. Treasury Bills 4.81 02/22/96 12,499,196
48,439,000 U.S. Treasury Bills 5.03 03/07/96 48,013,027
203,000 U.S. Treasury Bills 5.06 03/14/96 200,998
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 110,017,133
(Cost $109,968,334)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $137,174,700)* (Notes 1 and 3) 100.12% $ 139,813,807
Other Assets and Liabilities, Net (0.12) (160,115)
------ -------------
TOTAL NET ASSETS 100.00% $ 139,653,692
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 2,643,148
Gross Unrealized Depreciation (4,041)
------------
NET UNREALIZED APPRECIATION $ 2,639,107
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
121
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ------------------------
122
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALIFORNIA
ASSET CALIFORNIA TAX-FREE
ALLOCATION TAX-FREE INCOME
FUND BOND FUND FUND
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market
value (see cost below) $1,109,497,612 $ 323,383,970 $ 79,665,701
Cash 0 571 422
Receivables:
Dividends and interest 4,876,208 5,062,746 846,240
Fund shares sold 173,027 187,000 0
Investment securities sold 0 201,947 0
Organization expenses, net
of amortization 7,097 5,743 15,380
Prepaid expenses 214,726 4,423 1,748
TOTAL ASSETS 1,114,768,670 328,846,400 80,529,491
LIABILITIES
Cash overdraft due to
custodian (Note 2) 236,705 0 0
Payables:
Investment securities
purchased 0 3,563,763 2,231,926
Distribution to
shareholders 8,703,822 1,322,674 234,694
Fund shares redeemed 10,000 0 0
Due to sponsor and
distributor (Note 2) 200,264 295,317 18,625
Due to adviser (Note 2) 1,377,646 284,572 54,519
Other 34,350 47,120 24,291
TOTAL LIABILITIES 10,562,787 5,513,446 2,564,055
TOTAL NET ASSETS
$1,104,205,883 $ 323,332,954 $ 77,965,436
NET ASSETS CONSIST OF:
Paid-in capital - Class
A(1) 913,317,550 289,034,395 77,408,542
Paid-in capital - Class B 24,750,019 25,836,476 N/A
Undistributed
(overdistributed) net
investment income (loss) 0 0 0
Undistributed net realized
gain (loss) on
investments 1,614,110 (5,451,052) (172,071)
Net unrealized
appreciation
(depreciation) of
investments 164,524,204 13,913,135 728,965
TOTAL NET ASSETS $1,104,205,883 $ 323,332,954 $ 77,965,436
COMPUTATION OF NET ASSET
VALUE AND OFFERING PRICE
Net assets - Class A(1) $1,077,935,119 $ 296,416,508 $ 77,965,436
Shares outstanding - Class
A(1) 51,962,323 26,827,384 7,536,445
Net asset value per share -
Class A(1) $ 20.74 $ 11.05 $ 10.35
Maximum offering price per
share - Class A(1) $ 21.72(2) $ 11.57(2) $ 10.67(3)
Net assets - Class B $ 26,270,764 $ 26,916,446 N/A
Shares outstanding - Class B 2,100,948 2,389,620 N/A
Net asset value and offering
price per share - Class B $ 12.50 $ 11.26 N/A
INVESTMENTS AT COST (NOTE 3) $ 944,973,408 $ 309,470,835 $ 78,936,736
- ----------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
---------------------
123
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
CORPORATE DIVERSIFIED GINNIE
STOCK INCOME MAE
FUND FUND FUND
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market
value (see cost below) $ 328,436,307 $ 85,729,718 $ 177,877,562
Cash 0 1,827 1,556
Receivables:
Dividends and interest 612,535 331,665 1,711,177
Fund shares sold 0 72,263 90,000
Investment securities sold 0 1,136,550 0
Organization expenses, net
of amortization 0 35,858 11,598
Prepaid expenses 45,315 20,552 16,281
TOTAL ASSETS 329,094,157 87,328,433 179,708,174
LIABILITIES
Cash overdraft due to
custodian (Note 2) 131,065 0 0
Payables:
Investment securities
purchased 0 1,321,798 0
Distribution to
shareholders 1,135,314 560,970 978,199
Fund shares redeemed 0 0 0
Due to sponsor and
distributor (Note 2) 198,200 9,423 137,291
Due to adviser (Note 2) 399,256 90,324 193,228
Other 22,452 29,879 14,809
TOTAL LIABILITIES 1,886,287 2,012,394 1,323,527
TOTAL NET ASSETS
$ 327,207,870 $ 85,316,039 $ 178,384,647
NET ASSETS CONSIST OF:
Paid-in capital - Class
A(1) 187,037,545 68,252,787 180,185,663
Paid-in capital - Class B N/A 4,956,012 11,914,521
Undistributed
(overdistributed) net
investment income (loss) 0 0 0
Undistributed net realized
gain (loss) on
investments 1,114,527 1,545,551 (16,155,368)
Net unrealized
appreciation
(depreciation) of
investments 139,055,798 10,561,689 2,439,831
TOTAL NET ASSETS $ 327,207,870 $ 85,316,039 $ 178,384,647
COMPUTATION OF NET ASSET
VALUE AND OFFERING PRICE
Net assets - Class A(1) $ 327,207,870 $ 79,977,088 $ 166,157,490
Shares outstanding - Class
A(1) 7,893,164 5,994,404 14,904,153
Net asset value per share -
Class A(1) $ 41.45 $ 13.34 $ 11.15
Maximum offering price per
share - Class A(1) $ 41.45 $ 13.97(2) $ 11.68(2)
Net assets - Class B N/A $ 5,338,951 $ 12,227,157
Shares outstanding - Class B N/A 427,515 1,114,541
Net asset value and offering
price per share - Class B N/A $ 12.49 $ 10.97
INVESTMENTS AT COST (NOTE 3) $ 189,380,509 $ 75,168,029 $ 175,437,731
- ----------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
- ------------------------
124
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHORT-
INTERMEDIATE
U.S. U.S.
