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LOGO
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PROSPECTUS
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GINNIE MAE FUND
SHORT-INTERMEDIATE
U.S. GOVERNMENT
INCOME FUND
INSTITUTIONAL CLASS
June 3, 1996
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STAGECOACH FUNDS(R)
GINNIE MAE FUND
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
INSTITUTIONAL CLASS
Stagecoach Funds, Inc. (the "Company") is an open-end investment company. This
Prospectus contains information about one class of shares offered in two funds
of in the Stagecoach Family of Funds - the GINNIE MAE FUND -- INSTITUTIONAL
CLASS and SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND -- INSTITUTIONAL CLASS
(each, a Fund and collectively, the "Funds").
The GINNIE MAE FUND seeks to provide investors with a long-term total rate of
return through preserving capital and earning high interest income by investing
principally in a portfolio of U.S. Government mortgage pass-through securities,
consisting primarily of securities issued by the Government National Mortgage
Association, Federal National Mortgage Association and Federal Home Loan
Mortgage Corporation.
The SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND seeks to provide investors
with current income, while preserving capital, by investing primarily in a
portfolio consisting of short- to intermediate-term securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities.
Please read this Prospectus and retain it for future reference. It is designed
to provide you with important information and to help you decide if a Fund's
goals match your own. A Statement of Additional Information ("SAI"), dated May
1, 1996, containing additional information about the Funds, has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The Funds' SAI is available free of charge by writing to
Stagecoach Funds, Inc., c/o Stagecoach Shareholder Services, Wells Fargo Bank,
N.A., P.O. Box 7066, San Francisco, CA 94120-7066 or by calling the Company at
1-800-222-8222.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES CERTAIN
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED JUNE 3, 1996
PROSPECTUS
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Each Fund is advised by Wells Fargo Bank, which also serves as the Funds'
transfer and dividend disbursing agent and custodian. In addition, Wells Fargo
Bank is a Shareholder Servicing Agent and a Selling Agent (each as defined
below). Stephens Inc. ("Stephens") is the Funds' sponsor and administrator and
serves as distributor of the Funds' shares.
THE SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND'S SHARES AND PORTFOLIO
INVESTMENTS (EXCEPT AS NOTED UNDER "HOW THE FUNDS WORK - INVESTMENT OBJECTIVES
AND POLICIES" AND "PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES") ARE
NOT INSURED OR GUARANTEED BY THE UNITED STATES OR ANY FEDERAL AGENCY OR
INSTRUMENTALITY.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND PROVIDES CERTAIN OTHER SERVICES
TO THE FUNDS, FOR WHICH IT IS COMPENSATED. STEPHENS, WHICH IS NOT AFFILIATED
WITH WELLS FARGO BANK, IS THE FUNDS' SPONSOR, ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 5
HOW THE FUNDS WORK 7
THE FUNDS AND MANAGEMENT 11
INVESTING IN THE FUNDS 14
EXCHANGES 18
DIVIDENDS 19
MANAGEMENT AND SERVICING FEES 20
TAXES 22
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
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PROSPECTUS SUMMARY
The Funds provide you with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides you with summary information about the Funds. For more information,
please refer specifically to the identified Prospectus sections and generally to
the Funds' Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The GINNIE MAE FUND seeks to provide investors with a long-term total rate of
return through preserving capital and earning high interest income by
investing principally in a portfolio of U.S. Government mortgage
pass-through securities, consisting primarily of securities issued by the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC").
Under normal market conditions, the Fund will invest at least 65% of its
assets in securities issued by GNMA.
The SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND seeks to provide
investors with current income, while preserving capital, by investing
primarily in a portfolio consisting of short- to intermediate-term
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. The Fund invests primarily in U.S. Treasury securities,
notes and bonds and obligations issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises such as GNMA
and FNMA. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in U.S. Government obligations, and the
dollar-weighted effective average maturity of the portfolio is expected to
be between two and five years. The Fund may also invest in investment-grade
corporate debt obligations. The Fund is designed for investors with
investment horizons of two to five years. See "How the Funds Work" and
"Prospectus Appendix -- Additional Investment Policies" for further
information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. An investment in a Fund is not insured against loss of principal. Therefore,
you should be prepared to accept some risk with the money you invest in the
Funds. As with all mutual funds, there can be no assurance that a Fund will
achieve its investment objective.
The Funds invest primarily in U.S. Government obligations. U.S. Government
obligations include securities issued or guaranteed as to principal and
interest by the U.S. Government and supported by the full faith and credit
of the U.S. Treasury. U.S. Government obligations also include securities
issued or guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some of
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these obligations are supported by the full faith and credit of the United
States or U.S. Treasury guarantees; others, by the right of the issuer or
guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, only by the credit
of the agency or instrumentality issuing the obligation. There can be no
assurance that the U.S. Government will provide financial support to its
agencies or instrumentalities where it is not obligated to do so.
U.S. Government obligations, and corporate debt securities in which the
Short-Intermediate U.S. Government Income Fund may invest, are subject to
fluctuations in market value due to fluctuations in market interest rates.
As a general matter, the value of debt instruments declines when market
interest rates increase and rises when market interest rates decrease.
Certain types of U.S. Government obligations are subject to fluctuations in
yield or value due to their structure or contract terms.
In addition, corporate debt securities are subject to credit risk, which is
the risk that the issuer cannot pay all or a portion of the obligation
represented by a particular security.
The adjustable-rate feature of the mortgages underlying the adjustable-rate
mortgage securities ("ARMS") and the collateralized mortgage obligations
("CMOs") in which the Short-Intermediate U.S. Government Income Fund may
invest should reduce, but will not eliminate, price fluctuations in such
securities. Accordingly, the net asset value of Fund shares will fluctuate.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Funds' investment adviser, manages your investments.
Wells Fargo Bank also provides transfer agency and dividend disbursing
agency and custodial services to the Funds. In addition, Wells Fargo Bank is
a Shareholder Servicing Agent and a Selling Agent of the Funds. See "The
Funds and Management" and "Management and Servicing Fees."
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Institutional Class shares of
the Funds at the net asset value per share without a sales charge ("NAV").
Qualified investors include certain customers of affiliate, franchise or
correspondent banks of Wells Fargo & Company and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships
and corporations. Purchases are effected through the customer's account with
the Institution under the terms of the customer's account agreement with the
Institution. Investors wishing to purchase a Fund's Institutional Class
shares should contact their account representatives. See "Investing in the
Funds" for additional information.
PROSPECTUS 2
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Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares of
another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sales in your state of residence.
Exchanges are effected through the customer's account with the Institution
under the terms of the customer's account agreement with the Institution.
See "Exchanges."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares at NAV, without charge by the Company.
Institutional Class shares held by an Institution on behalf of its customers
must be redeemed in accordance with instructions and limitations pertaining
to the customer's account at the Institution. It is the responsibility of an
Institution to transmit redemption requests to the Company and to credit its
customers' accounts. The Company reserves the right to impose charges for
wiring redemption proceeds. See "Investing in the Funds -- Redemption of
Institutional Class Shares."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of the Funds are declared daily and
automatically reinvested in additional Institutional Class shares of the
Funds that paid the dividend at NAV. Shareholders may also elect to receive
dividends in cash. Any capital gains are distributed at least annually in
the same manner as dividends. See "Dividends" for additional information.
Q. WHAT ARE DERIVATIVES AND DO THE FUNDS USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or
rate. Some of the permissible investments described in this Prospectus, such
as adjustable-rate mortgage-backed securities, floating- and variable-rate
instruments and certain U.S. Government obligations, can be considered
derivatives. Some derivatives may be more sensitive than direct securities
to changes in interest rates or sudden market moves. Some derivatives also
may be susceptible to fluctuations in yield or value due to their structure
or contract terms.
Q. WHAT STEPS DO THE FUNDS TAKE TO CONTROL DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank, as investment adviser, uses a variety of internal risk
management procedures to ensure that derivatives use is consistent with a
Fund's investment objective, does not expose the Fund to undue risks and is
closely monitored. These procedures include providing periodic reports to
the Board of Directors concerning the use of derivatives. Derivatives use by
a Fund also is subject to broadly applicable investment policies. For
example, a Fund may not invest more than a
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specified percentage of its assets in "illiquid securities", including
derivatives that do not have active secondary markets. Nor may the Fund use
certain derivatives without establishing adequate "cover" in compliance with
SEC rules limiting the use of leverage. For more information on the Funds'
investment activities, see "How the Funds Work" and "Prospectus
Appendix -- Additional Investment Policies."
PROSPECTUS 4
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SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE
GINNIE MAE U.S. GOVERNMENT
FUND INCOME FUND
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<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price) .............. None None
Sales Charge Imposed on Reinvested Dividends ... None None
Maximum Sales Charge Imposed on Redemptions .... None None
Exchange Fees .................................. None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE
GINNIE MAE U.S. GOVERNMENT
FUND INCOME FUND
---------- ------------------
<S> <C> <C>
Management Fee (after waivers or
reimbursements)(1) ............................. 0.50% 0.27%
Shareholder Servicing Fee (after waivers)(2) ..... 0.17% 0.00%
Administrative Fee ............................. 0.03% 0.03%
Other Expenses (after waivers or
reimbursements)(3) ............................. 0.07% 0.35%
----- -----
TOTAL FUND OPERATING EXPENSES (after waivers or
reimbursements)(4) ............................. 0.77% 0.65%
===== =====
</TABLE>
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(1) Management fee (before waivers or reimbursements) would be 0.50% and 0.50%,
respectively.
(2) Shareholder Servicing Fees (before waivers) would be payable at maximum
annual rates of 0.25% and 0.25%, respectively.
(3) Other Expenses (before waivers or reimbursements) would be 0.36% and 0.54%,
respectively.
(4) Total Fund Operating Expenses (before waivers or reimbursements) would be
1.14% and 1.32%, respectively.
<TABLE>
<CAPTION>
EXAMPLE OF EXPENSES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment in a
Fund's Institutional Class, assuming a 5%
annual return and redemption at the end of
each time period indicated:
Ginnie Mae Fund........................ $8 $25 $43 $ 95
Short-Intermediate U.S. Government
Income Fund............................ $7 $21 $37 $ 82
</TABLE>
5 PROSPECTUS
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EXPLANATION OF TABLES
The purpose of the foregoing tables is to help a shareholder understand the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The tables do not reflect any charges that may be imposed by Wells
Fargo Bank or another Institution directly on its customers accounts in
connection with an investment in the Funds.
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when a shareholder buys
or sells Fund shares. Institutional Class shares are sold with no shareholder
transaction charges imposed by the Funds. The Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Institutional Class shares of the Funds
are based on applicable contract amounts and derived from amounts incurred
during the most recent fiscal year, restated to reflect voluntary fee waivers
and expense reimbursements that are expected to continue to reduce expenses
during the current fiscal year. WELLS FARGO BANK AND STEPHENS WILL WAIVE OR
REIMBURSE ALL OR A PORTION OF THEIR RESPECTIVE FEES CHARGED TO, OR EXPENSES PAID
BY, EACH FUND TO ENSURE THAT THE TOTAL FUND OPERATING EXPENSES DO NOT EXCEED, ON
AN ANNUAL BASIS, 0.77% OR 0.65%, RESPECTIVELY, OF THE GINNIE MAE FUND'S OR
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND'S AVERAGE DAILY NET ASSETS
THROUGH AUGUST 31, 1997. Any waivers or reimbursements would reduce a Fund's
total expenses. There can be no assurances that waivers or reimbursements will
continue after that time. For more complete descriptions of the various costs
and expenses you can expect to incur as an investor in the Funds, please see
"Management and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. This rate of return should
not be considered an indication of actual or expected performance of a Fund nor
a representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
PROSPECTUS 6
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HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
The GINNIE MAE FUND seeks to provide investors with a long-term total rate of
return through preserving capital and earning high interest income by investing
principally in a portfolio of U.S. Government mortgage pass-through securities,
consisting primarily of securities issued by GNMA, FNMA and FHLMC. This
investment objective is fundamental and cannot be changed without shareholder
approval. As with all mutual funds, there can be no assurance that the Fund,
which is a diversified portfolio, will achieve its investment objective. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in GNMA securities. These securities may bear interest at rates that are not
fixed ("floating- and variable-rate instruments") or may be purchased on a
"when-issued" or "firm commitment basis." The Fund also may invest in U.S.
Treasury securities, which are backed by the full faith and credit of the U.S.
Government, and repurchase agreements.
GNMAs, FNMAs and FHLMCs are mortgage-backed securities representing part
ownership of a pool of residential mortgage loans. A "pool" or group of such
mortgages is assembled and, after being approved by the entity, is offered to
investors through securities dealers. Once approved by GNMA, a government
corporation within the U.S. Department of Housing and Urban Development, the
timely payment of interest and principal of a GNMA security is guaranteed by the
full faith and credit of the U.S. Government. FNMA and FHLMC are federally
chartered corporations supervised by the U.S. Government and acting as
government-sponsored enterprises. FNMA and FHLMC securities are not direct
obligations of the U.S. Treasury, and are supported by the credit of FNMA or
FHLMC only. FNMA guarantees timely payment of interest and principal on its
securities; FHLMC guarantees timely payment of interest and ultimate payment of
principal only.
The Ginnie Mae Fund may temporarily invest some of its assets in shares of
unaffiliated registered, open-end investment companies, subject to the
limitations of the Investment Company Act of 1940, as amended (the "1940 Act").
The Fund may also invest in high-quality money market instruments, which include
U.S. Government obligations, obligations of domestic and foreign banks, and
short-term corporate debt obligations. Such temporary investments would most
likely be made when there is an unexpected or abnormal level of investor
purchases or redemptions of Fund shares or because of unusual market conditions.
The Fund also may lend its portfolio securities. A more complete description of
the Fund's investments and investment activities is contained in "Prospectus
Appendix - Additional Investment Policies" and in the SAI.
7 PROSPECTUS
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SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
The Short-Intermediate U.S. Government Income Fund (sometimes, the "Income
Fund") seeks to provide investors with current income, while preserving capital,
by investing primarily in a portfolio consisting of short- to intermediate-term
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. This investment objective is fundamental and cannot be
changed without shareholder approval. As with all mutual funds, there can be no
assurance that the Fund, which is a diversified portfolio, will achieve its
investment objective.
The Income Fund may invest in obligations of any maturity. Under ordinary
circumstances, the dollar-weighted effective average maturity of the Fund's
portfolio is generally expected to be between two and five years, and at least
65% of the value of its total assets will be invested in U.S. Government
obligations. The Fund seeks to enhance its total return by shortening the
average maturity of portfolio securities when interest rates are anticipated to
increase and lengthening the maturity of such portfolio securities to take
advantage of anticipated interest rate declines. Portfolio turnover generally
involves some expense to the Fund, including dealer mark-ups.
The Income Fund's assets may be invested in U.S. Government obligations and in
investment-grade corporate debt obligations rated at the date of purchase in the
top four rating groups by Standard & Poor's Rating Group ("S&P") or Moody's
Investor Services, Inc. ("Moody's"), i.e., "AAA"/"Aaa," "AA"/"Aa," "A/A," and
"BBB"/"Baa" by S&P and Moody's, respectively. Securities rated "BBB"/"Baa" have
speculative characteristics. In addition, it is possible that securities in
which the Fund may invest could be downgraded by a ratings group subsequent to
purchase by the Fund. The Fund will not hold more than 5% of its assets in
securities that have been downgraded below investment grade subsequent to
purchase.
The Income Fund also may purchase "stripped securities" that include
participations in trusts that hold U.S. Treasury obligations (such as TIGRs and
CATS) and interests in U.S. Treasury obligations reflected in the Federal
Reserve-Book Entry System that represent ownership in either the future interest
payments or the future principal payments on the U.S. Treasury obligations
(sometimes referred to as "STRIPs"). Stripped securities have significantly
different investment characteristics than the instruments from which they
derive. S&P and Moody's assign ratings based upon their judgement of the risk of
default of the securities underlying the stripped securities. Stripped
securities are issued at a discount to their "face value" and may exhibit
greater price volatility than ordinary debt obligations because of the manner in
which their principal and interest are paid to investors. Investors should
understand that most of the risk of these securities comes from interest-rate
risk and not from the risk of default. Stripped securities may have
significantly greater interest-rate risk than traditional government securities
with identical ratings.
PROSPECTUS 8
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The Income Fund may invest in ARMS with interest rates that periodically reset
when market rates change. The Fund is designed for investors who seek a
relatively stable net asset value while providing high current income relative
to high-quality, short-term investment alternatives. ARMS are pass-through
certificates representing ownership interests in a pool of adjustable-rate
mortgages and the resulting cash flow from those mortgages. The ARMS in which
the Fund may invest are issued or guaranteed by GNMA, FNMA or FHLMC. Unlike
conventional debt securities, which provide for periodic (usually semi-annual)
payments of interest and payments of principal at maturity or on specified call
dates, ARMS provide for monthly payments based on a pro rata share of both
periodic interest and principal payments and prepayments of principal on the
underlying mortgage pool (less GNMA's, FNMA's or FHLMC's fees and any applicable
loan servicing fees.)
The Income Fund also may invest in the adjustable-rate portions of CMOs issued
by government agencies, instrumentalities or government-sponsored enterprises
including, primarily, FNMA and FHLMC, and collateralized by pools of mortgage
loans. Payments of principal and interest on the collateral mortgages are used
to pay debt service on the CMOs. All CMOs purchased by the Fund are rated, at
the time of purchase, "AAA" by S&P or "Aaa" by Moody's.
On a temporary basis, the Income Fund may invest cash balances in shares of
unaffiliated, registered, open-end investment companies, subject to the
limitations of the 1940 Act. The Fund also may invest in U.S. Treasury bills,
engage in repurchase agreements and lend its portfolio securities, provided the
value of such loans of portfolio securities does not exceed one-third of the
current value of its total assets. Such temporary investments would most likely
be made when there is an unexpected or abnormal level of investor purchases or
redemptions of Fund shares or because of unusual market conditions. A more
complete description of the Fund's investments and investment activities is
contained in "Prospectus Appendix - Additional Investment Policies" and in the
SAI.
RISK FACTORS
Although GNMA securities are guaranteed by the U.S. Government as to timely
payment of principal and interest and ARMS are guaranteed by the U.S.
Government, its agencies or instrumentalities (including government-sponsored
enterprises as noted above), the market value of these securities, upon which
the Funds' daily net asset value is based, will fluctuate. The Funds are subject
to interest-rate risk, that is, the risk that increases in interest rates may
adversely affect the value of the securities in which the Funds invest, and
hence the value of your investment in the Funds. The value of the securities in
which a Fund invests generally changes inversely to changes in interest rates.
However, the adjustable-rate feature of the mortgages underlying the ARMS and
the CMOs in which the Income Fund may invest should reduce, but will not
eliminate,
9 PROSPECTUS
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price fluctuations in such securities, particularly during periods of extreme
fluctuations in market interest rates.
The full and timely payment of principal and interest on GNMA ARMS is
guaranteed by GNMA and backed by the full faith and credit of the U.S.
Government. FNMA also guarantees full and timely payment of both interest and
principal, while FHLMC guarantees full and timely payment of interest and
ultimate payment of principal. FNMA and FHLMC ARMS are not backed by the full
faith and credit of the U.S. Government. However, because FNMA and FHLMC are
government-sponsored enterprises, these securities are considered by some
investors to be high-quality investments that present minimal credit risks. The
yields provided by these ARMS have historically exceeded the yields on other
types of U.S. Government securities with comparable maturities. Of course, there
can be no assurance that this historical performance will continue or that
either Fund, which are diversified funds, will meet its investment objective.
Moreover, no assurance can be given that the U.S. Government would supply
financial support to U.S. Government-sponsored enterprises such as FNMA and
FHLMC in the event of a default in payment on the underlying mortgages which the
government-sponsored enterprise is unable to make good. Principal on the
mortgages underlying the mortgage pass-through securities in which the Funds may
invest may be prepaid in advance of maturity. Such prepayments tend to increase
when interest rates decline and may present a Fund with more principal to invest
at lower rates. The converse also tends to be the case. Portfolio turnover
should not adversely affect the Funds since portfolio transactions ordinarily
are made directly with principals on a net basis and, consequently, the Funds do
not incur brokerage expenses.
S&P and Moody's assign ratings based upon their judgment of the risk of
default (i.e., the risk that the issuer or guarantor may default in the payment
of principal and/or interest) of the securities underlying the CMOs. However,
investors should understand that most of the risk of these securities comes from
interest-rate risk (i.e., the risk that market interest rates may adversely
affect the value of the securities in which a Fund invests) and not from the
risk of default. CMOs may have significantly greater interest rate risk than
traditional government securities with identical ratings. The adjustable-rate
portions of CMOs have significantly less interest rate risk.
U.S. Government obligations have been selected by Wells Fargo Bank as the
Income Fund's principal investments because of their relatively low purchase and
sale transaction costs and because of the low default risk associated with them
(i.e., they are issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities).
PERFORMANCE
The performance of each class of shares of a Fund may be advertised from time
to time in terms of yield, effective yield, average annual total return and
cumulative total return.
PROSPECTUS 10
<PAGE> 15
Performance figures are based on historical results and are not intended to
indicate future performance.
Yield refers to the income generated by an investment in a class of the Fund's
shares over a period (usually 30 days), expressed as an annual percentage rate.
Effective yield is calculated in the same manner but assumes reinvestment of the
income earned from a Fund. Because of the effects of compounding, effective
yields are slightly higher than yields.
Average annual total return of a class of shares is based on the overall
dollar or percentage change in value of a hypothetical investment in a Fund's
class and assumes that the investment is at NAV and all dividends and any
capital gain distributions attributable to the class also are reinvested at NAV
in the class. Cumulative total return is calculated similarly except that the
return figure is aggregated over the relevant period instead of annualized.
In addition to presenting these standardized performance calculations, at
times, the Funds may also present non-standard performance figures, such as
three-month total returns or, in sales literature, distribution rates. Because
of differences in the fees and/or expenses borne by shares of each class of a
Fund, the performance figures on a class of shares can be expected, at any given
time, to vary from the performance figures for other classes of the Fund.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request free of
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
THE FUNDS AND MANAGEMENT
The Funds are two funds of the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of the following funds: Aggressive Growth, Asset Allocation, California
Tax-Free Bond, California Tax-Free Income, California Tax-Free Money Market
Mutual, Corporate Stock, Diversified Income, Ginnie Mae, Growth and Income,
Money Market Mutual, National Tax-Free Money Market Mutual, Short-Intermediate
U.S. Government Income, and U.S. Government Allocation Funds. Each of the
Company's funds, except the California Tax-Free Income, Corporate Stock,
Government Money Market Mutual, Money Market Trust and Short-Intermediate U.S.
Government Income Funds, currently offer three classes of shares. The California
Tax-Free Income and Short-Intermediate U.S. Government Income Funds offer two
classes of shares, and the Corporate Stock Fund,
11 PROSPECTUS
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Government Money Market Mutual Fund and the Money Market Trust offer a single
class of shares. The Funds are authorized to issue other classes of shares,
subject to a front-end sales charge and, in some cases, subject to a
contingent-deferred sales charge, that are offered to retail investors. Each
class of shares represents an equal proportionate interest in a Fund with other
shares of the same class. Shareholders of each class bear their pro rata portion
of the Fund's operating expenses except for certain class-specific expenses
(e.g., any state securities registration fees, shareholder servicing fees or
distribution fees that may be paid under Rule 12b-1) that are allocated to a
particular class. For information on another fund or class of shares, please
call Stagecoach Shareholder Services at 1-800-222-8222 or write the Company at
the address shown on the front cover of the Prospectus.
The Board of Directors of the Company supervises each Fund's activities and
monitors its contractual arrangements with various service-providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be requested for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing a fund's
investment objective or fundamental investment policies. All shares of the
Company have equal voting rights and will be voted in the aggregate, rather than
by series or class, unless otherwise required by law (such as when the voting
matter affects only one series or class). As a Fund shareholder, you receive one
vote for each share owned and fractional votes for fractional shares owned. See
"Management" in the SAI for more information on the Company's Directors and
Officers. A more detailed description of the voting rights and attributes of the
shares is contained under "Capital Stock" in the SAI.
Wells Fargo Bank is the Funds' investment adviser, transfer agent and dividend
disbursing agent. Wells Fargo Bank is also the custodian for the Funds. In
addition, Wells Fargo Bank serves as a Shareholder Servicing Agent and a Selling
Agent of the Funds. Wells Fargo Bank, one of the largest banks in the United
States, was founded in 1852 and is the oldest bank in the western United States.
As of April 1, 1996, Wells Fargo Bank and its affiliates provided investment
advisory services for over $56 billion of assets of individuals, trusts,
estates and institutions. Wells Fargo Bank also serves as investment adviser to
other separately managed funds (or the master portfolio in which a fund may
invest) of the Company and as investment adviser or sub-adviser to separately
managed funds of five other registered, open-end, management investment
companies. Wells Fargo Bank, a wholly owned subsidiary of Wells Fargo &
Company, is located at 420 Montgomery Street, San Francisco, California 94104.
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank, has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contracts and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions
PROSPECTUS 12
<PAGE> 17
relating to, present federal or state statutes, including the Glass-Steagall
Act, and regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as future changes in such statutes,
regulations and judicial or administrative decisions or interpretations, could
prevent such entities from continuing to perform, in whole or in part, such
services. If any such entity were prohibited from performing any such services,
it is expected that new agreements would be proposed or entered into with
another entity or entities qualified to perform such services.
Mr. Paul Single assumed responsibility for the day-to-day management of the
portfolio of the Ginnie Mae Fund on May 1, 1995. Mr. Single has managed taxable
bond portfolios for over a decade, and has specific expertise in mortgage-backed
securities. Prior to joining Wells Fargo Bank, in early 1988, he was a senior
portfolio manager for Benham Capital Management Group. Mr. Single received his
B.S. from Springfield College.
