<PAGE> 1
As filed with the Securities and Exchange Commission
on April 4, 1996
Registration No. 33-42927; 811-6419
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
[X]
Post-Effective Amendment No. 23
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 24 [X]
(Check appropriate box or boxes)
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STAGECOACH FUNDS, INC.
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
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Registrant's Telephone Number, including Area Code: (800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant [ ] on _________ pursuant
to Rule 485(b), or to Rule 485(b)
[X] 60 Days after filing pursuant [ ] on ___________pursuant
to Rule 485(a)(1), or to Rule 485(a)(1)
[ ] 75 days after filing pursuant [ ] on ___________pursuant to
to paragraph (a)(2), or paragraph (a)(2) of Rule 485
<PAGE> 2
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of shares of its Common
Stock, $.001 par value, under the Securities Act of 1933, pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended. The Rule 24f-2
Notice for the fiscal year ending December 31, 1995, was filed with the
Securities and Exchange Commission on February 29, 1996.
<PAGE> 3
EXPLANATORY NOTE
This Post-Effective Amendment No. 23 to the Registration
Statement (the "Amendment") of Stagecoach Funds, Inc. (the "Company") is being
filed to register a new class of shares - the Institutional Class - to the
Company's California Tax-Free Bond Fund, California Tax-Free Income Fund,
Ginnie Mae Fund, Growth and Income Fund, Money Market Mutual Fund and
Short-Intermediate U.S. Government Income Fund. This Amendment does not affect
the Registration Statement for the Company's Aggressive Growth, Asset
Allocation, California Tax-Free Money Market Mutual, Corporate Stock,
Diversified Income, Growth and Income, National Tax-Free Money Market Mutual,
and U.S. Government Allocation Funds.
<PAGE> 4
Cross Reference Sheet
---------------------
INSTITUTIONAL CLASS
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Form N-1A Item Number
<TABLE>
<CAPTION>
Part A Prospectus Captions
- ------ -------------------
<S> <C>
1 Cover Page
2 Prospectus Summary; Summary of Fund Expenses
3 Not Applicable
4 The Funds and Management; Prospectus Appendix - Additional
Investment Policies
5 How the Funds Work; The Funds and Management; Management
and Servicing Fees
6 The Funds and Management; Investing in the Funds
7 Investing in the Funds; Dividends; Taxes
8 Exchanges
9 Not Applicable
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page
11 Table of Contents
12 Introduction
13 Investment Restrictions; Portfolio Transactions; Additional
Permitted Investment Activities; SAI Appendix
14 Management
15 Management
16 Management; Distribution Plan; Custodian and Transfer
and Dividend Disbursing Agent; Independent Auditors
17 Portfolio Transactions
18 Capital Stock; Other
19 Determination of Net Asset Value; Fund Expenses
20 Federal Income Taxes
21 Distribution Plan
22 Calculation of Yield and Total Return
23 Financial Information
Part C Other Information
- ------ -----------------
24-32 Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Document.
</TABLE>
<PAGE> 5
[LOGO]
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PROSPECTUS
------------------------------
CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE INCOME FUND
INSTITUTIONAL CLASS
June 3, 1996
<PAGE> 6
STAGECOACH FUNDS(R)
CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE INCOME FUND
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> 7
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.
The Funds are 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 the 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 AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 8
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 16
MANAGEMENT AND SERVICING FEES 17
TAXES 19
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 9
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 located in California. 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 mutual funds, there can be no assurance
that the Funds will achieve their investment objectives.
1 PROSPECTUS
<PAGE> 10
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, exchanges and redemptions are effected through
the customer's account with the Institution under the terms of the
customer's account agreement with the Institution. The Company reserves the
right to impose charges for wiring redemption proceeds. See "Investing in
the Funds" and "Exchanges" for additional information. 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. See "Investing in the Funds." Investors wishing to
purchase a Fund's Institutional Class shares should contact their account
representatives.
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 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
PROSPECTUS 2
<PAGE> 11
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> 12
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
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<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>
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<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
0.14% and 0.29%, respectively.
(4) Total Fund Operating Expenses (before waivers or
reimbursements) would be 0.92% and 1.07%, respectively.
</TABLE>
PROSPECTUS 4
<PAGE> 13
<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, at their sole
discretion, may waive or reimburse all or a portion of the respective fees
charged to, or expenses paid by, a Fund. Any waivers or reimbursements would
reduce a Fund's total expenses. There can be no assurance that waivers or
reimbursements will continue. 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 example which illustrates 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> 14
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> 15
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 located in California. 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> 16
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, 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> 17
The yield of a class of shares is calculated by dividing the net investment
income per share earned during a specified period (usually 30 days) for the
class by its NAV per share on the last day of such period and annualizing the
result. 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 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.
In addition to presenting these standardized yields, at times, the Funds also
may present nonstandardized total returns, yields, and distribution rates for
purposes of sales literature.
Because of 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 and the Annual
Report, which is available upon request without charge by calling the Company at
1-800-222-8222.
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.
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.
Please contact Stagecoach Shareholder Services at
9 PROSPECTUS
<PAGE> 18
1-800-222-8222 if you would like additional information about the Funds' other
classes of shares.
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 shareholder of a Fund, you are
entitled to one vote for each share you own and fractional votes for fractional
shares owned. A more detailed description of the voting rights and attributes of
the shares is contained under "Capital Stock" in the SAI.
Wells Fargo Bank is the Funds' investment adviser, transfer and dividend
disbursing agent and custodian. In addition, Wells Fargo Bank is a Shareholder
Servicing Agent of the Funds, 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 January 1, 1996, Wells Fargo
Bank provided investment advisory services for over $33 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
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
PROSPECTUS 10
<PAGE> 19
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 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
11 PROSPECTUS
<PAGE> 20
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.
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
PROSPECTUS 12
<PAGE> 21
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.
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.
13 PROSPECTUS
<PAGE> 22
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 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
PROSPECTUS 14
<PAGE> 23
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 investor and reasonably believed by the Transfer Agent to be genuine. The
Company requires the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Company nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
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 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.
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.
15 PROSPECTUS
<PAGE> 24
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 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 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.
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 distributions paid on newly
issued shares shortly after a purchase would represent, in substance, a return
of capital, the
PROSPECTUS 16
<PAGE> 25
distribution would consist of net investment income 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, 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.
17 PROSPECTUS
<PAGE> 26
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
various administrative services with respect to Fund shares, such as maintaining
shareholder accounts and records; assisting shareholders with purchases,
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 during the period for which payment is being made by
investors with whom the Shareholder Servicing Agent maintains a servicing
relationship.
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, 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
PROSPECTUS 18
<PAGE> 27
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.
TAXES
The Company intends to qualify each Fund each year as a regulated investment
Company under Subchapter M of 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. 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 gains 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
dividend and capital-gain distributions on Fund shares that are held under a
qualified tax-deferred retirement plan. The Funds do not expect their dividends
to qualify for the dividends-received deduction allowed to corporate
shareholders.
19 PROSPECTUS
<PAGE> 28
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 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
the Funds 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 corporate and high-income noncorporate taxpayers who obtain
significant benefit from certain tax deductions and exemptions. Some of these
deductions and exemptions have been designated "tax preference items" which must
be added back to taxable income for purposes of calculating AMT. Among the "tax
preference items" is tax-exempt interest from "private activity bonds" issued
after August 7, 1986. To the extent that a Fund invests in private activity
bonds, shareholders who pay AMT will be required to report that portion of Fund
dividends attributable to income from the bonds as a tax preference item in
determining their AMT. Shareholders will be notified of the tax status of
distributions made by the Funds. Persons who may be "substantial users" (or
"related persons" of substantial users) of facilities financed by private
activity bonds should consult their tax advisors before purchasing shares in the
Funds. With respect to corporate shareholders of the Funds, exempt-interest
dividends paid by a Fund are included in the corporate shareholder's "adjusted
current earnings" as part of its AMT calculation, and may also affect its
federal "environmental tax" liability. As of the printing of this Prospectus,
individuals are subject to an AMT at a maximum rate of 28% and corporations at a
maximum rate of 20%. Shareholders with questions or concerns about AMT should
also consult their tax advisors.
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
gains. You should keep all statements you receive to assist in your personal
record keeping. The Company is required to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid or credited to individual
shareholders of the Funds, if a shareholder has not complied with IRS
regulations or a correct Taxpayer Identification Number, certified when
required, is not on file with the Company or the Transfer Agent. In connection
with this withholding requirement, investors are asked to certify on the Account
Application that the social security or taxpayer identification number provided
is correct and that you are not subject to 31% backup withholding for previous
underreporting to the IRS.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAI.
PROSPECTUS 20
<PAGE> 29
The foregoing discussion is based on tax laws and 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
<PAGE> 30
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> 31
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
<PAGE> 32
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 Tax-Exempt Mutual Funds
Subject to the limitations of the 1940 Act, the Funds may invest in shares of
other unaffiliated, open-end investment companies that have a fundamental policy
of investing, 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. Each Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by the
Fund and other investment companies advised by the investment adviser or its
affiliates. As a shareholder of another investment company, each Fund would
bear, along with other shareholders,
A-3 PROSPECTUS
<PAGE> 33
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.
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
PROSPECTUS A-4
<PAGE> 34
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 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.
A-5 PROSPECTUS
<PAGE> 35
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
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, the California Tax-Free Bond Fund may
invest up to 10%, and the California Tax-Free Income Fund may invest up to 15%,
of the current value of each Fund's net assets in repurchase agreements having
maturities of more than seven days, illiquid securities and fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days. 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> 36
- --------------------------------------------------------------------------------
Advised by WELLS FARGO BANK, N.A. - Sponsored/Distributed by
Stephens Inc., Member NYSE/SIPC
NOT FDIC INSURED
- --------------------------------------------------------------------------------
<PAGE> 37
THIS PAGE INTENTIONALLY LEFT BLANK
<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 SC-06-96-007 I
Printed on Recycled Paper
<PAGE> 39
[LOGO]
------------------------------
PROSPECTUS
------------------------------
GINNIE MAE FUND
SHORT-INTERMEDIATE
U.S. GOVERNMENT
INCOME FUND
INSTITUTIONAL CLASS
June 3, 1996
<PAGE> 40
STAGECOACH FUNDS(R)
GINNIE MAE FUND
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
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. If you hold shares in an IRA, please call 1-800-BEST-IRA
(1-800-237-8472) for information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") 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> 41
The Funds are 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 the 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 AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 42
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 4
HOW THE FUNDS WORK 6
THE FUNDS AND MANAGEMENT 10
INVESTING IN THE FUNDS 13
EXCHANGES 17
DIVIDENDS 18
MANAGEMENT AND SERVICING FEES 18
TAXES 21
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 43
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
1 PROSPECTUS
<PAGE> 44
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, exchanges and redemptions are effected through
the customer's account with the Institution under the terms of the
customer's account agreement with the Institution. The Company reserves the
right to impose charges for wiring redemption proceeds. See "Investing in
the Funds" and "Exchanges" for additional information. Investors wishing to
purchase a Fund's Institutional Class shares should contact their account
representatives.
PROSPECTUS 2
<PAGE> 45
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 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."
3 PROSPECTUS
<PAGE> 46
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE
GINNIE MAE U.S. GOVERNMENT
FUND INCOME 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>
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% 0.36%
----- -----
TOTAL FUND OPERATING EXPENSES (after waivers or
reimbursements)(4) ........................... 0.77% 0.66%
===== =====
</TABLE>
- -------------------------------
(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 0.27% and 0.79%,
respectively.
(4) Total Fund Operating Expenses (before waivers or reimbursements) would be
1.05% and 1.57%, respectively.
<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:
Ginnie Mae Fund........................ $8 $25 $43 $ 95
Short-Intermediate U.S. Government
Income Fund............................ $7 $21 $37 $ 82
</TABLE>
PROSPECTUS 4
<PAGE> 47
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, at their sole
discretion, may waive or reimburse all or a portion of their respective fees
charged to, or expenses paid by, the Funds. Any waivers or reimbursements would
reduce a Fund's total expenses. There can be no assurances that waivers or
reimbursements will continue. 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 example that illustrates 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> 48
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.
PROSPECTUS 6
<PAGE> 49
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.
7 PROSPECTUS
<PAGE> 50
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,
PROSPECTUS 8
<PAGE> 51
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 adjustabl-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, average annual total return and cumulative total
return. Performance
9 PROSPECTUS
<PAGE> 52
figures are based on historical results and are not intended to indicate future
performance.
The yield of a class of shares is calculated by dividing the net investment
income per share earned during a specified period (usually 30 days) for the
class by its NAV per share on the last day of such period and annualizing the
result.
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.
In addition to presenting a standardized yield, at times, a Fund also may
present nonstandardized yields, total returns and distribution rates for
purposes of sales literature.
Because of 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 and the Annual
Report, which is available upon request free of charge by calling the Company at
1-800-222-8222.
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. 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. Please contact
Stagecoach Shareholder Services at
PROSPECTUS 10
<PAGE> 53
1-800-222-8222 if you would like additional information about the Funds' other
classes of shares.
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 shareholder of a Fund, you
receive one vote for each share you own and fractional votes for fractional
shares owned. A more detailed description of the voting rights and attributes of
the shares is contained under "Capital Stock" in the SAI.
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 is a Shareholder Servicing Agent of the Funds 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 January 1, 1996, Wells Fargo Bank provided investment advisory
services for over $33 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 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. Mark Kraschel has co-managed the Income Fund since October 1993. He has
also co-managed 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
11 PROSPECTUS
<PAGE> 54
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 co-managed the Income Fund since 1993 and has
co-managed 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.
PROSPECTUS 12
<PAGE> 55
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
13 PROSPECTUS
<PAGE> 56
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)
PROSPECTUS 14
<PAGE> 57
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
15 PROSPECTUS
<PAGE> 58
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 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.
PROSPECTUS 16
<PAGE> 59
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 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.
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 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 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.
17 PROSPECTUS
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DIVIDENDS
The Funds intend to declare a daily dividend of substantially all of their 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 distributions paid on newly
issued shares shortly after a purchase would represent, in substance, a return
of capital, the distribution would consist of net investment income 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.
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
PROSPECTUS 18
<PAGE> 61
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 Fargo Bank) agree, as agents for their customers, to provide
various administrative services with respect to Fund shares, such as maintaining
shareholder accounts and records; assisting shareholders with purchases,
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 during the period for which payment is being made by
investors with whom the Shareholder Servicing Agent maintains a servicing
relationship.
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
19 PROSPECTUS
<PAGE> 62
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, 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,
PROSPECTUS 20
<PAGE> 63
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 pays out all its net investment income and any net
realized capital gains for each year. Dividends from the investment income
(including any net short-term capital gains) declared and paid by the Fund will
be taxable as ordinary income to Fund shareholders regardless of whether you
take such dividend payments in cash or have them automatically reinvested in
additional 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.
Portions of the investment income of each Fund may be subject to foreign taxes
withheld at the source; however, the Fund will be able to pass through any
portion of the foreign taxes to its shareholders.
Your Institution or your Shareholder Servicing Agent on its behalf, will
inform you of the amount and nature of Fund dividends and capital gains. You
should keep all statements you receive to assist in your personal recordkeeping.
The Company is required by federal law to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid and redemption proceeds
(including proceeds from exchanges) paid or credited to individual Fund
shareholders, if a shareholder has not complied with IRS regulations or if a
correct Taxpayer Identification Number, certified when required, is not on file
with the Company or the Transfer Agent. In connection with this withholding
requirement, you will be asked to certify on your Account Application that the
social security or taxpayer identification number you provide is correct and
that you are not subject to 31% backup withholding for previous underreporting
to the IRS.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAI.
21 PROSPECTUS
<PAGE> 64
The foregoing discussion is based on tax laws and 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.