GROWTH GOVERNMENT GOVERNMENT
AND INCOME INCOME ALLOCATION
FUND FUND FUND
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market
value (see cost below) $ 183,762,251 $ 44,393,067 $ 139,813,807
Cash 1,670 227,089 4,858
Receivables:
Dividends and interest 360,409 485,454 526,086
Fund shares sold 29,888 0 0
Investment securities sold 0 10,120,572 0
Organization expenses, net
of amortization 11,761 24,215 11,606
Prepaid expenses 46,403 8,496 32,761
TOTAL ASSETS 184,212,382 55,258,893 140,389,118
LIABILITIES
Cash overdraft due to
custodian (Note 2) 0 0 0
Payables:
Investment securities
purchased 0 15,010,547 0
Distribution to
shareholders 353,748 182,806 537,022
Fund shares redeemed 315,000 0 0
Due to sponsor and
distributor (Note 2) 48,656 3,183 26,895
Due to adviser (Note 2) 294,446 36,170 150,634
Other 30,510 98,029 20,875
TOTAL LIABILITIES 1,042,360 15,330,735 735,426
TOTAL NET ASSETS
$ 183,170,022 $ 39,928,158 $ 139,653,692
NET ASSETS CONSIST OF:
Paid-in capital - Class
A(1) 146,911,257 41,365,185 156,338,838
Paid-in capital - Class B 4,496,076 N/A 3,955,125
Undistributed
(overdistributed) net
investment income (loss) 0 0 0
Undistributed net realized
gain (loss) on
investments 2,223,141 (2,218,051) (23,279,378)
Net unrealized
appreciation
(depreciation) of
investments 29,539,548 781,024 2,639,107
TOTAL NET ASSETS $ 183,170,022 $ 39,928,158 $ 139,653,692
COMPUTATION OF NET ASSET
VALUE AND OFFERING PRICE
Net assets - Class A(1) $ 178,488,454 $ 39,928,158 $ 135,576,602
Shares outstanding - Class
A(1) 10,343,439 3,994,452 9,047,560
Net asset value per share -
Class A(1) $ 17.26 $ 10.00 $ 14.98
Maximum offering price per
share - Class A(1) $ 18.07(2) $ 10.31(3) $ 15.69(2)
Net assets - Class B $ 4,681,568 N/A $ 4,077,090
Shares outstanding - Class B 380,930 N/A 373,862
Net asset value and offering
price per share - Class B $ 12.29 N/A $ 10.91
INVESTMENTS AT COST (NOTE 3) $ 154,222,703 $ 43,612,043 $ 137,174,700
- ----------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
---------------------
125
<PAGE>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALIFORNIA
ASSET CALIFORNIA TAX-FREE
ALLOCATION TAX-FREE INCOME
FUND BOND FUND FUND
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 12,448,964 $ 0 $ 0
Interest 35,237,803 18,157,370 2,414,748
TOTAL INVESTMENT INCOME 47,686,767 18,157,370 2,414,748
EXPENSES (NOTE 2)
Advisory fees 3,814,364 1,542,893 267,645
Administration fees 306,436 93,013 16,793
Custody fees 0 55,013 10,407
Shareholder servicing fees 3,064,364 930,128 166,349
Portfolio accounting fees 0 123,508 61,353
Transfer agency fees 490,624 183,849 45,280
Distribution fees 566,001 231,192 27,725
Amortization of
organization expenses 9,403 5,872 8,399
Legal and audit fees 103,410 56,475 22,521
Registration fees 138,028 43,357 19,998
Directors' fees 5,000 5,000 5,000
Shareholder reports 144,343 59,999 14,015
Other 49,595 77,451 9,501
TOTAL EXPENSES 8,691,568 3,407,750 674,986
Less:
Waived fees (Note 2) (19,706) (1,232,856) (314,402)
Net Expenses 8,671,862 2,174,894 360,584
NET INVESTMENT INCOME 39,014,905 15,982,476 2,054,164
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss)
on sale of investments 4,576,913 591,815 (43,204)
Net change in unrealized
appreciation
(depreciation) of
investments 215,304,208 35,434,462 2,645,684
NET GAIN (LOSS) ON
INVESTMENTS 219,881,121 36,026,277 2,602,480
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 258,896,026 $ 52,008,753 $ 4,656,644
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
126
<PAGE>
STATEMENT OF OPERATIONS- FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHORT-
INTERMEDIATE
U.S.
CORPORATE DIVERSIFIED GINNIE GROWTH GOVERNMENT
STOCK INCOME MAE AND INCOME INCOME
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 7,225,361 $ 2,254,175 $ 0 $ 3,116,428 $ 0
Interest 110,982 319,781 13,291,508 513,058 1,323,136
TOTAL INVESTMENT INCOME 7,336,343 2,573,956 13,291,508 3,629,486 1,323,136
EXPENSES (NOTE 2)
Advisory fees 1,398,439 312,512 840,112 754,149 116,628
Administration fees 92,555 18,751 50,407 45,249 6,998
Custody fees 0 15,053 74,444 34,105 7,673
Shareholder servicing fees 861,478 187,508 504,067 452,488 70,914
Portfolio accounting fees 0 64,466 95,105 91,666 44,207
Transfer agency fees 152,625 54,528 156,422 160,168 16,846
Distribution fees 137,173 58,167 111,269 87,549 8,986
Amortization of
organization expenses 0 14,838 1,902 1,739 8,244
Legal and audit fees 38,305 29,184 36,553 30,527 26,620
Registration fees 51,775 36,323 46,185 46,748 29,743
Directors' fees 5,000 5,000 5,000 2,813 5,935
Shareholder reports 121,465 27,946 45,205 61,164 5,000
Other 8,938 25,031 15,375 43,866 0
TOTAL EXPENSES 2,867,753 849,307 1,982,046 1,812,231 347,794
Less:
Waived fees (Note 2) (108,638) (146,911) (574,978) (18,527) (199,881)
Net Expenses 2,759,115 702,396 1,407,068 1,793,704 147,913
NET INVESTMENT INCOME 4,577,228 1,871,560 11,884,440 1,835,782 1,175,223
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss)
on sale of investments 6,005,161 3,545,900 1,935,107 9,354,459 (1,740,504)
Net change in unrealized
appreciation
(depreciation) of
investments 76,552,587 10,976,829 13,236,756 25,841,652 1,047,532
NET GAIN (LOSS) ON
INVESTMENTS 82,557,748 14,522,729 15,171,863 35,196,111 (692,972)
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 87,134,976 $ 16,394,289 $ 27,056,303 $ 37,031,893 $ 482,251
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
127
<PAGE>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
ALLOCATION
FUND
<S> <C>
- --------------------------------------------
INVESTMENT INCOME
Dividends $ 0
Interest 8,814,682
TOTAL INVESTMENT INCOME 8,814,682
EXPENSES (NOTE 2)
Advisory fees 680,049
Administration fees 40,803
Custody fees 0
Shareholder servicing fees 408,029
Portfolio accounting fees 0
Transfer agency fees 126,816
Distribution fees 80,511
Amortization of
organization expenses 1,894
Legal and audit fees 26,905
Registration fees 31,212
Directors' fees 4,987
Shareholder reports 49,857
Other 5,616
TOTAL EXPENSES 1,456,679
Less:
Waived fees (Note 2) (31,101)
Net Expenses 1,425,578
NET INVESTMENT INCOME 7,389,104
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss)
on sale of investments 380,148
Net change in unrealized
appreciation
(depreciation) of
investments 11,177,439
NET GAIN (LOSS) ON
INVESTMENTS 11,557,587
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 18,946,691
- --------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
128
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 39,014,905 $ 44,227,670
Net realized gain (loss)
on sale of investments 4,576,913 40,999,918
Net change in unrealized
appreciation
(depreciation) of
investments 215,304,208 (119,837,699)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 258,896,026 (34,610,111)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (38,781,909) (44,227,697)
CLASS B (232,996) 0
From net realized gain on
sales of investments
CLASS A(1) (2,902,594) (40,796,983)
CLASS B (60,209) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 112,740,980 254,121,721
Reinvestment of dividends
- Class A(1) 84,335,697 31,759,403
Cost of shares redeemed -
Class A(1) (231,482,165) (317,969,973)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) (34,405,488) (32,088,849)
Proceeds from shares sold
- Class B 25,023,646 0
Reinvestment of dividends
- Class B 159,719 0
Cost of shares redeemed -
Class B (433,346) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 24,750,019 0
INCREASE (DECREASE) IN NET
ASSETS 207,262,849 (151,723,640)
NET ASSETS:
Beginning net assets 896,943,034 1,048,666,674
ENDING NET ASSETS $1,104,205,883 $ 896,943,034
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 5,898,807 13,807,751
Shares issued in
reinvestment of
dividends - Class A(1) 4,807,125 1,809,851
Shares redeemed - Class
A(1) (12,361,894) (17,788,892)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) (1,655,962) (2,171,290)
Shares sold - Class B 2,123,672 0
Shares issued in
reinvestment of
dividends - Class B 13,259 0