Mr. Mark Kraschel has been responsible for the day-to-day management of the
portfolio of the Short-Intermediate U.S. Government Income Fund since October
1993. He has also been responsible for the day-to-day management of the
portfolio of the Ginnie Mae Fund since May 1, 1995. He has specialized in
short-term bond investment applications for over a decade. He joined Wells Fargo
Bank in 1988 after five years in fixed-income management at First Boston
Corporation. Mr. Kraschel holds a B.S. in business administration from the
University of Oregon and an M.B.A. in finance from the University of San
Francisco.
Mr. Scott Smith also has been responsible for the day-to-day management of the
portfolio of the Short-Intermediate Government Income Fund since 1993 and has
been responsible for the management of the portfolio of the Ginnie Mae Fund
since May 1, 1995. He joined Wells Fargo Bank in 1988 as a taxable money market
portfolio specialist. His experience includes a position with a private money
management firm with mutual fund investment operations. Mr. Smith holds a B.A.
degree from the University of San Diego and is a chartered financial analyst.
Stephens is the Funds' sponsor and administrator and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years and have been providing discretionary portfolio management services
since 1983. Stephens currently manages investment portfolios for pension and
profit sharing plans, individual investors, foundations, insurance companies and
university endowments.
13 PROSPECTUS
<PAGE> 18
INVESTING IN THE FUNDS
Fund shares may be purchased on any day the Funds are open. The Funds are open
for business each day the New York Stock Exchange ("NYSE") is open for trading
(a "Business Day"). Currently, the NYSE is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day (each a "Holiday"). When any Holiday falls on a weekend, the
NYSE typically is closed on the weekday immediately before or after such
Holiday.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will transmit or cause to be transmitted promptly, without charge, a
paper copy of the electronic Prospectus.
SHARE VALUE
The value of a share of each class is its NAV. Wells Fargo Bank calculates the
NAV of each class of the Funds as of the close of regular trading on the NYSE
(referred to hereafter as "the close of the NYSE"), which is currently 1:00 p.m.
(Pacific time). The NAV per share for each class is computed by dividing the
value of a Fund's assets allocable to a particular class, less the liabilities
charged to that class by the total number of the outstanding shares of that
class. All expenses, including fees paid to the investment adviser and
administrator, are accrued daily and taken into account for the purpose of
determining the NAV, which is expected to fluctuate daily.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the other assets of the Funds are valued at
current market prices or, if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors. Prices
used for such valuations may be obtained from independent pricing services.
PURCHASE OF INSTITUTIONAL CLASS SHARES
Institutional Class shares of the Funds are sold at NAV (without a sales load)
on a continuous basis primarily to certain customers ("Customers") of affiliate,
franchise or correspondent banks of Wells Fargo & Company and other selected
institutions (previously defined as Institution). Customers may include
individuals, trusts, partnerships and corporations. Share purchases are effected
through a Customer's account at an Institution under the terms of the Customer's
account agreement with the Institution, and confirmations of share purchases and
redemptions are sent by the Funds to the Institution involved. Institutions (or
their nominees), acting on behalf of their Customers, normally are the holders
of record of Institutional Class shares. Customers' beneficial ownership of
Institutional Class shares is reflected in the account statements provided by
Institutions to their Customers. The exercise of voting rights and the
PROSPECTUS 14
<PAGE> 19
delivery to Customers of shareholder communications from the Funds is governed
by the Customers' account agreements with an Institution. Investors wishing to
purchase Institutional Class shares of a Fund should contact their account
representatives.
Institutional Class shares of the Funds are sold at the NAV per share next
determined after a purchase order has become effective. Purchase orders by an
Institution for Institutional Class shares in a Fund must be received by the
Company by 1:00 p.m. (Pacific time) on any Business Day. Payment for such shares
may be made by Institutions in federal funds or other funds immediately
available to the custodian no later than 1:00 p.m. (Pacific time) on the next
Business Day following the receipt of the purchase order.
It is the responsibility of Institutions to transmit orders for purchases by
their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to a Fund or its shareholders. Institutions may charge certain account fees
depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from a Fund with
respect to the investments of its Customers as described under "The Funds and
Management" and "Management and Servicing Fees." Payment for Institutional Class
shares of a Fund may, in the discretion of the investment adviser, be made in
the form of securities that are permissible investments for the Fund. For
further information see "Additional Purchase and Redemption Information" in the
SAI.
The Company reserves the right to reject any purchase order or to suspend
sales at any time. Payment for orders that are not received will be returned
after prompt inquiry. The issuance of Institutional Class shares is recorded on
the books of the Funds, and share certificates are not issued.
WIRE INSTRUCTIONS -- DIRECT PURCHASES BY INSTITUTIONS
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund and designate the Institutional
Class)
Account Name(s): name(s) in which to be registered
Account Number: (if investing into an existing account)
15 PROSPECTUS
<PAGE> 20
3. A completed Account Application should be sent by telefacsimile, with the
original subsequently mailed, to the following address immediately after the
funds are wired and must be received and accepted by the Transfer Agent
before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
STATEMENTS AND REPORTS
Institutions (or their nominees) typically send shareholders a confirmation or
statement of the account after every transaction that affects the share balance
or the Fund account registration. A statement with tax information for the
previous year will be mailed by January 31 of each year and also will be filed
with the IRS. At least twice a year, shareholders will receive financial
statements.
REDEMPTION OF INSTITUTIONAL CLASS SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Institutional
Class shares held by an Institution on behalf of its Customers must be redeemed
in accordance with instructions and limitations pertaining to a Customer's
account at the Institution. It is the responsibility of an Institution to
transmit redemption requests to the Company and to credit its Customers'
accounts with the redemption proceeds on a timely basis. The redemption proceeds
for Institutional Class shares of the Funds normally are wired to the redeeming
Institution the following Business Day after receipt of the request by the
Company. The Company reserves the right to delay the wiring of redemption
proceeds for up to seven days after it receives a redemption order if, in the
judgment of the investment adviser, an earlier payment could adversely affect a
Fund or unless the SEC permits a longer period under extraordinary
circumstances. Such extraordinary circumstances could include a period during
which an emergency exists as a result of which (a) disposal by a Fund of
securities owned by it is not reasonably practicable or (b) it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or a
period during which the SEC by order permits deferral of redemptions for the
protection of security holders of the Fund.
With respect to former shareholders of Westcore Trust or Pacifica Fund Trust
who do not have a relationship with an Institution, shares of a Fund may be
redeemed by writing or calling the Fund directly at the address and phone number
shown on the first page of
PROSPECTUS 16
<PAGE> 21
the Prospectus. When Institutional Class shares are redeemed directly from a
Fund, the Fund ordinarily sends the proceeds by check to the shareholder at the
address of record on the next Business Day unless payment by wire is requested.
The Fund may take up to seven days to make payment, although this will not be
the customary practice. Also, if the NYSE is closed (or when trading is
restricted) for any reason other than the customary weekend or holiday closing
or if an emergency condition as determined by the SEC merits such action, a Fund
may suspend redemptions or postpone payment dates.
To be accepted by a Fund, a letter requesting redemption must include: (i) the
Fund name and account registration from which the Institutional Class shares are
being redeemed; (ii) the account number; (iii) the amount to be redeemed; (iv)
the signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution. An "eligible guarantor institution" includes a
commercial bank that is an FDIC member, a trust company, a member firm of a
domestic stock exchange, a savings association, or a credit union that is
authorized by its charter to provide a signature guarantee. Signature guarantees
by notaries public are not acceptable. Further documentation may be requested
from corporations, administrators, executors, personal representatives, trustees
or custodians.
All redemptions of Institutional Class shares of a Fund are made in cash,
except that the commitment to redeem Institutional Class shares in cash extends
only to redemption requests made by each Fund shareholder during any 90-day
period of up to the lesser of $250,000 or 1% of the NAV of the Fund at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have a Fund
make payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of that Fund are valued. If
the recipient were to sell such securities, he or she would incur brokerage
charges.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
REDEMPTIONS BY TELEPHONE
Telephone exchange or redemption privileges authorize the Transfer Agent to
act on telephone instructions from any person representing himself or herself to
be the shareholder of record and reasonably believed by the Transfer Agent to be
genuine. The Company requires the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Company
and the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Company nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
17 PROSPECTUS
<PAGE> 22
EXCHANGES
The Company's funds offer a convenient way to exchange Institutional Class
shares in the Fund for Institutional Class shares in another fund of the
Company. Before engaging in an exchange transaction, a shareholder should read
carefully the Prospectus describing the fund into which the exchange will occur,
which is available without charge and can be obtained by writing or by calling
the Company at the address or phone number listed on the first page of the
Prospectus. A shareholder may not exchange Institutional Class shares of one
fund for Institutional Class shares of another fund if Institutional Class
shares of both funds are not qualified for sale in the state of the
shareholder's residence. The Company may terminate or amend the terms of the
exchange privilege at any time.
Exchange transactions are effected through a Customer's account at an
Institution under the terms of the Customer's account agreement with the
Institution, and confirmations of share exchanges are sent by a Fund to the
Institution involved. Institutions (or their nominees), acting on behalf of
their Customers, normally are the holders of record of Institutional Class
shares. Institutions are responsible for transmitting orders for exchanges to
the Company on a timely basis. Customers' exchange transactions are generally
reflected in the account statements provided by Institutions to their Customers.
Investors wishing to exchange Institutional Class shares of a Fund for
Institutional Class shares of another fund should contact their account
representatives. Investors with questions may call the Company at
1-800-222-8222.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges are
made at the NAV of the respective share classes next determined following
receipt of the request by the Company in good order.
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. Shareholders should receive written confirmation of the exchange
from the Institution within a few days of the completion of the transaction.
To exchange Institutional Class shares, or if you have any questions, simply
call the Company at 1-800-222-8222. A shareholder of record should be prepared
to give the telephone representative the following information: (i) the account
number, social security number and account registration; (ii) the name of the
fund from and the fund into which the transfer is to occur; and (iii) the dollar
or share amount of the exchange. The conversation may be recorded to protect
shareholders and the Company. Telephone exchanges are available unless the
shareholder of record has declined the privilege on the Purchase Application.
In addition, Institutional Class shares of a Fund may be exchanged for Class A
shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of Wells Fargo Bank or
PROSPECTUS 18
<PAGE> 23
another bank, trust company or thrift institution, or in other cases where
Institutional Class shares are not held in such qualified accounts. Similarly,
Class A shares may be exchanged for Institutional Class shares of the same Fund
if the shares are to be held in such a qualified trust, agency or custodial
account. These exchanges are made at the NAV of the respective share classes
next determined after the exchange request is received by the Company.
DIVIDENDS
Each Fund intends to declare a daily dividend of substantially all of its net
investment income. Dividends declared in a month generally are paid on the last
Business Day of the month to shareholders of record. The Funds distribute any
capital gains at least annually. Dividends and capital-gain distributions are
automatically invested in additional whole and fractional shares of the same
class unless the shareholder has elected to receive payment in cash. Expenses,
such as state securities registration fees and transfer agent fees, that are
attributable to a particular class may affect the relative dividends and/or
capital-gain distributions of a class of shares.
Dividends and capital-gain distributions have the effect of reducing the NAV
per share by the amount distributed. Although such dividends and distributions
paid on newly issued shares shortly after a purchase would represent, in
substance, a return of capital, the dividend or distribution would be
attributable to net investment income or capital gain and, accordingly, would be
taxable to the shareholder.
Dividends for a Saturday, Sunday or Holiday are declared payable to
shareholders of record as of the preceding Business Day. If a shareholder
redeems shares before the dividend payment date, any dividends credited to the
shareholder are paid on the following dividend payment date unless the
shareholder has redeemed all shares in the account, in which case the
shareholder receives accrued dividends together with redemption proceeds.
19 PROSPECTUS
<PAGE> 24
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Funds' investment adviser, provides investment guidance and
policy direction in connection with the management of the Funds' assets. Wells
Fargo Bank also furnishes the Board of Directors with periodic reports on the
Funds' investment strategy and performance. For these services, Wells Fargo Bank
is entitled to a monthly investment advisory fee from the Ginnie Mae Fund at an
annual rate equal to 0.50% of the first $250 million of the Fund's average daily
net assets, 0.40% of the next $250 million, and 0.30% on amounts in excess of
$500 million and, from the Income Fund, at an annual rate equal to 0.50% of the
Fund's average daily net assets. From time to time, Wells Fargo Bank may waive
such fees in whole or in part. Any such waiver will reduce a Fund's expenses
and, accordingly, have a favorable impact on the Fund's yield and total return.
For the year ended December 31, 1995, the Ginnie Mae Fund and Income Fund paid
fees at annual rates equal to 0.50% and 0.27%, respectively, of their average
daily net assets to Wells Fargo Bank for its services as investment adviser.
Purchase and sale orders of the securities held by the Funds may be combined
with those of other accounts that Wells Fargo Bank manages, and for which it has
brokerage placement authority, in the interest of seeking the most favorable
overall net results. When Wells Fargo Bank determines that a particular security
should be bought or sold for a Fund and other accounts managed by Wells Fargo
Bank, Wells Fargo Bank undertakes to allocate those transactions among the
participants equitably. From time to time, the Funds, to the extent consistent
with their investment objectives, policies and restrictions, may invest in
securities of entities with which Wells Fargo Bank has a lending relationship.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as the custodian and transfer and dividend disbursing
agent for the Funds. Under separate Custody Agreements with Wells Fargo Bank,
each Fund may, at times, borrow money from Wells Fargo Bank as needed to satisfy
temporary liquidity needs. Wells Fargo Bank charges interest on such overdrafts
at a rate determined pursuant to the Fund's Custody Agreement. Wells Fargo Bank
performs its custodial and transfer and dividend disbursing agency services at
525 Market Street, San Francisco, California 94105.
INSTITUTIONS AND SHAREHOLDER SERVICING AGENTS
The Funds have entered into Shareholder Servicing Agreements with Wells Fargo
Bank and may enter into similar agreements with other Institutions ("Shareholder
Servicing Agents"). Under such agreements, Shareholder Servicing Agents
(including Wells
PROSPECTUS 20
<PAGE> 25
Fargo Bank) agree, as agents for their customers, to provide shareholder
administrative and liaison services with respect to Fund shares, which include,
without limitation, aggregating and transmitting shareholder orders for
purchases, exchanges and redemptions; maintaining shareholder accounts and
records; and providing such other related services as the Company or a
shareholder may reasonably request. For these services, a Shareholder Servicing
Agent is entitled to receive a fee, at the annual rate of up to 0.25% of the
average daily net assets attributable to the Institutional Class shares owned of
record or beneficially by investors with whom the Shareholder Servicing Agent
maintains a servicing relationship. In no case shall payments exceed any maximum
amount that may be deemed applicable under applicable laws, regulations or
rules, including the Rules of Fair Practice of the NASD.
A Shareholder Servicing Agent also may impose certain conditions on its
customers, subject to the terms of this Prospectus, in addition to or different
from those imposed by the Funds, such as requiring a higher minimum initial
investment or by directly charging its customers for its services. Each
Shareholder Servicing Agent has agreed to disclose any fees it may directly
charge its customers who are shareholders of the Funds and to notify them in
writing at least 30 days before it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides the Funds with administrative services, including general
supervision of the Funds' operation, coordination of the other services provided
to the Funds, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports,
and general supervision of data compilation in connection with preparing
periodic reports to the Company's Directors and officers. Stephens also
furnishes office space and certain facilities to conduct the Funds' business,
and compensates the Company's Directors, officers and employees who are
affiliated with Stephens. For these services, Stephens is entitled to receive a
monthly fee at the annual rate of up to 0.03% of each Fund's average daily net
assets. From time to time, Stephens may waive its fees from a Fund in whole or
in part. Any such waiver will reduce the Fund's expenses and, accordingly, have
a favorable impact on the Fund's performance.
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company under to
which Stephens acts as agent for a Fund for the sale of its shares and may enter
into Selling Agreements with Selling Agents that wish to make available shares
of the Funds to their respective customers.
Stephens has established a non-cash compensation program, pursuant to which
broker/dealers or financial institutions that sell shares of the Company's funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations,
21 PROSPECTUS
<PAGE> 26
tickets to sporting events, theater or other entertainment, opportunities to
participate in golf or other outings and gift certificates for meals or
merchandise.
Financial Institutions acting as Selling Agents, Shareholder Servicing Agents,
or in certain other capacities may be required to register as dealers pursuant
to applicable state securities laws which may differ from federal law and any
interpretations expressed herein.
FUND EXPENSES
Except for the expenses borne by Wells Fargo Bank and Stephens, each Fund
bears all costs of its operations, including advisory, transfer agency, custody
and administration fees, fees and expenses of independent auditors and legal
counsel, and any extraordinary expenses. Expenses attributable to a class (e.g.,
any shareholder servicing or distribution fees or other class-specific expenses)
are charged against the assets of the class. General expenses of the Company are
allocated among all of the funds of the Company, including the Funds, in a
manner proportionate to the net assets of each fund, on a transactional basis,
or on such other basis as the Company's Board of Directors deems equitable.
TAXES
The Company intends to qualify each Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of the Fund's
shareholders. In addition, net capital gains, net investment income, and
operating expenses will be determined separately for each Fund from the
Company's other funds. By complying with the applicable provisions of the Code,
the Funds will not be subject to federal income tax with respect to net
investment income and any net realized capital gains distributed to their
shareholders. Each Fund intends to pay out substantially all of its net
investment income and any net realized capital gains for each year. Dividends
from investment income (including any net realized short-term capital gains)
declared and paid by the Fund will be taxable as ordinary income to Fund
shareholders. Such dividends and capital-gain distributions, which are taxable
to shareholders as capital gain, will generally be taxable to recipient
shareholders, regardless of whether you take such payments in cash or have them
automatically reinvested in Fund shares. You may be eligible to defer the
taxation of dividends and capital-gain distributions on Fund shares that are
held under a qualified tax-deferred retirement plan. The Funds' dividends are
not expected to qualify for the dividends-received deduction allowed to
corporate shareholders.
PROSPECTUS 22
<PAGE> 27
Your Institution or your Shareholder Servicing Agent on its behalf, will
inform you of the amount and nature of the Fund's dividends and any capital-gain
distributions. You should keep all statements you receive to assist in your
personal recordkeeping. The Company may be required to withhold, subject to
certain exemptions, at a rate of 31% on dividends, capital-gain distributions
and redemption proceeds (including proceeds from exchanges) paid or credited to
Fund shareholders, unless a shareholder provides a correct tax identification
number (generally, the shareholder's social security or employer identification
number) and, upon establishing an account with the Company, certifies on the
Account Application that the shareholder is not subject to back-up withholding,
or the IRS notifies the Company that the shareholder is subject to back-up
withholding.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAI.
The foregoing discussion is based on tax laws and federal regulations that
were in effect as of the date of this Prospectus and summarizes only some of the
important federal income tax considerations generally affecting the Funds and
their shareholders. It is not intended as a substitute for careful tax planning;
all shareholders should consult their tax advisors with respect to their
specific tax situation as well as with respect to state and local taxes.
Further federal tax considerations are discussed in the SAI.
23 PROSPECTUS
<PAGE> 28
PROSPECTUS APPENDIX -
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
FHLMC issues two types of mortgage pass-through securities: mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA certificates in that each PC represents a pro rata
share of all interest and principal payments made and owed on the underlying
pool of mortgages. GMCs also represent a pro rata interest in a pool of
mortgages. These instruments, however, pay interest semiannually and return
principal once a year in guaranteed minimum payments.
These mortgage-backed securities differ from bonds in that principal is paid
back by the borrower over the length of the loan rather than returned in a lump
sum at maturity. They are called "pass-through" securities because both interest
and principal payments, including prepayments, are passed through to the holder
of the security. The GNMA securities in which the Ginnie Mae Fund may invest are
of the "modified" type, which entitles the holder of such certificates to
receive its share of all interest and principal payments owed on the underlying
pool of mortgage loans, regardless of whether or not the mortgagors actually
make the payments.
The payment of principal on the underlying mortgages may exceed the minimum
required by the schedule of payments for the mortgages. Such prepayments are
made at the option of the mortgagors for a wide variety of reasons reflecting
their individual circumstances. For example, mortgagors may speed up the rate at
which they prepay their mortgages when interest rates decline sufficiently to
encourage refinancing. The Fund, when such prepayments are passed through to it,
may be able to reinvest them only at a lower rate of interest. As a result, if
the Fund purchases such securities at a premium, a prepayment rate that is
faster than expected will reduce yield to maturity, while a prepayment rate that
is slower than expected will have the opposite effect of increasing yield to
maturity. Conversely, if the Fund purchased such securities at a discount,
faster than expected prepayments will increase, while slower than expected
prepayments will reduce, yield to maturity. Accelerated prepayments on
securities purchased by the Fund at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time the
principal is repaid in full. In choosing specific issues, Wells Fargo Bank, as
investment adviser, will have made assumptions about the likely speed of
prepayment. Actual experience may vary from this assumption resulting in a
higher or lower investment return than anticipated.
The mortgages underlying ARMS guaranteed by GNMA are fully insured or
guaranteed by the Federal Housing Administration, the Veterans Administration or
the Farmers Home Administration, while those underlying ARMS issued by FNMA or
FHLMC are
A-1 PROSPECTUS
<PAGE> 29
typically conventional residential mortgages which are not so insured or
guaranteed, but which conform to specific underwriting, size and maturity
standards.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specified
coupon rate and has a stated maturity or final distribution date. The principal
and interest payment on the underlying mortgages may be allocated among the
classes of CMOs in several ways. Typically, payments of principal, including any
prepayments, on the underlying mortgages are applied to the classes in the order
of their respective stated maturities or final distribution dates, so that no
payment of principal is made on CMOs of a class until all CMOs of other classes
having earlier stated maturities or final distribution dates have been paid in
full. One or more classes of CMOs may have coupon rates that reset periodically
based on an index, such as the London Interbank Offered Rate or LIBOR.
The interest rates on the mortgages underlying the ARMS and the CMOs in which
a Fund may invest generally are readjusted at intervals of one year or less in
response to changes in a predetermined interest rate index. There are two main
categories of indices: those based on U.S. Treasury securities and those derived
from a calculated measure, such as cost-of-funds index or a moving average of
mortgage rates. Commonly utilized indices include the one-year and five-year
constant maturity U.S. Treasury note rates, the three-month U.S. Treasury bill
rate, the 180-day U.S. Treasury bill rate, rates on longer-term U.S. Treasury
securities, the National Median Cost of Funds, the one-month, three-month,
six-month or one-year LIBOR, a published prime rate, or commercial paper rates.
Certain of these indices follow overall market interest rates more closely than
others.
Adjustable-rate mortgages, an increasingly common form of residential
financing, generally are originated by banks and thrift institutions and have a
specified maturity date. Most provide for amortization of principal in a manner
similar to fixed-rate mortgages but have interest payment amounts that change in
response to changes in a specified interest-rate index. The rate of interest due
on such a mortgage is calculated by adding an agreed-upon "margin" to the
specified index, although there generally are limitations or "caps" on
interest-rate movements in any given period or over the life of the mortgage. To
the extent that the interest rates on adjustable-rate mortgages underlying the
ARMS or the CMOs in which the Fund may invest cannot be adjusted in response to
interest-rate changes because of such caps, the ARMS or CMOs are likely to
respond to changes in market rates more like fixed-rate securities. In other
words, interest-rate increases in excess of such caps can be expected to cause
the ARMS or CMOs backed by mortgages that have such caps to decline in value to
a greater extent than would be the case in the absence of such caps. Conversely,
interest-rate decreases below such floors can be expected to cause the ARMS or
CMOs backed by mortgages that have such floors to increase in value to a greater
extent than would be the case in the absence of such floors.
PROSPECTUS A-2
<PAGE> 30
Since the interest rates on many mortgages underlying ARMS and CMOs are reset
on an annual basis and generally are subject to caps, it can be expected that
the prices of such ARMS and CMOs will fluctuate to the extent prevailing market
interest rates are not reflected in the interest rates payable on the underlying
adjustable rate mortgages or the CMO. In this regard, the NAV of a Fund's shares
could fluctuate to the extent interest rates on underlying mortgages differ from
prevailing market interest rates during interim periods between interest rate
reset dates. Accordingly, investors could experience some principal loss or less
gain than might otherwise be achieved if they redeem their Fund shares before
the interest rates on the mortgages underlying the Funds' portfolio securities
are adjusted to reflect prevailing market interest rate.
The holder of ARMS and certain CMOs receives not only monthly scheduled
payments of principal and interest but also may receive unscheduled principal
payments representing prepayments on the underlying mortgages. An investor,
therefore, may have to reinvest the periodic payments and any unscheduled
prepayments of principal it receives at a rate of interest which is lower than
the rate on the ARMS and CMOs held by it.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. Planned Amortization Class CMOs ("PAC
Bonds") generally require payments of a specified amount of principal on each
payment date. PAC Bonds are always parallel pay CMOs with the required principal
payment on such securities having the highest priority after interest has been
paid to all classes.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities. A Fund will only invest in SMBS that are obligations backed
by the full faith and credit of the U.S. Government. SMBS are usually structured
with two classes that receive different proportions of the interest and
principal distributions from a pool of mortgage assets. A Fund will only invest
in SMBS whose mortgage assets are U.S. Government obligations.
A common type of SMBS will be structured so that one class receives some of
the interest and most of the principal from the mortgage assets, while the other
class receives most of the interest and the remainder of the principal. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, a Fund may fail to fully recoup its initial investment in these
securities. The market value of any class that consists primarily or entirely of
principal payments generally is unusually volatile in response to changes in
interest rates. Because SMBS were only recently introduced, established trading
markets for these securities have not yet developed.
The Income Fund also may invest cash balances temporarily in U.S. Treasury
bills, which are short-term U.S. Government obligations with maturities which do
not exceed one year. As described further in the SAI, each Fund may purchase
certain securities on a when-issued basis, although it currently does not expect
to invest more than 5% of its assets in such securities.