PROSPECTUS 22
<PAGE> 65
PROSPECTUS APPENDIX -
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
GINNIE MAE FUND
FHLMC issues two types of mortgage pass-through securities: mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA certificates in that each PC represents a pro rata
share of all interest and principal payments made and owed on the underlying
pool of mortgages. GMCs also represent a pro rata interest in a pool of
mortgages. These instruments, however, pay interest semiannually and return
principal once a year in guaranteed minimum payments.
These mortgage-backed securities differ from bonds in that principal is paid
back by the borrower over the length of the loan rather than returned in a lump
sum at maturity. They are called "pass-through" securities because both interest
and principal payments, including prepayments, are passed through to the holder
of the security. The GNMA securities in which the Ginnie Mae Fund 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 Ginnie Mae Fund, when such prepayments are passed
through to it, may be able to reinvest them only at a lower rate of interest. As
a result, if the Fund purchases such securities at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if the Fund purchased such securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. Accelerated prepayments on
securities purchased by the Fund at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time the
principal is repaid in full. In choosing specific issues, Wells Fargo Bank, as
investment adviser, will have made assumptions about the likely speed of
prepayment. Actual experience may vary from this assumption resulting in a
higher or lower investment return than anticipated.
A-1 PROSPECTUS
<PAGE> 66
INCOME FUND
The mortgages underlying ARMS guaranteed by GNMA are fully insured or
guaranteed by the Federal Housing Administration, the Veterans Administration or
the Farmers Home Administration, while those underlying ARMS issued by FNMA or
FHLMC are typically conventional residential mortgages which are not so insured
or guaranteed, but which conform to specific underwriting, size and maturity
standards.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specified
coupon rate and has a stated maturity or final distribution date. The principal
and interest payment on the 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
the Income Fund may invest generally are readjusted at intervals of one year or
less in response to changes in a predetermined interest rate index. There are
two main categories of indices: those based on U.S. Treasury securities and
those derived from a calculated measure, such as cost-of-funds index or a moving
average of mortgage rates. Commonly utilized indices include the one-year and
five-year constant maturity U.S. Treasury note rates, the three-month U.S.
Treasury bill rate, the 180-day U.S. Treasury bill rate, rates on longer-term
U.S. Treasury securities, the National Median Cost of Funds, the one-month,
three-month, six-month or one-year LIBOR, a published prime rate, or commercial
paper rates. Certain of these indices follow overall market interest rates more
closely than others.
Adjustable-rate mortgages, an increasingly common form of residential
financing, generally are originated by banks and thrift institutions and have a
specified maturity date. Most provide for amortization of principal in a manner
similar to fixed-rate mortgages but have interest payment amounts that change in
response to changes in a specified interest-rate index. The rate of interest due
on such a mortgage is calculated by adding an agreed-upon "margin" to the
specified index, although there generally are limitations or "caps" on
interest-rate movements in any given period or over the life of the mortgage. To
the extent that the interest rates on adjustable-rate mortgages underlying the
ARMS or the CMOs in which the Income Fund may invest cannot be adjusted in
response to interest-rate changes because of such caps, the ARMS or CMOs are
likely to respond to changes in market rates more like fixed-rate securities. In
other words, interest-rate increases in excess of such caps can be expected to
cause the ARMS or CMOs backed by mortgages that have such caps to decline in
value to a greater extent than would be the case in the absence of such caps.
Conversely, interest-rate decreases
PROSPECTUS A-2
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below such floors can be expected to cause the ARMS or CMOs backed by mortgages
that have such floors to increase in value to a greater extent than would be the
case in the absence of such floors.
Since the interest rates on many mortgages underlying ARMS and CMOs are reset
on an annual basis and generally are subject to caps, it can be expected that
the prices of such ARMS and CMOs will fluctuate to the extent prevailing market
interest rates are not reflected in the interest rates payable on the underlying
adjustable rate mortgages or the CMO. In this regard, the NAV of the Income
Fund's shares could fluctuate to the extent interest rates on underlying
mortgages differ from prevailing market interest rates during interim periods
between interest rate reset dates. Accordingly, investors could experience some
principal loss or less gain than might otherwise be achieved if they redeem
their Fund shares before the interest rates on the mortgages underlying the
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.
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.
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.
A-3 PROSPECTUS
<PAGE> 68
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 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.
PROSPECTUS A-4
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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, 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.
A-5 PROSPECTUS
<PAGE> 70
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.
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.
PROSPECTUS A-6
<PAGE> 71
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. Each Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) not more than 10% of the outstanding
voting stock of any one investment company will be owned in the aggregate by a
Fund and other investment companies advised by the investment adviser or its
affiliates. 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 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
A-7 PROSPECTUS
<PAGE> 72
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 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,
PROSPECTUS A-8
<PAGE> 73
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, the Ginnie Mae Fund may invest up to
10%, and the Income Fund may invest up to 15%, of the current value of each
Fund's net assets in illiquid securities. For this purpose, illiquid securities
include, among others, (a) securities that are illiquid by virtue of the absence
of a readily available market or are restricted by legal or contractual
conditions on resale, (b) fixed time deposits that are subject to withdrawal
penalties and that have maturities of more than seven days, and (c) repurchase
agreements not terminable within seven days. 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> 74
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 75
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 SC-06-96-004 I
Printed on Recycled Paper
<PAGE> 76
[LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank
- are NOT deposits or obligations of the Bank [LOGO]
- involve investment risk, including possible loss
of principal
[LOGO]
Printed on Recycled Paper
<PAGE> 77
[LOGO]
------------------------------
PROSPECTUS
------------------------------
GROWTH AND INCOME FUND
INSTITUTIONAL CLASS
June 3, 1996
<PAGE> 78
STAGECOACH FUNDS(R)
GROWTH AND INCOME FUND
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. If you hold shares in an IRA, please call 1-800-BEST-IRA
(1-800-237-8472) for information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") 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> 79
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 the 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 AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 80
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 10
EXCHANGES 14
DIVIDENDS 15
MANAGEMENT AND SERVICING FEES 15
TAXES 18
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 81
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> 82
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, exchanges and redemptions are effected through
the customer's account with the Institution under the terms of the
customer's account agreement with the Institution. The Company reserves the
right to impose charges for wiring redemption proceeds. See "Investing in
the Fund" and "Exchanges" for additional information. Investors wishing to
purchase the Fund's Institutional shares should contact their account
representatives.
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.
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."
PROSPECTUS 2
<PAGE> 83
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(1).............................................. 0.30 %
------
TOTAL FUND OPERATING EXPENSES
(after waivers)(2)......................................... 1.08 %
======
</TABLE>
- -------------------------------
1 Other Expenses (before waivers or reimbursements) would be
0.33%.
2 Total Fund Operating Expenses (before waivers or
reimbursements) would be 1.11%.
<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................. $ 11 $34 $60 $132
</TABLE>
3 PROSPECTUS
<PAGE> 84
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 at their sole
discretion may waive or reimburse all or a portion of their respective fees
charged to, or expenses paid by, the Fund. Any waivers or reimbursements would
reduce the Fund's total expenses. There can be no assurance that waivers or
reimbursements will continue. 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 example that illustrates 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> 85
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
5 PROSPECTUS
<PAGE> 86
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
PROSPECTUS 6
<PAGE> 87
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.
In addition to presenting a standardized total return, at times, the Fund also
may present nonstandardized total returns, yields and distribution rates for
purposes of sales literature.
The yield of a class of shares is calculated by dividing the net investment
income per share earned during a specified period (usually 30 days) for the
class by its NAV per share on the last day of such period and annualizing the
result.
Because of differences in the fees and/or expenses borne by shares of each
class of the Fund, the performance figures on such shares can be expected, at
any given time, to vary from the performance figures for other classes of the
Fund.
Additional performance information is contained in the SAI and the Annual
Report, which is available upon request free of charge by calling the Company at
1-800-222-8222.
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. The Fund is
authorized to issue two other classes
7 PROSPECTUS
<PAGE> 88
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. Please contact Stagecoach Shareholder Services at
1-800-222-8222 if you would like additional information about the Fund's other
classes of shares.
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 the 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 shareholder of the Fund, you
receive one vote for each share you own and fractional votes for fractional
shares owned. A more detailed description of the voting rights and attributes of
the shares is contained under "Capital Stock" in the SAI.
Wells Fargo Bank is the Fund's investment adviser, transfer and dividend
disbursing agent, and custodian. In addition, Wells Fargo Bank is a Shareholder
Servicing Agent of the Fund 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 January 1, 1996, Wells Fargo
Bank provided investment advisory services for over $33 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.
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
PROSPECTUS 8
<PAGE> 89
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.
Brian K. Mulligan has co-managed the Growth and Income Fund since October 1,
1995. Mr. Mulligan is also co-manager of the Company's Diversified Income Fund
and 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.
Thomas L. Dibblee also has co-managed the day-to-day management of the Growth
and Income Fund since October 1, 1995. Mr. Dibblee is also co-manager of the
Company's Diversified Income Fund and the Wells Fargo Core Equities Group. He
manages agency and trust accounts and plays a key role in guiding overall equity
strategy for Wells Fargo Bank's Investment Management Group. Mr. Dibblee joined
Wells Fargo Bank in 1978. Prior to joining Wells Fargo Bank, he was a brokerage
account executive for three years and a director of development for a major San
Francisco museum for three years. Mr. Dibblee is a member of the San Francisco
Society of Security Analysts and the Financial Analysts Federation. He holds an
A.B. from the University of California at Berkeley.
Stephens is the Fund's sponsor and administrator and distributes the Fund's
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit sharing plans, individual investors, foundations,
insurance companies and university endowments.
9 PROSPECTUS
<PAGE> 90
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 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
PROSPECTUS 10
<PAGE> 91
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.
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)
11 PROSPECTUS
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3. A completed Account Application should be sent by telefacsimile, with the
original subsequently mailed, to the following address immediately after 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 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
PROSPECTUS 12
<PAGE> 93
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.
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 investor and reasonably believed by the Transfer Agent to be genuine. The
Company requires the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Company nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
13 PROSPECTUS
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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.
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
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 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 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.
PROSPECTUS 14
<PAGE> 95
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 distributions paid on newly
issued shares shortly after a purchase would represent, in substance, a return
of capital, the distribution would consist of net investment income 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 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
15 PROSPECTUS
<PAGE> 96
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.
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
various administrative services with respect to Fund shares, such as maintaining
shareholder accounts and records; assisting shareholders with purchases,
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 during the period for which payment is being made by
investors with whom the Shareholder Servicing Agent maintains a servicing
relationship.
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
PROSPECTUS 16
<PAGE> 97
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.
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.
17 PROSPECTUS
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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 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
dividend and capital-gain distributions on Fund shares that are held under a
qualified tax-deferred retirement plan. Corporate shareholders may be eligible
for the dividends-received deduction on the dividends (excluding any net capital
gain distributions) paid by the Fund to the extent the Fund's income is derived
from certain dividends received from domestic corporations.
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
gains. You should keep all statements you receive to assist in your personal
record keeping. The Company is required to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid or credited to individual
shareholders of the Fund, if a shareholder has not complied with IRS regulations
or a correct Taxpayer Identification Number, certified when required, is not on
file with the Company or the Transfer Agent. In connection with this withholding
requirement, investors are asked to certify on the Account Application that the
social security or taxpayer identification number provided is correct and that
the Institution is not subject to 31% backup withholding for previous
underreporting to the IRS.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAI.
The foregoing discussion is based on tax laws and 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.
PROSPECTUS 18
<PAGE> 99
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
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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, interest may be
withheld at the source under foreign income tax laws, and there is a possibility
of expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.
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
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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
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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. The Fund currently intends to limit its investments so
that, as determined immediately after a securities purchase is made: (a) not
more than 5% of the value of its total assets will be invested in the securities
of any one investment company; (b) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment companies
as a group; (c) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund; and (d) not more than 10% of the
outstanding voting stock of any one investment company will be owned in the
aggregate by the Fund and other investment companies advised by the investment
adviser or its affiliates. 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
PROSPECTUS A-4
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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. As a matter of nonfundamental
policy, the Fund may invest up to 10% of the current value of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days and (c) repurchase agreements not terminable within seven
days. 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
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- --------------------------------------------------------------------------------
Advised by WELLS FARGO BANK, N.A. - Sponsored/Distributed by
Stephens Inc., Member NYSE/SIPC
NOT FDIC INSURED
- --------------------------------------------------------------------------------
<PAGE> 105
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<PAGE> 106
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 SC-06-96-003 I
Printed on Recycled Paper
<PAGE> 107
<TABLE>
<S> <C>
LOGO
P.O. Box 7066
San Francisco, CA 94120-7066
</TABLE>
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 SC-06-96-003 I
Printed on Recycled Paper
<PAGE> 108
LOGO
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PROSPECTUS
------------------------------
MONEY MARKET MUTUAL FUND
INSTITUTIONAL CLASS
June 3, 1996
<PAGE> 109
STAGECOACH FUNDS(R)
MONEY MARKET MUTUAL FUND
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. If you
hold shares in an IRA, please call 1-800-BEST-IRA (1-800-237-8472) for
information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") 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> 110
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 the 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 AND DISTRIBUTOR.
PROSPECTUS
<PAGE> 111
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 13
TAXES 16
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 112
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. 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 Fargo & Company and other selected institutions
("Institutions"). Customers may include individuals, trusts, partnerships
and corporations. Purchases, exchanges
1 PROSPECTUS
<PAGE> 113
and redemptions are effected through the customer's account with the
Institution under the terms of the customer's account agreement with the
Institution. The Company reserves the right to impose charges for wiring
redemption proceeds. See "Investing in the Fund" and "Exchanges" for
additional information. Investors wishing to purchase the Fund's
Institutional Class shares should contact their account representatives.
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> 114
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).... 0.03%
-----
TOTAL FUND OPERATING
EXPENSES (after waivers or reimbursements)(2)...... 0.71%
</TABLE>
- -------------------------------
<TABLE>
<S> <C>
(1) Other Expenses (before waivers and/or reimbursements) would be
0.05%.
(2) Total Fund Operating Expenses (before waivers and/or
reimbursements) would be 0.73%.
</TABLE>
3 PROSPECTUS
<PAGE> 115
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 $40 $ 88
</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 at their sole
discretion may waive or reimburse all or a portion of their respective fees
charged to, or expenses paid by, the Fund. Any waivers or reimbursements would
reduce the Fund's total expenses. There can be no assurance that waivers or
reimbursements will continue. 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 example that illustrates 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> 116
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:
5 PROSPECTUS
<PAGE> 117
- capped floaters (on which interest is not paid when market rates move above
a certain level);
- leveraged floaters (whose interest-rate reset provisions are based on a
formula that magnifies changes in interest rates);
- range floaters (which do not pay any interest if market interest rates move
outside of a specified range);
- dual index floaters (whose interest-rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, the Fund may not invest in 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 the each class of shares of 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 of a class of shares refers to the income generated by an investment in
the class of shares of the Fund, over a seven- and perhaps a thirty-day
period,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.
Additional performance information is contained in the SAI and the Annual
Report, which is available upon request without charge by calling the Company at
1-800-222-8222.
PROSPECTUS 6
<PAGE> 118
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. 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. Please contact Stagecoach
Shareholder Services at 1-800-222-8222 if you would like additional information
about the Fund's other classes of shares.
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 shareholder of the Fund, you are entitled to one vote
for each share you own and fractional votes for fractional shares owned. A more
detailed description of the voting rights and attributes of the shares is
contained under "Capital Stock" in the SAI.
Wells Fargo Bank is the Fund's investment adviser, custodian, transfer agent
and dividend disbursing agent (the "Transfer Agent"). In addition, Wells Fargo
Bank is 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 January 1, 1996,
Wells Fargo Bank provided investment advisory services for over $33 billion of
assets for individuals, trusts, estates and institutions. Wells Fargo Bank also
serves as the investment adviser to other separately managed funds (or the
master portfolio in which a fund 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.