Shares redeemed - Class B (35,983) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 2,100,948 0
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
---------------------
129
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 15,982,476 $ 22,512,196
Net realized gain (loss)
on sale of investments 591,815 (6,042,867)
Net change in unrealized
appreciation
(depreciation) of
investments 35,434,462 (52,684,575)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 52,008,753 (36,215,246)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (15,472,726) (22,512,196)
CLASS B (509,750) 0
From net realized gain on
sales of investments
CLASS A(1) 0 0
CLASS B 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 33,207,626 54,574,028
Reinvestment of dividends
- Class A(1) 10,558,616 17,945,317
Cost of shares redeemed -
Class A(1) (88,142,779) (240,793,430)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) (44,376,537) (168,274,085)
Proceeds from shares sold
- Class B 26,079,671 0
Reinvestment of dividends
- Class B 313,904 0
Cost of shares redeemed -
Class B (557,099) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 25,836,476 0
INCREASE (DECREASE) IN NET
ASSETS 17,486,216 (227,001,527)
NET ASSETS:
Beginning net assets 305,846,738 532,848,265
ENDING NET ASSETS $ 323,332,954 $ 305,846,738
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 3,122,899 5,123,672
Shares issued in
reinvestment of
dividends - Class A(1) 1,007,045 1,700,768
Shares redeemed - Class
A(1) (8,380,512) (23,326,239)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) (4,250,568) (16,501,799)
Shares sold - Class B 2,411,791 0
Shares issued in
reinvestment of
dividends - Class B 28,834 0
Shares redeemed - Class B (51,005) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 2,389,620 0
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
- ---------------------
130
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME
FUND CORPORATE STOCK FUND
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 2,054,164 $ 2,293,335 $ 4,577,228 $ 4,803,450
Net realized gain (loss)
on sale of investments (43,204) (128,868) 6,005,161 8,380,262
Net change in unrealized
appreciation
(depreciation) of
investments 2,645,684 (2,827,879) 76,552,587 (12,258,997)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 4,656,644 (663,412) 87,134,976 924,715
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (2,054,164) (2,293,335) (4,577,228) (4,801,337)
CLASS B N/A N/A N/A N/A
From net realized gain on
sales of investments
CLASS A(1) 0 0 (4,890,634) (8,103,675)
CLASS B N/A N/A N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 51,648,405 31,971,989 42,931,593 40,412,415
Reinvestment of dividends
- Class A(1) 1,618,516 1,875,590 17,597,071 3,563,379
Cost of shares redeemed -
Class A(1) (26,901,737) (34,766,280) (47,253,329) (54,056,667)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) 26,365,184 (918,701) 13,275,335 (10,080,873)
Proceeds from shares sold
- Class B N/A N/A N/A N/A
Reinvestment of dividends
- Class B N/A N/A N/A N/A
Cost of shares redeemed -
Class B N/A N/A N/A N/A
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) N/A N/A N/A N/A
INCREASE (DECREASE) IN NET
ASSETS 28,967,664 (3,875,448) 90,942,449 (22,061,170)
NET ASSETS:
Beginning net assets 48,997,772 52,873,220 236,265,421 258,326,591
ENDING NET ASSETS $ 77,965,436 $ 48,997,772 $ 327,207,870 $ 236,265,421
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 5,048,517 3,151,634 1,167,520 1,236,832
Shares issued in
reinvestment of
dividends - Class A(1) 159,491 186,105 505,005 111,768
Shares redeemed - Class
A(1) (2,650,715) (3,463,657) (1,299,326) (1,655,852)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) 2,557,293 (125,918) 373,199 (307,252)
Shares sold - Class B N/A N/A N/A N/A
Shares issued in
reinvestment of
dividends - Class B N/A N/A N/A N/A
Shares redeemed - Class B N/A N/A N/A N/A
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
---------------------
131
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DIVERSIFIED INCOME FUND
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 1,871,560 $ 1,214,151
Net realized gain (loss)
on sale of investments 3,545,900 (273,760)
Net change in unrealized
appreciation
(depreciation) of
investments 10,976,829 (1,076,102)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 16,394,289 (135,711)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (1,819,692) (1,214,150)
CLASS B (51,868) 0
From net realized gain on
sales of investments
CLASS A(1) (1,621,942) 0
CLASS B (104,647) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 36,625,693 32,526,614
Reinvestment of dividends
- Class A(1) 3,084,339 1,367,156
Cost of shares redeemed -
Class A(1) (17,324,191) (14,069,676)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) 22,385,841 19,824,094
Proceeds from shares sold
- Class B 5,158,139 0
Reinvestment of dividends
- Class B 122,225 0
Cost of shares redeemed -
Class B (324,353) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 4,956,011 0
INCREASE (DECREASE) IN NET
ASSETS 40,137,992 18,474,233
NET ASSETS:
Beginning net assets 45,178,047 26,703,814
ENDING NET ASSETS $ 85,316,039 $ 45,178,047
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 2,981,021 2,942,632
Shares issued in
reinvestment of
dividends - Class A(1) 244,288 124,853
Shares redeemed - Class
A(1) (1,429,340) (1,279,735)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) 1,795,969 1,787,750
Shares sold - Class B 446,270 0
Shares issued in
reinvestment of
dividends - Class B 9,860 0
Shares redeemed - Class B (28,616) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 427,514 0
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
- ---------------------
132
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GINNIE MAE FUND GROWTH AND INCOME FUND
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 11,884,440 $ 17,212,338 $ 1,835,782 $ 1,780,057
Net realized gain (loss)
on sale of investments 1,935,107 (12,854,822) 9,354,459 3,087,861
Net change in unrealized
appreciation
(depreciation) of
investments 13,236,756 (14,085,918) 25,841,652 (5,394,205)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 27,056,303 (9,728,402) 37,031,893 (526,287)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (11,629,261) (17,212,338) (1,827,656) (1,780,057)
CLASS B (255,179) 0 (8,126) 0
From net realized gain on
sales of investments
CLASS A(1) 0 0 (6,952,008) (3,087,861)
CLASS B 0 0 (179,310) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 24,703,217 36,339,249 61,077,854 41,116,188
Reinvestment of dividends
- Class A(1) 6,911,844 10,397,568 11,706,310 2,095,312
Cost of shares redeemed -
Class A(1) (51,605,131) (152,037,792) (35,699,783) (36,528,266)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) (19,990,070) (105,300,975) 37,084,381 6,683,234
Proceeds from shares sold
- Class B 12,424,092 0 4,557,982 0
Reinvestment of dividends
- Class B 69,456 0 184,612 0
Cost of shares redeemed -
Class B (579,027) 0 (246,518) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 11,914,521 0 4,496,076 0
INCREASE (DECREASE) IN NET
ASSETS 7,096,314 (132,241,715) 69,645,250 1,289,029
NET ASSETS:
Beginning net assets 171,288,333 303,530,048 113,524,772 112,235,743
ENDING NET ASSETS $ 178,384,647 $ 171,288,333 $ 183,170,022 $ 113,524,772
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 2,279,437 3,335,882 3,775,466 2,805,058
Shares issued in
reinvestment of
dividends - Class A(1) 646,128 970,355 726,595 145,120
Shares redeemed - Class
A(1) (4,839,906) (14,322,410) (2,208,631) (2,509,634)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) (1,914,341) (10,016,173) 2,293,430 440,544
Shares sold - Class B 1,161,521 0 386,746 0
Shares issued in
reinvestment of
dividends - Class B 6,474 0 14,982 0
Shares redeemed - Class B (53,454) 0 (20,798) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 1,114,541 0 380,930 0
- --------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
---------------------
133
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE U.S.