A-3 PROSPECTUS
<PAGE> 31
INVESTMENT ACTIVITIES
Money Market Instruments and Temporary Investments
The Funds may have temporary cash balances on account of new purchases,
dividends, interest and reserves for redemptions, which generally will be less
than 5% of a Fund's portfolio and which will be invested in the following
high-quality money market instruments: (i) U.S. Government obligations; (ii)
negotiable certificates of deposit, bankers' acceptances and fixed time deposits
and other obligations of domestic banks (including foreign branches) that have
more than $1 billion in total assets at the time of investment and are members
of the Federal Reserve System or are examined by the Comptroller of the Currency
or whose deposits are insured by the FDIC; (iii) commercial paper rated at the
date of purchase "P-1" by Moody's or "A-1+" or "A-1" by S&P, or, if unrated, of
comparable quality as determined by Wells Fargo Bank, as investment adviser;
(iv) nonconvertible corporate debt securities (e.g., bonds and debentures) with
remaining maturities of no more than one year that are rated at least
"Aa" by Moody's or "AA" by S&P; (v) repurchase agreements; and (vi) short-term,
U.S. dollar-denominated obligations of foreign banks (including U.S. branches)
that at the time of investment: (a) have more than $10 billion, or the
equivalent in other currencies, in total assets; (b) are among the 75 largest
foreign banks in the world as determined on the basis of assets; (c) have
branches or agencies in the United States; and (d) in the opinion of Wells Fargo
Bank, as investment adviser, are of comparable quality to obligations of U.S.
banks which may be purchased by the Funds.
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturities. Treasury bills, the most frequently issued
marketable government securities, have a maturity of up to one year and are
issued on a discount basis. U.S. Government obligations also include securities
issued or guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some obligations of agencies or
instrumentalities of the U.S. Government are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, by the right of
the issuer or guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, only by the credit of the agency
or instrumentality issuing the obligation. In the case of obligations not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government would
provide financial support to its agencies or instrumentalities where it is not
obligated to do so. In addition, U.S. Government obligations are subject to
fluctuations in market value due to
PROSPECTUS A-4
<PAGE> 32
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
Corporate Debt Instruments
The Funds may invest in commercial paper (including variable amount master
demand notes) which refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations which permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes.
The Income Fund may invest in nonconvertible corporate debt securities (e.g.,
bonds and debentures). The Ginnie Mae Fund may invest in nonconvertible
corporate debt securities with no more than one year remaining to maturity at
the date of settlement, provided that such corporate bonds and debentures are
rated at the time of purchase at least "Aa" by Moody's or "AA" by S&P.
Floating- and Variable-Rate Instruments
Certain of the instruments that the Funds may purchase bear interest at rates
that are not fixed but vary, for example, with changes in specified market rates
or indices or specified intervals. Certain of these instruments may carry a
demand feature that would permit the holder to tender them back to the issuer at
par value prior to maturity. The floating- and variable-rate instruments that
the Funds may purchase include certificates of participation in such obligations
purchased from banks. Wells Fargo Bank monitors on an ongoing basis the ability
of an issuer of a demand instrument to pay principal and interest on demand.
Events affecting the ability of the issuer of a demand instrument to make
payment when due may occur between the date a Fund elects to demand payment and
the date payment is due. Such events may affect the ability of the issuer of the
instrument to make payment when due, thereby affecting the Fund's ability to
obtain payment at par. Demand instruments whose demand feature is not
exercisable within seven days may be treated as liquid, provided that an active
secondary market exists.
Repurchase Agreements
The Funds may enter into repurchase agreements wherein the seller of a
security to a Fund agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days,
A-5 PROSPECTUS
<PAGE> 33
although it may extend over a number of months. The Funds may enter into
repurchase agreements only with respect to U.S. Government obligations and other
obligations that would be permissible investments for the Funds. All repurchase
agreements will be fully collateralized based on values that are
marked-to-market daily. While the maturities of the underlying securities in a
repurchase agreement transaction entered into by a Fund may be greater than
twelve months, the term of any repurchase agreement on behalf of the Fund will
always be less than twelve months or less. If the seller defaults and the value
of the underlying securities has declined, a Fund may incur a loss. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
security, a Fund's disposition of the security may be delayed or limited. The
Funds will enter into repurchase agreements only with registered broker/dealers,
commercial banks and other financial institutions that meet guidelines
established by the Company's Board of Directors and are not affiliated with the
Funds' investment adviser. Subject to exemptive relief granted by the SEC, the
Funds may participate in pooled repurchase agreement transactions with other
funds advised by Wells Fargo Bank.
Loans of Portfolio Securities
The Funds may lend securities from their respective portfolios to brokers,
dealers and financial institutions (but not individuals) if cash, U.S.
Government obligations or other high-quality debt instruments equal to at least
100% of the current market value of the securities loan (including accrued
interest thereon) plus the interest payable to a Fund with respect to the loan
are maintained with the Fund. In determining whether to lend a security to a
particular broker, dealer or financial institution, the Funds' investment
adviser considers relevant facts and circumstances, including the
credit-worthiness of the broker, dealer or financial institution. Any loans of
portfolio securities are fully collateralized based on values that are
marked-to-market daily. The Funds will not enter into any portfolio security
lending arrangement having a duration of longer than one year. Any securities
that a Fund may receive as collateral will not become part of the Fund's
portfolio at the time of the loan and, in the event of a default by the
borrower, the Fund, if permitted by law, will dispose of such collateral except
for such part thereof that is a security in which the Fund is permitted to
invest. During the time securities are on loan, the borrower will pay a Fund any
accrued income on those securities, and the Fund may invest the cash collateral
and earn income or receive an agreed-upon fee from a borrower that has delivered
cash-equivalent collateral. The Funds may not lend securities having a value
that exceeds one-third of the current value of their assets. Loans of securities
by a Fund are subject to termination at the Fund's or the borrower's option. The
Funds may pay reasonable administrative and custodial fees in connection with a
securities loan and may pay a negotiated portion of the interest or fee earned
with respect to the collateral to the borrower or the placing broker. Borrowers
and placing brokers may not be affiliated, directly or indirectly, with the
Company, the investment adviser, or the Distributor.
PROSPECTUS A-6
<PAGE> 34
Foreign Obligations
The Income Fund may invest up to 25% of its assets in high-quality, short-term
debt obligations of foreign branches of U.S. banks or U.S. branches of foreign
banks that are denominated in and pay interest in U.S. dollars. Investments in
foreign obligations involve certain considerations that are not typically
associated with investing in domestic obligations. There may be less publicly
available information about a foreign issuer than about a domestic issuer.
Foreign issuers also are not subject to the same uniform accounting, auditing
and financial reporting standards or governmental supervision as domestic
issuers. In addition, with respect to certain foreign countries, taxes may be
withheld at the source under foreign income tax laws, and there is a possibility
of expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.
Other Investment Companies
The Funds may invest in shares of other open-end, management investment
companies, subject to the limitations of the 1940 Act, provided that any such
purchases will be limited to temporary investments in shares of unaffiliated
investment companies and the Funds' investment adviser will waive its advisory
fees for that portion of the Funds' assets so invested, except when such
purchase is part of a plan of merger, consolidation, reorganization or
acquisition. As a shareholder of another investment company, a Fund would bear,
along with other shareholders, its pro rata portion of the expenses of such
other investment company, including advisory fees. The expenses would be in
addition to the other expenses that a Fund bears directly in connection with its
own operations and may represent a duplication of fees to shareholders of the
Fund. Notwithstanding any other investment policy or limitation (whether or not
fundamental), as a matter of fundamental policy, the Income Fund may invest all
of its assets in the securities of a single open-end, management investment
company with substantially the same fundamental investment objective, policies
and limitations as the Fund.
When-Issued Securities and Firm Commitment Agreements
The Ginnie Mae Fund may engage in securities transactions on a "when-issued"
or "firm commitment" basis. The price of such securities is fixed at the time a
commitment to purchase or sell is made, but delivery and payment for the
when-issued securities take place at a later date. Normally, the settlement date
occurs within one month of the purchase or sale. As an operating policy, the
settlement date always will be within 120 days. At the time securities purchased
on a when-issued basis are actually delivered to the Fund, their value may be
higher or lower than the price the Fund agreed to pay for such securities.
During the period between commitment and settlement, no payment is
A-7 PROSPECTUS
<PAGE> 35
made by the Fund and no interest accrues to the Fund. In some instances, the
Fund may sell a security and at the same time make a commitment to purchase the
same security at a future date at a specified price. Conversely, the Fund may
purchase a security and at the same time make a commitment to sell the same
security at a future date at a specified price. These types of transactions are
executed simultaneously in what are known as "roll" transactions. For example, a
securities dealer may seek to purchase a particular security which the Fund
owns. The Fund will sell that security to the dealer and simultaneously enter
into a "firm commitment" agreement to buy back the same security at a future
date, as described above. The net effect of these transactions is to generate
income for the Fund since the dealer is willing to execute these transactions at
prices favorable to the Fund in order to acquire the specific security which it
buys in the initial purchase transaction. Wells Fargo Bank will limit these
transactions to a maximum of 35% of the Fund's total assets.
There is a risk that a party with whom the Ginnie Mae Fund enters into
when-issued or firm commitment agreements may not perform its obligation to
deliver or purchase the securities, which could result in a gain or loss to the
Fund. To minimize the risk of default, the Fund enters into such transactions
only with those major banks and non-bank U.S. Government securities dealers who
are on the Federal Reserve Bank of New York's list of primary reporting dealers.
INVESTMENT POLICIES
Each Fund's investment objective, as set forth in "How the Funds
Work - Investment Objectives and Policies," is fundamental; that is, it may not
be changed without approval by the vote of the holders of a majority of the
Fund's outstanding voting securities, as described under "Capital Stock" in the
SAI. In addition, any fundamental investment policy may not be changed without
such shareholder approval. If the Board of Directors determines, however, that a
Fund's investment objective can best be achieved by a substantive change in a
nonfundamental investment policy or strategy, the Company's Board may make such
change without shareholder approval and will disclose any such material changes
in the then-current Prospectus.
As matters of fundamental policy, a Fund may: (i) not purchase securities of
any issuer (except U.S. Government obligations) if as a result more than 5% of
the value of the Fund's total assets would be invested in the securities of such
issuer or the Fund would own more than 10% of the outstanding voting securities
of such issuer; (ii) make loans of portfolio securities in accordance with its
investment policies; and (iii) not invest 25% or more of its assets (i.e.,
concentrate) in any particular industry, except that each Fund may invest 25% or
more of its assets in U.S. Government obligations. In addition, as a matter of
fundamental policy, the Income Fund may borrow from banks up to 10% of the
current value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 10% of
the current value of its net assets; and, the Ginnie Mae Fund may borrow from
banks up to 20% of the
PROSPECTUS A-8
<PAGE> 36
current value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 20% of
the current value of its net assets. Each Fund may not purchase investments
while any such outstanding borrowing exceeds 5% of its net assets.
With respect to fundamental investment policy (i) above, the Income Fund is
subject to this restriction only with respect to 75% of its assets, and, with
regard to both Funds, it may be possible that the Company would own more than
10% of the outstanding voting securities of the issuer. With respect to
fundamental investment policy (ii) above, neither Fund intends to make loans of
its portfolio securities during the coming year, and the Ginnie Mae Fund does
not intend to put at risk more than 5% of its assets during the coming year.
As a matter of nonfundamental policy, neither Ginnie Mae Fund nor the Income
Fund may invest more than 10% or 15%, respectively, of the current value of the
Fund's net assets in securities that are illiquid by virtue of the absence of a
readily available market or because of legal or contractual restrictions on
resale or maturities of more than seven days, unless the Board or investment
adviser, pursuant to guidelines adopted by the Board, determines that a liquid
trading market exists. The following securities are excluded from the applicable
limitation for a Fund: (a) securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 (the "1933 Act") that have been determined to
be liquid by the Fund's Board of Directors, and (b) commercial paper that is
sold under Section 4(2) of the 1933 Act that (i) is not traded flat or in
default as to interest or principal and (ii) is rated in one of the two highest
categories by at least two nationally recognized statistical rating
organizations and the Fund's Board of Directors has determined the commercial
paper to be liquid; or (iii) is rated in one of the two highest categories by
one nationally recognized statistical rating organization and the Fund's Board
of Directors has determined that the commercial paper is of equivalent quality
and is liquid).
A-9 PROSPECTUS
<PAGE> 37
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<PAGE> 38
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS, SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank nor
guaranteed by the Bank LOGO
- involve investment risk, including possible loss
of principal
</TABLE>
LOGO SC0211 (6/96)
Printed on Recycled Paper
<PAGE> 39
STAGECOACH FUNDS LOGO
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank NO FDIC LOGO
- involve investment risk, including possible loss
of principal
</TABLE>
RECYCLED PAPER LOGO
SC0211 (6/96)
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<PAGE> 40
LOGO
------------------------------
PROSPECTUS
------------------------------
CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE INCOME FUND
INSTITUTIONAL CLASS
June 3, 1996
<PAGE> 41
STAGECOACH FUNDS(R)
CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE INCOME FUND
INSTITUTIONAL CLASS
Stagecoach Funds, Inc. (the "Company") is an open-end investment company. This
Prospectus contains information about one class of shares offered in two funds
of the Stagecoach Family of Funds - the CALIFORNIA TAX-FREE BOND
FUND -- INSTITUTIONAL CLASS and the CALIFORNIA TAX-FREE INCOME
FUND -- INSTITUTIONAL CLASS (each, a "Fund" and, collectively, the "Funds").
The CALIFORNIA TAX-FREE BOND FUND seeks to provide investors with a high level
of income exempt from federal income taxes and California personal income taxes,
while preserving capital, by investing in medium- to long-term, investment-grade
municipal securities.
The CALIFORNIA TAX-FREE INCOME FUND seeks to provide investors with a high
level of income exempt from federal income taxes and California personal income
taxes, while preserving capital.
Please read this Prospectus and retain it for future reference. It is designed
to provide you with important information and to help you decide if a Fund's
goals match your own. A Statement of Additional Information ("SAI"), dated June
3, 1996, containing additional information about the Funds, has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The Funds' SAI is available free of charge by writing to
Stagecoach Funds, Inc., c/o Stagecoach Shareholder Services, Wells Fargo Bank,
N.A., P.O. Box 7066, San Francisco, CA 94120-7066 or by calling the Company at
1-800-222-8222.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES CERTAIN
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED JUNE 3, 1996
PROSPECTUS
<PAGE> 42
Under ordinary market conditions, substantially all of each Fund's assets will
consist of municipal obligations the interest on which is exempt from federal
income tax and California personal income tax.
Each Fund is advised by Wells Fargo Bank, which also serves as the Funds'
transfer and dividend disbursing agent and custodian. In addition, Wells Fargo
Bank is a Shareholder Servicing Agent and a Selling Agent (each as defined
below). Stephens Inc. ("Stephens") is the Funds' sponsor and administrator and
serves as distributor of the Funds' shares.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND PROVIDES CERTAIN OTHER SERVICES
TO THE FUNDS, FOR WHICH IT IS COMPENSATED. STEPHENS, WHICH IS NOT AFFILIATED
WITH WELLS FARGO BANK, IS THE FUNDS' SPONSOR, ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 43
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 4
HOW THE FUNDS WORK 6
THE FUNDS AND MANAGEMENT 9
INVESTING IN THE FUNDS 11
EXCHANGES 15
DIVIDENDS 17
MANAGEMENT AND SERVICING FEES 17
TAXES 20
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 44
PROSPECTUS SUMMARY
The Funds provide you with a convenient way to invest in a portfolio of
securities selected by professional management. The following provides you with
summary information about each Fund. For more information, please refer
specifically to the identified Prospectus sections and generally to the Funds'
Prospectus and SAI.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The CALIFORNIA TAX-FREE BOND FUND seeks to provide investors with a high
level of income exempt from federal income taxes and California personal
income taxes, while preserving capital, by investing in medium- to
long-term, investment-grade municipal securities.
The CALIFORNIA TAX-FREE INCOME FUND seeks to provide investors with a high
level of income exempt from federal income taxes and California personal
income taxes, while preserving capital.
Under normal market conditions, substantially all of each Fund's assets are
invested in municipal obligations that are exempt from federal income tax
and California personal income tax. Under normal market conditions, at least
65% of each Fund's net assets will be invested in municipal obligations of
issuers exempt from California personal income tax, including issuers of the
Virgin Islands, Guam and Puerto Rico. See "How the Funds Work" and
"Prospectus Appendix - Additional Investment Policies" for further
information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. An investment in a Fund is not insured against loss of principal. When the
value of the securities that a Fund owns declines, so does the value of your
Fund's shares. The portfolio debt instruments of the Funds are subject to
interest-rate risk and credit risk. Interest-rate risk is the risk that
increases in market interest rates may adversely affect the value of the
municipal securities in which each Fund invests and hence the value of your
investment in a Fund; the value of such securities generally changes
inversely to changes in market interest rates. Credit risk is the risk that
the issuer of a debt instrument is unable, due to financial constraints, to
make timely payments on its outstanding obligations. In addition, each Fund
may invest a portion of its assets in municipal securities that are
considered to have speculative characteristics.
Since the Funds invest substantially in securities issued by California, its
agencies and municipalities, events in California are more likely to affect
the Funds' investments. Also, the Funds are nondiversified, which means that
their assets may be invested among fewer issuers and therefore the value of
their assets may be subject to greater impact by events affecting one of
their investments. You should be prepared to accept some risk with the money
you invest in the Funds. As with all
1 PROSPECTUS
<PAGE> 45
mutual funds, there can be no assurance that the Funds will achieve their
investment objectives.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Funds' investment adviser, manages your investments.
Wells Fargo Bank also provides the Funds with transfer agency, dividend
disbursing agency and custodial services. In addition, Wells Fargo Bank is a
Shareholder Servicing Agent and a Selling Agent of the Funds. See "The Funds
and Management" and "Management and Servicing Fees."
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Institutional Class shares of
the Funds at the net asset value per share without a sales charge ("NAV").
Qualified investors include certain customers of affiliate, franchise or
correspondent banks of Wells Fargo & Company and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships
and corporations. Purchases are effected through the customer's account with
the Institution under the terms of the customer's account agreement with the
Institution. Fund shares may not be suitable investments for tax-exempt
institutions or tax-exempt retirement plans, since such investors would not
benefit from the exempt status of the Funds' dividends. Investors wishing to
purchase a Fund's Institutional Class shares should
contact their account representatives. See "Investing in the Funds" for
additional information.
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares of
another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sales in your state of residence.
Exchanges are effected through the customer's account with the Institution
under the terms of the customer's account agreement with the Institution.
See "Exchanges."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares at NAV, without charge by the Company.
Institutional Class shares held by an Institution on behalf of its customers
must be redeemed under the terms of the customer's account agreement with
the Institution. It is the responsibility of an Institution to transmit
redemption requests to the Company and to credit its customers' accounts.
The Company reserves the right to impose charges for wiring redemption
proceeds. See "Investing in the Funds -- Redemption of Institutional Class
Shares."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of a Fund are declared daily and
automatically reinvested monthly in additional Institutional Class shares of
such Fund at NAV. Shareholders may also elect to receive dividends in cash.
Any capital
PROSPECTUS 2
<PAGE> 46
gains are distributed at least annually in the same manner as dividends. See
"Dividends" for additional information.
Q. WHAT ARE DERIVATIVES AND DO THE FUNDS USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or
rate. Some of the permissible investments described in this Prospectus, such
as variable-rate instruments that have an interest rate that is reset
periodically based on an index, can be considered derivatives. Some
derivatives may be more sensitive than direct securities to changes in
interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms.
Q. WHAT STEPS DO THE FUNDS TAKE TO CONTROL DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank, as investment adviser, uses a variety of internal risk
management procedures to ensure that derivatives use is consistent with a
Fund's investment objective, does not expose the Fund to undue risks and is
closely monitored. These procedures include providing periodic reports to
the Board of Directors concerning the use of derivatives. Derivatives use by
each Fund also is subject to broadly applicable investment policies. For
example, the Funds may not invest more than a specified percentage of their
assets in "illiquid securities", including derivatives that do not have
active secondary markets. Nor may a Fund use certain derivatives without
establishing adequate "cover" in compliance with SEC rules limiting the use
of leverage. For more information on the Funds' investment activities, see
"How the Funds Work" and "Prospectus Appendix -- Additional Investment
Policies."
3 PROSPECTUS
<PAGE> 47
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA
TAX-FREE TAX-FREE INCOME
BOND FUND FUND
--------- ---------------
<S> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price).................. None None
Sales Charge Imposed
on Reinvested Dividends............. None None
Maximum Sales Charge Imposed
on Redemptions...................... None None
Exchange Fees........................... None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA
TAX-FREE TAX-FREE INCOME
BOND FUND FUND
--------- ---------------
<S> <C> <C>
Management Fee (after waivers or
reimbursements)(1)......................... 0.50% 0.43%
Shareholder Servicing Fee (after
waivers)(2)................................ 0.02% 0.00%
Administrative Fee........................... 0.03% 0.03%
Other Expenses (after waivers or
reimbursements)(3)......................... 0.08% 0.14%
-------- ---------
TOTAL FUND OPERATING
EXPENSES (after waivers or
reimbursements)(4)....................... 0.63% 0.60%
======== =========
</TABLE>
- -------------------------------
<TABLE>
<C> <S>
(1) Management Fee (before waivers or reimbursements) would be
0.50% and 0.50%, respectively.
(2) Shareholder Servicing Fees (before waivers) would be payable at
maximum annual rates of 0.25% and 0.25%, respectively.
(3) Other Expenses (before waivers or reimbursements) would be
0.24% and 0.41%, respectively.
(4) Total Fund Operating Expenses (before waivers or
reimbursements) would be 1.02% and 1.19%, respectively.
</TABLE>
PROSPECTUS 4
<PAGE> 48
<TABLE>
<CAPTION>
EXAMPLE OF EXPENSES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment in a Fund's
Institutional Class, assuming a 5% annual
return and redemption at the end of each
time period indicated:
California Tax-Free Bond Fund............. $6 $20 $35 $ 79
California Tax-Free Income Fund........... $6 $19 $33 $ 75
</TABLE>
EXPLANATION OF TABLES
The purpose of the foregoing tables is to help a shareholder understand the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The tables do not reflect any charges that may be imposed by Wells
Fargo Bank or another Institution directly on its customer accounts in
connection with an investment in a Fund.
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when a shareholder buys
or sells Fund shares. Institutional Class shares are sold with no shareholder
transaction charges imposed by the Funds. The Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Institutional Class shares of the Funds
are based on applicable contract amounts and derived from amounts incurred
during the most recent fiscal year, restated to include voluntary fee waivers
and expense reimbursements that are expected to continue to reduce expenses
during the current fiscal year. WELLS FARGO BANK AND STEPHENS WILL WAIVE OR
REIMBURSE ALL OR A PORTION OF THEIR RESPECTIVE FEES CHARGED TO, OR EXPENSES PAID
BY, EACH FUND TO ENSURE THAT THE TOTAL FUND OPERATING EXPENSES DO NOT EXCEED, ON
AN ANNUAL BASIS, 0.63% OR 0.60%, RESPECTIVELY, OF THE CALIFORNIA TAX-FREE BOND
FUND'S OR CALIFORNIA TAX-FREE INCOME FUND'S AVERAGE DAILY NET ASSETS THROUGH
AUGUST 31, 1997. Any waivers or reimbursements would reduce a Fund's total
expenses. There can be no assurance that waivers or reimbursements will continue
after that time. For more complete descriptions of the various costs and
expenses you can expect to incur as an investor in each Fund, please see
"Management and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. This rate of return should
not be considered an indication of actual or expected performance of a Fund nor
a representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown.
5 PROSPECTUS
<PAGE> 49
HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
The CALIFORNIA TAX-FREE BOND FUND seeks to provide investors with a high level
of income exempt from federal income taxes and California personal income taxes,
while preserving capital, by investing in medium- to long-term, investment-grade
municipal securities. Medium- and long-term securities include those securities
with remaining maturities of 2 to 10 years and 10 or more years, respectively.
Investment grade is a term used to describe securities suitable for purchase by
prudent investors. Standard & Poor's Rating Group ("S&P"), a nationally
recognized statistical rating organization ("NRSRO"), designates its top four
bond ratings as investment grade: "AAA", "AA", "A" and "BBB". Moody's Investors
Service, Inc. ("Moody's") is also an NRSRO and designates its top four bond
ratings as investment grade: "Aaa", "Aa", "A" and "Baa". The Fund also may
invest in unrated municipal securities that are determined by Wells Fargo Bank,
as investment adviser, to be of comparable quality to municipal securities that
are rated investment grade. A description of the relevant ratings is contained
in the Appendix to the SAI.
The CALIFORNIA TAX-FREE INCOME FUND seeks to provide investors with a high
level of income exempt from federal income taxes and California personal income
taxes, while preserving capital. It pursues this objective by investing
primarily in short- and intermediate-term, investment-grade municipal
securities. Short-term securities are securities with remaining maturities of
less than 2 years. Intermediate-term securities are securities with remaining
maturities of 2 to 10 years. The Fund also may invest in unrated municipal
securities that are determined by Wells Fargo Bank, as investment adviser, to be
of comparable quality to municipal securities that are rated investment grade. A
description of the relevant ratings is contained in the Appendix to the SAI.
The investment objective for each Fund is fundamental and cannot be changed
without shareholder approval. As with all mutual funds, there can be no
assurance that the Funds, which are nondiversified, will achieve their
investment objectives. Wells Fargo Bank, as investment adviser to the Funds,
pursues each Fund's objective by investing (under normal market conditions)
substantially all of the Fund's assets in the following types of municipal
obligations that pay interest which is exempt from both federal income tax and
California personal income tax: bonds, notes and commercial paper issued by or
on behalf of the State of California, its cities, municipalities, political
subdivisions and other public authorities. The Funds may also invest in
obligations issued by the U.S. Virgin Islands, Puerto Rico and Guam, the
interest on which is exempt from federal income tax and California personal
income tax. These municipal obligations and the taxable investments described
below may bear interest at rates that are not fixed ("floating- and
variable-rate instruments").