7 PROSPECTUS
<PAGE> 119
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 the Federal Reserve System and Wells Fargo Bank also
are open for business (a "Business Day"). Currently, one or both of these
institutions is closed on New Year's Day, Presidents' Day, Martin Luther King,
Good Friday, 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.
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 9:00 a.m. and 1:00 p.m. (Pacific
time) on each
PROSPECTUS 8
<PAGE> 120
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 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 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
9 PROSPECTUS
<PAGE> 121
"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.
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.
PROSPECTUS 10
<PAGE> 122
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 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
11 PROSPECTUS
<PAGE> 123
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 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.
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.
PROSPECTUS 12
<PAGE> 124
To exchange Institutional Class shares, or if you have any questions, simply
call the Company at 1-800-222-8222. A shareholder 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 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 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
13 PROSPECTUS
<PAGE> 125
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.
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
various administrative services with respect to Fund shares, such as maintaining
shareholder accounts and records; assisting shareholders with purchases,
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 during the period for which payment is being made by
investors with whom the Shareholder Servicing Agent maintains a servicing
relationship.
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.
PROSPECTUS 14
<PAGE> 126
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.
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.
15 PROSPECTUS
<PAGE> 127
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 net investment income
(including any net short-term capital gains) declared and paid by the Fund will
be taxable as ordinary income to Fund shareholders, regardless of whether you
take dividend payments in cash or have them automatically reinvested in
additional shares in the Fund. 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 Fund does not expect its dividends
to qualify for the dividends-received deduction allowed to corporate
shareholders.
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
gains. You should keep all statements you receive to assist in your personal
record keeping. The Company is required to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid or credited to individual
shareholders of the Fund, if a shareholder has not complied with IRS regulations
or if a correct Taxpayer Identification Number, certified when required, is not
on file with the Company or the Transfer Agent. In connection with this
withholding requirement, you will be asked to certify on your Account
Application that the social security or taxpayer identification number you
provide is correct and that you are not subject to 31% back-up withholding for
previous underreporting to the IRS.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAI.
The foregoing discussion is based on tax laws and 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.
PROSPECTUS 16
<PAGE> 128
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. 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,
consolidation, reorganization or acquisition. The Fund currently intends to
limit its investments so that, as determined immediately
A-1 PROSPECTUS
<PAGE> 129
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group; (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
the Fund; and (d) not more than 10% of the outstanding voting stock of any one
investment company will be owned in the aggregate by the Fund and other
investment companies advised by the investment adviser or its affiliates. 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
PROSPECTUS A-2
<PAGE> 130
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 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
A-3 PROSPECTUS
<PAGE> 131
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 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
<PAGE> 132
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 133
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>
LOGO SC-06-96-006 I
Printed on Recycled Paper
<PAGE> 134
STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
DATED JUNE 3, 1996
INSTITUTIONAL CLASS SHARES
CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE INCOME FUND
GINNIE MAE FUND
GROWTH AND INCOME FUND
MONEY MARKET MUTUAL FUND
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
__________________________________
Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about Institutional Class shares in six funds of the Stagecoach
Family of Funds -- the CALIFORNIA TAX-FREE BOND FUND (the "Bond Fund"), the
CALIFORNIA TAX-FREE INCOME FUND (the "Income Fund"), the GINNIE MAE FUND, the
GROWTH AND INCOME FUND (the "Growth Fund"), the MONEY MARKET MUTUAL FUND and
the SHORT- INTERMEDIATE U.S. GOVERNMENT INCOME FUND (the "Government Income
Fund") (each a "Fund" and collectively, the "Funds"). The investment objective
of each Fund is described in its respective Prospectus under "How the Fund(s)
Work(s) -- Investment Objective(s) and Policies."
This SAI is not a prospectus and should be read in conjunction
with each Fund's Prospectus. All terms used in this SAI that are defined in
the Funds' Prospectuses have the meanings assigned in the respective
Prospectus. A copy of the Funds' Prospectuses may be obtained free of charge
by writing Stephens, the Company's sponsor, administrator and distributor, at
111 Center Street, Little Rock, Arkansas 72201 or by calling the Transfer
Agent at the telephone number indicated above.
__________________________________
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<PAGE> 135
TABLE OF CONTENTS
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Permitted Investment Activities . . . . . . . . . . . . . 7
Special Considerations Affecting
California Municipal Obligations . . . . . . . . . . . . . . . . . . 13
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Calculation of Yield and Total Return . . . . . . . . . . . . . . . . 20
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . 23
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 24
Fund Expenses............................ . . . . . . . . . . . . . . 27
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 27
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . 33
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . 34
SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
-2-
<PAGE> 136
INVESTMENT RESTRICTIONS
The Funds are subject to the following investment restrictions,
all of which are fundamental policies.
NONE OF THE FUNDS MAY:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of a Fund's investments in that industry would
be 25% or more of the current value of the Fund's total assets, provided that
there is no limitation with respect to investments in (i) obligations of the
U.S. Government, its agencies or instrumentalities ("U.S. Government
obligations"), and (ii) with respect only to the Bond and Income Funds,
municipal securities (for the purpose of this restriction, private activity
bonds and notes shall not be deemed municipal securities if the payments of
principal and interest on such bonds or notes is the ultimate responsibility of
non-governmental issuers), and (iii) with respect to the Money Market Mutual
Fund, the obligations of domestic banks (for the purpose of this restriction,
domestic bank obligations do not include obligations of U.S. branches of
foreign banks or obligations of foreign branches of U.S. banks);
(2) underwrite securities of other issuers, except to the extent
that the purchase of permitted investments (which includes municipal securities
for the Bond and Income Fund) directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with a Fund's investment program may be deemed to be an
underwriting; and
(3) make investments for the purpose of exercising control or
management.
THE GINNIE MAE, GOVERNMENT INCOME AND GROWTH FUNDS MAY NOT:
(1) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;
(2) purchase or sell real estate or real estate limited
partnerships (other than securities secured by real estate or interests therein
or securities issued by companies that invest in real estate or interests
therein);
(3) purchase commodities or commodity contracts (including futures
contracts), except that the Funds may purchase securities of an issuer which
invests or deals in commodities or commodity contracts;
(4) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and, with respect to the Ginnie Mae
and Growth Funds, except for
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<PAGE> 137
margin payments in connection with options, futures and options on futures) or
make short sales of securities; and
(5) purchase securities of any issuer (except U.S. Government
obligations) if, with respect to 100% of the Ginnie Mae and Growth Funds' total
assets, and only 75% of the Government Income Fund's total assets, as a result,
more than 5% of the value of a Fund's total assets would be invested in the
securities of any one issuer or with respect to 100% of each Fund's total
assets the Fund's ownership would be more than 10% of the outstanding voting
securities of such issuer.
THE BOND, INCOME AND MONEY MARKET MUTUAL FUNDS MAY NOT:
(1) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions, except with regard to the Bond
Fund, for margin payments in connection with options, futures and options on
futures) or make short sales of securities;
(2) write, purchase or sell puts, calls, options or any
combination thereof, and with regard to the Money Market Mutual Fund write,
purchase or sell warrants, except that all Funds may purchase securities with
put rights in order to maintain liquidity;
(3) issue senior securities, except that a 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 the Fund's net assets (but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets); and
(4) purchase or sell real estate or real estate limited
partnerships (other than municipal obligations with respect to the Bond Fund
and the Income Fund, or other than money market securities with respect to the
Money Market Mutual Fund, or with respect to each Fund other securities secured
by real estate or interests therein or securities issued by companies that
invest in real estate or interests therein), commodities or commodity contracts
(including futures contracts);
THE GINNIE MAE AND GROWTH FUNDS MAY NOT:
(1) write, purchase or sell puts, calls, straddles, spreads,
warrants, options or any combination thereof, and except that the Growth Fund
may purchase securities with put rights in order to maintain liquidity, and may
invest up to 5% of its net assets in warrants in accordance with its investment
policies as stated below; and
(2) issue senior securities, except that the Growth 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 the Fund's net
assets (but investments may not be purchased while any such outstanding
borrowings exceed 5% of its net assets), and except that the Ginnie Mae Fund
may borrow up to
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<PAGE> 138
20% of the current value of the Fund's 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 the Fund's net assets (but investments may
not be purchased by the Fund while any such outstanding borrowings exceed 5% of
the Fund's net assets).
THE GOVERNMENT INCOME FUND MAY NOT:
(1) write, purchase or sell straddles, spreads, warrants, or any
combination thereof;
(2) borrow money or issue senior securities as defined in the
Investment Company Act of 1940 (the "1940 Act"), except that 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 the Fund's net
assets (but investments may not be purchased while any such outstanding
borrowings exceed 5% of its net assets), except that the Fund may issue
multiple classes of shares in accordance with applicable laws, rules,
regulations or orders; and
(3) make loans, except that the Fund may purchase or hold debt
instruments or lend its portfolio securities in accordance with its investment
policies, and may enter into repurchase agreements.
THE INCOME AND MONEY MARKET MUTUAL FUNDS MAY NOT:
(1) make loans of portfolio securities, (with regard to the Income
Fund, having a value that exceeds 50% of the current value of its total
assets), or other assets with regard to the Money Market Mutual Fund, provided
that, for purposes of this restriction, loans 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
public or private offerings.
With respect to loans of portfolio securities, the Funds do not
intend to engage in securities loans during the current year. If a Fund were
to engage in securities loans, the Fund would do so in compliance with SEC
guidelines applicable to these transactions, including limiting all loans to a
value not exceeding one third of the current value of its total assets.
The Funds are subject to the following non-fundamental policies;
that is, they may be changed by a majority vote of the Board of Directors
without shareholder approval:
NONE OF THE FUNDS MAY:
(1) purchase or retain securities of any issuer if the Officers
or Directors of the Company or the investment adviser owning beneficially more
than one-half of one percent (0.5%) of the securities of the issuer together
own beneficially more than 5% of such securities; and
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<PAGE> 139
(2) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets.
THE BOND, MONEY MARKET MUTUAL INCOME, GINNIE MAE AND GROWTH FUNDS
MAY NOT:
(1) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of such Fund's aggregate investment in such classes of
securities will exceed 5% of its total assets.
THE BOND, MONEY MARKET MUTUAL AND INCOME FUNDS MAY NOT:
(1) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs; and
(2) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days or other illiquid
securities (including restricted securities), with respect to the Bond Fund.
The Money Market Mutual Fund may not invest more than 10% of the current value
of its net assets that are illiquid by virtue of the absence of a readily
available market or legal or contractual restriction on resale and fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days. The Income Fund may not invest more than 15% of its net
assets in illiquid securities. For this purpose, illiquid securities include,
among others (a) securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale, (b)
fixed time deposits that are subject to withdrawal penalties and that have
maturities of more than seven days, (c) repurchase agreements not terminable
within seven days.
THE INCOME FUND MAY NOT:
(1) invest more than 15% of its net assets in illiquid securities.
For this purpose, illiquid securities include, among others, (a) securities
that are illiquid by virtue of the absence of a readily available market or
legal or contractual restrictions on resale, (b) fixed time deposits that are
subject to withdrawal penalties and that have maturities of more than seven
days, and (c) repurchase agreements not terminable within seven days; and
(2) invest more than 5% of its assets at the time of purchase in
warrants and not more than 2% of its net assets in warrants that are not listed
on the New York or American Stock Exchange.
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In addition, the Government Income Fund reserves the right to
invest up to 15% of the current value of its net assets in fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, repurchase agreements maturing in more than seven days or other
illiquid securities. However, as long as the Fund's shares are registered for
sale in a state that imposes a lower limit on the percentage of a fund's assets
that may be so invested, the Fund will comply with such lower limit. The fund
presently is limited to investing 10% of its net assets in such securities due
to limits applicable in several states.
The Money Market Mutual Fund may not purchase or sell real estate
limited partnership interests.
The Growth and Ginnie Mae Fund may not invest more than 10% of the
current value of its net assets in repurchase agreements maturing in more than
seven days or other illiquid securities (including restricted securities).
In addition, as provided in Rule 2a-7 under the 1940 Act, the
Money Market Mutual Fund may only purchase "Eligible Securities" (as defined in
Rule 2a-7) and only if, immediately after such purchase: the Money Market
Mutual Fund would have no more than 5% of its total assets in "First Tier
Securities" (as defined in Rule 2a-7) of any one issuer, excluding government
securities and except as otherwise permitted for temporary purposes and for
certain guarantees and unconditional puts; the Money Market Mutual Fund would
own no more than 10% of the voting securities of any one issuer; the Money
Market Mutual Fund would have no more than 5% of its total assets in "Second
Tier Securities" (as defined in Rule 2a-7); and the Money Market Mutual Fund
would have no more than the greater of $1 million or 1% of its total assets in
Second Tier Securities of any one issuer.
Further, all of the Funds may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies that have a
fundamental investment policy of investing at least 80% of their net assets in
obligations that are exempt from federal income taxes and are not subject to
the federal alternative minimum tax. The Funds' investment adviser will waive
its advisory fees, however, for that portion of the Funds' assets so invested,
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition.
Notwithstanding any other investment policy or limitation (whether
or not fundamental), 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.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Unrated Investments. The Bond, Growth, Income, Ginnie Mae and
Money Market Mutual Funds may purchase instruments that are not rated if, in
the opinion of Wells Fargo
-7-
<PAGE> 141
Bank, such obligations are of comparable quality to other rated investments
that are permitted to be purchased by the Funds, provided that the Money Market
Mutual Fund may do so subject to the provisions and restrictions of Rule 2a-7
under the 1940 Act. After purchase by a Fund, a security may cease to be rated
or its rating may be reduced below the minimum required for purchase by such
Fund. Neither event will require an immediate sale of such security by the
Fund, provided that with respect to the Money Market Mutual Fund, when a
security ceases to be rated, the Company's Board of Directors determines that
such security presents minimal credit risks and provided further that, when a
security is downgraded below the eligible quality for investment or no longer
presents minimal credit risks, the Board finds that the sale of such security
would not be in the Fund's best interests. To the extent the ratings given by
Moody's or S&P may change as a result of changes in such organizations or their
rating systems, each Fund will attempt to use comparable ratings as standards
for investments in accordance with the investment policies contained in the
Funds' Prospectuses and in this SAI. The ratings of Moody's and S&P are more
fully described in the SAI Appendix.
Letters of Credit. For the Bond, Income, Ginnie Mae, Growth and
Money Market Mutual Funds, certain of the debt obligations (including municipal
securities, certificates of participation, commercial paper and other
short-term obligations) that the Funds may purchase may be backed by an
unconditional and irrevocable letter of credit of a bank, savings and loan
association or insurance company that assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies that, in the opinion of
Wells Fargo Bank, are of comparable quality to issuers of other permitted
investments of each Fund may be used for letter of credit-backed investments.
Pass-Through Obligations. The Bond, Ginnie Mae, Government
Income, and Income Funds may purchase pass- through obligations that represent
an ownership interest in a pool of mortgages and the resultant cash flow from
those mortgages. Payments by homeowners on the loans in the pool flow through
to certificate holders in amounts sufficient to repay principal and to pay
interest at the pass-through rate. The stated maturities of pass-through
obligations may be shortened by unscheduled prepayments of principal on the
underlying mortgages. Therefore, it is not possible to predict accurately the
average maturity of a particular pass-through obligation. Variations in the
maturities of pass-through obligations will affect the yield of a Fund.
Furthermore, as with any debt obligation, fluctuations in interest rates will
inversely affect the market value of pass-through obligations. Each Fund may
invest in pass-through obligations that are supported by the full faith and
credit of the U.S. Government (such as those issued by the Government National
Mortgage Association) or those that are guaranteed by an agency or
instrumentality of the U.S. Government (such as the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation) or bonds
collateralized by any of the foregoing.