GOVERNMENT INCOME FUND
------------------------------
FOR THE
YEAR ENDED FOR THE
DEC. 31, YEAR ENDED
1995(2) DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 1,175,223 $ 557,955
Net realized gain (loss)
on sale of investments (1,740,504) (477,511)
Net change in unrealized
appreciation
(depreciation) of
investments 1,047,532 (260,085)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 482,251 (179,641)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (1,175,223) (557,955)
CLASS B N/A N/A
From net realized gain on
sales of investments
CLASS A(1) 0 0
CLASS B N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 38,655,106 15,266,240
Reinvestment of dividends
- Class A(1) 931,554 457,026
Cost of shares redeemed -
Class A(1) (10,567,251) (11,941,036)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) 29,019,409 3,782,230
Proceeds from shares sold
- Class B N/A N/A
Reinvestment of dividends
- Class B N/A N/A
Cost of shares redeemed -
Class B N/A N/A
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) N/A N/A
INCREASE (DECREASE) IN NET
ASSETS 28,326,437 3,044,634
NET ASSETS:
Beginning net assets 11,601,721 8,557,087
ENDING NET ASSETS $ 39,928,158 $ 11,601,721
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 3,742,963 1,559,723
Shares issued in
reinvestment of
dividends - Class A(1) 95,287 47,074
Shares redeemed - Class
A(1) (1,079,388) (1,227,993)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) 2,758,862 378,804
Shares sold - Class B N/A N/A
Shares issued in
reinvestment of
dividends - Class B N/A N/A
Shares redeemed - Class B N/A N/A
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B N/A N/A
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) "PROCEEDS FROM SHARES SOLD" AND "SHARES SOLD" INCLUDE $15,832,186 AND
1,612,905, RESPECTIVELY, AS A RESULT OF THE MERGER OF THE VARIABLE RATE
GOVERNMENT FUND. SEE NOTE 6.
The accompanying notes are an integral part of these financial statements.
- ---------------------
134
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION
FUND
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 7,389,104 $ 12,431,161
Net realized gain (loss)
on sale of investments 380,148 (23,621,944)
Net change in unrealized
appreciation
(depreciation) of
investments 11,177,439 (6,365,346)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 18,946,691 (17,556,129)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (7,305,279) (12,431,161)
CLASS B (83,825) 0
From net realized gain on
sales of investments
CLASS A(1) 0 0
CLASS B 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 24,249,760 34,301,793
Reinvestment of dividends
- Class A(1) 6,172,643 7,265,846
Cost of shares redeemed -
Class A(1) (46,347,301) (154,720,634)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) (15,924,898) (113,152,995)
Proceeds from shares sold
- Class B 4,453,188 0
Reinvestment of dividends
- Class B 43,367 0
Cost of shares redeemed -
Class B (541,430) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 3,955,125 0
INCREASE (DECREASE) IN NET
ASSETS (412,186) (143,140,285)
NET ASSETS:
Beginning net assets 140,065,878 283,206,163
ENDING NET ASSETS $ 139,653,692 $ 140,065,878
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 1,653,710 2,282,827
Shares issued in
reinvestment of
dividends - Class A(1) 428,154 508,903
Shares redeemed - Class
A(1) (3,211,044) (10,646,426)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) (1,129,180) (7,854,696)
Shares sold - Class B 420,344 0
Shares issued in
reinvestment of
dividends - Class B 4,057 0
Shares redeemed - Class B (50,540) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 373,861 0
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) "PROCEEDS FROM SHARES SOLD" AND "SHARES SOLD" INCLUDE $15,832,186 AND
1,612,905, RESPECTIVELY, AS A RESULT OF THE MERGER OF THE VARIABLE RATE
GOVERNMENT FUND. SEE NOTE 6.
The accompanying notes are an integral part of these financial statements.
---------------------
135
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ------------------------
136
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
-------------------------------
CLASS A
-------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $16.73 $18.80 $17.89
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.74 0.77 0.77
Net realized and unrealized gain (loss) on investments 4.07 (1.31) 1.88
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 4.81 (0.54) 2.65
LESS DISTRIBUTIONS:
Dividends from net investment income (0.74) (0.77) (0.77)
Distributions from net realized gain (0.06) (0.76) (0.97)
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.80) (1.53) (1.74)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $20.74 $16.73 $18.80
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED)(3) 29.18% (2.82)% 15.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $1,077,935 $896,943 $1,048,667
Number of shares outstanding, end of period (000) 51,962 53,618 55,790
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.84% 0.84% 0.86%
Ratio of net investment income to average net
assets(2) 3.81% 4.30% 4.20%
Portfolio turnover 15% 49% 40%
- -----------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses N/A N/A 0.86%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses N/A N/A 4.20%
- -----------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
---------------------
137
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.)
-------------------------------
CLASS A (CONT.) CLASS B
-------------------- ---------
YEAR YEAR YEAR
ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1992 1991 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $17.65 $14.45 $10.00
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.87 0.92 0.22
Net realized and unrealized gain (loss) on investments 0.31 2.28 2.53
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.18 3.20 2.75
LESS DISTRIBUTIONS:
Dividends from net investment income (0.87) 0.00 (0.22)
Distributions from net realized gain (0.07) 0.00 (0.03)
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.94) 0.00 (0.25)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $17.89 $17.65 $12.50
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED)(3) 7.00% 22.13% 27.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $542,226 $367,251 $26,271
Number of shares outstanding, end of period (000) 30,303 20,811 2,101
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.95% 0.95% 1.53%
Ratio of net investment income to average net
assets(2) 5.22% 5.88% 2.71%
Portfolio turnover 5% 25% 15%
- -----------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 0.97% N/A 1.76%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 5.20% N/A 2.48%
- -----------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
- ---------------------
138
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
-----------------------------------------------------
CLASS A CLASS B
------------------------------------------ ---------
YEAR YEAR YEAR YEAR YEAR
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 $9.84 $11.20 $10.41 $10.00 $10.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.55 0.56 0.56 0.53 0.48
Net realized and
unrealized gain (loss)
on investments 1.21 (1.36) 0.84 0.41 1.26
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.76 (0.80) 1.40 0.94 1.74
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.55) (0.56) (0.56) (0.53) (0.48)
Distributions from net
realized gain 0.00 0.00 (0.05) 0.00 0.00
--------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.55) (0.56) (0.61) (0.53) (0.48)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $11.05 $9.84 $11.20 $10.41 $11.26
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 18.24% (7.27)% 13.82% 10.35% 17.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $296,417 $305,847 $532,848 $242,409 $26,916
Number of shares
outstanding, end of
period (000) 26,827 31,078 47,580 23,298 2,390
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.68% 0.65% 0.64% 0.19% 1.32%
Ratio of net investment
income to average net
assets(2) 5.18% 5.35% 5.05% 5.67% 4.31%
Portfolio turnover 9% 3% 7% 18% 9%
- -----------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.07% 1.06% 1.01% 1.07% 1.72%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 4.79% 4.94% 4.68% 4.79% 3.91%
- -----------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
---------------------
139
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME FUND
------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(4)
<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 (loss) 0.38 0.40 0.39 0.02
Net realized and unrealized gain (loss) 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 gain 0.00 0.00 0.00 0.00
--------- --------- --------- ---------
TOTAL FROM 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)(3) 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(1) 0.65% 0.16% 0.34% 0.00%
Ratio of net investment income to average
net assets(2) 3.70% 4.03% 3.74% 3.56%
Portfolio turnover 31% 33% 11% 0%
- ------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets
prior to waived fees and reimbursed expenses 1.22% 1.21% 1.23% 1.55%
(2) 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>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
The accompanying notes are an integral part of these financial statements.
- ---------------------
140
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CORPORATE STOCK FUND
-----------------------------------------------------
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
<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
(loss) 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 FROM 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)(3) 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(1) 0.96% 0.97% 0.97% 0.93% 0.97%
Ratio of net investment
income to average net
assets(2) 1.59% 1.92% 1.81% 2.05% 2.30%
Portfolio turnover 6% 7% 5% 4% 4%
- -----------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.00% 1.00% 0.99% 1.00% N/A
(2) 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>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
The accompanying notes are an integral part of these financial statements.