PROSPECTUS 6
<PAGE> 50
Each Fund may temporarily invest some of its assets in open-end tax-free funds
with a similar fundamental investment objective and which pay interest that is
exempt from federal income tax and not subject to the federal alternative
minimum tax, subject to the limitations of the Investment Company Act of 1940,
as amended (the "1940 Act"). Each Fund may also invest temporarily in cash
reserves or certain high-quality, taxable money market instruments, or may
engage in other investment activities. Each Fund may elect to invest temporarily
up to 20% of its net assets in certain permitted taxable investments, which
include cash reserves, U.S. Government obligations, obligations of domestic
banks, commercial paper, taxable municipal obligations, and repurchase
agreements. The Funds may make loans of portfolio securities. Such temporary
investments would most likely be made when there is an unexpected or abnormal
level of investor purchases or redemptions of shares of a Fund or because of
unusual market conditions. The income from these temporary investments and
investment activities may be subject to federal income tax and California
personal income tax. However, as stated above, Wells Fargo Bank seeks to invest
substantially all of the Funds' assets in securities exempt from such taxes.
Additional description of tax-free municipal obligations, taxable money market
instruments, and other investment activities is contained in the "Prospectus
Appendix - Additional Investment Policies" and in the SAI.
As a matter of fundamental policy, at least 80% of each Fund's net assets are
invested (under normal market conditions) in municipal obligations which pay
interest that is exempt from federal income tax and not subject to the federal
alternative minimum tax (or in other open-end tax-free funds with a similar
fundamental policy). As a matter of general operating policy, however, each Fund
seeks to have substantially all of its assets invested in such municipal
obligations. In addition, under normal market conditions, at least 65% of the
California Tax-Free Bond Fund's total assets are invested in municipal bonds, as
opposed to municipal notes or commercial paper, and at least 65% of the
California Tax-Free Income Fund's total assets are invested in short- and
intermediate-term municipal obligations. As a matter of general operating
policy, the California Tax-Free Income Fund intends that, under normal market
conditions, the average expected duration of its portfolio securities will be
from one to five years.
At least 65% of each Fund's total assets are invested (under normal market
conditions) in municipal obligations of issuers exempt from California personal
income tax, including issuers of the Virgin Islands, Guam and Puerto Rico. The
Funds' investment adviser may rely on an opinion of either counsel to the issuer
of the municipal obligations or bond counsel regarding the tax treatment of
these obligations. In addition, each Fund may invest 25% or more of its assets
in California municipal obligations that are related in such a way that an
economic, business or political development or change affecting one such
obligation would also affect the other obligations; for example, a Fund may own
different municipal obligations which pay interest based on the revenues of
similar types of projects.
7 PROSPECTUS
<PAGE> 51
RISK FACTORS
As noted above and discussed further under "Prospectus Appendix - Additional
Investment Policies," some of the securities purchased by the Funds may be rated
in the lowest investment-grade category (i.e., rated "BBB" by S&P or "Baa" by
Moody's). These securities are regarded by S&P as having an adequate capacity to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make such
repayments. Moody's considers such securities as having speculative
characteristics.
Since the Funds invest substantially in securities issued by California and
its agencies and municipalities, events in California are more likely to affect
the Funds' investments. While the Funds seek to reduce risk by investing their
assets in securities of various issuers, the Funds are considered to be
nondiversified for purposes of the 1940 Act. However, the Funds will comply with
the Internal Revenue Code of 1986 ("Code") diversification requirements, as
described in "Prospectus Appendix - Additional Investment Policies" section
below.
California is experiencing recurring budget deficits caused by lower than
anticipated tax revenues and increased expenditures for certain programs. These
budget deficits have depleted the state's available cash resources, and the
state has recently had to use a series of external borrowings to meet its cash
needs. In addition, since 1992 some of the credit rating agencies have assigned
their third highest rating to certain of the state's debt obligations. On July
15, 1994, three of the ratings agencies rating California's long-term debt
lowered their ratings of the state's general obligation bonds. Moody's Investors
Service lowered its rating from "Aa" to "A1," S&P lowered its rating from "A+"
to "A" and termed its outlook as "stable," and Fitch Investors Service lowered
its rating from "AA" to "A." The Funds may invest in securities rated in the top
four rating categories, i.e., investment-grade securities. Any further rating
downgrade of the state's debt obligations may impact the availability of
securities that meet the Funds' investment policies and restrictions. The Funds'
investment adviser will continue to monitor and evaluate the investments of each
Fund in light of the events in California and each Fund's investment objective
and investment policies. The rating agencies will also continue to monitor
events in the state and the state and local governments' responses to budget
shortfalls. See "Special Considerations Affecting California Municipal
Obligations" in the SAI.
PERFORMANCE
The performance of each class of shares of a Fund may be advertised from time
to time in terms of yield, effective yield, tax-equivalent yield, average annual
total return and cumulative total return. Performance figures are based on
historical results and are not intended to indicate future performance.
PROSPECTUS 8
<PAGE> 52
Yield refers to the income generated by an investment in a class of the Fund's
shares over a specified period (usually 30 days), expressed as an annual
percentage rate. Effective yield is calculated in the same manner but assumes
reinvestment of the income earned from a Fund. Because of the effects of
compounding, effective yields are slightly higher than yields. The
tax-equivalent yield of a class of shares is similarly calculated but assumes
that a stated income tax rate has been applied to determine the tax-equivalent
figure.
Average annual total return of a class of shares is based on the overall
dollar or percentage change in value of a hypothetical investment in a Fund's
class and assumes that the investment is at NAV and all dividends and any
capital gain distributions attributable to the class also are reinvested at NAV
in the class. Cumulative total return is calculated similarly except that the
return figure is aggregated over the relevant period instead of annualized.
In addition to presenting these standardized performance calculations, at
times, the Funds may also present non-standard performance figures, such as
effective tax-equivalent yields or, in sales literature, distribution rates.
Because of differences in the fees and/or expenses borne by shares of each class
of a Fund, the performance figures on a class of shares can be expected, at any
given time, to vary from the performance figures for other classes of the Fund.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request without
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
THE FUNDS AND MANAGEMENT
The Funds are two funds of the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of the following funds: the Aggressive Growth, Asset Allocation,
California Tax-Free Bond, California Tax-Free Income, California Tax-Free Money
Market Mutual, Corporate Stock, Diversified Income, Ginnie Mae, Growth and
Income, Money Market Mutual, National Tax-Free Money Market Mutual,
Short-Intermediate U.S. Government Income and U.S. Government Allocation Funds.
Each of the Company's funds, except the California Tax-Free Income, Corporate
Stock, Government Money Market Mutual, Money Market Trust and Short-Intermediate
U.S. Government Income Funds, currently offer three classes of shares. The
California Tax-Free Income and Short-Intermediate U.S. Government Income Funds
offer two classes of shares, and the Corporate Stock, Government Money Market
Mutual Fund and the Money Market Trust offer a single class of shares. The Funds
are authorized to issue other classes of shares, subject to a front-end sales
charge and, in some cases, subject to a contingent-deferred sales charge, that
9 PROSPECTUS
<PAGE> 53
are offered to retail investors. Each class of shares represents an equal
proportionate interest in a Fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the Fund's operating
expenses except for certain class-specific expenses (e.g., any state securities
registration fees, shareholder servicing fees or distribution fees that may be
paid under Rule 12b-1) that are allocated to a particular class. For information
on another fund or a class of shares, please call Stagecoach Shareholder
Services at 1-800-222-8222 or write the Company at the address shown on the
front cover of the Prospectus.
The Board of Directors of the Company supervises the Funds' activities and
monitors their contractual arrangements with various service providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be required for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing a fund's
investment objective or fundamental investment policies. All shares of the
Company have equal voting rights and will be voted in the aggregate, rather than
by fund or class, unless otherwise required by law (such as when the voting
matter affects only one fund or class). As a Fund shareholder, you are entitled
to one vote for each share owned and fractional votes for fractional shares
owned. See "Management" in the SAI for more information on the Company's
Directors and Officers. A more detailed description of the voting rights and
attributes of the shares is contained under "Capital Stock" in the SAI.
Wells Fargo Bank is the Funds' investment adviser, transfer and dividend
disbursing agent and custodian. In addition, Wells Fargo Bank serves as a
Shareholder Servicing Agent and a Selling Agent of the Funds. Wells Fargo Bank,
one of the largest banks in the United States, was founded in 1852 and is the
oldest bank in the western United States. As of April 1, 1996, Wells Fargo Bank
and its affiliates provided investment advisory services for over $56 billion of
assets of individuals, trusts, estates and institutions. Wells Fargo Bank also
serves as investment adviser to other separately managed funds (or the master
portfolio in which a fund may invest) of the Company and as investment adviser
or sub-adviser to other separately managed funds of five other registered,
open-end, management investment companies. Wells Fargo Bank, a wholly owned
subsidiary of Wells Fargo & Company, is located at 420 Montgomery Street, San
Francisco, California 94104.
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank, has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contracts and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
PROSPECTUS 10
<PAGE> 54
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Mr. David Klug assumed sole responsibility for the day-to-day management of
the California Tax-Free Bond Fund on June 1, 1995. Mr. Klug had been a
co-manager of the Fund since January 1992 and has managed municipal bond
portfolios for Wells Fargo Bank for over nine years. Prior to joining Wells
Fargo Bank, he managed the municipal bond portfolio for a major property and
casualty insurance company. Mr. Klug holds an M.B.A. from the University of
Chicago and is a member of the National Federation of Municipal Analysts and its
California chapter.
Ms. Laura Milner assumed sole responsibility for the day-to-day management of
the California Tax-Free Income Fund on June 1, 1995. Ms. Milner had been a
co-manager of the Fund since November 1992. Her background includes over seven
years experience specializing in short- and long-term municipal securities with
Salomon Brothers. She is a member of the National Federation of Municipal
Analysts and its California chapter.
Stephens is the Funds' sponsor and administrator and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUNDS
Fund shares may be purchased on any day the Funds are open. The Funds are open
for business each day the New York Stock Exchange ("NYSE") is open for trading
(a "Business Day"). Currently, the NYSE is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day (each a "Holiday"). When any Holiday falls on a weekend, the
NYSE typically is closed on the weekday immediately before or after such
Holiday.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will transmit or cause to be transmitted promptly, without charge, a
paper copy of the electronic Prospectus.
Shares of the Funds may not be suitable investments for tax-exempt
institutions or individual shareholders of tax-deferred retirement plans, since
such investors would not
11 PROSPECTUS
<PAGE> 55
benefit from the exempt status of the Funds' dividends. See "Federal Income
Taxes - Special Tax Considerations" in the SAI.
SHARE VALUE
The value of a share of each class is its NAV. Wells Fargo Bank calculates the
NAV of each class of a Fund as of the close of regular trading on the NYSE
(referred to hereafter as "the close of the NYSE"), which is currently 1:00 p.m.
(Pacific time). The NAV per share for each class of shares is computed by
dividing the value of a Fund's assets allocable to a particular class, less the
liabilities charged to that class by the total number of the outstanding shares
of that class. All expenses, including fees paid to the investment adviser and
administrator, are accrued daily and taken into account for the purpose of
determining the NAV, which is expected to fluctuate daily.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the other assets of the Funds are valued at
current market prices or, if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors. Prices
used for such valuations may be obtained from independent pricing services.
PURCHASE OF INSTITUTIONAL CLASS SHARES
Institutional Class shares of the Funds are sold at NAV (without a sales load)
on a continuous basis primarily to certain customers ("Customers") of affiliate,
franchise or correspondent banks of Wells Fargo & Company and other selected
institutions (previously defined as Institutions). Customers may include
individuals, trusts, partnerships and corporations. Share purchases are effected
through a Customer's account at an Institution under the terms of the Customer's
account agreement with the Institution, and confirmations of share purchases and
redemptions are sent by the Fund to the Institution involved. Institutions (or
their nominees), acting on behalf of their Customers, normally are the holders
of record of Institutional Class shares. Customers' beneficial ownership of
Institutional Class shares is reflected in the account statements provided by
Institutions to their Customers. The exercise of voting rights and the delivery
to Customers of shareholder communications from the Funds is governed by the
Customers' account agreements with an Institution. Investors wishing to purchase
Institutional Class shares of a Fund should contact their account
representatives.
Institutional Class shares of a Fund are sold at the NAV per share next
determined after a purchase order has become effective. Purchase orders by an
Institution for Institutional Class shares in a Fund must be received by the
Company by 1:00 p.m. (Pacific time) on any Business Day. Payment for such shares
may be made by Institutions in federal funds or other funds immediately
available to the custodian no later than 1:00 p.m. (Pacific time) on the next
Business Day following the receipt of the purchase order.
PROSPECTUS 12
<PAGE> 56
It is the responsibility of Institutions to transmit orders for purchases by
their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Funds with
respect to the investments of its Customers as described under "The Funds and
Management" and "Management and Servicing Fees." Payment for Institutional Class
shares of a Fund may, in the discretion of the investment adviser, be made in
the form of securities that are permissible investments for the Fund. For
further information see "Additional Purchase and Redemption Information" in the
SAI.
The Company reserves the right to reject any purchase order or to suspend
sales at any time. Payment for orders that are not received will be returned
after prompt inquiry. The issuance of Institutional Class shares is recorded on
the books of the Funds, and share certificates are not issued.
WIRE INSTRUCTIONS -- DIRECT PURCHASES BY INSTITUTIONS
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund and designate the Institutional
Class)
Account Name(s): name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be sent by telefacsimile, with the
original subsequently mailed, to the following address immediately after the
funds are wired and must be received and accepted by the Transfer Agent
before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
13 PROSPECTUS
<PAGE> 57
STATEMENTS AND REPORTS
Institutions (or their nominees) typically send shareholders a confirmation or
statement of the account after every transaction that affects the share balance
or the Fund account registration. A statement with tax information for the
previous year will be mailed by January 31 of each year and also will be filed
with the IRS. At least twice a year, shareholders will receive financial
statements.
REDEMPTION OF INSTITUTIONAL CLASS SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Institutional
Class shares held by an Institution on behalf of its Customers must be redeemed
in accordance with instructions and limitations pertaining to the Customer's
account at the Institution. It is the responsibility of an Institution to
transmit redemption requests to the Company and to credit its Customers'
accounts with the redemption proceeds on a timely basis. The redemption proceeds
for Institutional Class shares of a Fund normally are wired to the redeeming
Institution the following Business Day after receipt of the request by the
Company. The Company reserves the right to delay the wiring of redemption
proceeds for up to seven days after it receives a redemption order if, in the
judgment of the investment adviser, an earlier payment could adversely affect a
Fund or unless the SEC permits a longer period under extraordinary
circumstances. Such extraordinary circumstances could include a period during
which an emergency exists as a result of which (a) disposal by a Fund of
securities owned by it is not reasonably practicable or (b) it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or a
period during which the SEC by order permits deferral of redemptions for the
protection of security holders of the Fund.
With respect to former shareholders of Westcore Trust or Pacifica Funds Trust
who do not have a relationship with an Institution, shares of the Funds may be
redeemed by writing or calling the Funds directly at the address and phone
number shown on the first page of the Prospectus. When Institutional Class
shares are redeemed directly from a Fund, the Fund ordinarily will send the
proceeds by check to the shareholder at the address of record on the next
Business Day unless payment by wire is requested. The Funds may take up to seven
days to make payment, although this will not be the customary practice. Also, if
the NYSE is closed (or when trading is restricted) for any reason other than the
customary weekend or holiday closing or if an emergency condition as determined
by the SEC merits such action, the Funds may suspend redemptions or postpone
payment dates.
To be accepted by a Fund, a letter requesting redemption must include: (i) the
Fund name and account registration from which the Institutional Class shares are
being redeemed; (ii) the account number; (iii) the amount to be redeemed; (iv)
the signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution. An "eligible guarantor institution" includes a
commercial bank
PROSPECTUS 14
<PAGE> 58
that is an FDIC member, a trust company, a member firm of a domestic stock
exchange, a savings association, or a credit union that is authorized by its
charter to provide a signature guarantee. Signature guarantees by notaries
public are not acceptable. Further documentation may be requested from
corporations, administrators, executors, personal representatives, trustees or
custodians.
All redemptions of Institutional Class shares of the Funds are made in cash,
except that the commitment to redeem Institutional Class shares in cash extends
only to redemption requests made by each shareholder of a Fund during any 90-day
period of up to the lesser of $250,000 or 1% of the net asset value of that Fund
at the beginning of such period. This commitment is irrevocable without the
prior approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have the
Funds make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of a
Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of that Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
REDEMPTIONS BY TELEPHONE
Telephone exchange or redemption privileges authorize the Transfer Agent to
act on telephone instructions from any person representing himself or herself to
be the shareholder of record and reasonably believed by the Transfer Agent to be
genuine. The Company requires the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Company
and the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Company nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
EXCHANGES
The Funds offer a convenient way to exchange Institutional Class shares in one
Fund for Institutional Class shares in another fund of the Company. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the fund into which the exchange will occur, which is
available without charge and can be obtained by writing or by calling the
Company at the address or phone number listed on the first page of the
Prospectus. A shareholder may not exchange Institutional Class shares of one
fund for Institutional Class shares of another fund if Institutional Class
15 PROSPECTUS
<PAGE> 59
shares of both funds are not qualified for sale in the state of the
shareholder's residence. The Company may terminate or amend the terms of the
exchange privilege at any time.
Exchange transactions are effected through a Customer's account at an
Institution under the terms of the Customer's account agreement with the
Institution, and confirmations of share exchanges are sent by a Fund to the
Institution involved. Institutions (or their nominees), acting on behalf of
their Customers, normally are the holders of record of Institutional Class
shares. Institutions are responsible for transmitting orders for exchanges to
the Company on a timely basis. Customers' exchange transactions are generally
reflected in the account statements provided by Institutions to their Customers.
Investors wishing to exchange Institutional Class shares of a Fund for
Institutional Class shares of another fund should contact their account
representatives. Investors with questions may call the Company at
1-800-222-8222.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges are
made based on the NAV next determined following receipt of the request by the
Company in good order.
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
To exchange Institutional Class shares, or if you have any questions, simply
call the Company at 1-800-222-8222. A shareholder of record should be prepared
to give the telephone representative the following information: (i) the account
number, social security number and account registration; (ii) the name of the
fund from and the fund into which the transfer is to occur; and (iii) the dollar
or share amount of the exchange. The conversation may be recorded to protect
shareholders and the Company. Telephone exchanges are available unless the
shareholder of record has declined the privilege on the Purchase Application.
In addition, Institutional Class shares of a Fund may be exchanged for Class A
shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of Wells Fargo Bank or another bank, trust company or thrift
institution, or in other cases where Institutional Class shares are not held in
such qualified accounts. Similarly, Class A shares may be exchanged for
Institutional Class shares of the same Fund if the shares are to be held in such
a qualified trust, agency or custodial account. These exchanges are made at the
NAV of the respective share classes next determined after the exchange request
is received by the Company.
PROSPECTUS 16
<PAGE> 60
DIVIDENDS
The Funds intend to declare daily substantially all of their net investment
income as a dividend payable to shareholders of record as of the close of
regular trading of the NYSE (currently 1:00 p.m., Pacific time). Shareholders
begin earning dividends on the Business Day following the date the purchase
order is effective and continue to earn dividends through the day such shares
are redeemed. Expenses, such as state securities registration fees and transfer
agency fees, that are attributable to a particular class may affect the relative
dividends and/or capital-gain distributions of a class of shares.
Dividends declared in a month generally are paid on the last Business Day of
each month. Dividends and any capital-gain distributions are automatically
invested in additional whole and fractional shares of the same class unless the
shareholder has elected to receive payment in cash.
Dividends and capital-gain distributions have the effect of reducing the NAV
per share by the amount distributed. Although such dividends and distributions
paid on newly issued shares shortly after a purchase would represent, in
substance, a return of capital, the dividend or distribution would be
attributable to net investment income or capital gain and, accordingly, would be
taxable to the shareholder.
Dividends for a Saturday, Sunday or Holiday are declared payable to
shareholders of record as of the preceding Business Day. If a shareholder
redeems shares before the dividend payment date, any dividends credited to the
shareholder are paid on the following dividend payment date unless the
shareholder has redeemed all of the shares in the account, in which case the
shareholder receives accrued dividends together with redemption proceeds. The
Funds intend to distribute any capital gains at least annually.
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Funds' investment adviser, provides investment guidance and
policy direction in connection with the management of the Funds' assets. Wells
Fargo Bank also furnishes the Board of Directors with periodic reports on the
Funds' investment strategies and performance. For these services, Wells Fargo
Bank is entitled to a monthly investment advisory fee at the annual rate of
0.50% of the average daily net assets of each Fund. From time to time, Wells
Fargo Bank may waive such fees in whole or in part. Any such waiver will reduce
a Fund's expenses and, accordingly, have a favorable impact on the Fund's yield
and total return. From time to time, each Fund, consistent with its investment
objective, policies and restrictions, may invest in securities of entities with
which Wells Fargo Bank has a lending relationship. For the year ended December
31,
17 PROSPECTUS
<PAGE> 61
1995, the Company paid an amount equal to 0.50% of the average daily net assets
of the California Tax-Free Bond Fund to Wells Fargo Bank for its services as
investment adviser. For the year ended December 31, 1995, the Company paid an
amount equal to 0.43% of the average daily net assets of the California Tax-Free
Income Fund to Wells Fargo Bank for its services as investment adviser.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as each Fund's custodian and transfer and
dividend disbursing agent. Under separate Custody Agreements with Wells Fargo
Bank, each Fund may, at times, borrow money from Wells Fargo Bank as needed to
satisfy temporary liquidity needs. Wells Fargo Bank charges interest on such
overdrafts at a rate determined pursuant to each Fund's Custody Agreement. Wells
Fargo Bank performs its custodial and transfer and dividend disbursing agency
services at 525 Market Street, San Francisco, California 94105.
INSTITUTIONS AND SHAREHOLDER SERVICING AGENTS
The Funds have entered into Shareholder Servicing Agreements with Wells Fargo
Bank and may enter into similar agreements with other Institutions ("Shareholder
Servicing Agents"). Under such agreements, Shareholder Servicing Agents
(including Wells Fargo Bank), agree, as agents for their customers, to provide
shareholder administrative and liaison services with respect to Fund shares,
which include, without limitation, aggregating and transmitting shareholder
orders for purchases, exchanges and redemptions; maintaining shareholder
accounts and records; and providing such other related services as the Company
or a shareholder may reasonably request. For these services, a Shareholder
Servicing Agent is entitled to receive a fee at the annual rate of up to 0.25%
of the average daily net assets attributable to the Institutional Class shares
owned of record or beneficially by investors with whom the Shareholder Servicing
Agent maintains a servicing relationship. In no case shall payments exceed any
maximum amount that may be deemed applicable under applicable laws, regulations
or rules, including the Rules of Fair Practice of the NASD.
A Shareholder Servicing Agent also may impose certain conditions on its
customers, subject to the terms of this Prospectus, in addition to or different
from those imposed by the Funds, such as requiring a higher minimum initial
investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent has agreed to disclose any fees it may directly
charge its customers who are shareholders of a Fund and to notify them in
writing at least 30 days before it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides the Funds with administrative services, including general
supervision of each Fund's operation, coordination of the other services
provided to each Fund, compilation of information for reports to the SEC and the
state securities commissions,
PROSPECTUS 18
<PAGE> 62
preparation of proxy statements and shareholder reports, and general supervision
of data compilation in connection with preparing periodic reports to the
Company's Directors and officers. Stephens also furnishes office space and
certain facilities to conduct each Fund's business, and compensates the
Company's Directors, officers and employees who are affiliated with Stephens.
For these services, Stephens is entitled to a monthly fee at the annual rate of
0.03% of each Fund's average daily net assets. From time to time, Stephens may
waive its fees from a Fund in whole or in part. Any such waivers will reduce a
Fund's expenses and, accordingly, have a favorable impact on the Fund's
performance.
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company pursuant to
which Stephens is responsible for distributing Fund shares. The Distribution
Agreement provides that Stephens shall act as agent for the Funds for the sale
of their shares and may enter into Selling Agreements with Selling Agents that
wish to make available shares of the Funds to their respective customers.
Stephens has established a non-cash compensation program, pursuant to which
broker/dealers or financial institutions that sell shares of the Company's funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise.
Financial institutions acting as Selling Agents, Shareholder Servicing Agents,
or in certain other capacities may be required to register as dealers pursuant
to applicable state securities laws which may differ from federal law and any
interpretations expressed herein.
FUND EXPENSES
Except for the expenses borne by Wells Fargo Bank and Stephens, each Fund
bears all costs of its operations, including advisory, transfer agency, custody
and administration fees, fees and expenses of independent auditors and legal
counsel, and any extraordinary expenses. Expenses attributable to a class (e.g.,
any shareholder servicing or distribution fees or other class-specific expenses)
are charged against the assets of the class. General expenses of the Company are
allocated among all of the funds of the Company, including the Funds, in a
manner proportionate to the net assets of each fund, on a transactional basis,
or on such other basis as the Company's Board of Directors deems equitable.
19 PROSPECTUS
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TAXES
The Company intends to qualify each Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is in the best interest of each Fund's
shareholders. In addition, net capital gains, net investment income, and
operating expenses will be determined separately for each Fund from the
Company's other funds. By complying with the applicable provisions of the Code,
the Funds will not be subject to federal income tax with respect to net
investment income and any net realized capital gains distributed to their
shareholders. Each Fund intends to pay out substantially all of its net
investment income and any net realized capital gains for each year. In addition,
each Fund's shareholders will not be subject to federal income tax on any
dividends of the Fund attributable to interest from tax-exempt securities.