When-Issued Securities. The Bond, Government Income, Ginnie Mae,
Growth, and Income Funds may invest in securities that 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 (120 days for the
Growth Fund and the Ginnie Mae Fund). The Bond, Growth and Government Income
Funds do not intend to invest more than 5% of their net assets in such
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<PAGE> 142
securities during the coming year. Each Fund currently will only make
commitments to purchase securities on a when- issued basis 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 that will be 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 will establish a segregated account in which it will
maintain cash, U.S. Government Obligations, or other high-quality debt
instruments in an amount at least equal in value to its commitments to purchase
when-issued securities. If the value of these assets declines, a Fund will
place 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.
Loans of Portfolio Securities. The Ginnie Mae and Growth Funds
may lend securities from its portfolios to brokers, dealers and financial
institutions (but not individuals) if cash, U.S. Government securities or other
high- quality debt obligations 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 a
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 will, if permitted by
law, 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 will not lend securities having a value that exceeds 33
1/3% 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 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 Stagecoach, its Investment Adviser, or its Distributor. The Ginnie Mae
Fund currently intends to limit the practice of lending portfolio securities to
no more than 5% of its net assets during the coming year.
Foreign Obligations. For the Ginnie Mae and Growth Funds,
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 generally subject to uniform accounting,
auditing and financial reporting standards or governmental supervision
comparable
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to those applicable to 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.
While the Growth Fund currently does not intend to invest more than 10% of its
assets in foreign obligations, it may invest 25% or more of its assets in
foreign obligations. The Ginnie Mae Fund does not intend to invest in foreign
obligations during the coming year.
Convertible Securities (Lower Rated Securities) Subject to the
limitations described in its Prospectus, the Ginnie Mae and Growth Funds may
invest in convertible securities that are not rated in one of the four highest
rating categories by a nationally recognized statistical rating organization
(NRSRO). The yields on such lower rated securities, which include securities
also known as junk bonds, generally are higher than the yields available on
higher- rated securities. However, investments in lower rated securities and
comparable unrated securities generally involve greater volatility of price and
risk of loss of income and principal, including the probability of default by
or bankruptcy of the issuers of such securities. Lower rated securities and
comparable unrated securities (a) will likely have some quality and protective
characteristics that, in the judgment of the rating organization, are
outweighed by large uncertainties or major risk exposures to adverse conditions
and (b) are predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligation. Accordingly, it is possible that these types of factors could, in
certain instances, reduce the value of securities held in the Fund's portfolio,
with a commensurate effect on the value of the Fund's shares. Therefore, an
investment in the Fund should not be considered as a complete investment
program and may not be appropriate for all investors.
While the market values of lower rated securities and comparable
unrated securities tend to react less to fluctuations in interest rate levels
than the market values of higher-rated securities, the market values of certain
lower rated securities and comparable unrated securities also tend to be more
sensitive to individual corporate developments and changes in economic
conditions than higher-rated securities. In addition, lower rated securities
and comparable unrated securities generally present a higher degree of credit
risk. Issuers of lower rated securities and comparable unrated securities
often are highly leveraged and may not have more traditional methods of
financing available to them so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by such
issuers is significantly greater because lower rated securities and comparable
unrated securities generally are unsecured and frequently are subordinated to
the prior payment of senior indebtedness. The Fund may incur additional
expenses to the extent that it is required to seek recovery upon a default in
the payment of principal or interest on its portfolio holdings. The existence
of limited markets for lower rated securities and comparable unrated securities
may diminish the Fund's ability to (a) obtain accurate market quotations for
purposes of valuing such securities and calculating net asset value and (b)
sell the securities at fair value either to meet redemption requests or to
respond to changes in the economy or in financial markets.
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Certain lower rated debt securities and comparable unrated
securities frequently have call or buy-back features that permit their issuers
to call or repurchase the securities from their holders, such as the Fund. If
an issuer exercises these rights during periods of declining interest rates,
the Fund may have to replace the security with a lower yielding security, thus
resulting in a decreased return to the Fund.
The market for certain lower rated securities and comparable
unrated securities is relatively new and has not weathered a major economic
recession. The effect that such a recession might have on such securities is
not known. Any such recession, however, could disrupt severely the market for
such securities and adversely affect the value of such securities. Any such
economic downturn also could adversely affect the ability of the issuers of
such securities to repay principal and pay interest thereon.
Privately Issued Securities (Rule 144A). The Growth Fund may
invest in privately issued securities which may be resold only in accordance
with Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"). Rule
144A Securities are restricted securities and will not be publicly traded.
Accordingly, the liquidity of the market for specific Rule 144A Securities may
vary. The Company's investment adviser, pursuant to guidelines established by
the Board of Directors of the Company will evaluate the liquidity
characteristics of each Rule 144A Security proposed for purchase by the Fund on
a case-by-case basis and will consider the following factors, among others, in
their evaluation: (1) the frequency of trades and quotes for the Rule 144A
Security; (2) the number of dealers willing to purchase or sell the Rule 144A
Security and the number of other potential purchasers; (3) dealer undertakings
to make a market in the Rule 144A Security; and (4) the nature of the Rule 144A
Security and the nature of the marketplace trades (e.g., the time needed to
dispose of the Rule 144A Security, the method of soliciting offers and the
mechanics of transfer). The Fund does not intend to invest more than 5% of its
net assets in Rule 144A Securities during the coming year.
Municipal Bonds. The Bond and Income Funds may invest in
municipal bonds. As discussed in the Prospectus, the two principal
classifications of municipal bonds are "general obligation" and "revenue"
bonds. Municipal bonds are debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public
facilities such as bridges, highways, housing, hospitals, mass transportation,
schools, streets, and water and sewer works. Other purposes for which
municipal bonds may be issued include the refunding of outstanding obligations
and obtaining funds for general operating expenses or to loan to other public
institutions and facilities. Industrial development bonds are a specific type
of revenue bond backed by the credit and security of a private user. Certain
types of industrial development bonds are issued by or on behalf of public
authorities to obtain funds to provide privately-operated housing facilities,
sports facilities, convention or trade show facilities, airport, mass transit,
port or parking facilities, air or water pollution control facilities and
certain local facilities for water supply, gas, electricity, or sewage or solid
waste disposal. Neither Fund may invest 25% or more of its assets in
industrial development bonds. Assessment bonds, wherein a specially created
district or project area levies a tax (generally on its taxable property) to
pay for an improvement or project may be considered a variant of either
category. There are, of course, other variations in the types of municipal
bonds, both within a particular classification and
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between classifications, depending on numerous factors. Some of these bonds
may be considered private activity bonds for federal income tax purposes.
Municipal Notes. The Bond and Income Funds may invest in
municipal notes which include, but are not limited to, tax anticipation notes
("TANs"), bond anticipation notes ("BANs"), revenue anticipation notes ("RANs")
and construction loan notes. Notes sold as interim financing in anticipation
of collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise
taxes as a result of such things as a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers mix
various tax proceeds into a general fund that is used to meet obligations other
than those of the outstanding TANs. Use of such a general fund to meet various
obligations could affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its obligations
on its BANs is primarily dependent on the issuer's adequate access to the
longer term municipal bond market and the likelihood that the proceeds of such
bond sales will be used to pay the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.
The values of outstanding municipal securities will vary as a
result of changing market evaluations of the ability of their issuers to meet
the interest and principal payments (i.e., credit risk). Such values also will
change in response to changes in the interest rates payable on new issues of
municipal securities (i.e., market risk). Should such interest rates rise, the
values of outstanding securities, including those held in a Fund's portfolio,
will decline and (if purchased at par value) sell at a discount. If interests
rates fall, the values of outstanding securities will generally increase and
(if purchased at par value) sell at a premium. Changes in the value of
municipal securities held in the Fund's portfolio arising from these or other
factors will cause changes in the net asset value per share of the Fund.
Investments in Warrants. Although they have no present intention
to do so, the Bond, Income and Growth Funds may each invest up to 5% of their
net assets at the time of purchase in warrants (other than those that have been
acquired in units or attached to other securities), and not more than 2% of its
net assets in warrants which are not listed on the New York or American Stock
Exchange. Warrants represent rights to purchase securities at a specific price
valid for a specific period of time. The prices of warrants do not necessarily
correlate with the prices of the underlying securities. Each Fund may only
purchase warrants on securities in which the Fund may invest directly.
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SPECIAL CONSIDERATIONS AFFECTING
CALIFORNIA MUNICIPAL OBLIGATIONS
Certain debt obligations held by the Income Fund and the Bond Fund
may be obligations of issuers which rely in whole or in substantial part on
California state revenues for the continuance of their operations and the
payment of their obligations. The extent to which the California Legislature
will continue to appropriate a portion of the state's general funds to
counties, cities and their various entities, is not entirely certain. To the
extent local entities do not receive money from the state to pay for their
operations and services, their ability to pay debt service on obligations held
by these Funds may be impaired.
Certain of the municipal obligations in which the Funds may invest
may be obligations of California issuers that rely in whole or in part,
directly or indirectly, on ad valorem real property taxes as a source of
revenue. The California Constitution limits the powers of municipalities to
impose and collect ad valorem taxes on real property, which, in turn, restricts
the ability of municipalities to service their debt obligations from such
taxes.
For example, Article XIIIA of the California Constitution, as
amended, limits ad valorem real property taxes to 1% of the full cash value of
the property, defined as the county tax assessor's valuation as of March 1,
1975, plus adjustments not to exceed 2% per year, adjustments upon purchase,
change of ownership or new construction after that date, and certain other
adjustments. Article XIIIB provides that state and local government
appropriations from certain revenue sources each year may not exceed the
"appropriations limit" related to such revenue sources set forth for the fiscal
year 1978-79, with certain adjustments made for changes in the cost of living
and population and certain limited exemptions. Because of the complex nature
of Articles XIIIA and XIIIB, ambiguities and possible inconsistencies in their
respective terms, the existence of litigation challenging these provisions and
the impossibility of predicting future appropriations and changes in population
and cost of living, it is not possible to determine the impact of Article XIIIA
or Article XIIIB or any implementing or related legislation on the municipal
obligations in the Funds or the ability of state or local government to pay the
interest on, or repay the principal of, such municipal obligations.
Certain debt obligations held by the Funds may be obligations
payable solely from lease payments on real or personal property leased to the
state, cities, counties or their various public entities. California law
provides that a lessor may not be required to make payments during any period
that it is denied use and occupancy of the property in proportion to such loss.
Moreover, the lessor only agrees to appropriate funding for lease payments in
its annual budget for each fiscal year. In case of a default under the lease,
the only remedy available against the lessor is that of reletting the property;
no acceleration of lease payments is permitted. Each of these factors presents
a risk that the lease financing obligations held by a Fund would not be paid in
a timely manner.
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Certain debt obligations held by the Funds may be obligations
payable solely from the revenues of health care institutions. The method of
reimbursement for indigent care, California's selective contracting with health
care providers for such care and selective contracting by health insurers for
care of its beneficiaries now in effect under California and federal law may
adversely affect these revenues and, consequently, payment on those debt
obligations.
There can be no assurance that general economic difficulties or
the financial circumstances of California or its towns and cities will not
adversely affect the market value of California municipal securities or the
ability of obligors to continue to make payments on such securities.
* * *
The taxable securities market is a broader and more liquid market
with a greater number of investors, issuers and market makers than the market
for municipal securities. The more limited marketability of municipal
securities may make it difficult in certain circumstances to dispose of large
investments advantageously.
MANAGEMENT
The following information supplements and should be read in conjunction
with the corresponding sections in the Prospectus. The principal occupations
during the past five years of the Directors and principal executive Officer of
the Company are listed below. The address of each, unless otherwise indicated,
is 111 Center Street, Little Rock, Arkansas 72201. Directors deemed to be
"interested persons" of the Company for purposes of the 1940 Act are indicated
by an asterisk.
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position During Past 5 Years
- --------------------- -------- ---------------------
<S> <C> <C>
Jack S. Euphrat, 73 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.
*R. Greg Feltus, 44 Director, Senior Vice President
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of Stephens
Sports Management
</TABLE>
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<PAGE> 148
<TABLE>
<S> <C> <C>
Inc.; and President of
Investor Brokerage
Insurance Inc.
Thomas S. Goho, 53 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School of
Business and
Accountancy; Associate Professor of Finance
of the School of Business and Accounting at
Wake Forest University since 1983.
*Zoe Ann Hines, 46 Director Senior Vice President
of Stephens and
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource
Management.
W. Rodney Hughes, 69 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 77 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 51 Director Private Investor; Real Estate
10 Legrae Street Developer; Chairman
Charleston, SC 29401 of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.
Richard H. Blank, Jr., 39 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary and Director of Stephens
</TABLE>
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<PAGE> 149
<TABLE>
<S> <C>
Treasurer Sports Management
Inc.; and Director of
Capo Inc.
</TABLE>
COMPENSATION TABLE
For the Fiscal Year Ended December 31, 1995
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
<S> <C> <C>
Jack S. Euphrat $10,188 $39,750
Director
*R. Greg Feltus 0 0
Director
Thomas S. Goho 10,188 39,750
Director
*Zoe Ann Hines 0 0
Director
*W. Rodney Hughes 9,438 37,000
Director
Robert M. Joses 9,938 39,000
Director
*J. Tucker Morse 8,313 33,250
Director
</TABLE>
Directors of the Company are compensated annually by the Company and by all the
registrants in the fund complex for their services as indicated above and also
are reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. Each of the Directors and Officers of the Company serves in the
identical capacity as Officers and Directors of Overland Express Funds, Inc.
and Stagecoach Inc., and as Trustees and/or Officers of Stagecoach Trust,
Master Investment Portfolio, Life & Annuity Trust, Master Investment Trust and
Managed Series Investment Trust, each of which is a registered open-end
management investment company and each of which is considered to be in the same
"fund complex," as such term is defined in Form N-1A under the 1940 Act, as the
Company. The Directors are compensated by other Companies and Trusts within
the fund complex for their services as Directors/Trustees to such Companies
-16-
<PAGE> 150
and Trusts. Currently the Directors do not receive any retirement benefits or
deferred compensation from the Company or any other member of the fund complex.
As of the date of this SAI, Directors and officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.
Investment Adviser. The Funds are advised by Wells Fargo Bank
pursuant to Advisory Contracts that provide for Wells Fargo Bank to furnish to
the Funds investment guidance and policy direction in connection with the daily
portfolio management of the Funds. Pursuant to the Advisory Contracts, Wells
Fargo Bank furnishes to the Company's Board of Directors periodic reports on
the investment strategy and performance of each Fund.
Wells Fargo Bank has agreed to provide to each Fund with, among
other things, money market and fixed-income research, analysis and statistical
and economic data and information concerning interest rate and security market
trends, portfolio composition, credit conditions and average maturities of each
Fund's portfolio.
Each Advisory Contract will continue in effect for more than two
years provided the continuance is approved annually (i) by the holders of a
majority of the respective Fund's outstanding voting securities or by the
Company's Board of Directors and (ii) by a majority of the Directors of the
Company who are not parties to the Advisory Contract or "interested persons"
(as defined in the 1940 Act) of any such party. The Advisory Contracts may be
terminated on 60 days' written notice by either party and will terminate
automatically if assigned.