---------------------
141
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
DIVERSIFIED INCOME FUND
-----------------------------------------------------
CLASS A CLASS B
------------------------------------------ ---------
YEAR YEAR YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(4) 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.76 $11.08 $10.29 $10.00 $10.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.35 0.33 0.30 0.02 0.20
Net realized and unrealized gain
(loss) on investments 2.86 (0.32) 0.96 0.29 2.75
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 3.21 0.01 1.26 0.31 2.95
LESS DISTRIBUTIONS:
Dividends from net investment income (0.35) (0.33) (0.30) (0.02) (0.20)
Distributions from net realized gain (0.28) 0.00 (0.17) 0.00 (0.26)
--------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.63) (0.33) (0.47) (0.02) (0.46)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $13.34 $10.76 $11.08 $10.29 $12.49
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED)(3) 30.17% 0.08% 12.33% 3.10% 29.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $79,977 $45,178 $26,704 $1,379 $5,339
Number of shares outstanding, end of
period (000) 5,994 4,198 2,411 134 428
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 1.10% 1.06% 0.46% 0.00% 1.73%
Ratio of net investment income to
average net assets(2) 3.02% 3.16% 3.51% 4.09% 2.40%
Portfolio turnover 70% 62% 46% 1% 70%
- ---------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.31% 1.34% 1.66% 3.49% 2.57%
(2) Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 2.81% 2.88% 2.31% 0.60% 1.57%
- ---------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
(5) THE FUND COMMENCED OPERATIONS ON JANUARY 3, 1991.
The accompanying notes are an integral part of these financial statements.
- ---------------------
142
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
GINNIE MAE FUND
----------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- ---------
YEAR YEAR YEAR YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991(5) 1995
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.18 $11.31 $11.34 $11.42 $10.00 $10.00
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.76 0.77 0.83 0.83 0.83 0.66
Net realized and
unrealized gain (loss)
on investments 0.97 (1.13) (0.03) (0.08) 0.59 0.97
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.73 (0.36) 0.80 0.75 1.42 1.63
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.76) (0.77) (0.83) (0.83) 0.00 (0.66)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.76) (0.77) (0.83) (0.83) 0.00 (0.66)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $11.15 $10.18 $11.31 $11.34 $11.42 $10.97
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 17.53% (3.23)% 7.19% 6.86% 14.30% 16.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $166,157 $171,288 $303,530 $184,692 $4,870 $12,227
Number of shares
outstanding, end of
period (000) 14,904 16,618 26,835 16,289 3,053 1,115
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.82% 0.73% 0.46% 0.46% 1.04% 1.47%
Ratio of net investment
income to average net
assets(2) 7.09% 7.20% 7.19% 7.93% 7.66% 6.01%
Portfolio turnover 118% 69% 121% 73% 241% 118%
- ----------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.15% 1.07% 1.02% 1.26% 1.05% 2.12%
(2) 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% 5.36%
- ----------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
(5) THE FUND COMMENCED OPERATIONS ON JANUARY 3, 1991.
The accompanying notes are an integral part of these financial statements.
---------------------
143
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
-------------------------------
CLASS A
-------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $14.10 $14.75 $13.88
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.19 0.22 0.23
Net realized and unrealized gain (loss) on investments 3.87 (0.27) 0.93
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 4.06 (0.05) 1.16
LESS DISTRIBUTIONS:
Dividends from net investment income (0.19) (0.22) (0.23)
Distributions from net realized gain (0.71) (0.38) (0.06)
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.90) (0.60) (0.29)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $17.26 $14.10 $14.75
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED)(3) 28.90% (0.29)% 8.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $178,488 $113,525 $112,236
Number of shares outstanding, end of period (000) 10,343 8,050 7,609
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 1.18% 1.11% 0.93%
Ratio of net investment income to average net
assets(2) 1.23% 1.51% 1.72%
Portfolio turnover 100% 71% 55%
- -----------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.21% 1.15% 1.11%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 1.20% 1.47% 1.54%
- -----------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON OCTOBER 27, 1993.
The accompanying notes are an integral part of these financial statements.
- ---------------------
144
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND (CONT.)
------------------------------- SHORT-INTERMEDIATE U.S.
CLASS A (CONT.) CLASS B GOVERNMENT INCOME FUND
-------------------- --------- -------------------------------
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1992 1991 1995 1995 1994 1993(4)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $12.84 $10.29 $10.00 $9.39 $9.99 $10.00
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.27 0.41 0.05 0.55 0.46 0.06
Net realized and
unrealized gain (loss)
on investments 1.44 2.14 2.79 0.61 (0.60) (0.01)
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.71 2.55 2.84 1.16 (0.14) 0.05
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.27) 0.00 (0.05) (0.55) (0.46) (0.06)
Distributions from net
realized gain (0.40) 0.00 (0.50) 0.00 0.00 0.00
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.67) 0.00 (0.55) (0.55) (0.46) (0.06)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $13.88 $12.84 $12.29 $10.00 $9.39 $9.99
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 13.45% 24.77% 28.47% 12.67% (1.42)% 0.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $44,883 $10,323 $4,682 $39,928 $11,602 $8,557
Number of shares
outstanding, end of
period (000) 3,233 804 381 3,994 1,236 857
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.42% 0.05% 1.87% 0.71% 0.25% 0.00%
Ratio of net investment
income to average net
assets(2) 2.31% 3.50% 0.43% 5.64% 4.75% 3.49%
Portfolio turnover 80% 13% 100% 472% 288% N/A
- ----------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.10% 1.16% 2.21% 1.67% 2.28% 2.45%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 1.63% 2.39% 0.09% 4.68% 2.72% 1.04%
- ----------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON OCTOBER 27, 1993.
The accompanying notes are an integral part of these financial statements.
---------------------
145
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
-------------------------------
CLASS A
-------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $13.76 $15.71 $15.41
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.79 0.87 0.96
Net realized and unrealized gain (loss) on investments 1.22 (1.95) 1.69
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 2.01 (1.08) 2.65
LESS DISTRIBUTIONS:
Dividends from net investment income (0.79) (0.87) (0.96)
Distributions from net realized gain 0.00 0.00 (1.39)
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.79) (0.87) (2.35)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $14.98 $13.76 $15.71
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED)(3) 14.91% (6.99)% 17.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $135,577 $140,066 $283,206
Number of shares outstanding, end of period (000) 9,048 10,177 18,031
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 1.04% 1.01% 0.99%
Ratio of net investment income to average net
assets(2) 5.41% 5.94% 5.92%
Portfolio turnover 292% 112% 150%
- -----------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.07% 1.08% 1.02%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 5.38% 5.87% 5.89%
- -----------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
- ---------------------
146
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
(CONT.)
-------------------------------
CLASS A (CONT.) CLASS B
-------------------- ---------
YEAR YEAR YEAR
ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1992 1991 1995
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $15.41 $13.14 $10.00
--------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.87 0.94 0.49
Net realized and
unrealized gain (loss)
on investments 0.04 1.33 0.91
--------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 0.91 2.27 1.40
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.87) 0.00 (0.49)
Distributions from net
realized gain (0.04) 0.00 0.00
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.91) 0.00 (0.49)
--------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $15.41 $15.41 $10.91
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 6.30% 17.21% 14.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $127,504 $30,098 $4,077
Number of shares
outstanding, end of
period (000) 8,272 1,954 374
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.00% 1.01% 1.65%
Ratio of net investment
income to average net
assets(2) 6.06% 6.77% 4.31%
Portfolio turnover 33% 147% 292%
- ----------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.08% N/A 2.36%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 5.98% N/A 3.60%
- ----------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
---------------------
147
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Stagecoach Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
investment company. The Company commenced operations on January 1, 1992, at
which time the merger described in Note 5 was consummated, 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 financial statements of
the California Tax-Free Money Market Mutual and Money Market Mutual Funds are
presented separately from these financial statements.
These Funds invest in a range of securities, generally including money market
instruments, equities and U.S. government securities.
Each of the funds presented in this book (the "Funds"), with the exception of
the California Tax-Free Income, Corporate Stock, and Short- Intermediate U.S.
Government Income Funds, commenced offering Class B shares on January 1, 1995.
The two classes of shares differ principally in the applicable sales charges,
shareholder servicing fees and distribution fees. Shareholders of each class
also bear certain expenses that pertain to that particular class. All
shareholders bear the common expenses of the Fund and earn income from the
portfolio pro rata based on the average daily net assets of each class, without
distinction between share classes. Dividends are declared separately for each
class. Gains are allocated to each class pro rata based upon net assets of each
class on the date of distribution. No class has preferential dividend rights.