Dividends attributable to interest from taxable securities and distributions of
capital gain will be taxable to shareholders, regardless of whether such
dividends and distributions are paid in cash or reinvested in Fund shares. You
may be eligible to defer the taxation of dividends and capital-gain
distributions on Fund shares that are held under a qualified tax-deferred
retirement plan. The Funds' dividends are not expected to qualify for the
dividends-received deduction allowed to corporate shareholders.
In addition, by complying with the applicable provisions of the California
Revenue and Taxation Code, dividends of the Funds also will be exempt from
California personal income tax to the extent such dividends are attributable to
instruments that pay interest which would be exempt from California personal
income tax were such instruments held directly by an individual. The Funds do
not make any representation regarding the taxation of their corporate
shareholders with respect to their receipt of dividends and capital-gain
distributions and recommends that they consult their tax advisors.
Interest on indebtedness incurred or continued to purchase or carry shares of
a Fund will not be deductible to the extent that a Fund's distributions are
exempt from federal income tax. In addition, the IRS has devised federal
alternative minimum tax ("AMT") rules to ensure that at least a minimum amount
of tax is paid by taxpayers who obtain significant benefit from certain tax
deductions and exemptions. Some of these deductions and exemptions have been
designated "tax preference items" which must be added back to taxable income for
purposes of calculating AMT. Among the "tax preference items" is tax-exempt
interest from "private activity bonds" issued after August 7, 1986. To the
extent that a Fund invests in private activity bonds, shareholders who pay AMT
will be required to report that portion of Fund dividends attributable to
interest on such bonds as a tax preference item in determining their AMT.
Persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by private activity bonds should consult their tax
advisors before purchasing shares in the Funds. With respect to corporate
shareholders of the Funds, exempt-interest dividends paid by a Fund are included
in the corporate shareholder's "adjusted current earnings"
PROSPECTUS 20
<PAGE> 64
as part of its AMT calculation, and may also affect its federal "environmental
tax" liability. As of the printing of this Prospectus, individuals are subject
to an AMT at a maximum rate of 28% and corporations at a maximum rate of 20%.
Shareholders with questions or concerns about AMT should also consult their tax
advisors.
Your Institution or your Shareholder Servicing Agent on its behalf, will
inform you of the amount and nature of the Fund's dividends and any capital-gain
distributions. You should keep all statements you receive to assist in your
personal record keeping. The Company may be required to withhold, subject to
certain exemptions, at a rate of 31% on dividends, capital-gain distributions,
and redemption proceeds (including proceeds from exchanges) paid or credited to
Fund shareholders, unless a shareholder has provided a correct tax
identification number (generally the shareholder's social security or employer
identification number) and, upon establishing an account with the Company,
certifies on the Account Application that the shareholder is not subject to
back-up withholding, or the IRS notifies the Company that the shareholder is
subject to back-up withholding.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAI.
The foregoing discussion is based on tax laws and federal regulations that
were in effect as of the date of this Prospectus and summarizes only some of the
important federal income tax considerations generally affecting the Funds and
their shareholders. It is not intended as a substitute for careful tax planning;
all shareholders should consult their tax advisors with respect to their
specific tax situations as well as with respect to state and local taxes.
Further federal tax considerations are discussed in the SAI.
21 PROSPECTUS
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PROSPECTUS APPENDIX -
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
Municipal Securities
The Funds invest in municipal bonds rated at the date of purchase "Baa" or
better by Moody's or "BBB" or better by S&P, or unrated bonds that are
considered by Wells Fargo Bank, as investment adviser, to be of comparable
quality. Bonds rated at the minimum permitted level have speculative
characteristics and are more likely than higher-rated bonds to have a weakened
capacity to pay principal and interest in times of adverse economic conditions;
all are considered investment grade. Municipal bonds generally have a maturity
at the time of issuance of up to 40 years.
The Funds invest in municipal notes rated at the date of purchase "MIG-2" (or
"VMIG-2" in the case of an issue having a variable rate with a demand feature)
or better by Moody's or "SP-2" or better by S&P, or unrated notes that are
considered by Wells Fargo Bank, as investment adviser, to be of comparable
quality. Municipal notes generally have maturities at the time of issuance of
three years or less. Municipal notes are generally issued in anticipation of the
receipt of tax funds, of the proceeds of bond placements, or of other revenues.
The ability of an issuer to make payments on notes is therefore especially
dependent on such tax receipts, proceeds from bond sales or other revenues, as
the case may be.
The Funds invest in municipal commercial paper rated at the date of purchase
"P-1" or "P-2" by Moody's or "A-1+," "A-1" or "A-2" by S&P, or unrated
commercial paper that is considered by Wells Fargo Bank, as investment adviser,
to be of comparable quality. Municipal commercial paper is a debt obligation
with a stated maturity of 270 days or less that is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt.
In the event a security purchased by the Funds is downgraded below investment
grade, the Funds may retain such security, although the Funds may not have more
than 5% of their assets invested in securities rated below investment grade at
any time. A description of the ratings is contained in the Appendix to the SAI.
From time to time, each Fund may invest 25% or more of the current value of
its total assets in certain "private activity bonds," such as pollution control
bonds; provided, however, that such investments will be made only to the extent
they are consistent with the Funds' fundamental policy of investing, under
normal circumstances, at least 80% of their net assets in municipal obligations
that are exempt from federal income tax and not subject to the federal
alternative minimum tax, and provided further that neither Fund may invest 25%
or more of its assets in industrial development bonds.
A-1 PROSPECTUS
<PAGE> 66
For a further discussion of factors affecting purchases of municipal
obligations by the Funds, see "Special Considerations Affecting California
Municipal Obligations" in the SAI.
Taxable Investments
Pending the investment of proceeds from the sale of shares of the Funds or
proceeds from sales of portfolio securities or in anticipation of redemptions or
to maintain a "defensive" posture when, in the opinion of Wells Fargo Bank, as
investment adviser, it is advisable to do so because of market conditions, each
Fund may elect to invest temporarily up to 20% of the current value of its net
assets in cash reserves, in instruments that pay interest which is exempt from
federal income tax, but not from California personal income tax, or the
following taxable high-quality money market instruments: (i) U.S. Government
obligations; (ii) negotiable certificates of deposit, bankers' acceptance and
fixed time deposits and other obligations of domestic banks (including foreign
branches) that have more than $1 billion in total assets at the time of
investment and are members of the Federal Reserve System or are examined by the
Comptroller of the Currency or whose deposits are insured by the FDIC; (iii)
commercial paper rated at the date of purchase "P-1" by Moody's or "A-1+" or
"A-1" by S&P; (iv) certain repurchase agreements; and (v) high-quality municipal
obligations, the income from which may or may not be exempt from federal income
tax.
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturities. Treasury bills, the most frequently issued
marketable government securities, have a maturity of up to one year and are
issued on a discount basis. U.S. Government obligations also include securities
issued or guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some obligations of agencies or
instrumentalities of the U.S. Government are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, by the right of
the issuer or guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, only by the credit of the agency
or instrumentality issuing the obligation. In the case of obligations not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government will provide
financial support to its agencies or instrumentalities where it is not obligated
to do so. In addition, U.S. Government obligations are subject to fluctuations
in market value due to fluctuations in market interest rates. As a general
matter, the value of debt instruments, including U.S. Government obligations,
declines when market rates increase and rises
PROSPECTUS A-2
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when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
When-Issued Securities
Certain of the securities in which the Funds invest are purchased on a
when-issued basis, in which case delivery and payment normally take place within
45 days after the date of the commitment to purchase. The Funds make commitments
to purchase securities on a when-issued basis only with the intention of
actually acquiring the securities, but may sell them before the settlement date
if it is deemed advisable. When-issued securities are subject to market
fluctuation, and no income accrues to the purchaser during the period prior to
issuance. The purchase price and the interest rate received on debt securities
are fixed at the time the purchaser enters into the commitment. Purchasing a
security on a when-issued basis can involve a risk that the market price at the
time of delivery may be lower than the agreed-upon purchase price, in which case
there could be an unrealized loss at the time of delivery.
Each Fund establishes a segregated account in which it maintains cash, U.S.
Government obligations or other high-quality debt instruments in an amount at
least equal in value to its respective commitments to purchase when-issued
securities. If the value of these assets declines, the Fund places additional
liquid assets in the account on a daily basis so that the value of the assets in
the account is equal to the amount of such commitments.
Other Investment Companies
Subject to the limitations of the 1940 Act, the Funds may invest in shares of
other unaffiliated, open-end investment companies that have a fundamental policy
of investing, under normal circumstances, at least 80% of their net assets in
obligations that are exempt from federal income tax and are not subject to the
federal alternative minimum tax. Such investment companies can be expected to
charge management fees and other operating expenses that would be in addition to
those charged to the Funds. The Funds' investment adviser has undertaken,
however, to waive its advisory fees with respect to assets so invested, except
when such purchase is part of a plan of merger, consolidation, reorganization or
acquisition. As a shareholder of another investment company, each Fund would
bear, along with other shareholders, its pro rata portion of the expenses of
such other investment company, including advisory fees. These expenses would be
in addition to the other expenses that a Fund bears directly in connection with
its own operations, and may represent a duplication of fees to shareholders of
the Fund. Notwithstanding any other investment policy or limitation (whether or
not fundamental), as a matter of fundamental policy, the California Tax-Free
Income Fund may invest all of its assets in the securities of a single open-end,
management investment company with substantially the same fundamental investment
objective, policies and limitations as the Fund.
A-3 PROSPECTUS
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Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds may purchase bear interest at
rates that are not fixed, but vary, for example, with changes in specified
market rates or indices or at specified intervals. Certain of these instruments
may carry a demand feature that would permit the holder to tender them back to
the issuer at par value prior to maturity. The floating- and variable-rate
instruments that the Funds may purchase include certificates of participation in
such obligations. Wells Fargo Bank, as investment adviser to the Funds, will
monitor on an ongoing basis the ability of an issuer of a demand instrument to
pay principal and interest on demand. Events affecting the ability of the issuer
of a demand instrument to make payment when due may occur between the time a
Fund elects to demand payment and the time payment is due, thereby affecting
such Fund's ability to obtain payment at par. Demand instruments whose demand
feature is not exercisable within seven days may be treated as liquid, provided
that an active secondary market exists.
Repurchase Agreements
The Funds may enter into repurchase agreements wherein the seller of a
security to a Fund agrees to repurchase that security from such Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Funds may enter into repurchase agreements only with respect to U.S.
Government obligations and other obligations that could otherwise be purchased
by the participating Fund. All repurchase agreements will be fully
collateralized based on values that are marked to market daily. While the
maturities of the underlying securities in a repurchase agreement transaction
may be greater than twelve months, the term of any repurchase agreement on
behalf of a Fund will always be twelve months or less. If the seller defaults
and the value of the underlying securities has declined, the participating Fund
may incur a loss. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the security, the participating Fund's disposition of
the security may be delayed or limited. The Funds enter into repurchase
agreements only with registered broker/dealers, commercial banks and other
financial institutions that meet guidelines established by the Company's Board
of Directors and that are not affiliated with Wells Fargo Bank. Subject to
exemptive relief granted by the SEC, the Funds may participate in pooled
repurchase agreement transactions with other funds advised by Wells Fargo Bank.
Loans of Portfolio Securities
The Funds may lend securities from their portfolios to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government
obligations or other high-quality debt instruments equal to at least 100% of the
current market value of the securities loan (including accrued interest thereon)
plus the interest payable to a Fund with respect to the loan is maintained with
the Fund. In determining whether to lend a
PROSPECTUS A-4
<PAGE> 69
security to a particular broker, dealer or financial institution, the Funds'
investment adviser will consider all relevant facts and circumstances, including
the creditworthiness of the broker, dealer or financial institution. Any loans
of portfolio securities will be fully collateralized based on values that are
marked-to-market daily. The Funds will not enter into any portfolio security
lending arrangement having a duration of longer than one year. Any securities
that a Fund may receive as collateral will not become part of the Fund's
portfolio at the time of the loan and, in the event of a default by the
borrower, the Fund, if permitted by law, will dispose of such collateral except
for such part thereof that is a security in which the Fund is permitted to
invest. During the time securities are on loan, the borrower will pay the Fund
any accrued income on those securities, and the Fund may invest the cash
collateral and earn additional income or receive an agreed-upon fee from a
borrower that has delivered cash-equivalent collateral. The Funds may not lend
securities having a value that exceeds one-third of the current value of each of
their total assets. Loans of securities by a Fund will be subject to termination
at the Fund's or the borrower's option. The Funds may pay reasonable
administrative and custodial fees in connection with a securities loan and may
pay a negotiated portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker. Borrowers and placing brokers
may not be affiliated, directly or indirectly, with the Company, the investment
adviser, or the Distributor.
INVESTMENT POLICIES
Each Fund's investment objective, as set forth in the "How the Funds Work -
Investment Objectives and Policies," section is fundamental; that is, it may not
be changed without approval by the vote of the holders of a majority of such
Fund's outstanding voting securities, as described under "Capital Stock" in the
SAI. In addition, any fundamental investment policy may not be changed without
such shareholder approval. If the Company's Board of Directors determines,
however, that a Fund's investment objective can best be achieved by a
substantive change in a nonfundamental investment policy or strategy, the
Company's Board may make such change without shareholder approval and will
disclose any such material changes in the then-current prospectus.
As matters of fundamental policy (i) the Funds may borrow from banks up to 10%
of the current value of each of their net assets only for temporary purposes in
order to meet redemptions, and these borrowings may be secured by the pledge of
up to 10% of the current value of each of their net assets (but investments may
not be purchased by a Fund while any such outstanding borrowings exceed 5% of
its net assets); (ii) the California Tax-Free Bond Fund may make loans of
portfolio securities in accordance with its investment policies and (iii)
neither Fund may purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and as
a result thereof, the value of a Fund's investments in that industry would be
25% or more of the current value of the Fund's total assets, provided that there
A-5 PROSPECTUS
<PAGE> 70
is no limitation with respect to investments in (a) municipal securities (for
the purpose of this restriction, private activity bonds shall not be deemed
municipal securities if the payment of principal and interest on such bonds is
the ultimate responsibility of nongovernmental users) and (b) U.S. Government
obligations.
As a matter of nonfundamental policy, neither the California Tax-Free Bond
Fund nor the California Tax-Free Income Fund may invest more than 10% or 15%,
respectively, of the current value of the Fund's net assets in securities that
are illiquid by virtue of the absence of a readily available market or because
of legal or contractual restrictions on resale or maturities of more than seven
days, unless the Board or investment adviser, pursuant to guidelines adopted by
the Board, determines that a liquid trading market exists. The following
securities are excluded from the applicable limitation for a Fund: (a)
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 (the "1933 Act") that have been determined to be liquid by the Fund's Board
of Directors, and (b) commercial paper that is sold under Section 4(2) of the
1933 Act that (i) is not traded flat or in default as to interest or principal
and (ii) is rated in one of the two highest categories by at least two NRSROs
and the Fund's Board of Directors has determined the commercial paper to be
liquid; or (iii) is rated in one of the two highest categories by one NRSRO and
the Fund's Board of Directors has determined that the commercial paper is of
equivalent quality and is liquid.
For purposes of complying with the Code, each Fund will diversify its holdings
so that, at the end of each quarter of the taxable year: (i) at least 50% of the
market value of each Fund's assets is represented by cash, U.S. Government
obligations and other securities limited in respect of any one issuer to an
amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer; and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government obligations and the securities of other regulated investment
companies), or of two or more issuers which the taxpayer controls and which are
determined to be engaged in the same or similar trades or businesses or related
trades or businesses. With respect to paragraph (i), it may be possible that the
Company would own more than 10% of the outstanding voting securities of an
issuer.
PROSPECTUS A-6
<PAGE> 71
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<PAGE> 72
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS, SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank nor
guaranteed by the Bank [LOGO]
- involve investment risk, including possible loss of
principal
</TABLE>
[LOGO] SC0212 (6/96)
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<PAGE> 73
STAGECOACH FUNDS LOGO
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank NO FDIC LOGO
- involve investment risk, including possible loss
of principal
</TABLE>
RECYCLED PAPER LOGO
SC0212 (6/96)
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<PAGE> 74
LOGO
------------------------------
PROSPECTUS
------------------------------
MONEY MARKET MUTUAL FUND
INSTITUTIONAL CLASS
June 3, 1996
<PAGE> 75
STAGECOACH FUNDS(R)
MONEY MARKET MUTUAL FUND
INSTITUTIONAL CLASS
Stagecoach Funds, Inc. (the "Company") is an open-end investment company. This
Prospectus contains information about one class of shares offered in one fund of
the Stagecoach Family of Funds-the MONEY MARKET MUTUAL FUND -- INSTITUTIONAL
CLASS (the "Fund").
The MONEY MARKET MUTUAL FUND seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in high-quality,
short-term instruments.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
CONSTANT $1.00 NET ASSET VALUE PER SHARE.
Please read this Prospectus and retain it for future reference. It is designed
to provide you with important information and to help you decide if the Fund's
goals match your own. A Statement of Additional Information ("SAI"), dated April
1, 1996, containing additional information about the Fund has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The Fund's SAI is available without charge and can be
obtained by writing to Stagecoach Shareholder Services, Wells Fargo Bank, N.A.,
P.O. Box 7066, San Francisco, CA 94120-7066 or by calling 1-800-222-8222.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND INVOLVES CERTAIN
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED
JUNE 3, 1996
PROSPECTUS
<PAGE> 76
The Fund is advised by Wells Fargo Bank, which also serves as the Fund's
transfer and dividend disbursing agent and custodian. In addition, Wells Fargo
Bank is a Shareholder Servicing Agent and a Selling Agent (each as defined
below). Stephens Inc. ("Stephens") is the Fund's sponsor and administrator and
serves as distributor of the Fund's shares.
WELLS FARGO BANK IS THE INVESTMENT ADVISER TO THE FUND AND PROVIDES CERTAIN
OTHER SERVICES TO THE FUND, FOR WHICH IT IS COMPENSATED. STEPHENS, WHICH
IS NOT AFFILIATED WITH WELLS FARGO BANK, IS THE FUND'S SPONSOR,
ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 77
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 3
HOW THE FUND WORKS 5
THE FUND AND MANAGEMENT 7
INVESTING IN THE FUND 8
EXCHANGES 12
DIVIDENDS 13
MANAGEMENT AND SERVICING FEES 14
TAXES 16
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 78
PROSPECTUS SUMMARY
The Fund provides investors with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides summary information about the Fund. For more information, please refer
specifically to the identified Prospectus sections and generally to the Fund's
Prospectus and SAI.
Q. WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A. The MONEY MARKET MUTUAL FUND seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in
high-quality, short-term instruments. In pursuing this objective, the Fund
invests in securities with remaining maturities not exceeding 397 days, as
determined in accordance with Rule 2a-7 under the Investment Company Act of
1940, as amended (the "1940 Act"). These securities include obligations of
the U.S. Government, its agencies and instrumentalities, high-quality debt
obligations such as corporate debt, certain obligations of U.S. banks and
certain repurchase agreements. See "How the Fund Works -- Investment
Objective and Policies" and "Prospectus Appendix -- Additional Investment
Policies" for further information on investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. Investments in the Fund are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC nor are they insured or guaranteed
against loss of principal. Therefore, investors should be willing to accept
some risk with money invested in the Fund. Although the Fund seeks to
maintain a stable net asset value of $1.00 per share, there can be no
assurance that it will be able to do so. The Fund may not achieve as high a
level of current income as other mutual funds that do not limit their
investments to the high credit quality instruments in which the Fund
invests. As with all mutual funds, there can be no assurance that the Fund
will achieve its investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Fund's investment adviser, manages your investments.
Wells Fargo Bank also provides transfer agency, dividend disbursing agency
and custodial services to the Fund. In addition, Wells Fargo Bank is a
Shareholder Servicing Agent and a Selling Agent of the Fund. See "The Fund
and Management" and "Management and Servicing Fees."
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Institutional Class shares of
the Fund at the net asset value per share without a sales charge ("NAV").
Qualified investors include certain customers of affiliate, franchise or
correspondent banks of Wells
1 PROSPECTUS
<PAGE> 79
Fargo & Company and other selected institutions ("Institutions"). Customers
may include individuals, trusts, partnerships and corporations. Purchases
are effected through the customer's account with the Institution under the
terms of the customer's account agreement with the Institution. Investors
wishing to purchase the Fund's Institutional Class shares should contact
their account representatives. See "Investing in the Fund" for additional
information.
Q. ARE EXCHANGES TO THE FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares
of another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sales in your state of residence.
Exchanges are effected through the customer's account with the Institution
under the terms of the customer's account agreement with the Institution.
See "Exchanges."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares at NAV, without charge by the Company.
Institutional Class shares held by an Institution on behalf of its customers
must be redeemed under the terms of the customer's account agreement with
the Institution. It is the responsibility of an Institution to transmit
redemption requests to the Company and to credit its customers' accounts.
The Company reserves the right to impose charges for wiring redemption
proceeds. See "Investing in the Fund - Redemption of Institutional Class
Shares."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income are declared daily, paid monthly and
automatically reinvested in additional Institutional Class shares at NAV.
Shareholders may also elect to receive dividends in cash. Any capital gains
are distributed at least annually in the same manner as dividends. See
"Dividends" for additional information.
PROSPECTUS 2
<PAGE> 80
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
MONEY MARKET
MUTUAL FUND
------------
<S> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)................................. None
Sales Charge Imposed on
Reinvested Dividends............................... None
Sales Charge Imposed on
Redemptions........................................ None
Exchange Fees.......................................... None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
MONEY
MARKET
MUTUAL FUND
-----------
<S> <C>
Management Fee......................................... 0.40%
Shareholder Servicing Fee.............................. 0.25%
Administrative Fee..................................... 0.03%
Other Expenses (after waivers or reimbursements)1...... 0.05%
-----
TOTAL FUND OPERATING
EXPENSES (after waivers or reimbursements)2........ 0.73%
</TABLE>
- -------------------------------
<TABLE>
<C> <S>
1 Other Expenses (before waivers and/or reimbursements) would be
0.10%.
2 Total Fund Operating Expenses (before waivers and/or
reimbursements) would be 0.78%.
</TABLE>
3 PROSPECTUS
<PAGE> 81
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment
in the Fund's Institutional Class,
assuming a 5% annual return and
redemption at the end of each time
period indicated:
Money Market Mutual Fund....... $7 $ 23 $41 $ 91
</TABLE>
EXPLANATION OF TABLES
The purpose of the foregoing tables is to help a shareholder understand the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The tables do not reflect any charges that may be imposed by Wells
Fargo Bank or another Institution directly on its customer accounts in
connection with an investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when a shareholder buys
or sells Fund shares. Institutional Class shares are sold with no shareholder
transaction expenses imposed by the Fund. The Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Institutional Class shares of the Fund
are based on applicable contract amounts and derived from amounts incurred
during the most recent fiscal year, restated to reflect voluntary fee waivers
and expense reimbursements that are expected to continue to reduce expenses
during the current fiscal year. WELLS FARGO BANK AND STEPHENS WILL WAIVE OR
REIMBURSE ALL OR A PORTION OF THEIR RESPECTIVE FEES CHARGED TO, OR EXPENSES PAID
BY, THE FUND TO ENSURE THAT THE TOTAL FUND OPERATING EXPENSES DO NOT EXCEED, ON
AN ANNUAL BASIS, 0.73% OF THE MONEY MARKET MUTUAL FUND'S AVERAGE DAILY NET
ASSETS THROUGH AUGUST 31, 1997. Any waivers or reimbursements would reduce the
Fund's total expenses. There can be no assurance that waivers or reimbursements
will continue after that time. For more complete descriptions of the various
costs and expense you can expect to incur as an investor in the Fund, please see
"Management and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods, based on the expenses in the above
tables and an assumed annual rate of return of 5%. This rate of return should
not be considered an indication of actual or expected performance of the Fund
nor a representation of past or future expenses; actual expenses and returns may
be greater or lesser than those shown.
PROSPECTUS 4
<PAGE> 82
HOW THE FUND WORKS
INVESTMENT OBJECTIVE AND POLICIES
The MONEY MARKET MUTUAL FUND seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in high-quality,
short-term instruments. The Fund invests its assets in U.S. dollar-denominated,
high-quality money market instruments and may engage in certain other investment
activities as described in this Prospectus. Permitted investments include
short-term U.S. Government obligations, obligations of domestic and foreign
banks, commercial paper, and repurchase agreements. In pursuing its objective,
the Fund invests in instruments with remaining maturities not exceeding 397
days, as determined in accordance with Rule 2a-7 under the 1940 Act. A more
complete description of these investments and investment activities is contained
in "Prospectus Appendix - Additional Investment Policies" and in the SAI.
RISK FACTORS
Fund shares are not bank accounts and are not insured or guaranteed against
loss of principal. Although the Fund seeks to maintain a stable NAV of $1.00 per
share, there is no assurance that it will be able to do so. As with all mutual
funds, there can be no assurance that the Fund, which is a diversified
portfolio, will achieve its investment objective.
The Fund, under the 1940 Act, must comply with certain investment criteria
designed to provide liquidity, reduce risk, and allow the Fund to maintain a
stable NAV of $1.00 per share. The dollar-weighted average portfolio maturity of
the Fund must not exceed 90 days. Any security that the Fund purchases must have
a remaining maturity of not more than 397 days. In addition, any security that
the Fund purchases must present minimal credit risks and be of high quality
(i.e., be rated in the top two rating categories by the required number of
nationally recognized statistical rating organizations ("NRSROs") or, if
unrated, determined to be of comparable quality to such rated securities by
Wells Fargo Bank, as the Fund's investment adviser, under guidelines adopted by
the Board of Directors).