For the years ended December 31, 1993, 1994 and 1995, the Funds
paid to Wells Fargo Bank the advisory fees indicated below and Wells Fargo Bank
waived the indicated amounts:
<TABLE>
<CAPTION>
1993 1994 1995
FEES FEES FEES FEES FEES FEES
FUND PAID WAIVED PAID WAIVED PAID WAIVED
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
California Tax-Free Bond $2,157,487 $0 $ 368,134 $ 1,728,107 $ 1,542,893 $0
Fund
California Tax-Free
Income $ 38,402 $122,967 $0 $ 279,496 $ 236,632 $31,013
Ginnie Mae $ 888,174 $437,110 $ 1,185,036 $0 $ 840,112 $0
Growth and Income $ 443,874 $0 $ 587,977 $0 $ 754,149 $0
Fund
</TABLE>
-17-
<PAGE> 151
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Money Market Mutual $1,285,690 $0 $2,073,686 $2,008,946 $12,729,506 $0
Short-Intermediate
U.S. Gov't Income
Fund $0 $ 3,704 $0 $ 58,270 $ 56,387 $60,241
</TABLE>
Morrison & Foerster LLP, special counsel to Wells Fargo Bank and
counsel to the Company, has advised Wells Fargo Bank and the Company that Wells
Fargo Bank should be able to perform the services contemplated by the Advisory
Contract, the Shareholder Servicing Agreement, the Selling Group Agreement, the
Agency Agreement, the Custody Agreement and the Prospectus, without violation
of the Glass-Steagall Act. Such counsel have 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 and regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, as well
as future changes in federal or state statutes and regulations and judicial or
administrative decisions or interpretations thereof, could prevent Wells Fargo
Bank from continuing to perform, in whole or in part, such services. If Wells
Fargo Bank were prohibited from performing any of such services, it is expected
that new agreements would be proposed or entered into with another entity or
entities qualified to perform such services.
Administrator and Distributor. The Company has retained Stephens
as administrator and distributor on behalf of the Funds. Each Administration
Agreement between Stephens and the Fund states that Stephens shall provide as
administrative services, among other things: (i) general supervision of the
operation of each Fund, including coordination of the services performed by the
Fund's investment adviser, transfer agent, custodian, shareholder servicing
agent(s), independent auditors and legal counsel, regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC and state securities commissions; and preparation of
proxy statements and shareholder reports for the Fund; and (ii) general
supervision relative to the compilation of data required for the preparation of
periodic reports distributed to the Company's Officers and Board of Directors.
Stephens also furnishes office space and certain facilities required for
conducting the business of the Funds together with those ordinary clerical and
bookkeeping services that are not being furnished by Wells Fargo Bank.
Stephens also pays the compensation of the Company's Directors, officers and
employees who are affiliated with Stephens.
For the fiscal years ended December 31, 1993, 1994 and 1995, the
net amounts paid by the Funds for administrative fees to Stephens were as
follows:
<TABLE>
<CAPTION>
FUND 1993 1994 1995
=======================================================================================================
<S> <C> <C> <C>
California Tax-Free Bond Fund $130,939 $126,570 $ 93,013
California Tax-Free Income Fund $ 9,912 -0- $ 16,793
Ginnie Mae Fund $ 81,058 $ 71,842 $ 50,407
</TABLE>
-18-
<PAGE> 152
<TABLE>
<S> <C> <C> <C>
Growth and Income Fund $ 26,644 $ 35,279 $ 45,249
Money Market Mutual Fund $ 96,535 $ 306,209 $ 954,713
Short-Intermediate U.S. Government $ 3,522 $ 3,522 $ 6,998
Fund
</TABLE>
The Advisory Contract and Administration Agreement for each Fund
provide that if, in any fiscal year, the total expenses of a Fund incurred by,
or allocated to, the Fund (excluding taxes, interest, brokerage commissions and
other portfolio transaction expenses, expenditures that are capitalized in
accordance with generally accepted accounting principles, extraordinary
expenses and amounts accrued or paid under a Plan but including the fees
provided for in the Advisory Contract and a Administration Agreement) exceed
the most restrictive expense limitation applicable to the Fund imposed by the
securities laws or regulations of the states in which the Fund's shares are
registered for sale, Wells Fargo Bank and Stephens shall waive their fees
proportionately under the Advisory Contract and the Administration Agreement,
respectively, for each Fund for the fiscal year to the extent of the excess or
reimburse the excess, but only to the extent of their respective fees. The
Advisory Contract and the Administration Agreement for each Fund further
provide that the respective Fund's total expenses shall be reviewed monthly so
that, to the extent the annualized expenses for such month exceed the most
restrictive applicable annual expense limitation, the monthly fees under the
contract and the agreement shall be reduced as necessary. The most stringent
applicable restriction limits these expenses for any fiscal year to 2.50% of
the first $30 million of the Fund's average net assets, 2.00% of the next $70
million of average net assets, and 1.50% of the average net assets in excess of
$100 million.
Shareholder Servicing Agent. As discussed in the Funds'
prospectuses under the heading "Shareholder Servicing Agent", the Company may
enter into shareholder servicing agreements on behalf of each Fund's
Institutional Class shares with Wells Fargo Bank. The Company does not
currently intend to pay fees to Shareholder Servicing Agents during the fiscal
year ending December 31, 1996.
Custodian and Transfer and Dividend Disbursing Agent. Wells Fargo
Bank has been retained to act as custodian and transfer and dividend disbursing
agent for each Fund. The custodian, among other things, maintains a custody
account or accounts in the name of each Fund; receives and delivers all assets
for each Fund upon purchase and upon sale or maturity; collects and receives
all income and other payments and distributions on account of the assets of
each Fund and pays all expenses of each Fund. For its services as custodian,
Wells Fargo Bank receives an asset-based fee and transaction charges from each
Fund; and for its services as transfer and dividend disbursing agent, it
receives a base fee and per-account fees from each Fund.
For the year ended December 31, 1995, the Funds paid custody fees
to Wells Fargo Bank as follows:
<TABLE>
<CAPTION>
FUND 1995
--------------------------------------------------------------------
<S> <C>
California Tax-Free Bond Fund $-0-
</TABLE>
-19-
<PAGE> 153
<TABLE>
<S> <C> <C>
California Tax-Free Income Fund $-0-
Ginnie Mae Fund $-0-
Growth and Income Fund $15,578
Money Market Mutual Fund $-0-
Short-Intermediate U.S. Government Income Fund $-0-
</TABLE>
For the year ended December 31, 1995, the Funds paid transfer and
dividend disbursing agency fees to Wells Fargo Bank or its affiliates as
follows:
<TABLE>
<CAPTION>
FUND 1995
--------------------------------------------------------------------
<S> <C>
California Tax-Free Bond Fund $-0-
California Tax-Free Income Fund $-0-
Ginnie Mae $-0-
Growth and Income $160,168
Money Market Mutual $-0-
Short-Intermediate U.S. Government Income Fund $-0-
</TABLE>
CALCULATION OF YIELD AND TOTAL RETURN
As indicated in the Prospectuses, performance information for the
Funds' Institutional Class shares may be presented from time to time. Average
annual compound rate of return ("T") is computed by using the redeemable value
at the end of a specified period ("ERV") of a hypothetical initial investment
in a Class of shares ("P") over a period of years ("n") according to the
following formula: P(1+T)n = ERV.
Cumulative total returns on each Fund's Institutional Class shares
may also be presented from time to time. Cumulative total return is computed
on a per share basis and assumes the reinvestment of dividends and
distributions. Cumulative total return of shares generally is expressed as a
percentage rate calculated by combining the income and principal changes for a
specified period and dividing by the net asset value per share at the beginning
of the period. Advertisements may include the percentage rate of total return
of shares or may include the value of a hypothetical investment in shares at
the end of the period which assumes the application of the percentage rate of
total return.
As indicated in their Prospectuses, the yield of each Fund's
Institutional Class shares may also be presented from time to time. Yield is
calculated based on a 30-day (or one month) period, by dividing the net
investment income per share of the Institutional Class shares of a Fund earned
during the period by the net asset value price per share of such Class on the
last day of the period, according to the following formula: YIELD = 2[((a-
b/cd)+1)6-1], where a = dividends and interest earned during the period; b =
expenses accrued for the period (net of reimbursements); c = the average daily
number of shares outstanding during the period that were
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<PAGE> 154
entitled to receive dividends; and d = the maximum offering price per share on
the last day of the period. The net investment income of a Fund's
Institutional Class shares includes actual interest income, plus or minus
amortized purchase discount (which may include original issue discount) or
premium, less accrued expenses. Realized and unrealized gains and losses on
portfolio securities are not included in net investment income. Tax-equivalent
yield for each Fund is computed by dividing that portion of the yield of the
Fund that is tax exempt by one minus a stated income tax rate and adding the
product to that portion, if any, of the yield of the Fund that is not tax
exempt. For purposes of sales literature, a distribution rate of the
Institutional Class shares also may be presented provided that the yield data
derived pursuant to the calculation described above also are presented.
Effective yield and effective tax-equivalent yield for each Fund
are calculated by determining the net change, or tax-equivalent assumed net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding one, raising the sum to a power
equal to 365 divided by 30, and subtracting one from the result.
Fund performance information will fluctuate from time to time,
unlike bank deposits or other investments that pay a fixed yield for a stated
period of time, and does not provide a basis for determining future yields
since it is based on historical data. Yield, total return and other
performance calculations are a function of portfolio quality, composition,
maturity and market conditions as well as the expenses allocated to a Fund and
its Institutional Class shares.
Yield and total return information for a Fund or Class of shares
in a Fund may be useful in reviewing the performance of such Fund or Class of
shares and for providing a basis for comparison with investment alternatives.
The yields and total returns, however, may not be comparable to the yields or
total returns from investment alternatives because of differences in the
foregoing variables and differences in the methods used to value portfolio
securities, compute expenses and calculate yield. In addition, investors
should recognize that changes in the net asset value of shares of a Class of
the Funds will affect the yield of each such Class for any specified period,
and such changes should be considered together with the yield in ascertaining
the total return to shareholders of a Class of shares for the period.
From time to time and only to the extent the comparison is
appropriate for a Fund or a Class of shares, the Company may quote the
performance or price-earning ratio of a Fund or Class in advertising and other
types of literature as compared to the performance of the S&P Index, the Dow
Jones Industrial Average, the Lehman Brothers 20+ Treasury Index, the Lehman
Brothers 5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate
Investment Averages (as reported by the National Association of Real Estate
Investment Trusts), Gold Investment Averages (provided by World Gold Council),
Bank Averages (which are calculated from figures supplied by the U.S. League of
Savings Institutions based on effective annual rates of interest on both
passbook and certificate accounts), average annualized certificate of deposit
rates (from the Federal Reserve G-13 Statistical Releases or the Bank Rate
Monitor), the
-21-
<PAGE> 155
Salomon One Year Treasury Benchmark Index, the Consumer Price Index (as
published by the U.S. Bureau of Labor Statistics), other managed or unmanaged
indices or performance data of bonds, municipal securities, stocks or
government securities (including data provided by Ibbotson Associates), or by
other services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices. The
performance of a Class also may be compared to those of other mutual funds
having similar objectives. This comparative performance could be expressed as
a ranking prepared by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Bloomberg Financial Markets or Morningstar, Inc.,
independent services which monitor the performance of mutual funds.
Any such comparisons may be useful to investors who wish to
compare past performance of the Funds with that of competitors. Of course,
past performance cannot be a guarantee of future results. The Company also may
include, from time to time, a reference to certain marketing approaches of the
Distributor, including, for example, a reference to a potential shareholder
being contacted by a selected broker or dealer. General mutual fund statistics
provided by the Investment Company Institute may also be used.
The Company also may disclose in sales literature, the
distribution rate on the shares of a class of the Funds. Distribution rate,
which may be annualized, is the amount determined by dividing the dollar amount
per share of each class of the most recent dividend by the most recent NAV or
maximum offering price per share as of a date specified in the sales
literature. Distribution rate will be accompanied by the standard 30-day yield
as required by the SEC.
The Company also may use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for the Fund: (i) the Consumer Price Index may be
used to assess the real rate of return from an investment in a Fund; (ii) other
government statistics, including, but not limited to, The Survey of Current
Business, may be used to illustrate investment attributes of a Fund or the
general economic, business, investment, or financial environment in which a
Fund operates; (iii) the effect of tax-deferred compounding on the investment
returns of a Fund, or on returns in general, may be illustrated by graphs,
charts, etc., where such graphs or charts would compare, at various points in
time, the return from an investment in a Fund (or returns in general) on a
tax-deferred basis (assuming reinvestment of capital gains and dividends and
assuming one or more tax rates) with the return on a taxable basis; and (iv)
the sectors or industries in which a Fund invests may be compared to relevant
indices of stocks or surveys (e.g., S&P Industry Surveys) to evaluate a Fund's
historical performance or current or potential value with respect to the
particular industry or sector.
The Company also may disclose in sales literature, information and
statements the distribution rate on the shares of each class of the Funds.
Distribution rate, which may be annualized, is the amount determined by
dividing the dollar amount per share of the most recent dividend by the most
recent NAV or maximum offering price per share as of a date specified in the
sales literature. Distribution rate will be accompanied by the standard 30-day
yield as required by the SEC.
-22-
<PAGE> 156
From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability
of combined Wells Fargo Bank and Stagecoach Funds account statements." The
Company may also disclose in advertising and other types of sales literature
the assets and categories of assets under management by its investment adviser
or sub-adviser and the total amount of assets under management by Wells Fargo
Investment Management Group. As of January 1, 1996, IMG had $30.1 billion in
assets under management.
DETERMINATION OF NET ASSET VALUE
The assets of the Bond Fund, other than debt securities maturing
in 60 days or less, are valued at latest quoted bid prices. Debt securities
maturing in 60 days or less are valued at amortized cost. In all cases, bid
prices will be furnished by a reputable independent pricing service approved by
the Board of Directors. Prices provided by an independent pricing service may
be determined without exclusive reliance on quoted prices and may take into
account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data. All other securities and other
assets of the Bond Fund for which current market quotations are not readily
available are valued at fair value as determined in good faith by the Company's
Directors and in accordance with procedures adopted by the Directors.
For the Government Income and Growth Funds, securities for which
market quotations are available are valued at latest prices. Securities of a
Fund for which the primary market is a national securities exchange or the
National Association of Securities Dealers Automated Quotations National Market
System are valued at last sale prices. In the absence of any sale of such
securities on the valuation date and in the case of other securities, including
U.S. Government securities but excluding money market instruments maturing in
60 days or less, the valuations are based on latest quoted bid prices. Money
market instruments maturing in 60 days or less are valued at amortized cost.
Futures contracts will be marked to market daily at their respective settlement
prices determined by the relevant exchange. These prices are not necessarily
final closing prices, but are intended to represent prices prevailing during
the final 30 seconds of the trading day. Options listed on a national exchange
are valued at the last sale price on the exchange on which they are traded at
the close of the NYSE, or, in the absence of any sale on the valuation date, at
latest quoted bid prices. Options not listed on a national exchange are valued
at latest quoted bid prices. Debt securities maturing in 60 days or less are
valued at amortized cost. In all cases, bid prices will be furnished by a
reputable independent pricing service approved by the Board of Directors.
Prices provided by an independent pricing service may be determined without
exclusive reliance on quoted prices and may take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality,
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<PAGE> 157
coupon rate, maturity, type of issue, trading characteristics and other market
data. All other securities and other assets of the Funds for which current
market quotations are not readily available are valued at fair value as
determined in good faith by the Company's Directors and in accordance with
procedures adopted by the Directors.
PORTFOLIO TRANSACTIONS
The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Company's Board of Directors, Wells Fargo Bank is
responsible for the Funds' portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Company to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Funds do not
necessarily pay the lowest spread or commission available.
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.
Except in the case of equity securities purchased by the Growth
Fund, purchases and sales of securities usually are principal transactions.
Portfolio securities normally are purchased or sold from or to dealers serving
as market makers for the securities at a net price. The Funds also purchase
portfolio securities in underwritten offerings and may purchase securities
directly from the issuer. Generally, the obligations in which the Funds invest
are traded on a net basis and do not involve brokerage commissions. The cost
of executing a Fund's portfolio securities transactions consists primarily of
dealer spreads and underwriting commissions. Under the 1940 Act, persons
affiliated with the Company are prohibited from dealing with the Company as a
principal in the purchase and sale of securities unless an exemptive order
allowing such transactions is obtained from the SEC or an exemption is
otherwise available.