Differences in per share dividend rates generally result from the relative
weightings of pro rata income and gain allocations and from differences in
separate class expenses, including distribution and service fees.
The following significant accounting policies are consistently followed by the
Company in the preparation of its 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 asssets 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.
- ---------------------
148
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SECURITY VALUATION
Investments in securities for which the primary market is a national securities
exchange or the Nasdaq National Market System are valued at the last reported
sales price on the day of valuation. U.S. Government obligations are valued in a
range between the last reported bid and ask prices. In the absence of any sale
of such securities on the valuation date and in the case of other securities,
excluding debt securities maturing in 60 days or less, the valuations are based
on latest quoted bid prices. Debt securities maturing in 60 days or less are
valued at amortized cost. Securities for which quotations are not readily
available are valued at fair value as determined by procedures set by the Fund's
Board of Directors.
Cash equivalents relating to firm commitment purchase agreements are segregated
by the custodian and may not be sold while the current commitment is
outstanding.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are accounted for on the date the securities are
purchased or sold (trade date). Dividend income is recognized on the ex-dividend
date, and interest income is recognized on a daily accrual basis. Realized gains
or losses are reported on the basis of identified cost of securities delivered.
Bond discounts are accredited and premiums are 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
adviser to the Funds pools the Fund's cash and invests in repurchase agreements
entered into by the Funds. The repurchase agreements must be fully
collateralized based on values that are marked to market daily. The collateral
may be 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, are
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 Asset Allocation,
Corporate Stock, Diversified Income, and Growth and Income Funds are declared
and distributed quarterly. Dividends to shareholders from net investment income
of the California Tax-Free Bond, California Tax-Free Income, Ginnie Mae,
Short-Intermediate U.S. Government Income and U.S. Government Allocation Funds
are declared daily and distributed monthly. Any dividends to
---------------------
149
<PAGE>
NOTES TO FINANCIAL STATEMENTS
shareholders from net realized capital gains are declared and distributed
annually.
FEDERAL INCOME TAXES
The Company's policy with respect to each Fund is to comply with the
requirements of the Internal Revenue Code that are applicable to regulated
investment companies and to distribute substantially all of the Fund's net
investment income and any net realized capital gain to its shareholders.
Therefore, no federal or state income tax provision is required. As of December
31, 1995, the California Tax-Free Income Fund has capital loss carryforwards of
$128,868 which will expire in the year 2002 and $43,203 which will expire in
2003. The California Tax-Free Bond Fund has a capital loss carryforward of
$5,451,042 which will expire in the year 2002. The U.S. Government Allocation
Fund has a capital loss carryforward of $23,204,215 which will expire in the
year 2002. The Short-Intermediate U.S. Government Income Fund has capital loss
carryforwards of $127,148, $200,718, $1,798,834, and $84,610 which will expire
in 2000, 2001, 2002, and 2003, respectively. Certain of these loss carryforwards
resulted from transactions entered into by the Variable Rate Government Fund
prior to the merger with the Short-Intermediate U.S. Government Income Fund. The
utilization of these loss carryforwards from the Variable Rate Government Fund
may be subject to limitations as a result of rules in the Internal Revenue Code
applicable to corporate changes of ownership. The Ginnie Mae Fund has capital
loss carryforwards of $3,300,546 which will expire in the year 2001 and
$12,854,823 which will expire in the year 2002.
The Board intends to offset net capital gains with each capital loss
carryforward until each carryforward has been fully utilized or expires. In
addition, no capital gain distributions shall be made until the capital loss
carryforward has been fully utilized or expires.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) were recorded by
the Fund. The differences between the income and gains distributed on a book
versus tax basis are shown as excess distributions of net investment income and
net realized gain on the sale of investments in the accompanying Statements of
Changes in Net Assets.
As a result of permanent book-to-tax differences due to the treatment of
equalization accounting, used in 1993, tax returns of capital existed for the
Ginnie Mae Fund. However, reclassification adjustments for equalization and tax
returns of capital offset each other. The per share effect of the tax return of
capital in 1993 was less than one cent per share for Asset Allocation Fund and
U.S. Government Allocation Fund and $0.02 for the Ginnie Mae Fund.
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Funds' administrator, sponsor and distributor,
- ---------------------
150
<PAGE>
NOTES TO FINANCIAL STATEMENTS
has charged the Funds for expenses incurred in connection with the organization
and initial registration of the Fund and/or Class. These expenses are being
amortized by the Funds on a straightline basis over 60 months from the date each
Fund and/or Class commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into separate advisory contracts on behalf of the Funds
with Wells Fargo Bank, N.A. ("WFB"). Pursuant to the contracts, WFB furnishes to
the Funds investment guidance and policy direction in connection with daily
portfolio management. Under the contracts with the California Tax-Free Bond,
California Tax-Free Income, Diversified Income and Short-Intermediate U.S.
Government Income Funds, WFB is entitled to be paid a monthly advisory fee at an
annual rate of 0.50% of the average daily net assets of the respective Fund.
Under the contracts with the Asset Allocation, Corporate Stock, Ginnie Mae,
Growth and Income, and U.S. Government Allocation Funds. WFB is entitled to be
paid a monthly advisory fee at an annual rate of 0.50% of average daily net
assets up to $250 million, 0.40% of average daily net assets of the next $250
million, and 0.30% in excess of $500 million.
In connection with the Asset Allocation, Corporate Stock and U.S. Government
Allocation Funds, the Company has entered into subadvisory contracts with Wells
Fargo Nikko Investment Advisors ("WFNIA"). WFNIA is an affiliate of Wells Fargo
& Company. Pursuant to such agreements, WFB has agreed to pay WFNIA a
subadvisory fee. In addition, Wells Fargo Institutional Trust Company N.A.
("WFITC"), a subsidiary of WFNIA, acts as custodian for these Funds. Custody and
portfolio accounting fees are paid to WFITC from the sub-advisory fee paid to
WFNIA.
Effective January 1, 1996, BZW Barclays Global Fund Advisors ("BGFA") replaced
WFNIA as investment sub-adviser to the Asset Allocation, Corporate Stock and
U.S. Government Allocation Funds. BGFA was created by the reorganization of
WFNIA with and into an affiliate of WFITC.
Pursuant to a sub-advisory contract with each Fund and subject to the overall
supervision of WFB, the investment adviser to each Fund, BGFA is responsible for
day-to-day portfolio management of each Fund. BGFA will continue to employ
substantially the same personnel and will continue to use the computer-based
investment model developed and previously used by WFNIA to determine the
recommended mix of assets in each Fund's portfolio. BGFA is entitled to receive
from WFB as compensation for its sub-advisory services monthly fees at the
annual rate of 0.20%, 015% and 0.08% of the average daily net assets of the
Asset Allocation, U.S. Government Allocation and Corporate Stock Funds,
respectively. BGFA is also entitled to receive from WFB annual fees of $40,000
each for its services to the U.S. Government Allocation and Corporate Stock
Funds.
BGFA is an indirect subsidiary of Barclays Bank PLC and is located at 45 Fremont
---------------------
151
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Street, San Francisco, CA 94105. As of January 1, 1996 BGFA and its affiliates
provide investment advisory services for over $220 billion of assets under
management. As of January 1, 1996, WFB provides investment advisory services for
approximately $33 billion of assets.
Effective January 1, 1996, WFITC, due to a change in control of its outstanding
voting securities, became a wholly owned subsidiary of BZW Barclays Global
Investors Holdings Inc. (formerly, The Nikko Building U.S.A., Inc.) and WFITC
was renamed BZW Barclays Global Investors, N.A. ("BGI"). BGI currently acts as
the Asset Allocation, Corporate Stock and U.S. Government Allocation Funds'
custodian. BGFA is a subsidiary of BGI. BGI will not be entitled to receive
compensation for its services to the Funds so long as BGFA is entitled to
receive fees for providing investment advisory services to the Funds. The
principal business address of BGI is 45 Fremont Street, San Francisco,
California 94105.