The Fund seeks to reduce risk by investing its assets in securities of various
issuers. As such, the Fund is considered to be diversified for purposes of the
1940 Act. In addition, the Fund, since its inception, has emphasized safety of
principal and high credit quality. In particular, the internal investment
policies of Wells Fargo Bank, the investment adviser to the Fund, have always
prohibited the purchase for the Fund of many types of floating-rate instruments
commonly referred to as "derivatives" that are considered potentially volatile.
The following types of derivative instruments ARE NOT permitted investments for
the Fund:
- capped floaters (on which interest is not paid when market rates move above
a certain level);
5 PROSPECTUS
<PAGE> 83
- leveraged floaters (whose interest-rate reset provisions are based on a
formula that magnifies changes in interest rates);
- range floaters (which do not pay any interest if market interest rates move
outside of a specified range);
- dual index floaters (whose interest-rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, the Fund may not invest in instruments whose interest rate reset
provisions are tied to an index that materially lags short-term interest rates,
such as Cost of Funds Index ("COFI") floaters. The Fund may only invest in
variable- or floating-rate instruments that bear interest at a rate that resets
quarterly or more frequently, and which resets based on changes in standard
money market rate indices such as U.S. Government Treasury bills, London
Interbank Offered Rate or LIBOR, the prime rate, published commercial paper
rates, federal funds rates, Public Securities Associates ("PSA") floaters or JJ
Kenney index floaters.
PERFORMANCE
The performance of each class of shares may be advertised from time to time in
terms of current yield and effective yield. Performance figures are based on
historical results and are not intended to indicate future performance.
Yield refers to the income generated by an investment in a class of the Fund's
shares over a specified period (usually 7 days), expressed as an annual
percentage rate. Effective yields are calculated similarly but assume that the
income earned from the shares is reinvested at NAV in shares of the same class
of the Fund. Because of the effects of compounding, effective yields are
slightly higher than yields.
Average annual return of a class of shares is based on the overall dollar or
percentage change of an investment in a Fund's class and assumes the investment
is at NAV and all dividends and distributions attributable to a class are also
reinvested at NAV in shares of the class.
In addition to presenting these standardized performance calculations, at
times, the Funds may also present non-standard performance figures, such as
yields and effective yields for a 30-day period or, in sales literature,
distribution rates. Because of the differences in the fees and/or expenses borne
by shares of each class of the Funds, the performance figures on such shares can
be expected, at any given time, to vary from the performance figures for other
classes of the Funds.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request without
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
PROSPECTUS 6
<PAGE> 84
THE FUND AND MANAGEMENT
The Fund is one fund of the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of the following funds: Aggressive Growth, Asset Allocation, California
Tax-Free Bond, California Tax-Free Income, California Tax-Free Money Market
Mutual, Corporate Stock, Diversified Income, Ginnie Mae, Growth and Income,
National Tax-Free Money Market Mutual, Short-Intermediate U.S. Government Income
and U.S. Government Allocation Funds. Each of the Company's funds, except the
California Tax-Free Income, Corporate Stock, Government Money Market Mutual,
Money Market Trust and Short-Intermediate U.S. Government Income Funds,
currently offer three classes of shares. The California Tax-Free Income and
Short-Intermediate U.S. Government Income Funds offer two classes of shares, and
the Corporate Stock Fund, Government Money Market Mutual Fund and the Money
Market Trust offer a single class of shares. The Fund is authorized to issue two
other classes of shares, one class that is offered to retail investors and
another class that is offered to qualified business investors who purchase such
shares through certain non-interest bearing transaction accounts offered by
Wells Fargo Bank. Each class of shares represents an equal proportionate
interest in the Fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the Fund's operating expenses except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule
12-b) that are allocated to a particular class. For information on another fund
or class of shares, please call Stagecoach Shareholder Services at
1-800-222-8222 or write the Company at the address shown on the front cover of
the Prospectus.
The Company's Board of Directors supervises the Fund's activities and monitors
its contractual arrangements with various service providers. Although the
Company is not required to hold annual shareholder meetings, special meetings
may be required for purposes such as electing or removing Directors, approving
advisory contracts and distribution plans, and changing a fund's investment
objective or fundamental investment policies. All shares of the funds have equal
voting rights and will be voted in the aggregate, rather than by fund or class,
unless otherwise required by law (such as when the voting matter affects only
one fund or class). As a Fund shareholder, you are entitled to one vote for each
share owned and fractional votes for fractional shares owned. See "Management"
in the SAI for more information on the Company's Directors and Officers. A more
detailed description of the voting rights and attributes of the shares is
contained under "Capital Stock" in the SAI.
Wells Fargo Bank is the Fund's investment adviser, custodian, transfer agent
and dividend disbursing agent (the "Transfer Agent"). In addition, Wells Fargo
Bank serves as a Shareholder Servicing Agent and Selling Agent of the Funds.
Wells Fargo Bank, one of the largest banks in the United States, was founded in
1852 and is the oldest bank in the western United States. As of April 1, 1996,
Wells Fargo Bank and its affiliates provided investment advisory services for
over $56 billion of assets for individuals, trusts,
7 PROSPECTUS
<PAGE> 85
estates and institutions. Wells Fargo Bank also serves as the investment adviser
to other separately managed funds (or the master portfolio in which a fund may
invest) of the Company and as investment adviser or sub-adviser to other
separately managed funds of five other registered, open-end management
investment companies. Wells Fargo Bank, a wholly owned subsidiary of Wells Fargo
& Company, is located at 420 Montgomery Street, San Francisco, California 94104.
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank, has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Investment
Advisory Contract and this Prospectus without violation of the Glass-Steagall
Act. Such counsel has pointed out, however, that there are no controlling
judicial or administrative interpretations or decisions and that future judicial
or administrative interpretations of, or decisions relating to, present federal
or state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Stephens is the Company's sponsor and administrator and distributes the Fund's
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit-sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUND
Institutional Class shares of the Fund may be purchased on any day the Fund is
open for business, provided Wells Fargo Bank also is open for business (a
"Business Day"). Currently, Wells Fargo Bank is closed on New Year's Day,
Presidents' Day, Martin Luther King, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day (each a
"Holiday"). When any Holiday falls on a weekend, the Fund typically is closed on
the weekday immediately before or after such Holiday.
PROSPECTUS 8
<PAGE> 86
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from an investor or the investor's
representative, the Company or Stephens will transmit or cause to be transmitted
promptly, without charge, a paper copy of the electronic Prospectus.
SHARE VALUE
The value of a share of each class is its NAV. Wells Fargo Bank calculates the
NAV of each class of the Fund's shares as of 12:00 noon and 1:00 p.m. (Pacific
time) on each Business Day. The NAV per share for each class of shares is
computed by dividing the value of the Fund's assets allocable to a particular
class, less the liabilities charged to that class by the total number of
outstanding shares of that class. All expenses, including fees paid to the
investment adviser and administrator, are accrued daily and taken into account
for the purpose of determining the NAV. As noted above, the Fund seeks to
maintain a constant $1.00 per share NAV, although there can be no assurance that
it will be able to do so.
The Fund's NAV is calculated on the basis of the amortized cost method. This
valuation method is based on the receipt of a steady rate of payment on
portfolio instruments from the date of purchase until maturity rather than
actual changes in market value. The Company's Board of Directors believes that
this valuation method accurately reflects fair value.
PURCHASE OF INSTITUTIONAL CLASS SHARES
Institutional Class shares of the Fund are sold at NAV (without a sales load)
on a continuous basis primarily to certain customers ("Customers") of affiliate,
franchise or correspondent banks of Wells Fargo & Company and other selected
institutions (previously defined as Institutions). Customers may include
individuals, trusts, partnerships and corporations. Share purchases are effected
through a Customer's account at an Institution under the terms of the Customer's
account agreement with the Institution, and confirmations of share purchases and
redemptions are sent by the Fund to the Institution involved. Institutions (or
their nominees), acting on behalf of their Customers, normally are the holders
of record of Institutional Class shares. Customers' beneficial ownership of
Institutional Class shares is reflected in the account statements provided by
Institutions to their Customers. The exercise of voting rights and the delivery
to Customers of shareholder communications from the Fund is governed by the
Customers' account agreements with an Institution. Investors wishing to purchase
Institutional Class shares of the Fund should contact their account
representatives.
Institutional Class shares of the Fund are sold at the NAV per share next
determined after a purchase order has become effective. Purchase orders placed
by an Institution must be received by the Company before 12:00 noon (Pacific
time) on any Business Day. Payment for such shares may be made by Institutions
in federal funds or other funds
9 PROSPECTUS
<PAGE> 87
immediately available to the custodian no later than 1:00 p.m. (Pacific time) on
that Business Day.
It is the responsibility of Institutions to transmit orders for purchases by
their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Fund with
respect to the investments of its Customers as described under "Management and
Servicing Fees." Payment for Institutional Class shares of the Fund may, in the
discretion of the investment adviser, be made in the form of securities that are
permissible investments for the Fund. For further information see "Additional
Purchase and Redemption Information" in the SAI.
The Company reserves the right to reject any purchase order or to suspend
sales at any time. Payment for orders that are not received will be returned
after prompt inquiry. The issuance of Institutional Class shares is recorded on
the Company's books, and share certificates are not issued.
WIRE INSTRUCTIONS DIRECT PURCHASES BY INSTITUTIONS
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund and designate the Institutional
Class)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be sent by telefacsimile, with the
original subsequently mailed, to the following address immediately after the
funds are wired and must be received and accepted by the Transfer Agent
before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
PROSPECTUS 10
<PAGE> 88
STATEMENTS AND REPORTS
Institutions (or their nominees) typically send shareholders a confirmation or
statement of the account after every transaction that affects the share balance
or the Fund account registration. A statement with tax information for the
previous year will be mailed by January 31 of each year and also will be filed
with the IRS. At least twice a year, shareholders will receive financial
statements.
REDEMPTION OF INSTITUTIONAL CLASS SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Institutional
Class shares held by an Institution on behalf of its Customers must be redeemed
in accordance with instructions and limitations pertaining to the Customer's
accounts at the Institution. It is the responsibility of an Institution to
transmit redemption requests to the Company and to credit its Customers'
accounts with the redemption proceeds on a timely basis. The redemption proceeds
for Institutional Class shares of the Fund normally are wired to the redeeming
Institution the following Business Day after receipt of the request by the
Company. The Company reserves the right to delay the wiring of redemption
proceeds for up to seven days after it receives a redemption order if, in the
judgment of the investment adviser, an earlier payment could adversely affect
the Fund or unless the SEC permits a longer period under extraordinary
circumstances. Such extraordinary circumstances could include a period during
which an emergency exists as a result of which (a) disposal by the Fund of
securities owned by it is not reasonably practicable or (b) it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or a
period during which the SEC by order permits deferral of redemptions for the
protection of security holders of the Fund.
With respect to former shareholders of Westcore Trust or Pacifica Fund Trust
who do not have a relationship with an Institution, Fund shares may be redeemed
by writing or calling the Fund directly at the address and phone number shown on
the first page of the Prospectus. When Institutional Class shares are redeemed
directly from the Fund, the Fund ordinarily will send the proceeds by check to
the shareholder at the address of record on the next Business Day unless payment
by wire is requested. The Fund may take up to seven days to make payment,
although this will not be the customary practice. Also, if the New York Stock
Exchange is closed (or when trading is restricted) for any reason other than the
customary weekend or holiday closing or if an emergency condition as determined
by the SEC merits such action, the Fund may suspend redemptions or postpone
payment dates.
To be accepted by the Fund, a letter requesting redemption must include: (i)
the Fund name and account registration from which the Institutional Class shares
are being redeemed; (ii) the account number; (iii) the amount to be redeemed;
(iv) the signatures of all registered owners; and (v) a signature guarantee by
any eligible guarantor institution. An "eligible guarantor institution" includes
a commercial bank
11 PROSPECTUS
<PAGE> 89
that is an FDIC member, a trust company, a member firm of a domestic stock
exchange, a savings association, or a credit union that is authorized by its
charter to provide a signature guarantee. Signature guarantees by notaries
public are not acceptable. Further documentation may be requested from
corporations, administrators, executors, personal representatives, trustees or
custodians.
All redemptions of Institutional Class shares of the Fund are made in cash,
except that the commitment to redeem Institutional Class shares in cash extends
only to redemption requests made by each Fund shareholder during any 90-day
period of up to the lesser of $250,000 or 1% of the NAV of the Fund at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have the
Fund make payment, in whole or in part, in securities or other assets, in case
of an emergency or any time a cash distribution would impair the liquidity of
the Fund to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the securities of the Fund are
valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
A redemption may be a taxable transaction on which gain or loss may be
recognized.
REDEMPTIONS BY TELEPHONE
Telephone exchange or redemption privileges authorize the Transfer Agent to
act on telephone instructions from any person representing himself or herself to
be the shareholder of record and reasonably believed by the Transfer Agent to be
genuine. The Company requires the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Company
and the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Company nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
EXCHANGES
The Fund offers a convenient way to exchange Institutional Class shares in the
Fund for Institutional Class shares in another fund of the Company. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the fund into which the exchange will occur, which is
available without charge and can be obtained by writing or by calling the
Company at the address or phone number listed on the first page of the
Prospectus. A shareholder may not exchange Institutional Class shares of one
fund for Institutional Class shares of another fund if Institutional Class
shares of both funds are not qualified for sale in the state of the
shareholder's residence. The Company may terminate or amend the terms of the
exchange privilege at any time.
PROSPECTUS 12
<PAGE> 90
Exchange transactions are effected through a Customer's account at an
Institution under the terms of the Customer's account agreement with the
Institution, and confirmations of share exchanges are sent by a Fund to the
Institution involved. Institutions (or their nominees), acting on behalf of
their Customers, normally are the holders of record of Institutional Class
shares. Institutions are responsible for transmitting orders for exchanges to
the Company on a timely basis. Customers' exchange transactions are generally
reflected in the account statements provided by Institutions to their Customers.
Investors wishing to exchange Institutional Class shares of a Fund for
Institutional Class shares of another fund should contact their account
representatives. Investors with questions may call the Company at
1-800-222-8222.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges are
made at the NAV of the respective funds next determined following receipt of the
request by the Company in good order.
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. Shareholders should receive written confirmation of the exchange
from the Institution within a few days of the completion of the transaction.
To exchange Institutional Class shares, or if you have any questions, simply
call the Company at 1-800-222-8222. A shareholder of record should be prepared
to give the telephone representative the following information: (i) the account
number, social security number and account registration; (ii) the name of the
fund from and the fund into which the transfer is to occur; and (iii) the dollar
or share amount of the exchange. The conversation may be recorded to protect
shareholders and the Company. Telephone exchanges are available unless the
shareholder of record has declined the privilege on the Purchase Application.
In addition, Institutional Class shares of the Fund may be exchanged for the
Fund's Class A shares in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of Wells Fargo Bank or another bank, trust company or thrift
institution, or in other cases where Institutional Class shares are not held in
such qualified accounts. Similarly, Class A shares may be exchanged for the
Fund's Institutional Class shares if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made at the
NAV of the respective share classes next determined after the exchange request
is received by the Company.
DIVIDENDS
The Fund intends to declare dividends on a daily basis payable to
Institutional Class shareholders of record as of 1:00 p.m. (Pacific time).
Institutional Class shareholders begin earning dividends on the Business Day the
investment is effected and continue to
13 PROSPECTUS
<PAGE> 91
earn dividends through the day before the date that the shares are redeemed.
Dividends for a Saturday, Sunday or Holiday are declared payable to shareholders
of record as of the preceding Business Day. The Fund declares and distributes
any capital gains at least annually. Expenses, such as state securities
registration fees and transfer agent fees, that are attributable to a particular
class may affect the relative dividends and/or capital-gain distributions of a
class of shares.
Dividends declared in a month generally are paid on the last Business Day of
each month. Dividends and any capital-gain distributions are automatically
invested in additional whole and fractional shares unless the shareholder has
elected to receive payment in cash.
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Fund's investment adviser, provides investment guidance and
policy direction in connection with the management of the Fund's assets. Wells
Fargo Bank also furnishes the Board of Directors with periodic reports on the
Fund's investment strategies and performance. For these services, Wells Fargo
Bank is entitled to receive a monthly investment advisory fee at the annual rate
of 0.40% of the average daily net assets of the Fund. From time to time, Wells
Fargo Bank may waive such fees in whole or in part. Any such waiver will reduce
expenses of the Fund and, accordingly, have a favorable impact on the Fund's
yields and returns. From time to time, the Fund, consistent with its investment
objective, policies and restrictions, may invest in securities of entities with
which Wells Fargo Bank has a lending relationship. For the year ended December
31, 1995, Wells Fargo Bank was paid at an annual rate equal to 0.40% of the
Fund's average daily net assets for its services as investment adviser.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as the Fund's custodian and transfer and dividend
disbursing agent. Under its Custody Agreement with Wells Fargo Bank, the Fund
may, at times, borrow money from Wells Fargo Bank as needed to satisfy temporary
liquidity needs. Wells Fargo Bank charges interest on such overdrafts at a rate
determined pursuant to the Fund's Custody Agreement. Wells Fargo Bank performs
its custodial and transfer and dividend disbursing agency services at 525 Market
Street, San Francisco, California 94105.
PROSPECTUS 14
<PAGE> 92
INSTITUTIONS AND SHAREHOLDER SERVICING AGENTS
The Fund has entered into a Shareholder Servicing Agreement with Wells Fargo
Bank and may enter into similar agreements with other Institutions ("Shareholder
Servicing Agents"). Under such agreements, Shareholder Servicing Agents
(including Wells Fargo Bank) agree, as agents for their customers, to provide
shareholder administrative and liaison services with respect to Fund shares,
which include, without limitation, aggregating and transmitting shareholder
orders for purchases, exchanges and redemptions; maintaining shareholder
accounts and records; exchanges and redemptions; and providing such other
related services as the Company or a shareholder may reasonably request. For
these services, a Shareholder Servicing Agent is entitled to receive a fee at
the annual rate of up to 0.25% of the average daily net assets attributable to
the Institutional Class shares owned of record or beneficially by investors with
whom the Shareholder Servicing Agent maintains a servicing relationship. In no
case shall payments exceed any maximum amount that may be deemed applicable
under applicable laws, regulations or rules, including the Rules of Fair
Practice of the NASD.
A Shareholder Servicing Agent may impose certain conditions on its customers,
subject to the terms of this Prospectus, in addition to or different from those
imposed by the Fund, such as requiring a minimum initial investment or payment
of a separate fee for additional services. Each Shareholder Servicing Agent has
agreed to disclose any fees it may directly charge its customers who are
shareholders of the Fund and to notify them in writing at least 30 days before
it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the governing Board of Directors,
Stephens provides the Fund with administrative services, including general
supervision of the Fund's operation, coordination of the other services provided
to the Fund, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports
and general supervision of data compilation in connection with preparing
periodic reports. Stephens also furnishes office space and certain facilities to
conduct the Fund's business, and compensates the Directors, officers and
employees who are affiliated with Stephens. For these services, Stephens is
entitled to a monthly fee at the annual rate of 0.03% of the Fund's average
daily net assets. From time to time, Stephens may waive its fees charged to the
Fund in whole or in part. Any such waivers will reduce the Fund's expenses and,
accordingly, have a favorable impact on the Fund's performance.
Stephens, as the principal underwriter of the Fund within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company under which
Stephens acts as agent for the Fund for the sale of its shares and may enter
into selling agreements with other agents ("Selling Agents") that wish to make
available shares of the Fund to their respective customers.
15 PROSPECTUS
<PAGE> 93
Stephens has established a non-cash compensation program, pursuant to which
broker/dealers or financial institutions that sell shares of the Company's funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise.
Financial institutions acting as Shareholder Servicing Agents or Selling
Agents, or in certain other capacities, may be required to register as dealers
pursuant to applicable state securities laws which may differ from federal law
and any interpretations expressed herein.
EXPENSES
Except for the expenses borne by Wells Fargo Bank and Stephens, the Fund bears
all costs of its operations, including advisory, transfer agency, custody and
administration fees, interest, fees and expenses of independent auditors and
legal counsel, and any extraordinary expenses. Expenses attributable to a class
(e.g., any state securities registration fees, shareholder servicing or
distribution fees or other class-specific expenses) are charged against the
assets of the class. General expenses of the Company are allocated among all of
the funds of the Company, including the Fund, in a manner proportionate to the
net assets of each fund, on a transactional basis, or on such other basis as the
Company's Board of Directors deems equitable.
TAXES
The Company intends to qualify the Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), as long as such qualification is the best interest of the Fund's
shareholders. In addition, net capital gains, net investment income, and
operating expenses will be determined separately for the Fund from the Company's
other funds. By complying with the applicable provisions of the Code, the Fund
will not be subject to federal income tax with respect to net investment income
and any net realized capital gains distributed to its shareholders. The Fund
intends to pay out substantially all of its net investment income and any net
realized capital gains for each year. Dividends from investment income
(including any net realized short-term capital gains) declared and paid by the
Fund will be taxable as ordinary income to Fund shareholders. Such dividends and
capital-gain distributions, which are taxable to shareholders as capital gain,
will generally be taxable to recipient shareholders, regardless of whether you
take such payments in cash or have them automatically reinvested in Fund shares.
You may be eligible to defer the taxation of dividend and capital-gain
distributions on Fund shares that are held under a qualified tax-deferred
retirement plan. The Funds' dividends are not expected to qualify for the
dividends-received deduction allowed to corporate shareholders.
PROSPECTUS 16
<PAGE> 94
Your Institution, or your Shareholder Servicing Agent on its behalf, will
inform you of the amount and nature of the Fund's dividends and any capital-gain
distributions. You should keep all statements you receive to assist in your
personal record keeping. The Company may be required to withhold, subject to
certain exemptions, at a rate of 31% on dividends, capital-gain distributions,
and redemption proceeds (including proceeds from exchanges) paid or credited to
Fund shareholders, unless a shareholder provides a correct tax identification
number (generally the shareholder's social security or employer identification
number) and, upon establishing an account with the Company, certifies on the
Account Application that the shareholder is not subject to back-up withholding,
or the IRS notifies the Company that the shareholder is subject to back-up
withholding.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAI.
The foregoing discussion is based on tax laws and federal regulations that
were in effect as of the date of this Prospectus and summarizes only some of the
important federal tax considerations generally affecting the Fund and its
shareholders. It is not intended as a substitute for careful tax planning; all
shareholders should consult their tax advisors with respect to their specific
tax situation as well as with respect to state and local taxes.
Further federal tax considerations are discussed in the SAI.
17 PROSPECTUS
<PAGE> 95
PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
The Fund may invest in the following:
(i) obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including government-sponsored enterprises ("U.S.
Government obligations") (discussed below);
(ii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other short-term obligations of U.S. banks (including
foreign branches) that have more than $1 billion in total assets at the
time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are insured
by the FDIC ("bank instruments");
(iii) commercial paper rated at the date of purchase P-1 by Moody's Investors
Service, Inc. ("Moody's") or "A-1+" or "A-1" by Standard & Poor's Rating
Group ("S&P") ("rated commercial paper");
(iv) commercial paper unrated at the date of purchase but secured by a letter
of credit from a U.S. bank that meets the above criteria for investment;
(v) certain floating- and variable-rate instruments ("variable-rate
instruments") (discussed below);
(vi) certain repurchase agreements ("repurchase agreements") (discussed
below); and
(vii) short-term, U.S. dollar-denominated obligations of U.S. branches of
foreign banks that at the time of investment have more than $10 billion,
or the equivalent in other currencies, in total assets ("foreign bank
obligations") (discussed below).
Other Investment Companies
For temporary investments and subject to the limitations under the 1940 Act,
the Fund may invest in shares of other open-end investment companies that invest
exclusively in high-quality short-term securities similar to the securities in
which the Fund is permitted to invest and also that seek to maintain a stable
net asset value of $1.00 per share. Such investment companies can be expected to
charge management fees and other operating expenses that would be in addition to
those charged to the Fund; however, Wells Fargo Bank has undertaken to waive its
advisory fees with respect to that portion of the Fund's assets so invested,
except when such purchase is part of a plan of merger,
A-1 PROSPECTUS
<PAGE> 96
consolidation, reorganization or acquisition. As a shareholder of another
investment company, the Fund would bear, along with other shareholders, its pro
rata portion of the expenses of such other investment company, including
advisory fees. These expenses would be in addition to the other expenses that
the Fund bears directly in connection with its own operations and may represent
a duplication of fees to shareholders of the Fund.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Fund may purchase bear interest at
rates that are not fixed, but vary for example, with changes in specified market
rates or indices or at specified intervals. These instruments may carry a demand
feature that would permit the holder to tender them back to the issuer at par
value prior to maturity. The floating-and variable-rate instruments that the
Fund may purchase include certificates of participation in such obligations. The
Fund may invest in floating- and variable-rate obligations even if they carry
stated maturities in excess of 397 days, upon compliance with certain conditions
of the SEC, in which case such obligations will be treated in accordance with
these conditions as having maturities not exceeding 397 days. Wells Fargo Bank,
as investment adviser to the Fund, monitors on an ongoing basis the ability of
an issuer of a demand instrument to pay principal and interest on demand. Events
affecting the ability of the issuer of a demand instrument to make payment when
due may occur between the time the Fund elects to demand payment and the time
payment is due, thereby affecting the Fund's ability to obtain payment at par.
The investment adviser, in accordance with the guidelines approved by the
Company's Board of Directors, may treat those instruments which have a demand
feature that is not exercisable within seven days as liquid, provided that an
active secondary market exists.
Repurchase Agreements
The Fund may enter into repurchase agreements wherein the seller of a security
to the Fund agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The period of maturity is usually quite short, often
overnight or a few days, although it may extend over a number of months. The
Fund may enter into repurchase agreements only with respect to U.S. Government
obligations and other obligations that could otherwise be purchased by the Fund.