The Bond and Income Funds may purchase municipal obligations from
underwriting syndicates of which Stephens, Wells Fargo Bank or their affiliates
is a member under certain conditions in accordance with the provisions of a
rule adopted under the 1940 Act and in compliance with procedures adopted by
the Board of Directors.
For the Growth Fund, purchases and sales of equity securities on a
securities exchange are effected through brokers who charge a negotiated
commission for their services. Orders may be directed to any broker including,
to the extent and in the manner permitted by applicable law, Stephens or Wells
Fargo Securities Inc. In the over-the-counter market,
-24-
<PAGE> 158
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. No Fund will deal with Stephens, Wells Fargo Bank or
their affiliates in any transaction in which any of them acts as principal
without an exemptive order from the SEC or unless an exemption is otherwise
available.
In placing orders for portfolio securities of the Growth Fund,
Wells Fargo Bank is required to give primary consideration to obtaining the
most favorable price and efficient execution. This means that Wells Fargo Bank
will seek to execute each transaction at a price and commission, if any, that
provide the most favorable total cost or proceeds reasonably attainable in the
circumstances. While Wells Fargo Bank will generally seek reasonably
competitive spreads or commissions, the Fund will not necessarily be paying the
lowest spread or commission available. Commission rates are established
pursuant to negotiations with the broker based on the quality and quantity of
execution services provided by the broker in the light of generally prevailing
rates. The allocation of orders among brokers and the commission rates paid
are reviewed periodically by the Board of Directors.
Wells Fargo Bank, as the Funds' investment adviser, may, in
circumstances in which two or more dealers are in a position to offer
comparable results for a Fund portfolio transaction, give preference to a
dealer that has provided statistical or other research services to Wells Fargo
Bank. By allocating transactions in this manner, Wells Fargo Bank is able to
supplement its research and analysis with the views and information of
securities firms. Information so received will be in addition to, and not in
lieu of, the services required to be performed by Wells Fargo Bank under the
Advisory Contracts, and the expenses of Wells Fargo Bank will not necessarily
be reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by dealers through which
Wells Fargo Bank places securities transactions for each Fund may be used by
Wells Fargo Bank in servicing its other accounts, and not all of these services
may be used by Wells Fargo Bank in connection with advising such Fund.
Brokerage Commissions. For the years ended December 31, 1993,
1994 and 1995 the Funds paid the following for brokerage commissions:
<TABLE>
<CAPTION>
FUND 1993 1994 1995
==========================================================================================================
<S> <C> <C> <C>
California Tax-Free Bond Fund $0 $0 $0
California Tax-Free Income Fund $0 $0 $0
Short-Intermediate U.S. $0 $0 $0
Government Income Fund
Growth and Income Fund $ 347,779 $ 407,643 $ 607,442
Money Market Mutual Fund $0 $0 $0
Ginnie Mae Fund $0 $0 $0
</TABLE>
-25-
<PAGE> 159
Securities of Regular Broker/Dealers. As of December 31, 1995,
each Fund owned securities of its "regular brokers or dealers" or their parents
as defined in the Act, as follows:
<TABLE>
<CAPTION>
FUND AMOUNT REGULAR BROKER/DEALER
=====================================================================================================
<S> <C> <C>
California Tax-Free Income Fund $0 N/A
California Tax-Free Bond Fund $0 N/A
Short-Intermediate U.S.
Government Income Fund $1,119,000 Goldman Sachs & Co.
Growth and Income Fund $1,998,000 Goldman Sachs & Co.
Money Market Mutual Fund $0 N/A
Ginnie Mae Fund $ 587,000 Goldman Sachs & Co.
</TABLE>
Portfolio Turnover. For the Government Income Fund, portfolio
turnover generally involves some expenses to the Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover can
generate short-term capital gain tax consequences. The portfolio turnover rate
for the Fund generally is not expected to exceed 100%. For the Bond Fund and
the Income Fund, the portfolio turnover rate for the Funds generally is not
expected to exceed 300%. For the Money Market Mutual Fund, because the
portfolios of the Fund consist of securities with relatively short-term
maturities, the Fund can expect to experience high portfolio turnover rates.
The higher portfolio rates of the Ginnie Mae Fund should not adversely affect
it because portfolio transactions are made directly with principals on a net
basis and, consequently, the Fund usually does not incur brokerage expenses.
For the Funds, the portfolio turnover rate is not a limiting factor when Wells
Fargo Bank deems portfolio changes appropriate.
-26-
<PAGE> 160
FUND EXPENSES
Except for the expenses borne by Wells Fargo Bank and Stephens,
the Funds bear all costs of its operations, including the compensation of its
Directors who are not affiliated with Stephens or Wells Fargo Bank or any of
their affiliates; advisory and administration fees; interest charges; taxes;
fees and expenses of its independent auditors, legal counsel, transfer agent
and dividend disbursing agent; expenses of redeeming shares; expenses of
preparing and printing prospectuses (except the expense of printing and mailing
prospectuses used for promotional purposes), shareholders' reports, notices,
proxy statements and reports to regulatory agencies; insurance premiums and
certain expenses relating to insurance coverage; trade association membership
dues; brokerage and other expenses connected with the execution of portfolio
transactions; fees and expenses of its custodian, including those for keeping
books and accounts and calculating the NAV per share of a Fund; expenses of
shareholders' meetings; expenses relating to the issuance, registration and
qualification of a Fund's shares; pricing services, and any extraordinary
expenses. Expenses attributable to a Fund are charged against the Fund's
assets, and expenses of a class (such as shareholder servicing fees or expenses
paid pursuant to a Plan) are charged against the assets of the class. General
expenses of the Company are allocated among all of the funds of the Company,
including each 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.
FEDERAL INCOME TAXES
The Prospectuses describes generally the tax treatment of
distributions by the Funds. This section of the SAI includes additional
information concerning federal income taxes.
Qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"), requires, among other
things, that (a) at least 90% of a Fund's annual gross income be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of securities or options thereon; (b) a Fund
derives less than 30% of its gross income from gains from the sale or other
disposition of securities or options thereon held for less than three months;
and (c) a Fund diversifies its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of the Fund's assets is
represented by cash, government securities 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 securities and the securities of other
regulated investment companies), or of two or more issuers which the Fund
controls and which are determined to be engaged in the same or similar trades
or businesses or related trades or businesses. As a regulated investment
company, each Fund will not be subject to federal income tax on its net
investment income and net capital gains distributed to its shareholders,
provided, among other things, that it distributes to its stockholders at least
90% of its net investment income and tax-exempt income earned in each year.
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<PAGE> 161
In addition, in order to qualify under the Code to pay
exempt-interest dividends, the Bond Fund and the Income Fund intend that at
least 50% of the value of their respective total assets at the close of each
quarter of a taxable year will consist of obligations the interest on which is
exempt from federal income tax. The portion of total dividends paid by a Fund
with respect to any taxable year that constitutes tax-exempt-interest dividends
will be the same for all shareholders receiving dividends during such year.
The exemption of interest income derived from investments in tax-exempt
obligations for federal income tax purposes may not result in a similar
exemption under the laws of a particular state or local taxing authority.
However, see "California Tax Issues" below.
Although the Funds' dividends will be declared daily based on each
day's earnings, for federal income tax purposes, the Funds' earnings and
profits will be determined at the end of each taxable year and will be
allocated pro rata over the entire year. For federal tax purposes, only
amounts paid out of earnings and profits will qualify as dividends. Thus, if
during a taxable year, the Fund's declared dividends (as declared daily
throughout the year) exceed the Fund's net income (as determined at the end of
the year), only that portion of the year's distributions which equals the
year's earnings and profits will be deemed to have constituted a dividend. It
is expected that the Fund's net income, on an annual basis, will equal the
dividends declared during the year.
Generally, dividends and distributions of capital gain are taxable
to shareholders when paid. However, dividends and distributions declared
payable in October, November or December and made payable to shareholders of
record in such a month are treated as paid and are thereby taxable as of
December 31, provided that such dividends or distributions are actually paid no
later than January 31 of the following year.
In addition, a 4% nondeductible excise tax will be imposed on each Fund
(other than to the extent of the Fund's tax-exempt income) to the extent it
does not meet certain minimum distribution requirements by the end of each
calendar year. Each Fund will either distribute, or be deemed to distribute,
all of its net investment income and net capital gains by the end of the
calendar year and, thus, expects not to be subject to the excise tax.
Income and dividends received by a Fund from sources within
foreign countries may be subject to withholding and other taxes (generally at
rates of 10% to 40%) imposed by such countries. Tax conventions between
certain countries and the United States may reduce or eliminate such taxes.
Because not more than 50% of the value of the total assets of any Fund is
expected to consist of securities of foreign issuers, each Fund will not be
eligible to elect to "pass through" foreign tax credits to shareholders.
For the Income Fund and the Bond Fund, gains or losses on sales of
portfolio securities by each Fund will generally be long-term capital gains or
losses if the securities have been held by it for more than one year, except in
certain cases where a Fund acquires a put thereon. Gain recognized on the
disposition of a debt obligation (including tax-exempt obligations purchased
after April 30, 1993) purchased by a Fund at a market discount (generally, at a
price less than its principal amount) will be treated as ordinary income to the
extent of the
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portion of the market discount which accrued during the period of time the Fund
held the debt obligation. Other gains or losses on the sale of securities will
be short-term capital gains or losses. To the extent that a Fund recognizes
long-term capital gains, such gains will be distributed at least annually.
Such distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares. Such distributions
will be designated as a capital gains distributions in a written notice mailed
by the Fund to the shareholders not later than 60 days after the close of the
Fund's taxable year.
For the Government Income and Growth Funds, gains or losses on
sales of portfolio securities by a Fund will generally be long-term capital
gains or losses if the securities have been held by it for more than one year.
Other gains or losses on the sale of securities will be short-term capital
gains or losses. To the extent that a Fund recognizes long-term capital gains,
such gains will be distributed at least annually. Such distributions will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares. Such distributions will be designated as a
capital gain distribution in a written notice mailed by the Fund to
shareholders not later than 60 days after the close of the Fund's taxable year.
If a shareholder receives such a designated capital gain distribution (to be
treated by the shareholder as a long-term capital gain) with respect to any
Fund share and such Fund share is held for six months or less, then (unless
otherwise disallowed) any loss on the sale or exchange of that Fund share will
be treated as a long-term capital loss to the extent of the designated capital
gains distribution. Gain recognized on the disposition of a debt obligation
purchased by the Fund at a market discount (generally, at a price less than its
principal amount) will be treated as ordinary income to the extent of the
portion of the market discount which accrued during the period of time the Fund
held the debt obligation.
For a Fund, if a shareholder receives such a designated
capital-gain distribution (to be treated by the shareholder as a long-term
capital gain) with respect to any Fund share and such Fund share is held for
six months or less, then (unless otherwise disallowed) any loss on the sale or
exchange of that Fund share will be treated as a long- term capital loss to the
extent of the designated and capital gain distribution. In addition, any loss
realized by a shareholder upon the sale or redemption of Fund shares held less
than six months is disallowed to the extent of any exempt-interest dividends
received thereon by the shareholder. These rules shall not apply, however, to
losses incurred under a periodic redemption plan.
As of the printing of this SAI, the maximum individual marginal
tax rate applicable to ordinary income is 39.60% (marginal rates may be higher
for some individuals due to the phase-out of exemptions and elimination of
deductions), the maximum individual rate applicable to net realized capital
gains is 28.00%; and the maximum corporate tax rate applicable to ordinary
income and net realized capital gains is 35.00%. However, to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of income tax of up to $100,000.
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Corporate shareholders of the Growth Fund may be eligible for the
dividends-received deduction on the dividends paid out of the Fund's net
investment income attributable to dividends received from domestic corporations
which, if received directly, would qualify for such deduction. In order to
qualify for the dividends-received deduction, a corporate shareholder must hold
the Fund shares paying the dividends upon which the deduction is based for at
least 46 days.
Also, any loss realized on a redemption or exchange of shares of a
Fund will be disallowed to the extent that substantially identical shares are
reacquired within the 61-day period beginning 30 days before and ending 30 days
after the shares are disposed of.
If, in the opinion of the Fund, ownership of its shares has or may
become concentrated to an extent that could cause the Fund to be deemed a
personal holding company within the meaning of the Code, the Fund may require
the redemption of shares or reject any order for the purchase of shares in an
effort to prevent such concentration.
Foreign Shareholders. Under the Code, distributions of net
investment income by each Fund to a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or a lower treaty rate). Withholding will not apply if a
dividend paid by a Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.
Other Matters. Investors should be aware that the investments to
be made by the Funds may involve sophisticated tax rules such as the original
issue discount, marked to market and real estate mortgage investment conduit
("REMIC") rules that would result in income or gain recognition by a Fund
without corresponding current cash receipts. Although each Fund will seek to
avoid significant noncash income, such noncash income could be recognized by a
Fund, in which case a Fund may distribute cash derived from other sources in
order to meet the minimum distribution requirements described above.
It is expected that the net income of each Fund will be a positive
amount at the time of each determination thereof. If, however, the net income
of a Fund determined at any time is a negative amount (which could occur, for
instance, upon nonpayment of interest and/or principal by an issuer of a
security held by the Fund), a Fund would, pursuant to SEC rules, first offset
the negative amount with respect to each shareholder account from the dividends
declared during the month with respect to each such account. If, and to the
extent that, such negative amount exceeds such declared dividends at the end of
the month, a Fund will reduce the number of its outstanding shares by treating
each shareholder as having contributed to the capital of the Fund that number
of full and fractional shares in the account of such shareholder which
represents the
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shareholder's proportion of the amount of such excess. Each shareholder will
be deemed to have agreed to such contribution in these circumstances by
investing in a Fund.
Special Tax Considerations for the Bond and Income Funds
Federal -- The Funds do not expect to earn any significant
investment company taxable income. If the Funds do earn any taxable income,
such income, when distributed, will be taxable to shareholders. Not later than
60 days after the close of its taxable year, each Fund will notify its
shareholders of the portion of the dividends paid with respect to such taxable
year which constitutes interest dividends. The aggregate amount of dividends
so designated cannot exceed the excess of the amount of interest excludable
from gross income under Section 103 of the Code received by such Fund during
the taxable year over any amounts disallowed as deductions under Sections 265
and 171(a)(2) of the Code.
Shareholders who may be "substantial users" (or related persons of
substantial users) with respect to municipal securities held by the Funds
should consult their tax advisors to determine whether exempt-interest
dividends and California exempt-interest dividends (as defined below) paid by a
Fund with respect to such obligations retain their federal and California tax
exclusions. In this connection, the rules regarding the possible
unavailability of exempt dividend treatment to substantial users are similar
for federal and California state tax purposes.
Interest on indebtedness incurred or continued to purchase or
carry shares of the Funds will not be deductible to the extent that the Funds'
distributions are exempt from federal and California income tax.
California Tax Issues -- Each Fund expects to be exempt from tax
in California on the same basis as under Subchapter M of the Code as described
above. Moreover, if at the close of each quarter of the Company's taxable
year, at least 50% of the value of a Fund's total assets consists of
obligations the interest on which, if such obligations were held by an
individual, would be exempt from California personal income tax (under either
the laws of California or of the United States), the Fund will be entitled to
pay dividends to its shareholders that will be exempt from California personal
income tax (hereinafter referred to as "California exempt-interest dividends").
Under normal market conditions, the Funds will invest primarily in municipal
securities of the State of California, its cities, municipalities and other
political authorities. The Funds intend to qualify under the above
requirements so that they can pay California exempt-interest dividends.