The Company has entered into contracts with WFB on behalf of all of the Funds
except the Asset Allocation, Corporate Stock and U.S. Government Allocation
Funds, whereby WFB is responsible for providing custody and portfolio accounting
services for the Funds. WFB is entitled to certain transaction charges plus an
annual fee for custody services at an annual rate of 0.0167% of the average
daily net assets of the respective Funds.
For portfolio accounting services, WFB is entitled to a monthly base fee from
each Fund of $2,000 plus an annual fee of 0.07% of the first $50 million of
average daily net assets, 0.045% of the next $50 million, and 0.02% of the
average daily net assets over $100 million.
The Company has entered into a contract on behalf of the Funds with WFB, whereby
WFB has agreed to act as transfer agent for the Funds. Under the contract, WFB
is paid a per account fee plus other related costs with a minimum monthly fee of
$3,000 per Fund, unless net assets of the respective Fund are under $20 million.
For as long as the assets remain under $20 million a Fund will not be charged
any transfer agent fees by WFB.
The Company has entered into a contract on behalf of the Funds with WFB, whereby
WFB has agreed to provide shareholder servicing. Pursuant to the contract, WFB
is entitled to an annual fee for providing shareholder servicing of 0.30% of the
respective Fund's average daily net assets.
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 pays Stephens a
monthly fee at the annual rate of 0.03% of such Fund's average daily net assets.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the
1940 Act for the following non multi-class funds: the California Tax-Free
Income, Corporate Stock, and Short-
- ---------------------
152
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Intermediate U.S. Government Income Funds. The Company has also adopted,
pursuant to Rule 12b-1 of the 1940 Act, separate Distribution Plans for Class A
and Class B shares of the multi-class funds.
The Distribution Plan for the non multi-class funds and the separate
Distribution Plan for each of the Class A shares of the multi-class funds
provides that 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 0.05% of the Class A's or non multi-class Fund's average
daily net assets for costs incurred. Each of these funds may participate in
joint distribution activities with other Funds, in which event, expenses
reimbursed out of the assets of one of the Funds may be attributable, in part,
to the distribution-related activities of another Fund. Generally, the expenses
attributable to joint distribution activities will be allocated among the Funds
in proportion to their relative net asset sizes.
The separate Class B Distribution Plan for the multi-class funds provides that
the Funds may pay, as compensation for distribution-related services, a monthly
fee at an annual rate of 0.70% of each such Fund's average daily net assets
attributable to Class B shares.
<TABLE>
<CAPTION>
DISTRIBUTION DISTRIBUTION
FEES FEES
FUND CLASS A CLASS B
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
Asset Allocation Fund $ 506,479 $ 59,522
California Tax-Free Bond Fund 149,164 82,028
Diversified Income Fund 43,182 14,985
Ginnie Mae Fund 81,915 29,354
Growth and Income Fund 74,482 13,067
U.S. Government Allocation Fund 67,043 13,468
</TABLE>
WAIVED FEES
The following amounts of fees and expenses have been waived by WFB for the year
ended December 31, 1995:
<TABLE>
<CAPTION>
FEES WAIVED
FUND BY WFB
<S> <C> <C>
- -----------------------------------------------------------------------------------
Asset Allocation Fund $ 19,706
California Tax-Free Bond Fund 1,232,856
California Tax-Free Income Fund 314,402
Corporate Stock Fund 108,638
Diversified Income Fund 146,911
Ginnie Mae Fund 574,978
Growth and Income Fund 18,527
Short-Intermediate U.S. Government Income Fund 199,881
U.S. Government Allocation Fund 31,101
</TABLE>
---------------------
153
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Waived fees and reimbursed expenses continue at the discretion of WFB and
Stephens, respectively.
Certain officers and directors of the Company are also officers of Stephens. As
of December 31, 1995, Stephens owned 6,311shares of the California Tax-Free Bond
Fund, 11,228 shares of the California Tax-Free Income Fund and 11,339 shares of
the Diversified Income Fund.
Stephens has retained $1,184,736 as sales charges from the proceeds of Class A
capital shares sold and $66,575 from the proceeds of Class B capital shares
redeemed by the Company for the year ended December 31, 1995. Wells Fargo
Securities Inc., a subsidiary of WFB, received $333,234 as sales charges from
the proceeds of Class A capital shares sold by the Company for the year ended
December 31, 1995.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for each
Fund for the year ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
AGGREGATE ASSET CALIFORNIA CALIFORNIA
PURCHASES ALLOCATION TAX-FREE TAX-FREE CORPORATE DIVERSIFIED
AND SALES OF: FUND BOND FUND INCOME FUND STOCK FUND INCOME FUND
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT
OBLIGATIONS:
Purchases at cost $ 3,210,000 $ 0 $ 0 $ 0 $ 0
Sales proceeds 422,194,531 0 0 0 0
OTHER SECURITIES:
Purchases at cost 119,731,930 27,057,332 39,393,662 16,072,363 64,777,860
Sales proceeds 53,149,119 40,202,450 15,296,421 16,077,985 40,584,769
</TABLE>
<TABLE>
<CAPTION>
SHORT-
INTERMEDIATE U.S.
U.S. GOVERNMENT
AGGREGATE PURCHASES GINNIE MAE GROWTH AND GOVERNMENT ALLOCATION
AND SALES OF: FUND INCOME FUND INCOME FUND FUND
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
OBLIGATIONS:
Purchases at cost $155,156,563 $ 0 $82,621,249 $ 214,955,269
Sales proceeds 135,966,523 0 59,925,207 332,625,095
OTHER SECURITIES:
Purchases at cost 46,377,956 117,111,717 23,199,819 0
Sales proceeds 57,025,032 142,979,376 16,571,316 0
- --------------------------------------------------------------------------------
</TABLE>
- ---------------------
154
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. CAPITAL SHARES TRANSACTIONS
As of December 31, 1995, there were 10 billion shares of $0.001 par value
capital stock authorized by the Company. At December 31, 1995, each Fund was
authorized to issue 100 million shares of $0.001 par value capital stock for
each class of shares, except that the California Tax-Free Money Market Mutual
Fund was authorized to issue 3 billion, each class of the Ginnie Mae Fund was
authorized to issue 3 hundred million shares, the Money Market Mutual Fund was
authorized to issue 8 billion and each class of the U.S. Government Allocation
Fund was authorized to issue 3 hundred million shares. Transactions in capital
shares are disclosed in detail in the Statements of Changes in Net Assets.
5. REORGANIZATION OF WELLS FARGO INVESTMENT TRUST FOR RETIREMENT PROGRAMS
At special meetings held on December 31, 1991, unitholders owning a majority of
the outstanding units of each of the Wells Fargo Investment Trust for Retirement
Programs Funds (the "Trust") as of the close of business on November 8, 1991,
approved an Agreement and Plan of Reorganization (the "Agreement") among the
Trust, for itself and on behalf of each of the six funds comprising the Trust
(each a "Predecessor Fund"); the Stagecoach Funds, Inc., a Maryland corporation
("Stagecoach"); Stephens Inc., a Delaware corporation ("Stephens"); and Wells
Fargo in its capacity as the Trustee of the Trust, and in its individual
capacity. The Agreement provided, among other things, for the transfer of the
assets of each Predecessor Fund to a corresponding series of Stagecoach (each a
"Stagecoach Fund"). The Agreement provided that in consideration therefore, each
Stagecoach Fund would assume certain identified liabilities of the corresponding
Predecessor Fund and would deliver to the corresponding Predecessor Fund the
number of full and fractional shares of common stock of the Stagecoach Fund
having an aggregate net asset value equivalent to the aggregate net asset value
of the assets transferred to the Stagecoach Fund by the corresponding
Predecessor Fund (collectively, the "Reorganization").