All repurchase agreements will be fully collateralized based on values that are
marked-to-market daily. While the maturities of the underlying securities in a
repurchase agreement transaction may be greater than twelve months, the term of
any repurchase agreement on behalf of the Fund will always be twelve months or
less. If the seller defaults and the value of the underlying securities has
declined, the Fund may incur a loss. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, disposition of the
security by the Fund may be delayed or limited. The Fund enters into repurchase
agreements only with registered broker/dealers, commercial banks and other
financial institutions that meet guidelines established by the Board of
Directors and that are not affiliated with Wells Fargo Bank. Subject to
exemptive relief granted by the SEC, the Fund may participate
PROSPECTUS A-2
<PAGE> 97
in pooled repurchase agreement transactions with other funds advised by Wells
Fargo Bank.
Letters of Credit
Certain of the debt obligations, certificates of participation, commercial
paper and other short-term obligations which the Fund is permitted to purchase
may be backed by an unconditional and irrevocable letter of credit of a bank,
savings and loan association or insurance company which assumes the obligation
for payment of principal and interest in the event of default by the issuer.
Letter of credit-backed investments must, in the opinion of Wells Fargo Bank, be
of investment quality comparable to other permitted investments of the Fund.
Foreign Obligations
The Fund may invest up to 25% of its assets in high-quality, short-term (397
days or less) debt obligations of foreign branches of U.S. banks or U.S.
branches of foreign banks that are denominated in and pay interest in U.S.
dollars. Investments in foreign obligations involve certain considerations that
are not typically associated with investing in domestic obligations. There may
be less publicly available information about a foreign issuer than about a
domestic issuer. Foreign issuers also are not subject to the same uniform
accounting, auditing and financial reporting standards or governmental
supervision as domestic issuers. In addition, with respect to certain foreign
countries, taxes may be withheld at the source under foreign income tax laws and
there is a possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments that could affect adversely
investments in, the liquidity of, and the ability to enforce contractual
obligations with respect to, securities of issuers located in those countries.
INVESTMENT POLICIES
The Fund's investment objective, as set forth in the "How the Fund Works --
Investment Objective and Policies" section, is fundamental; that is, it may not
be changed without approval by the vote of the holders of a majority of the
Fund's outstanding voting securities, as described under "Capital Stock" in the
SAI. In addition, any fundamental investment policy may not be changed without
such shareholder approval. If the Company's Board of Directors determines,
however, that the Fund's investment objective can best be achieved by a
substantive change in a nonfundamental investment policy or strategy, the
Company's Board may make such a change without shareholder approval and will
disclose any such material changes in the then-current prospectus.
As matters of fundamental policy, the Fund may: (i) borrow from banks up to
10% of the current value of its net assets only for temporary purposes in order
to meet redemptions, and these borrowings may be secured by the pledge of up to
10% of the
A-3 PROSPECTUS
<PAGE> 98
current value of its net assets (but investments may not be purchased by the
Fund while any such outstanding borrowing in excess of 5% of its net assets
exists); (ii) not make loans of portfolio securities or other assets, except
that loans for purposes of this restriction will not include the purchase of
fixed time deposits, repurchase agreements, commercial paper and other
short-term obligations, and other types of debt instruments commonly sold in a
public or private offering; and (iii) not invest more than 25% of its assets
(i.e. , concentrate) in any particular industry, excluding, (a) U.S. Government
obligations, and (b) obligations of domestic banks (for purposes of this
restriction, domestic bank obligations do not include obligations of foreign
branches of U.S. banks and obligations of U.S. branches of foreign banks).
As matters of nonfundamental policy: (i) the Fund may not purchase securities
of any issuer (except for U.S. Government obligations, for certain temporary
purposes and for certain guarantees and unconditional puts) if as a result more
than 5% of the value of the Fund's total assets would be invested in the
securities of such issuer or the Fund would own more than 10% of the outstanding
voting securities of such issuer; and (ii) the Fund may not invest more than 10%
of the current value of its net assets in securities that are illiquid by virtue
of the absence of a readily available market or legal or contractual
restrictions on resale and fixed time deposits that are subject to withdrawal
penalties and that have maturities of more than seven days. The following
securities are excluded from the 10% limitation: (a) securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act")
that have been determined to be liquid by the Fund's Board of Directors, and (b)
commercial paper that is sold under Section 4(2) of the 1933 Act that (i) is not
traded flat or in default as to interest or principal and (ii) is rated in one
of the two highest categories by at least two NRSROs and the Fund's Board of
Directors has determined the commercial paper to be liquid; or (iii) is rated in
one of the two highest categories by one NRSRO and the Fund's Board of Directors
has determined that the commercial paper is of equivalent quality and is liquid.
PROSPECTUS A-4
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<PAGE> 100
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUND, SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank
nor guaranteed by the Bank
- involve investment risk, including possible loss of
principal LOGO
Money market mutual funds seek to maintain a stable net
asset value of $1.00 per share; however, there can be no
assurance that the Fund will meet this goal.
</TABLE>
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<PAGE> 101
STAGECOACH FUNDS LOGO
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank
nor guaranteed by the Bank
- involve investment risk, including possible loss of
principal NO FDIC LOGO
Money market mutual funds seek to maintain a stable net
asset value of $1.00 per share; however, there can be no
assurance that the Fund will meet this goal.
</TABLE>
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[LOGO]
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PROSPECTUS
--------------------
GROWTH AND INCOME FUND
INSTITUTIONAL CLASS
June 3, 1996
<PAGE> 103
STAGECOACH FUNDS(R)
GROWTH AND INCOME FUND
INSTITUTIONAL CLASS
Stagecoach Funds, Inc. (the "Company") is an open-end investment company. This
Prospectus contains information about one class of shares offered in one fund of
the Stagecoach Family of Funds - the GROWTH AND INCOME FUND -- INSTITUTIONAL
CLASS (the "Fund").
The GROWTH AND INCOME FUND seeks to earn current income and achieve long-term
capital appreciation by investing primarily in common stocks, and preferred
stocks and debt securities that are convertible into common stocks.
Please read this Prospectus and retain it for future reference. It is designed
to provide you with important information and to help you decide if the Fund's
goals match your own. A Statement of Additional Information ("SAI"), dated June
3, 1996, containing additional information about the Fund has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The Fund's SAI is available free of charge by writing to
Stagecoach Funds, Inc., c/o Stagecoach Shareholder Services, Wells Fargo Bank,
N.A., P.O. Box 7066, San Francisco, CA 94120-7066, or by calling the Company at
1-800-222-8222.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED JUNE 3, 1996
PROSPECTUS
<PAGE> 104
The Fund is advised by Wells Fargo Bank, which also serves as the Fund's
transfer and dividend disbursing agent and custodian. In addition, Wells Fargo
Bank is a Shareholder Servicing Agent and a Selling Agent (each as defined
below). Stephens Inc. ("Stephens") is the Fund's sponsor and administrator and
serves as distributor of the Fund's shares.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND PROVIDES CERTAIN OTHER SERVICES
TO THE FUND, FOR WHICH IT IS COMPENSATED. STEPHENS, WHICH IS NOT AFFILIATED WITH
WELLS FARGO BANK, IS THE FUND'S SPONSOR, ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 105
TABLE OF CONTENTS
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 4
HOW THE FUND WORKS 6
THE FUND AND MANAGEMENT 8
INVESTING IN THE FUND 11
EXCHANGES 15
DIVIDENDS 16
MANAGEMENT AND SERVICING FEES 17
TAXES 19
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 106
PROSPECTUS SUMMARY
The Fund provides you with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides you with summary information about the Fund. For more information,
please refer specifically to the identified Prospectus sections and generally to
the Fund's Prospectus and SAI.
Q. WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A. The GROWTH AND INCOME FUND seeks to earn current income and achieve long-
term capital appreciation by investing primarily in common stocks, and
preferred stocks and debt securities that are convertible into common
stocks. Common stocks will be selected on the basis of strong earnings
growth trend, above-average prospects for future earnings growth and
diversification among industries and companies. Convertible securities will
be selected on the basis of strong earnings and credit record, the ability
to provide current income and the same characteristics described above with
respect to common stocks. See "How the Fund Works" and "Prospectus
Appendix - Additional Investment Policies" for further information on
investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF
INVESTMENT?
A. An investment in the Fund is not insured against loss of principal. When the
value of the securities that the Fund owns declines, so does the value of
your shares of the Fund. Therefore, you should be prepared to accept some
risk with the money you invest in the Fund. The portfolio equity securities
of the Fund are subject to equity-market risk. Equity-market risk is the
risk that common stock prices will fluctuate or decline over short or even
extended periods. The portfolio debt instruments of the Fund are subject to
credit and interest-rate risk. Credit risk is the risk that issuers of the
debt instruments in which the Fund invests may default on the payment of
principal and/or interest. Interest-rate risk is the risk that increases in
market interest rates may adversely affect the value of the debt instruments
in which the Fund invests and hence the value of your investment in the
Fund. The Fund's investments in smaller-size companies present greater risks
than investments in larger-size companies with more established operating
histories and financial capacity. As with all mutual funds, there can be no
assurance that the Fund will achieve its investment objective.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Fund's investment adviser, manages your
investments. Wells Fargo Bank also provides transfer agency, dividend
disbursing agency and custodial services to the Fund. In addition, Wells
Fargo Bank is a Shareholder Servicing Agent and a Selling Agent of the
Fund. See "The Fund and Management" and "Management and Servicing Fees.
1 PROSPECTUS
<PAGE> 107
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Institutional Class shares of
the Fund at the net asset value per share without a sales charge ("NAV").
Qualified investors include certain customers of affiliate, franchise or
correspondent banks of Wells Fargo & Company and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships
and corporations. Purchases are effected through the customer's account with
the Institution under the terms of the customer's account agreement with the
Institution. Investors wishing to purchase the Fund's Institutional shares
should contact their account representatives. See "Investing in the Fund"
for additional information.
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares
of another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sales in your state of residence.
Exchanges are effected through the customer's account with the Institution
under the terms of the customer's account agreement with the Institution.
See "Exchanges."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares at NAV, without charge by the Company.
Institutional Class shares held by an Institution on behalf of its customers
must be redeemed in accordance with instructions and limitations pertaining
to the customer's account at the Institution. It is the responsibility of an
Institution to transmit redemption requests to the Company and to credit its
customers' accounts. The Company reserves the right to impose charges for
wiring redemption proceeds. See "Investing in the Fund - Redemption of
Institutional Class Shares."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of the Fund are declared and paid
quarterly and automatically reinvested in additional Institutional Class
shares of the Fund at NAV. Shareholders may also elect to receive dividends
in cash. Any capital gains are distributed at least annually in the same
manner as dividends. See "Dividends" for additional information.
Q. WHAT ARE DERIVATIVES AND DOES THE FUND USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or
rate. Some of the permissible investments described in this Prospectus, such
as variable-rate instruments that have an interest rate that is reset
periodically based on an index, can be considered derivatives. Some
derivatives may be more sensitive than direct securities to changes in
interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms.
PROSPECTUS 2
<PAGE> 108
Q. WHAT STEPS DOES THE FUND TAKE TO CONTROL DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank, as investment adviser to the Fund, uses a variety of
internal risk management procedures to ensure that derivatives use is
consistent with the Fund's investment objective, does not expose the Fund
to undue risks and is closely monitored. These procedures include
providing periodic reports to the Board of Directors concerning the use of
derivatives. Derivatives use by the Fund also is subject to broadly
applicable investment policies. For example, the Fund may not invest more
than a specified percentage of its assets in "illiquid securities,"
including derivatives that do not have active secondary markets. Nor may
the Fund use certain derivatives without establishing adequate "cover" in
compliance with SEC rules limiting the use of leverage. For more
information on the Fund's investment activities, see "How the Fund Works"
and "Prospectus Appendix - Additional Investment Policies."
3 PROSPECTUS
<PAGE> 109
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
-----------
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................ None
Sales Charge Imposed on Reinvested Dividends................... None
Maximum Sales Charge Imposed on Redemptions.................... None
Exchange Fees.................................................. None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
-----------
<S> <C>
Management Fee................................................. 0.50 %
Shareholder Servicing Fee...................................... 0.25 %
Administrative Fee............................................. 0.03 %
Other Expenses (after waivers)1................................ 0.35 %
------
TOTAL FUND OPERATING EXPENSES
(after waivers)2........................................... 1.13 %
======
</TABLE>
- -------------------------------
<TABLE>
<C> <S>
1 Other Expenses (before waivers or reimbursements) would be
0.38%.
2 Total Fund Operating Expenses (before waivers or
reimbursements) would be 1.16%.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE OF EXPENSES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- -------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment in the
Fund's Institutional Class, assuming a 5%
annual return and redemption at the end of
each time period indicated:
Growth and Income Fund................. $ 12 $36 $62 $137
</TABLE>
PROSPECTUS 4
<PAGE> 110
EXPLANATION OF TABLES
The purpose of the foregoing tables is to help a shareholder understand the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The tables do not reflect any charges that may be imposed by Wells
Fargo Bank or another Institution directly on its customer accounts in
connection with an investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when a shareholder buys
or sells Fund shares. Institutional Class shares are sold with no shareholder
transaction charges imposed by the Fund. The Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for the Institutional Class shares of the Fund
are based on applicable contract amounts and derived from amounts incurred
during the most recent fiscal year, restated to include voluntary fee waivers
and expense reimbursements that are expected to continue to reduce expenses
during the current fiscal year. WELLS FARGO BANK AND STEPHENS WILL WAIVE OR
REIMBURSE ALL OR A PORTION OF THEIR RESPECTIVE FEES CHARGED TO, OR EXPENSES PAID
BY, THE FUND TO ENSURE THAT THE TOTAL FUND OPERATING EXPENSES DO NOT EXCEED, ON
AN ANNUAL BASIS, 1.13% OF THE GROWTH AND INCOME FUND'S AVERAGE DAILY NET ASSETS
THROUGH AUGUST 31, 1997. Any waivers or reimbursements would reduce the Fund's
total expenses. There can be no assurance that waivers or reimbursements will
continue after that time. For more complete descriptions of the various costs
and expenses you can expect to incur as an investor in the Fund, please see
"Management and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses associated
with a $1,000 investment over stated periods based on the expenses in the above
tables and an assumed annual rate of return of 5%. This rate of return should
not be considered an indication of actual or expected performance of the Fund
nor a representation of past or future expenses; actual expenses and returns may
be greater or lesser than those shown.
5 PROSPECTUS
<PAGE> 111
HOW THE FUND WORKS
INVESTMENT OBJECTIVE AND POLICIES
The GROWTH AND INCOME FUND seeks to earn current income and achieve long-term
capital appreciation by investing primarily in common stocks, and preferred
stocks and debt securities that are convertible into common stocks. There can be
no assurance that the Fund, which is a diversified portfolio, will achieve its
investment objective. Under normal market conditions, the Fund will invest at
least 65% of its total assets in common stocks and securities which are
convertible into common stocks and at least 65% of its total assets in
income-producing securities. Up to 10% of the Fund's assets may be invested in
securities of foreign issuers.
The Fund may invest in common stocks of issuers that, in the opinion of Wells
Fargo Bank, as the Fund's investment adviser, exhibit a strong earnings growth
trend and that are believed by Wells Fargo Bank to have above-average prospects
for future earnings growth. The Fund maintains a portfolio of common stocks
diversified among industries and companies. The Fund may invest in common stocks
of large companies (i.e., for the purposes of the Fund, those companies with
more than $750 million in capitalization) that Wells Fargo Bank believes offer
the potential for long-term earnings growth or above-average dividend yield.
Emphasis may be placed on common stocks that are trading at low
price-to-earnings ratios, either relative to the overall market or to the
security's historic price-to-earnings relationship, and on common stocks of
issuers that have historically paid above-average dividends. Some investments
also may be made in common stocks of medium- and smaller-size companies (i.e.,
for the purposes of the Fund, those companies with at least $250 million, but
less than $750 million in capitalization) which may have the potential to
generate high levels of future revenue and earnings growth and where the
investment opportunity may not be fully reflected in the price of the securities
but which may involve greater risks than investments in larger companies.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Convertible Securities. The Fund seeks to invest in convertible securities
that provide current income and are issued by companies with the characteristics
described above for the Fund and that have a strong earnings and credit record.
The Fund may purchase convertible securities which are fixed-income debt
securities or preferred stocks that may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the same
issuer. Convertible securities, while usually subordinate to similar
nonconvertible securities, are senior to common stocks in an issuer's capital
structure. Convertible securities offer flexibility by providing the investor
with a steady income stream (which generally yield a lower amount than similar
nonconvertible securities and a higher amount than common stocks yield) as well
as the
PROSPECTUS 6
<PAGE> 112
opportunity to take advantage of increases in the price of the issuer's common
stock through the conversion feature. Fluctuations in the convertible security's
price can reflect changes in the market value of the common stock or changes in
market interest rates. At most, 5% of the Fund's net assets will be invested, at
the time of purchase, in convertible securities that are not rated in the four
highest rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs"), such as Moody's or S&P, or unrated but
determined by the investment adviser to be of comparable quality.
Cash Management. The Fund may temporarily hold assets in cash or make
short-term investments to the extent appropriate to maintain adequate liquidity
for redemption requests or other cash management needs, or for temporary
defensive purposes. The short-term investments that the Fund may purchase for
liquidity purposes include U.S. Treasury bills, shares of other mutual funds
subject to the limitations of the Investment Company Act of 1940, as amended
(the "1940 Act"), and repurchase agreements (as described below).
A more complete description of the Fund's investments and investment
activities is contained in "Prospectus Appendix - Additional Investment
Policies" and in the SAI.
RISK FACTORS
The Fund intends to invest less than 50% of its assets in the securities of
medium- and smaller-size companies and the remainder in securities of
larger-size companies. The actual percentages may vary according to changes in
market conditions and the judgment of the investment adviser of how best to
achieve the Fund's investment objective. There may be some additional risk
associated with investments in smaller companies because securities of such
companies tend to trade less frequently and may be less liquid than securities
issued by larger companies. In addition, smaller companies, relative to larger
concerns, may depend on a small group of key managers or may have limited
product lines, financial resources or available markets. As a result, the price
of securities issued by small companies may be more volatile than the price of
securities issued by larger companies.
An investment in the Fund is not insured against loss of principal. When the
value of the securities that the Fund owns declines, so does the value of your
shares of the Fund. Therefore, you should be prepared to accept some risk with
the money you invest in the Fund. The portfolio equity securities of the Fund
are subject to equity-market risk. Equity-market risk is the risk that common
stock prices will fluctuate or decline over short or even extended periods. The
portfolio debt instruments of the Fund are subject to credit and interest-rate
risk. Credit risk is the risk that issuers of the debt instruments in which the
Fund invests may default on the payment of principal and/or interest.
Interest-rate risk is the risk that increases in market interest rates may
adversely affect the value of the debt instruments in which the Fund invests and
hence the value of an investment in the Fund. The Fund's investments in
smaller-size companies present
7 PROSPECTUS
<PAGE> 113
greater risks than investments in larger-size companies with more established
operating histories and financial capacity. As with all mutual funds, there can
be no assurance that the Fund, a diversified fund, will achieve its investment
objective.
PERFORMANCE
The performance of each class of shares of the Fund may be advertised from
time to time in terms of average annual total return, cumulative total return
and yield. These performance figures are based on historical results and are not
intended to indicate future performance.
Average annual total return of a class of shares is based on the overall
dollar or percentage change in value of a hypothetical investment in the class
and assumes that the investment is at NAV and all dividends and any capital gain
distributions attributable to the class also are reinvested at NAV in the class.
Cumulative total return is calculated similarly except that the return figure is
aggregated over the relevant period instead of annualized.
Yield refers to the income generated by an investment in a class of the Fund's
shares over a specified period (usually 30 days), expressed as an annual
percentage rate.
In addition to presenting a standardized total return, at times, the Fund also
may present nonstandardized performance figures, such as three-month total
returns and, for purposes of sales literature, yields and distribution rates.
Because of differences in the fees and/or expenses borne by shares of each class
of the Fund, the performance figures on a class of shares can be expected, at
any given time, to vary from the performance figures for other classes of the
Fund.
Additional performance information is contained in the SAI under "Performance
Calculations" and in the Annual Report, which are available upon request free of
charge by calling the Company at 1-800-222-8222 or by writing the Company at the
address shown on the front cover of the Prospectus.
THE FUND AND MANAGEMENT
The Fund is one fund of the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of the following funds: Aggressive Growth, Asset Allocation, California
Tax-Free Bond, California Tax-Free Income, California Tax-Free Money Market
Mutual, Corporate Stock, Diversified Income, Ginnie Mae, Growth and Income,
Money Market Mutual, National Tax-Free Money Market Mutual, Short-Intermediate
U.S. Government Income and U.S. Government Allocation Funds. Each of the
Company's funds, except the
PROSPECTUS 8
<PAGE> 114
California Tax-Free Income, Corporate Stock, Government Money Market Mutual,
Money Market Trust and Short-Intermediate U.S. Government Income Funds,
currently offer three classes of shares. The California Tax-Free Income and
Short-Intermediate U.S. Government Income Funds offer two classes of shares, and
the Corporate Stock Fund, Government Money Market Mutual Fund and the Money
Market Trust offer a single class of shares. The Fund is authorized to issue two
other classes of shares, subject to a front-end sales charge and subject to a
contingent-deferred sales charge, that are offered to retail investors. Each
class of shares represents an equal proportionate interest in the Fund with
other shares of the same class. Shareholders of each class bear their pro rata
portion of the Fund's operating expenses except for certain class-specific
expenses (e.g., any state securities registration fees, shareholder servicing
fees or distribution fees that may be paid under Rule 12b-1) that are allocated
to a particular class. For information on another fund or a class of shares,
please call Stagecoach Shareholder Services at 1-800-222-8222 or write the
Company at the address shown on the front cover of the Prospectus.
The Board of Directors of the Company supervises the Fund's activities and
monitors its contractual arrangements with various service-providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be requested for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing a fund's
investment objective or fundamental investment policies. All shares of the
Company have equal voting rights and will be voted in the aggregate, rather than
by series or class, unless otherwise required by law (such as when the voting
matter affects only one series or class). As a Fund shareholder, you receive one
vote for each share owned and fractional votes for fractional shares owned. See
"Management" in the SAI for more information on the Company's Directors and
Officers. A more detailed description of the voting rights and attributes of the
shares is contained under "Capital Stock" in the SAI.
Wells Fargo Bank is the Fund's investment adviser, transfer and dividend
disbursing agent, and custodian. In addition, Wells Fargo Bank serves as a
Shareholder Servicing Agent and a Selling Agent of the Fund. Wells Fargo Bank,
one of the largest banks in the United States, was founded in 1852 and is the
oldest bank in the western United States. As of April 1, 1996, Wells Fargo Bank
and its affiliates provided investment advisory services for over $56 billion of
assets of individuals, trusts, estates and institutions. Wells Fargo Bank also
serves as the investment adviser to the other separately managed funds (or the
master portfolio in which a fund may invest) of the Company and as investment
adviser or sub-adviser to other separately managed funds of five other
registered, open-end, management investment companies. Wells Fargo Bank, a
wholly owned subsidiary of Wells Fargo & Company, is located at 420 Montgomery
Street, San Francisco, California 94104.
9 PROSPECTUS
<PAGE> 115
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank, has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contract and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
PORTFOLIO MANAGERS
Brian K. Mulligan is primarily responsible, as co-manager, for the day-to-day
management of the portfolio of the Growth and Income Fund. Mr. Mulligan has been
co-manager since October 1, 1995. Mr. Mulligan is also co-manager of the Wells
Fargo Core Equities Group. He is a vice president and manager of the San
Francisco Investment Office, where he is primarily responsible for personal
accounts including individuals, charitable foundations and IRAs. He also covers,
from a research standpoint, the telecommunications and electric utility
industries. Mr. Mulligan has been with Wells Fargo Bank since its merger with
Crocker National Bank in 1986. Mr. Mulligan was graduated from Skidmore College
with a B.S. degree in business management. He is a chartered financial analyst
and serves as a member of the staff of graders. In addition, Mr. Mulligan is a
former member of the Board of Governors for the Los Angeles Society of Financial
Analysts and a present member of the San Francisco Security Analysts Society.
Mr. Robert Bissell is primarily responsible, as co-manager, for the day-to-day
management of the portfolio of the Growth and Income Fund. Mr. Bissell assumed
these responsibilities as of February 14, 1996. Except for a brief period
between October 1, 1995 and February 14, 1996, Mr. Bissell has been responsible
for the day-to-day management of the Growth and Income Fund since 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.
Stephens is the Fund's sponsor and administrator and distributes the Fund's
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been
PROSPECTUS 10
<PAGE> 116
providing securities and investment services for more than 60 years.
Additionally, they have been providing discretionary portfolio management
services since 1983. Stephens currently manages investment portfolios for
pension and profit sharing plans, individual investors, foundations, insurance
companies and university endowments.
INVESTING IN THE FUND
Fund Shares may be purchased on any day the Fund is open. The Fund is open for
business each day the New York Stock Exchange ("NYSE") is open for trading (a
"Business Day"). Currently, the NYSE is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day (each a "Holiday"). When any Holiday falls on a weekend, the
NYSE typically is closed on the weekday immediately before or after such
Holiday.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will transmit or cause to be transmitted promptly, without charge, a
paper copy of the electronic Prospectus.
SHARE VALUE
The value of a share of each class is its NAV. Wells Fargo Bank calculates the
NAV of each class of the Fund as of the close of regular trading on the NYSE
(referred to hereafter as "the close of the NYSE"), which is currently 1:00 p.m.
(Pacific time). The NAV per share for each class of shares is computed by
dividing the value of the Fund's assets allocable to a particular class, less
the liabilities charged to that class by the total number of the outstanding
shares of that class. All expenses, including fees paid to the investment
adviser and administrator, are accrued daily and taken into account for the
purpose of determining the NAV, which is expected to fluctuate daily.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the other assets of the Fund are valued at
current market prices or, if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors. Prices
used for such valuations may be obtained from independent pricing services.