Not later than 60 days after the close of its taxable year, each
Fund will notify its shareholders of the portion of the dividends paid which
constitutes California exempt-interest dividends with respect to such taxable
year. The total amount of California exempt-interest dividends paid by each
Fund to all of its shareholders with respect to any taxable year cannot exceed
the amount of interest received by the Fund during such year on California
municipal securities and other obligations the interest on which is tax exempt,
less any expenses or expenditures (including any expenditures attributable to
the acquisition of securities of other
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investment companies). Dividends paid by each Fund in excess of this
limitation will be treated as ordinary dividends subject to California personal
income tax at ordinary rates.
Long-term and/or short-term capital gain distributions will not
constitute California exempt-interest dividends and will be taxed as capital
gains and ordinary income dividends, respectively. Moreover, interest on
indebtedness incurred by a shareholder to purchase or carry shares of a Fund is
not deductible for California personal income tax purposes to the extent the
shareholder receives California exempt-interest dividends during his or her
taxable year. Exempt-interest dividends will be tax exempt for purposes of the
California personal income tax. For corporate shareholders, dividends will be
subject to the corporate franchise taxes in California.
Other Matters. Shares of the Bond Fund and the Income Fund would
not be suitable for tax-exempt institutions and may not be suitable for
retirement plans qualified under Section 401 of the Code, H.R. 10 plans and
IRAs since such plans and accounts are generally tax-exempt and, therefore,
would not benefit from the exempt status of dividends from such Fund. Such
dividends would be ultimately taxable to the beneficiaries when distributed to
them.
CAPITAL STOCK
The Company, an open-end, management investment company, was
incorporated in Maryland on September 9, 1991. The authorized capital stock of
the Company consists of 15,000,000,000 shares having a par value of $.001 per
share. As of the date of this SAI, the Company's Board of Directors has
authorized the issuance 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, Short- Intermediate U.S. Government
Income and U.S. Government Allocation Funds -- and the Board of Directors may,
in the future, authorize the issuance of other funds representing shares of
additional investment portfolios.
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, 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. The Bond, Ginnie Mae, Growth and Money Market Mutual Funds are
comprised of three classes of shares and the Government Income and Income Funds
are comprised of two classes of shares. 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. With respect
to matters affecting one class, but not another, shareholders of each Fund vote
as a class. For example, approval of a distribution plan is voted on only by
members of the class affected by the plan. Subject to the foregoing, all
shares of a Fund have equal voting rights. In situations where voting by
series (fund) is required by law or
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where the matter involved affects only one series, shares of each Fund vote by
series. For example, a change in a Fund's fundamental investment policy would
be voted upon by only shareholders of the Fund involved. Additionally,
approval of an advisory contract is a matter to be determined separately by a
Fund. Approval by the shareholders of one Fund is effective as to that Fund
whether or not sufficient votes are received from the shareholders of other
series to approve the proposal as to those series. As used in the Prospectuses
and in this SAI, the term "majority", when referring to approvals to be
obtained from shareholders means the vote of the lesser of (i) 67% of the
shares of the Fund, or the respective class of the Fund, depending on the
context, represented at a meeting if the holders of more than 50% of the
outstanding shares of the Fund, or of such class of the Fund, are present in
person or by proxy, or (ii) more than 50% of the outstanding shares of such
Fund, or of the respective class of the Fund. Shareholders are entitled to one
vote for each full share held and fractional votes for fractional shares held.
The Company is not required to hold annual meetings of
shareholders and may dispense with a special meeting of shareholders in any
year in which it is not required to elect Directors under the 1940 Act.
Each Fund share represents an equal proportional interest in the
Fund with every other share and is entitled to such dividends and distributions
out of the income earned on the assets belonging to the Fund as are declared in
the discretion of the Directors. In the event of the liquidation or
dissolution of the Company, shareholders of a Fund are entitled to receive the
assets attributable to the Fund that are available for distribution, and a
distribution of any general assets not attributable to a particular investment
portfolio that are available for distribution in such manner and on such basis
as the Directors in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All
shares, when issued for the consideration described in the applicable
Prospectus, will be fully paid and non-assessable by the Company.
As of April 1, 1996, no shareholders were known by the Company to
own 5% or more of the outstanding Class A Shares of the Funds.
OTHER
The Registration Statement, including the Prospectuses, the SAI
and the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C. Statements contained in the Prospectuses or the SAI as to the
contents of any contract or other document are not necessarily complete, and,
in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
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INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been selected as the independent auditor
for the Company. KPMG Peat Marwick LLP provides audit services, tax return
preparation and assistance and consultation in connection with review of
certain SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero
Center, San Francisco, California 94111.
FINANCIAL INFORMATION
The audited financial statements and portfolio of investments
contained in the Company's Annual Report for the most recent fiscal year will
be sent free of charge with this SAI to any shareholder who requests the SAI.
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SAI APPENDIX
The following is a description of the ratings given by Moody's and
S&P to corporate and municipal bonds, municipal notes, and corporate and
municipal commercial paper.
Corporate and Municipal Bonds
Moody's: The four highest ratings for corporate and municipal
bonds are "Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of
the "best quality" and carry the smallest amount of investment risk. Bonds
rated "Aa" are of "high quality by all standards," but margins of protection or
other elements make long-term risks appear somewhat greater than "Aaa" rated
bonds. Bonds rated "A" possess many favorable investment attributes and are
considered to be upper medium grade obligations. Bonds rated "Baa" are
considered to be medium grade obligations; interest payments and principal
security appear adequate for the present, but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds have speculative characteristics as well. Moody's applies
numerical modifiers: 1, 2 and 3 in each rating category from "Aa" through
"Baa" in its rating system. The modifier 1 indicates that the security ranks
in the higher end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds
are "AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings
assigned by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded 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. The ratings from "AA" to "BBB" may be modified by the addition of
a plus or minus sign to show relative standing within the category.
Municipal Notes
Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality." Notes rated "MIG
2" or "VMIG 2" are of "high quality," with margins of protections "ample
although not as large as in the preceding group." Notes rated "MIG 3" or
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<PAGE> 169
"VMIG 3" are of "favorable quality," with all security elements accounted for,
but lacking the strength of the preceding grades.
S&P: The "SP-1" rating reflects a "very strong or strong capacity
to pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
Corporate and Municipal Commercial Paper
Moody's: The highest rating for corporate and municipal
commercial paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior
capacity for repayment of short-term promissory obligations." Issuers rated
"P-2" (Prime- 2) "have a strong capacity for repayment of short-term promissory
obligations," but earnings trends, while sound, will be subject to more
variation.
S&P: The "A-1" rating for corporate and municipal commercial
paper indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."
Corporate Notes
S&P: The two highest ratings for corporate notes are "SP-1" and
"SP-2." The "SP-1" rating reflects a "very strong or strong capacity to pay
principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
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STAGECOACH FUNDS, INC.
SEC REGISTRATION NOS. 33-42927; 811-6419
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Not Applicable.
(b) Exhibits:
Exhibit
Number Description
------ -----------
1 - Amended and Restated Articles of
Incorporation dated November 22, 1995,
incorporated by reference to Post-Effective
Amendment No. 17 to the Registration
Statement, filed November 29, 1995.
2 - By-Laws, incorporated by reference to the
Initial Registration Statement, filed
September 30, 1991.
3 - Not Applicable
4 - Not Applicable
5(a)(i)(A) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Asset Allocation
Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(i)(B) - Sub-Advisory Contract with BZW Barclays
Global Fund Advisors on behalf of the Asset
Allocation Fund, incorporated by reference
to Post-Effective Amendment No. 21 to the
Registration Statement, filed February 29,
1996.
(ii)(A) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the U.S. Government
Allocation Fund, incorporated by reference
to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(ii)(B) - Sub-Advisory Contract with BZW Barclays
Global Fund Advisors on behalf of the U.S.
Government Allocation Fund, incorporated by
reference to Post-Effective Amendment No.
21 to the Registration Statement, filed
February 29, 1996.
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(iii) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the California Tax-Free
Money Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April
17, 1992.
(iv) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the California Tax-Free
Bond Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(v) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Ginnie Mae Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(vi) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Growth and Income
Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(vii)(A) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Corporate Stock Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(vii)(B) - Sub-Advisory Contract with BZW Barclays
Global Fund Advisors on behalf of the
Corporate Stock Fund, incorporated by
reference to Post-Effective Amendment No.
21 to the Registration Statement, filed
February 29, 1996.
(viii) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Money Market Mutual
Fund, incorporated by reference to
Post-Effective Amendment No. 3 to the
Registration Statement, filed May 1, 1992.
(ix) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the California Tax-Free
Income Fund, incorporated by reference to
Post-Effective Amendment No. 4 to the
Registration Statement, filed September 10,
1992.
(x) - Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Diversified Income
Fund, incorporated by reference to
Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29,
1995.
5(b)(i) - Administration Agreement with Stephens Inc.
on behalf of the Asset Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(ii) - Administration Agreement with Stephens Inc.
on behalf of the U.S. Government Allocation
Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(b)(iii) - Administration Agreement with Stephens Inc.
on behalf of the California Tax-Free Bond
Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(b)(iv) - Administration Agreement with Stephens Inc.
on behalf of the California Tax-Free Money
Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April
17, 1992.
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(b)(v) - Administration Agreement with Stephens Inc.
on behalf of the Ginnie Mae Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(vi) - Administration Agreement with Stephens Inc.
on behalf of the Growth and Income Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(vii) - Administration Agreement with Stephens Inc.
on behalf of the Corporate Stock Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(viii) - Administration Agreement with Stephens Inc.
on behalf of the Money Market Mutual Fund,
incorporated by reference to Post-Effective
Amendment No. 3 to the Registration
Statement, filed May 1, 1992.
(b)(ix) - Form of Administration Agreement with
Stephens Inc. on behalf of the California
Tax- Free Income Fund, incorporated by
reference to Post-Effective Amendment No. 4
to the Registration Statement, filed
September 10, 1992.
(b)(x) - Form of Administration Agreement with
Stephens Inc. on behalf of the
Diversified Income Fund,incorporated by
reference to Post-Effective Amendment No. 4
to the Registration Statement, filed
September 10, 1992.
(b)(xi) - Administration Agreement with Stephens Inc.
on behalf of the Short-Intermediate U.S.
Government Income Fund, incorporated by
reference to Post-Effective Amendment No. 8
to the Registration Statement, filed
February 10, 1994.
(b)(xii) - Administration Agreement with Stephens Inc.
on behalf of the National Tax-Free Money
Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No.
19 to the Registration Statement, filed
December 18, 1995.
(b)(xiii) - Administration Agreement with Stephens Inc.
on behalf of the Aggressive Growth Fund,
incorporated by reference to Post-Effective
Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
6(a) - Amended Distribution Agreement with
Stephens Inc., incorporated by reference to
Post- Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(i) - Selling Agreement with Marketing One
Securities, Inc. on behalf of the Funds,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(ii) - Selling Agreement with Wells Fargo Bank,
N.A. on behalf of the Funds, incorporated
by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed
April 17, 1992.
7 - Not Applicable
8(a) - Custody Agreement with Wells Fargo
Institutional Trust Company, N.A. on behalf
of the Asset Allocation Fund, incorporated
by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed
April 17, 1992.
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<PAGE> 173
(b) - Custody Agreement with Wells Fargo
Institutional Trust Company, N.A. on behalf
of the U.S. Government Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(c) - Custody Agreement with Wells Fargo
Institutional Trust Company, N.A. on behalf
of the Corporate Stock Fund, incorporated
by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed
April 17, 1992.
(d) - Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the California Tax-Free
Money Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April
17, 1992.
(e) - Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the California Tax-Free
Bond Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(f) - Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the Growth and Income
Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(g) - Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the Ginnie Mae Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(h) - Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the Money Market Fund,
incorporated by reference to Post-Effective
Amendment No. 3 to the Registration
Statement, filed May 1, 1992.
(i) - Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the California Tax-Free
Income Fund, incorporated by reference to
Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29,
1995.
(j) - Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the Diversified Income
Fund, incorporated by reference to
Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29,
1995.
(k) - Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the Short-Intermediate
U.S. Government Income Fund, incorporated
by reference to Post-Effective Amendment
No. 8 to the Registration Statement, filed
February 10, 1994.
(l) - Form of Custody Agreement with Wells Fargo
Bank, N.A. on behalf of the National Tax-
Free Money Market Mutual Fund, incorporated
by reference to Post-Effective Amendment
No. 17 to the Registration Statement, filed
November 29, 1995.
(m) - Form of Custody Agreement with Wells Fargo
Bank, N.A. on behalf of the Aggressive
Growth Fund, incorporated by reference to
Post-Effective Amendment No. 19 to the
Registration Statement, filed December 18,
1995.
9(a)(i) - Agency Agreement with Wells Fargo Bank,
N.A. on behalf of the Funds, incorporated
by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed
April 17, 1992.
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9(a)(ii) - Form of Agency Agreement with Wells Fargo
Bank, N.A. on behalf of the National Tax-
Free Money Market Mutual Fund, incorporated
by reference to Post-Effective Amendment
No. 17 to the Registration Statement, filed
November 29, 1995.
9(a)(iii) - Form of Agency Agreement with Wells Fargo
Bank, N.A. on behalf of the Aggressive
Growth Fund, incorporated by reference to
Post-Effective Amendment No. 19 to the
Registration Statement, filed December 18,
1995.
9(b)(i) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the
California Tax-Free Money Market Mutual
Fund, incorporated by reference to Post-
Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(b)(ii) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Corporate
Stock Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(b)(iii) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Money
Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 3
to the Registration Statement, filed May 1,
1992.
(b)(iv) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the
California Tax-Free Income Fund,
incorporated by reference to Post-Effective
Amendment No. 17 to the Registration
Statement, filed November 29, 1995.
(b)(v) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Short-
Intermediate U.S. Government Income Fund,
incorporated by reference to Post-Effective
Amendment No. 8 to the Registration
Statement, filed February 10, 1994.
(b)(vi) - Form of Shareholder Servicing Agreement
with Wells Fargo Bank, N.A. on behalf of
the National Tax-Free Money Market Mutual
Fund, incorporated by reference to Post-
Effective Amendment No. 17 to the
Registration Statement, filed November 29,
1995.
(b)(vii) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class B
Shares of the Asset Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(viii) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class B
Shares of the California Tax-Free Bond
Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(ix) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class B
Shares of the Diversified Income Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(x) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class B
Shares of the Ginnie Mae Fund, incorporated
by reference to Post-Effective Amendment
No. 15 to the Registration Statement, filed
May 1, 1995.
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(b)(xi) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class B
Shares of the Growth and Income Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(xii) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class B
Shares of the U.S. Government Allocation
Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(xiii) - Form of Shareholder Servicing Agreement
with Wells Fargo Bank, N.A. on behalf of
the Class B Shares of the Aggressive Growth
Fund, incorporated by reference to Post-
Effective Amendment No. 19 to the
Registration Statement, filed December 18,
1995.
(b)(xiv) - Amended Shareholder Servicing Agreement
with Wells Fargo Bank, N.A. on behalf of
the Class A Shares of the Asset Allocation
Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(xv) - Amended Shareholder Servicing Agreement
with Wells Fargo Bank, N.A. on behalf of
the Class A Shares of the California
Tax-Free Bond Fund, incorporated by
reference to Post-Effective Amendment No.
15 to the Registration Statement, filed May
1, 1995.
(b)(xvi) - Amended Shareholder Servicing Agreement
with Wells Fargo Bank, N.A. on behalf of
the Class A Shares of the Diversified
Income Fund, incorporated by reference to
Post- Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(xvii) - Amended Shareholder Servicing Agreement
with Wells Fargo Bank, N.A. on behalf of
the Class AShares of the Ginnie Mae Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(xviii) - Amended Shareholder Servicing Agreement
with Wells Fargo Bank, N.A. on behalf of
the Class A Shares of the Growth and Income
Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(xix) - Amended Shareholder Servicing Agreement
with Wells Fargo Bank, N.A. on behalf of
the Class A Shares of the U.S. Government
Allocation Fund, incorporated by reference
to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(xx) - Form of Shareholder Servicing Agreement
with Wells Fargo Bank, N.A. on behalf of
the Class A Shares of the Aggressive Growth
Fund, incorporated by reference to Post-
Effective Amendment No. 19 to the
Registration Statement, filed December 18,
1995.