On January 1, 1992, the Reorganizations closed, and each Predecessor Fund made a
pro rata liquidating distribution to its unitholders of the shares of the
corresponding Stagecoach Fund it had received.
All of the expenses connected with the Reorganizations were paid by Wells Fargo
or Stephens.
All information contained in this Semi-Annual Report which reflects financial
data on the Stagecoach Funds for periods prior to 1992 refers to the
corresponding Predecessor Funds.
6. SHAREHOLDER MEETINGS
A. MERGER OF FUNDS TO COMBINE VARIABLE RATE GOVERNMENT FUND INTO SHORT-
INTERMEDIATE U.S. GOVERNMENT INCOME FUND
At a special meeting of the shareholders of the Variable Rate Government Fund on
August 7, 1995, an Agreement and
---------------------
155
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Plan of Reorganization was approved to combine the Variable Rate Government Fund
into the Short-Intermediate U.S. Government Income Fund. This reorganization was
completed on August 28, 1995.
B. ASSET ALLOCATION, CORPORATE STOCK, AND U.S. GOVERNMENT ALLOCATION FUNDS
APPROVAL OF REORGANIZATION TO MASTER/FEEDER STRUCTURE, NEW SUB-ADVISORY
CONTRACTS AND THE USE OF CERTAIN FUTURES CONTRACTS AND RELATED TRANSACTIONS
On behalf of its Asset Allocation, Corporate Stock and U.S. Government
Allocation Funds, the Company requested shareholder approval of a proposal to
reorganize each Fund into a master/feeder structure. The Company also requested
shareholder approval of new sub-advisory contracts for each Fund and proposed
new corresponding master portfolio with WFB, as adviser, and BGFA (the successor
entity to WFNIA), as sub-adviser. This action was necessary because of the
purchase by a subsidiary of Barclays Bank PLC of WFNIA. Finally the Company
requested shareholder approval of an investment policy to permit each Fund to
engage in the purchase and sale of certain futures contracts and related
transactions. Engaging in these transactions would permit each Fund to maintain
liquid assets while investing pursuant to its investment strategy.
At a special meeting of shareholders scheduled for December 5, 1995, as
adjourned to December 12, 1995 for the U.S. Government Allocation Fund and to
December 19, 1995 for the Asset Allocation and Corporate Stock Funds,
shareholders voted on the proposals listed elsewhere in this annual report. The
proposals received the required majority of votes and were adopted for each
Fund.
- ---------------------
156
<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 Asset Allocation Fund, California Tax-Free
Bond Fund, California Tax-Free Income Fund, Corporate Stock Fund, Diversified
Income Fund, Ginnie Mae Fund, Growth and Income Fund, Short-Intermediate U.S.
Government Income Fund, and U.S. Government Allocation Fund (nine 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. For Asset Allocation Fund, Corporate
Stock Fund, Ginnie Mae Fund, Growth and Income Fund and U.S. Government
Allocation Fund, all periods indicated in the accompanying financial highlights
ending prior to January 1, 1992 were audited by other auditors whose report
dated February 19, 1992, expressed an unqualified opinion on this information.
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, except as noted above, in
conformity with generally accepted accounting principles.
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1996
---------------------
157
<PAGE>
- -----------------
PROXY VOTING RESULTS
PROPOSAL 1.
To consider approval of the proposal to reorganize each Fund into a
master/feeder structure, with amendments to certain fundamental investment
restrictions to permit each Fund to invest all of its assets in another
investment company.
ASSET ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
21,187,771 2,239,173 3,624,864
</TABLE>
CORPORATE STOCK FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,154,688 290,316 532,338
</TABLE>
U.S. GOVERNMENT ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,745,979 398,052 656,376
</TABLE>
PROPOSAL 2A.
Approve an Advisory Contract on behalf of each Master Portfolio, with Wells
Fargo Bank, N.A. ("Wells Fargo Bank"), as adviser.
ASSET ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
21,256,865 2,174,947 3,633,260
</TABLE>
CORPORATE STOCK FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,170,337 281,283 526,295
</TABLE>
U.S. GOVERNMENT ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,760,833 372,547 668,443
</TABLE>
PROPOSAL 2B.
Approve an interim Sub-Advisory Contract on behalf of each Master Portfolio,
with Wells Fargo Bank, as adviser, and Wells Fargo Nikko Investment Advisors
("WFNIA"), as sub-adviser (necessary if the proposed Reorganization occurs
before the sale of WFNIA).
ASSET ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
21,190,837 2,202,502 3,671,732
</TABLE>
CORPORATE STOCK FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,154,124 282,522 541,269
</TABLE>
U.S. GOVERNMENT ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,743,622 378,623 679,579
</TABLE>
PROPOSAL 2C.
Approve a final Sub-Advisory Contract on behalf of each Master Portfolio, with
Wells Fargo Bank, as adviser, and BZW Global Investors, as sub-adviser.
ASSET ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
21,143,389 2,211,751 3,696,667
</TABLE>
CORPORATE STOCK FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,150,119 285,231 541,993
</TABLE>
U.S. GOVERNMENT ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,726,452 385,021 688,934
</TABLE>
- ---------------------
158
<PAGE>
PROPOSAL 3.
To consider approval of an interim Sub-Advisory Contract for the Company, on
behalf of each Fund, with Wells Fargo Bank, as adviser, and BZW Global
Investors, as sub-adviser.
ASSET ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
21,209,815 2,183,135 3,672,123
</TABLE>
CORPORATE STOCK FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,158,070 282,932 536,913
</TABLE>
U.S. GOVERNMENT ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,735,488 393,279 673,058
</TABLE>
PROPOSAL 4.
To consider approval of a proposed investment policy to authorize each Fund to
engage in the purchase and sale of certain futures contracts and related
transactions, with amendments to certain fundamental investment restrictions
that would otherwise preclude each Fund from engaging in such transactions.
ASSET ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
20,219,137 3,159,688 3,672,983
</TABLE>
CORPORATE STOCK FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
2,999,094 434,746 543,502
</TABLE>
U.S. GOVERNMENT ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,500,933 621,777 677,697
</TABLE>
PROPOSAL FOR VARIABLE RATE
GOVERNMENT FUND.
To approve an Agreement and Plan of Reorganization for the Variable Rate
Government Fund (the "VRG Fund") and the transactions contemplated thereby,
which include (a) the transfer of all the assets of the VRG Fund to the Short-
Intermediate U.S. Government Income Fund (the "Government Fund") of Stagecoach
Funds, and the assumption by the Government Fund of stated liabilities of the
VRG Fund, in exchange for shares of the Government Fund; and (b) the
distribution to shareholders of the VRG Fund of the shares of the Government
Fund so received.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
820,523 31,115 42,670
</TABLE>
---------------------
159
<PAGE>
LIST OF ABBREVIATIONS
<TABLE>
<S> <C> <C>
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
</TABLE>
- ---------------------
160
<PAGE>
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---------------------
161
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
162
<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.
STAGECOACH FUNDS, INC.
DIVERSIFIED INCOME FUND
GROWTH AND INCOME FUND
SUPPLEMENT DATED FEBRUARY 16, 1996
TO PROSPECTUS DATED MAY 1, 1995
AS SUPPLEMENTED ON AUGUST 24, 1995,
OCTOBER 18, 1995 AND JANUARY 2, 1996
The following paragraph replaces the fourth paragraph under the prospectus
section "THE FUNDS AND MANAGEMENT":
Mr. Robert Bissell has replaced Thomas L. Dibblee as co-manager of the
portfolios of the Diversified Income and Growth and Income Funds 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 from
January 1992. 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.
<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-05-96-002 (02/96)
BULK RATE
STAGECOACH FUNDS-R- 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