PURCHASE OF INSTITUTIONAL CLASS SHARES
Institutional Class shares of the Fund are sold at NAV (without a sales load)
on a continuous basis primarily to certain customers ("Customers") of affiliate,
franchise or correspondent banks of Wells Fargo & Company and other selected
institutions (previously defined as Institutions). Customers may include
individuals, trusts, partnerships and corporations. Share purchases are effected
through a Customer's
11 PROSPECTUS
<PAGE> 117
account at an Institution under the terms of the Customer's account agreement
with the Institution, and confirmations of share purchases and redemptions are
sent by the Fund to the Institution involved. Institutions (or their nominees),
acting on behalf of their Customers, normally are the holders of record of
Institutional Class shares. Customers' beneficial ownership of Institutional
Class shares is reflected in the account statements provided by Institutions to
their Customers. The exercise of voting rights and the delivery to Customers of
shareholder communications from the Fund is governed by the Customers' account
agreements with an Institution. Investors wishing to purchase Institutional
Class shares of the Fund should contact their account representatives.
Institutional Class shares of the Fund are sold at the NAV per share next
determined after a purchase order has become effective. Purchase orders by an
Institution for Institutional Class shares in the Fund must be received by the
Company by 1:00 p.m. (Pacific time) on any Business Day. Payment for such shares
may be made by Institutions in federal funds or other funds immediately
available to the custodian no later than 1:00 p.m. (Pacific time) on the next
Business Day following the receipt of the purchase order.
It is the responsibility of Institutions to transmit orders for purchases by
their Customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the Institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with an
Institution. In addition, an Institution may receive fees from the Fund with
respect to the investments of its Customers as described under "The Fund and
Management" and "Management and Servicing Fees." Payment for Institutional Class
shares of the Fund may, in the discretion of the investment adviser, be made in
the form of securities that are permissible investments for the Fund. For
further information see "Additional Purchase and Redemption Information" in the
SAI.
The Company reserves the right to reject any purchase order or to suspend
sales at any time. Payment for orders that are not received will be returned
after prompt inquiry. The issuance of Institutional Class shares is recorded on
the Fund's books, and share certificates are not issued.
PROSPECTUS 12
<PAGE> 118
WIRE INSTRUCTIONS -- DIRECT PURCHASES BY INSTITUTIONS
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund and designate the Institutional
Class)
Account Name(s): name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be sent by telefacsimile, with the
original subsequently mailed, to the following address immediately after the
funds are wired and must be received and accepted by the Transfer Agent
before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
STATEMENTS AND REPORTS
Institutions (or their nominees) typically send shareholders a confirmation or
statement of the account after every transaction that affects the share balance
or the Fund account registration. A statement with tax information for the
previous year will be mailed by January 31 of each year and also will be filed
with the IRS. At least twice a year, shareholders will receive financial
statements.
REDEMPTION OF INSTITUTIONAL CLASS SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Institutional
Class shares held by an Institution on behalf of its Customers must be redeemed
in accordance with instructions and limitations pertaining to a Customer's
account at the Institution. It is the responsibility of an Institution to
transmit redemption requests to the Company and to credit its Customers'
accounts with the redemption proceeds on a timely basis. The redemption proceeds
for Institutional Class shares of the Fund normally are wired to the redeeming
Institution the following Business Day after receipt of the request by the
Company. The Company reserves the right to delay the wiring of redemption
proceeds
13 PROSPECTUS
<PAGE> 119
for up to seven days after it receives a redemption order if, in the judgment of
the investment adviser, an earlier payment could adversely affect the Fund or
unless the SEC permits a longer period under extraordinary circumstances. Such
extraordinary circumstances could include a period during which an emergency
exists as a result of which (a) disposal by the Fund of securities owned by it
is not reasonably practicable or (b) it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or a period during which
the SEC by order permits deferral of redemptions for the protection of security
holders of the Fund.
With respect to former shareholders of Westcore Trust or Pacifica Funds Trust
who do not have a relationship with an Institution, shares of the Fund may be
redeemed by writing or calling the Fund directly at the address and phone number
shown on the first page of the Prospectus. When Institutional Class shares are
redeemed directly from the Fund, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next Business Day
unless payment by wire is requested. The Fund may take up to seven days to make
payment, although this will not be the customary practice. Also, if the NYSE is
closed (or when trading is restricted) for any reason other than the customary
weekend or holiday closing or if an emergency condition as determined by the SEC
merits such action, the Fund may suspend redemptions or postpone payment dates.
To be accepted by the Fund, a letter requesting redemption must include: (i)
the Fund's name and account registration from which the Institutional Class
shares are being redeemed; (ii) the account number; (iii) the amount to be
redeemed; (iv) the signatures of all registered owners; and (v) a signature
guarantee by any eligible guarantor institution. An "eligible guarantor
institution" includes a commercial bank that is an FDIC member, a trust company,
a member firm of a domestic stock exchange, a savings association, or a credit
union that is authorized by its charter to provide a signature guarantee.
Signature guarantees by notaries public are not acceptable. Further
documentation may be requested from corporations, administrators, executors,
personal representatives, trustees or custodians.
All redemptions of Institutional Class shares of the Fund are made in cash,
except that the commitment to redeem Institutional Class shares in cash extends
only to redemption requests made by each shareholder of the Fund during any
90-day period of up to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of such period. This commitment is irrevocable without
the prior approval of the SEC. In the case of redemption requests by
shareholders in excess of such amounts, the Board of Directors reserves the
right to have the Fund make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair the
Fund's liquidity to the detriment of the existing shareholders. In this event,
the securities would be valued in the same manner as the securities of the Fund
are valued. If the recipient were to sell such securities, he or she would incur
brokerage charges.
PROSPECTUS 14
<PAGE> 120
A redemption may be a taxable transaction on which gain or loss may be
recognized.
REDEMPTIONS BY TELEPHONE
Telephone exchange or redemption privileges authorize the Transfer Agent to
act on telephone instructions from any person representing himself or herself to
be the shareholder of record and reasonably believed by the Transfer Agent to be
genuine. The Company requires the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Company
and the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Company nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
EXCHANGES
The Fund offers a convenient way to exchange Institutional Class shares in the
Fund for Institutional Class shares in another fund of the Company. Before
engaging in an exchange transaction, a shareholder should read carefully the
Prospectus describing the fund into which the exchange will occur, which is
available without charge and can be obtained by writing or by calling the
Company at the address and phone number listed on the first page of the
Prospectus. A shareholder may not exchange Institutional Class shares of one
fund for Institutional Class shares of another fund if Institutional Class
shares of both funds are not qualified for sale in the state of the
shareholder's residence. The Company may terminate or amend the terms of the
exchange privilege at any time.
Exchange transactions are effected through a Customer's account at an
Institution under the terms of the Customer's account agreement with the
Institution, and confirmations of share exchanges are sent by a Fund to the
Institution involved. Institutions (or their nominees), acting on behalf of
their Customers, normally are the holders of record of Institutional Class
shares. Institutions are responsible for transmitting orders for exchanges to
the Company on a timely basis. Customers' exchange transactions are generally
reflected in the account statements provided by Institutions to their Customers.
Investors wishing to exchange Institutional Class shares of a Fund for
Institutional Class shares of another fund should contact their account
representatives. Investors with questions may call the Company at
1-800-222-8222.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges are
made at the NAV of the respective funds next determined following receipt of the
request by the Company in good order.
15 PROSPECTUS
<PAGE> 121
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
To exchange Institutional Class shares, or if you have any questions, simply
call the Company at 1-800-222-8222. A shareholder of record should be prepared
to give the telephone representative the following information: (i) the account
number, social security number and account registration; (ii) the name of the
fund from and the fund into which the transfer is to occur; and (iii) the dollar
or share amount of the exchange. The conversation may be recorded to protect
shareholders and the Company. Telephone exchanges are available unless the
shareholder of record has declined the privilege on the Purchase Application.
In addition, Institutional Class shares of the Fund may be exchanged for the
Fund's Class A shares in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of Wells Fargo Bank or another bank, trust company or thrift
institution, or in other cases where Institutional Class shares are not held in
such qualified accounts. Similarly, Class A shares may be exchanged for the
Fund's Institutional Class shares if the shares are to be held in such a
qualified trust, agency or custodial account. These exchanges are made at the
NAV of the respective share classes next determined after the exchange request
is received by the Company.
DIVIDENDS
The Fund intends to declare daily substantially all of its net investment
income as a dividend payable to shareholders of record as of the close of
regular trading of the NYSE (currently 1:00 p.m., Pacific time). Shareholders
begin earning dividends on the Business Day following the date the purchase
order is effective and continue to earn dividends through the day such shares
are redeemed. Expenses, such as state securities registration fees and transfer
agency fees, that are attributable to a particular class may affect the relative
dividends and/or capital-gain distributions of a class of shares.
Dividends declared in a month generally are paid on the last Business Day of
each month. Dividends and any capital-gain distributions are automatically
invested in additional whole and fractional shares of the same class unless the
shareholder has elected to receive payment in cash.
Dividends and capital-gain distributions have the effect of reducing the NAV
per share by the amount distributed. Although such dividends and distributions
paid on newly issued shares shortly after a purchase would represent, in
substance, a return of capital, the dividend or distribution would be
attributable to net investment income or capital gain and, accordingly, would be
taxable to the shareholder.
PROSPECTUS 16
<PAGE> 122
Dividends for a Saturday, Sunday or Holiday are declared payable to
shareholders of record as of the preceding Business Day. If a shareholder
redeems shares before the dividend payment date, any dividends credited to the
shareholder are paid on the following dividend payment date unless the
shareholder has redeemed all of the shares in the account, in which case the
shareholder will receive accrued dividends together with redemption proceeds.
The Fund will distribute any capital gains at least annually.
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors, Wells
Fargo Bank, as the Fund's investment adviser, provides investment guidance and
policy direction in connection with the management of the Fund's assets. Wells
Fargo Bank also furnishes the Board of Directors with periodic reports on the
Fund's investment strategy and performance. For these services, Wells Fargo Bank
is entitled to a monthly investment advisory fee at the annual rate of 0.50% of
the first $250 million of the Fund's average daily net assets, 0.40% of the next
$250 million, and 0.30% of the Fund's average daily net assets in excess of $500
million. From time to time, Wells Fargo Bank may waive such fees in whole or in
part. Any such waiver will reduce expenses of the Fund, and, accordingly, have a
favorable impact on the Fund's yield and total return. From time to time, the
Fund, consistent with its investment objective, policies and restrictions, may
invest in securities of entities with which Wells Fargo Bank has a lending
relationship. For the year ended December 31, 1995, the Company paid monthly
fees at an annual rate of 0.50% of the Fund's average daily net assets to Wells
Fargo Bank as compensation for its services as investment adviser.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as the Fund's custodian and transfer and dividend
disbursing agent. Under its Custody Agreement with Wells Fargo Bank, the Fund
may, at times, borrow money from Wells Fargo Bank as needed to satisfy temporary
liquidity needs. Wells Fargo Bank charges interest on such overdrafts at a rate
determined pursuant to the Fund's Custody Agreement. Wells Fargo Bank performs
its custodial and transfer and dividend disbursing agency services at 525 Market
Street, San Francisco, California 94105.
17 PROSPECTUS
<PAGE> 123
INSTITUTIONS AND SHAREHOLDER SERVICING AGENTS
The Fund has entered into a Shareholder Servicing Agreement with Wells Fargo
Bank and may enter into similar agreements with other Institutions ("Shareholder
Servicing Agents"). Under such agreements, Shareholder Servicing Agents
(including Wells Fargo Bank), agree, as agents for their customers, to provide
shareholder administrative and liaison services with respect to Fund shares,
which include, without limitation, aggregating and transmitting shareholder
orders for purchases, exchanges and redemptions; maintaining shareholder
accounts and records; and providing such other related services as the Company
or a shareholder may reasonably request. For these services, a Shareholder
Servicing Agent is entitled to receive a fee at the annual rate of up to 0.25%
of the average daily net assets attributable to the Institutional Class shares
owned of record or beneficially by investors with whom the Shareholder Servicing
Agent maintains a servicing relationship. In no case shall payments exceed any
maximum amount that may be deemed applicable under applicable laws, regulations
or rules, including the Rules of Fair Practice of the NASD.
A Shareholder Servicing Agent also may impose certain conditions on its
customers, subject to the terms of this Prospectus, in addition to or different
from those imposed by the Fund, such as requiring a higher minimum initial
investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent has agreed to disclose any fees it may directly
charge its customers who are shareholders of the Fund and to notify them in
writing at least 30 days before it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the Company's Board of Directors,
Stephens provides the Fund with administrative services, including general
supervision of the Fund's operation, coordination of the other services provided
to the Fund, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports,
and general supervision of data compilation in connection with preparing
periodic reports to the Company's Directors and officers. Stephens also
furnishes office space and certain facilities to conduct the Fund's business,
and compensates the Company's Directors, officers and employees who are
affiliated with Stephens. For these services, Stephens is entitled to receive
from the Fund a monthly fee at the annual rate of 0.03% of the Fund's average
daily net assets. From time to time, Stephens may waive its fees from the Fund
in whole or in part. Any such waiver will reduce the Fund's expenses and,
accordingly, have a favorable impact on the Fund's performance.
Stephens, as the principal underwriter of the Fund within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company under which
Stephens acts as agent for the Fund for the sale of its shares and may enter
into Selling Agreements with Selling Agents that wish to make available shares
of the Fund to their respective customers.
PROSPECTUS 18
<PAGE> 124
Stephens has established a non-cash compensation program, pursuant to which
broker/dealers or financial institutions that sell shares of the Company's funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise.
Financial institutions acting as Selling Agents, Shareholder Servicing Agents
or in certain other capacities may be required to register as dealers pursuant
to applicable state securities laws which may differ from federal law and any
interpretations expressed herein.
FUND EXPENSES
Except for the expenses borne by Wells Fargo Bank and Stephens, the Fund bears
all costs of its operations, including advisory, transfer agency, custody and
administration fees, fees and expenses of its independent auditors and legal
counsel, and any extraordinary expenses. Expenses attributable to a class (e.g.,
any shareholder servicing or distribution fees or other class-specific expenses)
are charged against the assets of the class. General expenses of the Company are
allocated among all of the funds of the Company, including the Fund, in a manner
proportionate to the net assets of each fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.
TAXES
The Company intends to qualify the Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code") as long as such qualification is in the best interest of the Fund's
shareholders. In addition, net capital gains, net investment income, and
operating expenses will be determined separately for the Fund from the Company's
other funds. By complying with the applicable provisions of the Code, the Fund
will not be subject to federal income tax with respect to net investment income
and any net realized capital gains distributed to its shareholders. The Fund
intends to pay out substantially all of its net investment income and any net
realized capital gains for each year. Dividends from investment income
(including any net realized short-term capital gains) declared and paid by the
Fund will be taxable as ordinary income to Fund shareholders. Such dividends and
capital-gain distributions, which are taxable to shareholders as capital gain,
will generally be taxable to recipient shareholders, regardless of whether you
take such payments in cash or have them automatically reinvested in Fund shares.
You may be eligible to defer the taxation of dividends and capital-gain
distributions on Fund shares that are
19 PROSPECTUS
<PAGE> 125
held under a qualified tax-deferred retirement plan. Corporate shareholders may
be eligible for the dividends-received deduction on the dividends paid by the
Fund to the extent the Fund's income is derived from certain dividends received
from domestic corporations, as long as the corporate shareholder holds the Fund
share on which the eligible dividend was paid for at least 46 days.
Your Institution, or your Shareholder Servicing Agent on its behalf, will
inform you of the amount and nature of the Fund's dividends and any capital-gain
distributions. You should keep all statements you receive to assist in your
personal record keeping. The Company may be required to withhold, subject to
certain exemptions, at a rate of 31% on dividends, capital-gain distributions,
and redemption proceeds (including proceeds from exchanges) paid or credited to
Fund shareholders, unless a shareholder provides a correct tax identification
number (generally, the shareholder's social security or employer identification
number) and, upon establishing an account with the Company, certifies on the
Account Application that the shareholder is not subject to back-up withholding,
or the IRS notifies the Company that the shareholder is subject to back-up
withholding.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAI.
The foregoing discussion is based on tax laws and federal regulations that
were in effect as of the date of this Prospectus and summarizes only some of the
important federal income tax considerations generally affecting the Fund and its
shareholders. It is not intended as a substitute for careful tax planning; all
shareholders should consult their tax advisors with respect to their specific
tax situations as well as with respect to state and local taxes.
Further federal tax considerations are discussed in the SAI.
PROSPECTUS 20
<PAGE> 126
PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
Temporary Investments
From time to time, for temporary defensive purposes, the Fund may hold assets
in cash or make short-term investments, to the extent appropriate, to maintain
adequate liquidity for redemption requests or other cash management needs or for
temporary defensive purposes. The short-term investments that the Fund may
purchase for liquidity purposes include: U.S. Treasury bills, shares of other
mutual funds and repurchase agreements (as discussed below). Other permissible
investments include: (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including government-sponsored
enterprises) ("U.S. Government obligations"); (ii) negotiable certificates of
deposit, bankers' acceptances and fixed time deposits and other obligations of
domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC; (iii) commercial paper rated at the date of purchase "P-1"
by Moody's or "A-1+" or "A-1" by S&P, or, if unrated, of comparable quality as
determined by Wells Fargo Bank, as investment adviser; and (iv) short-term, U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) that,
at the time of investment: (a) have more than $10 billion, or the equivalent in
other currencies, in total assets; (b) are among the 75 largest foreign banks in
the world as determined on the basis of assets; (c) have branches or agencies in
the United States; and (d) in the opinion of Wells Fargo Bank, as investment
adviser, are of comparable quality to obligations of U.S. banks which may be
purchased by the Fund.
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their maturities. Treasury bills, the most frequently issued
marketable government securities, have a maturity of up to one year and are
issued on a discount basis. U.S. Government obligations also include securities
issued or guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some obligations of agencies or
instrumentalities of the U.S. Government are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, by the right of
the issuer or guarantor to borrow from the U.S. Treasury; still others, by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality;
A-1 PROSPECTUS
<PAGE> 127
and others, only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
which agency or instrumentality may be privately owned. There can be no
assurance that the U.S. Government will provide financial support to its
agencies or instrumentalities where it is not obligated to do so. In addition,
U.S. Government obligations are subject to fluctuations in market value due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market rates
increase and rises when market interest rates decrease. Certain types of U.S.
Government obligations are subject to fluctuations in yield or value due to
their structure or contract terms.
Foreign Securities
The Fund may invest a portion of its assets (generally no more than 10%, but
in no event more than 25%) in securities of foreign governmental and private
issuers that are denominated in and pay interest in U.S. dollars. Investments in
foreign securities involve certain considerations that are not typically
associated with investing in domestic securities. There may be less publicly
available information about a foreign issuer than about a domestic issuer.
Foreign issuers also are not generally subject to the same accounting, auditing
and financial reporting standards or governmental supervision as domestic
issuers. In addition, with respect to certain foreign countries, taxes may be
withheld at the source under foreign income tax laws, and there is a possibility
of expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Fund may purchase bear interest at
rates that are not fixed, but vary, for example with, changes in specified
market rates or indices or specified intervals. Certain of these instruments may
carry a demand feature that would permit the holder to tender them back to the
issuer at par value prior to maturity. Wells Fargo Bank, as investment adviser,
will monitor on an ongoing basis the ability of an issuer of a demand instrument
to pay principal and interest on demand. Events affecting the ability of the
issuer of a demand instrument to make payment when due may occur between the
date the Fund elects to demand payment and the date payment is due, thereby
affecting the Fund's ability to obtain payment at par, except when such demand
instruments permit same-day settlement. Demand instruments whose demand feature
is not exercisable within seven days may be treated as liquid, provided that an
active secondary market exists.
PROSPECTUS A-2
<PAGE> 128
Repurchase Agreements
The Fund may enter into repurchase agreements wherein the seller of a security
to the Fund agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The period of maturity is usually quite short, often
overnight or a few days, although it may extend over a number of months. The
Fund may enter into repurchase agreements only with respect to U.S. Government
obligations and other obligations that could otherwise be purchased by the Fund.
All repurchase agreements will be fully collateralized based on values that are
marked-to-market daily. While the maturities of the underlying securities in a
repurchase agreement transaction entered into by the Fund may be greater than
twelve months, the term of any repurchase agreement will always be twelve months
or less. If the seller defaults and the value of the underlying securities has
declined, the Fund may incur a loss. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, the Fund's disposition of
the security may be delayed or limited. The Fund enters into repurchase
agreements only with registered broker/dealers, commercial banks and other
financial institutions that meet guidelines established by the Company's Board
of Directors and that are not affiliated with the Fund's investment adviser.
Subject to exemptive relief granted by the SEC, the Fund may participate in
pooled repurchase agreement transactions with other funds advised by Wells Fargo
Bank.
Loans of Portfolio Securities
The Fund may lend securities from its portfolios to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government
obligations or other high-quality debt instruments equal to at least 100% of the
current market value of the securities loan (including accrued interest thereon)
plus the interest payable to the Fund with respect to the loan is maintained
with the Fund. In determining whether to lend a security to a particular broker,
dealer or financial institution, the Fund's investment adviser will consider all
relevant facts and circumstances, including the creditworthiness of the broker,
dealer or financial institution. Any loans of portfolio securities will be fully
collateralized based on values that are marked-to-market daily. The Fund will
not enter into any portfolio security lending arrangement having a duration of
longer than one year. Any securities that the Fund may receive as collateral
will not become part of the Fund's portfolio at the time of the loan and, in the
event of a default by the borrower, the Fund, if permitted by law, will dispose
of such collateral except for such part thereof that is a security in which the
Fund is permitted to invest. During the time securities are on loan, the
borrower will pay the Fund any accrued income on those securities, and the Fund
may invest the cash collateral and earn additional income or receive an
agreed-upon fee from a borrower that has delivered cash-equivalent collateral.
The Fund may not lend securities having a value that exceeds one-third of the
current value of its total assets. Loans of securities by the Fund will be
subject to termination at the Fund's or the borrower's option. The Fund may pay
reasonable administrative and custodial fees in connection with a securities
loan and may
A-3 PROSPECTUS
<PAGE> 129
pay a negotiated portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker. Borrowers and placing brokers
may not be affiliated, directly or indirectly, with the Company, the investment
adviser, or the Distributor.
Other Investment Companies
The Fund may invest in shares of other unaffiliated, open-end, management
investment companies, subject to the limitations of the 1940 Act, provided that
any such purchases will be limited to temporary investments in shares of
unaffiliated investment companies and the investment adviser has agreed to waive
its advisory fees for that portion of the Fund's assets so invested, except when
such purchase is part of a plan of merger, consolidation, reorganization or
acquisition. Subject to the limitations of the 1940 Act, the Fund may purchase
shares of exchange-listed, closed-end funds consistent with pursuing its
investment objectives. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the expenses
of such other investment company, including advisory fees. These expenses would
be in addition to the other expenses that the Fund bears directly in connection
with its own operations, and may represent a duplication of fees to shareholders
of the Fund.
INVESTMENT POLICY
The Fund's investment objective, as set forth in "How the Fund
Works - Investment Objective and Policies," is fundamental; that is, it may not
be changed without approval by the vote of the holders of a majority of the
Fund's outstanding voting securities, as described under "Capital Stock" in the
SAI. If the Board of Directors determines, however, that the Fund's investment
objective can best be achieved by a substantive change in a nonfundamental
investment policy or strategy, the Company may make such change without
shareholder approval and will disclose any such material changes in the
then-current Prospectus.
As matters of fundamental policy: (i) the Fund may not purchase securities of
any issuer (except U.S. Government obligations) if as a result, more than 5% of
the value of a Fund's total assets would be invested in the securities of such
issuer or the Fund would own more than 10% of the outstanding voting securities
of such issuer; (ii) the Fund may borrow from banks up to 10% of the current
value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 10% of
the current value of its net assets (but investments may not be purchased by the
Fund while any such outstanding borrowings exceed 5% of the Fund's net assets);
(iii) the Fund may make loans of portfolio securities in accordance with its
investment policies; and (iv) the Fund may not invest 25% or more of its assets
(i.e., concentrate) in any particular industry, except that the Fund may invest
25% or more of its assets in U.S. Government obligations. With respect to
fundamental investment policy (i) above, it may be possible that the Company
would own more than 10% of the outstanding voting securities of the issuer.
PROSPECTUS A-4
<PAGE> 130
As a matter of nonfundamental policy, the Fund may not invest more than 10% of
the current value of its net assets in securities that are illiquid by virtue of
the absence of a readily available market or because of legal or contractual
restrictions on resale or maturities of more than seven days, unless the Board
or investment adviser, pursuant to guidelines adopted by the Board, determines
that a liquid trading market exists. The following securities are excluded from
the 15% limitation: (a) securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 (the "1933 Act") that have been determined to
be liquid by the Fund's Board of Directors, and (b) commercial paper that is
sold under Section 4(2) of the 1933 Act that (i) is not traded flat or in
default as to interest or principal and (ii) is rated in one of the two highest
categories by at least two NRSROs and the Fund's Board of Directors has
determined the commercial paper to be liquid; or (iii) is rated in one of the
two highest categories by one NRSRO and the Fund's Board of Directors has
determined that the commercial paper is of equivalent quality and is liquid.
A-5 PROSPECTUS
<PAGE> 131
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<PAGE> 132
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND
DIVIDEND DISBURSING AGENT AND
CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUND, SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank nor
guaranteed by the Bank LOGO
- involve investment risk, including possible loss
of principal
</TABLE>
LOGO SC0209 (6/96)
Printed on Recycled Paper
<PAGE> 133
STAGECOACH FUNDS (R)
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank nor
guaranteed by the Bank [NO FDIC LOGO]
- involve investment risk, including possible loss
of principal
[RECYCLED PAPER LOGO] SC0209 (6/96)
Printed on Recycled Paper