(c) - Cross Indemnification Agreement,
incorporated by reference to Post-Effective
Amendment No. 11 to the Registration
Statement of Stagecoach Inc., filed July
27, 1994.
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(d)(i) - Servicing Plan on behalf of the National
Tax-Free Money Market Mutual Fund,
incorporated by reference to Post-Effective
Amendment No. 17 to the Registration
Statement, filed November 29, 1995.
(d)(ii) - Servicing Plan on behalf of the Class B
Shares of the Asset Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(d)(iii) - Servicing Plan on behalf of the Class B
Shares of the California Tax-Free Bond
Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(d)(iv) - Servicing Plan on behalf of the Class B
Shares of the Diversified Income Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(d)(v) - Servicing Plan on behalf of the Class B
Shares of the Ginnie Mae Fund, incorporated
by reference to Post-Effective Amendment
No. 15 to the Registration Statement, filed
May 1, 1995.
(d)(vi) - Servicing Plan on behalf of the Class B
Shares of the Growth and Income Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(d)(vii) - Servicing Plan on behalf of the Class B
Shares of the U.S. Government Allocation
Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(d)(viii) - Servicing Plan on behalf of the Class B
Shares of the Aggressive Growth Fund,
incorporated by reference to Post-Effective
Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
(d)(ix) - Servicing Plan on behalf of the Class A
Shares of the Aggressive Growth Fund,
incorporated by reference to Post-Effective
Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
10 - Opinion and Consent of Counsel, filed
herewith.
11 - Not Applicable.
12 - Not Applicable
13 - Investment letter, incorporated by
reference to Item 24(b) of Pre-Effective
Amendment No. 1 to the Registration
Statement, filed November 29, 1991.
14 - Not Applicable
15(a)(i) - Distribution Plan on behalf of the
California Tax-Free Money Market Mutual
Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17,
1992.
(a)(ii) - Distribution Plan on behalf of the
Corporate Stock Fund, incorporated by
reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April
17, 1992.
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(a)(iii) - Distribution Plan on behalf of the Money
Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 3
to the Registration Statement, filed May 1,
1992.
(a)(iv) - Distribution Plan on behalf of the
California Tax-Free Income Fund,
incorporated by reference to Post-Effective
Amendment No. 4 to the Registration
Statement, filed September 10, 1992.
(a)(v) - Distribution Plan on behalf of the
Short-Intermediate U.S. Government Income
Fund, incorporated by reference to
Post-Effective Amendment No. 8 to the
Registration Statement, filed February 10,
1994.
(a)(vi) - Distribution Plan on behalf of the National
Tax-Free Money Market Mutual Fund,
incorporated by reference to Post-Effective
Amendment No. 17 to the Registration
Statement, filed November 29, 1995.
(b)(i) - Distribution Plan on behalf of the Class B
Shares of the Asset Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(ii) - Distribution Plan on behalf of the Class B
Shares of the California Tax-Free Bond
Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(iii) - Distribution Plan on behalf of the Class B
Shares of the Diversified Income Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(iv) - Distribution Plan on behalf of the Class B
Shares of the Ginnie Mae Fund, incorporated
by reference to Post-Effective Amendment
No. 15 to the Registration Statement, filed
May 1, 1995.
(b)(v) - Distribution Plan on behalf of the Class B
Shares of the Growth and Income Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(vi) - Distribution Plan on behalf of the Class B
Shares of the U.S. Government Allocation
Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(vii) - Distribution Plan on behalf of the Class B
Shares of the Aggressive Growth Fund,
incorporated by reference to Post-Effective
Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
(c)(i) - Amended Distribution Plan on behalf of the
Class A Shares of the Asset Allocation
Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(c)(ii) - Amended Distribution Plan on behalf of the
Class A Shares of the California Tax-Free
Bond Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
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(c)(iii) - Amended Distribution Plan on behalf of the
Class A Shares of the Diversified Income
Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(c)(iv) - Amended Distribution Plan on behalf of the
Class A Shares of the Ginnie Mae Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(c)(v) - Amended Distribution Plan on behalf of the
Class A Shares of the Growth and Income
Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(c)(vi) - Amended Distribution Plan on behalf of the
Class A Shares of the U.S. Government
Allocation Fund, incorporated by reference
to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(c)(vii) - Distribution Plan on behalf of the Class A
Shares of the Aggressive Growth Fund,
incorporated by reference to Post-Effective
Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
16(a) - Schedules for Computation of Performance
Data, incorporated by reference to Post-
Effective Amendment No. 2, filed April 17,
1992.
16(b) - Schedules for Computation of Performance
Data, incorporated by reference to Post-
Effective Amendment No. 15, filed May 1,
1995.
17 - Powers of Attorney, incorporated by
reference to Initial Registration
Statement, filed September 30, 1991.
18(a) - Rule 18f-3 Multi-Class Plan, incorporated
by reference to Post-Effective Amendment
No. 14 to the Registration Statement, filed
April 14, 1995.
18(b) - Amended Rule 18f-3 Multi-Class Plan,
incorporated by reference to Post-Effective
Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant
No person is controlled by or under common control with
Registrant.
Item 26. Number of Holders of Securities
As of February 29, 1996, the number of record holders of each
class of Securities of the Registrant was as follows:
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<TABLE>
<CAPTION>
Number of Record Holders
------------------------
Title of Class
--------------
Class A* Class B
------- -------
<S> <C> <C>
Aggressive Growth Fund 1 1
Asset Allocation Fund 69,567 2,005
California Tax-Free Bond Fund 9,384 765
California Tax-Free Income Fund 2,858 N/A
California Tax-Free Money Market Mutual Fund 30,350 N/A
Corporate Stock Fund 28,957 N/A
Diversified Income Fund 10,673 368
Ginnie Mae Fund 13,715 468
Growth and Income Fund 22,506 537
Money Market Mutual Fund 147,972 4,542**
National Tax-Free Money Market 1 N/A
Mutual Fund
Short-Intermediate U.S. Government 5,124 N/A
Income Fund
U.S. Government Allocation Fund 14,705 178
</TABLE>
* For purposes of this chart, shares of single class Funds are included under
the designation "Class A"
** Designates the number of Class S Shares outstanding.
Item 27. Indemnification
The following paragraphs of Article VIII of the Registrant's
Articles of Incorporation provide:
(h) The Corporation shall indemnify (1) its Directors and
Officers, whether serving the Corporation or at its request any other entity,
to the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law, and (2) its other employees
and agents to such extent as shall be authorized by the Board of Directors or
the Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from
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time to time such By-Laws, resolutions or contracts implementing such
provisions or such further indemnification arrangements as may be permitted by
law. No amendment of these Articles of Incorporation of the Corporation shall
limit or eliminate the right to indemnification provided hereunder with respect
to acts or omissions occurring prior to such amendment or repeal. Nothing
contained herein shall be construed to authorize the Corporation to indemnify
any Director or officer of the Corporation against any liability to the
Corporation or to any holders of securities of the Corporation to which he is
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office. Any
indemnification by the Corporation shall be consistent with the requirements of
law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland
statutory and decisional law and the 1940 Act, as amended or interpreted, no
Director or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for money damages; provided, however, that
nothing herein shall be construed to protect any Director or officer of the
Corporation against any liability to which such Director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. No amendment, modification or repeal of this Article VIII shall
adversely affect any right or protection of a Director or officer that exists
at the time of such amendment, modification or repeal.
Item 28. Business and Other Connections of Investment Adviser.
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned
subsidiary of Wells Fargo & Company, currently serves as investment adviser to
several of the Registrant's investment portfolios and to certain other
registered open-end management investment companies. Wells Fargo Bank's
business is that of a national banking association with respect to which it
conducts a variety of commercial banking and trust activities.
To the knowledge of Registrant, none of the directors or
executive officers of Wells Fargo Bank, except those set forth below, is or has
been at any time during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial nature, except
that certain executive officers also hold various positions with and engage in
business for Wells Fargo & Company. Set forth below are the names and principal
businesses of the directors and executive officers of Wells Fargo Bank who are
or during the past two fiscal years have been engaged in any other business,
profession, vocation or employment of a substantial nature for their own
account or in the capacity of director, officer, employee, partner or trustee.
All the directors of Wells Fargo Bank also serve as directors of Wells Fargo &
Company.
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<TABLE>
<S> <C>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
------------------- ------------------------------------------
H. Jesse Arnelle Senior Partner of Arnelle & Hastie
Director 455 Market Street
San Francisco, CA 94105
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
William R. Breuner General Partner in Breuner Associates, Breuner
Director Properties and Breuner-Pavarnick Real Estate
Developers. Retired Chairman of the Board
of Directors of John Breuner Co.
2300 Clayton Road, Suite 1570
Concord, CA 94520
Vice Chairman of the California State Railroad
Museum Foundation.
111 I Street
Old Sacramento, CA 95814
William S. Davila President and Director of The Vons Companies, Inc.
Director 618 Michillinda Avenue
Arcadia, CA 91007
Officer of Western Association of Food Chains
825 Colorado Blvd. #203
Los Angeles, CA 90041
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Co.
P.O. Box 1000
Lebec, CA 93243
Director of Turner Casting Corp.
P.O. Box 1099
Cudahy, CA 90201
Director of The Bakersfield Californian
P.O. Box 440
1707 I Street
Bakersfield, CA 93302
Director of Kern County Economic Development Corp.
P.O. Box 1229
2700 M Street, Suite 225
Bakersfield, CA 93301
</TABLE>
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<TABLE>
<S> <C>
Chairman of the Board of Trustees of
Whittier College
13406 East Philadelphia Avenue
P.O. Box 634
Whittier, CA 90608
Paul Hazen Chairman of the Board of Directors of
Chairman of the Wells Fargo & Company
Board of Directors 420 Montgomery Street
San Francisco, CA 94105
Director of Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Director of Phelps Dodge Corp.
2600 North Central Avenue
Phoenix, AZ 85004
Director of Safeway Inc.
Fourth and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Accounting Professor and Dean Emeritus of
Director Graduate School of Business,
Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Homestake Mining Co.
650 California Street
San Francisco, CA 94108
Director of California Water
Service Company
1720 North First Street
San Jose, CA 95112
Director of Boise Cascade Corp.
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of Enron Corp.
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
</TABLE>
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<TABLE>
<S> <C>
Paul A. Miller Chairman of Executive Committee and Director of
Director Pacific Enterprises
633 West Fifth Street
Los Angeles, CA 90071
Trustee of Mutual Life Insurance Company of New York
1740 Broadway
New York, NY 10019
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Trustee of University of Southern California
University Park TGF 200
665 Exposition Blvd.
Los Angeles, CA 90089
Ellen M. Newman President of Ellen Newman Associates
Director 323 Geary Street, Suite 507
San Francisco, CA 94102
Chair of Board of Trustees of
University of California at San Francisco Foundation
250 Executive Park Blvd., Suite 2000
San Francisco, CA 94143
Director of American Conservatory Theater
30 Grant Avenue
San Francisco, CA 94108
Director of California Chamber of Commerce
1201 K Street, 12th Floor
Sacramento, CA 95814
Philip J. Quigley Chairman, Chief Executive Officer and
Director Director of Pacific Telesis Group
130 Kearney Street, Rm. 3700
San Francisco, CA 94108
Director of Varian Associates
3050 Hansen Way
P.O. Box 10800
Palo Alto, CA 94303
</TABLE>
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<TABLE>
<S> <C>
Carl E. Reichardt Chairman and Chief Executive Officer of the
Director Board of Directors of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Hospital Corporation of America,
HCA-Hospital Corp. of America
One Park Plaza
Nashville, TN 37203
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Donald B. Rice President, Chief Operating Officer and Director of
Director Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067
Director of Vulcan Materials Company
One Metroplex Drive
Birmingham, AL 35209
Retired Secretary of the Air Force
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
Chang-Lin Tien Chancellor of University of California at Berkeley
Director UC at Berkeley
Berkeley, CA 94720
John A. Young President, Director and Chief Executive Officer of
Director Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
</TABLE>
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<TABLE>
<S> <C>
William F. Zuendt Director of 3Com Corp.
President 5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052
Director of MasterCard International
888 Seventh Avenue
New York, NY 10106
Trustee of Golden Gate University
536 Mission Street
San Francisco, CA 94163
</TABLE>
BZW Barclays Global Fund Advisors ("BGFA"), a wholly-owned
subsidiary of BZW Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo
Institutional Trust Company), serves as the sub-adviser to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds of the Company
and to certain other open-end management investment companies. As of May 1,
1996, BGFA will no longer serve as sub-adviser to the Asset Allocation,
Corporate Stock and U.S. Government Allocation Funds. As of this date, BGFA
will serve as sub-adviser to the corresponding Asset Allocation, U.S.
Government Allocation and Corporate Stock Master Portfolios of Master
Investment Trust in which such funds invest substantially all of their assets.
The directors and officers of BGFA consist primarily of persons
who during the past two years have been active in the investment management
business of the former sub-adviser to the Registrant, Wells Fargo Nikko
Investment Advisors ("WFNIA") and, in some cases, the service business of BGI.
With the exception of Irving Cohen, each of the directors and executive
officers of BGFA will also have substantial responsibilities as directors
and/or officers of BGI. To the knowledge of the Registrant, except as set
forth below, none of the directors or executive officers of BGFA is or has been
at any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature.
<TABLE>
<S> <C>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
------- --------------------------------
Frederick L.A. Grauer Chairman and Director of WFNIA and WFITC+
Chairman, Director
Donald L. Luskin Chief Executive Officer of WFNIA's Defined
Vice Chairman & Director Contribution Group+
Irving Cohen Chief Financial Officer and Chief Operating
Director Officer of Barclays Bank PLC, New York Branch
and Chief Operating Officer of Barclays Group,
Inc. (USA)*: previously Chief Financial
Officer of Barclays de Zoete Wedd Securities
Inc. (1994)*
</TABLE>
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<TABLE>
<S> <C>
Andrea M. Zolberti Chief Financial Officer of WFNIA and WFITC+
Chief Financial Officer
Vincent J. Bencivenga Previously Vice President at State Street Bank
Chief Fiduciary Officer & Trust Company++
</TABLE>
* 222 Broadway, New York, New York, 10038.
+ 45 Fremont Street, San Francisco, California 94105.
++ One Financial Center, Boston, Massachusetts 02111.
Prior to January 1, 1996 Wells Fargo Nikko Investment Advisors
("WFNIA") served as the sub-adviser to the Asset Allocation, Corporate Stock
and U.S. Government Allocation Funds of the Company and as adviser or
sub-adviser to various other open-end management investment companies. For
additional information, see "The Funds and Management" in the Prospectus and
"Management" in the Statement of Additional Information of such Funds. For
information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and management committees of WFNIA,
reference is made to WFNIA's Form ADV and Schedules A and D filed under the
Investment Advisers Act of 1940, File No. 801-36479, incorporated herein by
reference.
Item 29. Principal Underwriters.
(a) Stephens Inc., distributor for the Registrant, does not
presently act as investment adviser for any other registered investment
companies, but does act as principal underwriter for Overland Express Funds,
Inc., Stagecoach Inc. and Stagecoach Trust; and is the exclusive placement
agent for Master Investment Trust, Managed Series Investment Trust, Life &
Annuity Trust and Master Investment Portfolio, which are registered open-end
management investment companies, and has acted as principal underwriter for the
Liberty Term Trust, Inc., Nations Government Income Term Trust 2003, Inc., and
Nations Government Income Term Trust 2004, Inc., and Managed Balanced Target
Maturity Fund, Inc., which are closed-end management investment companies and
Nations Fund Trust, Nations Funds, Inc., Nations Fund Portfolios, Inc. and The
Capitol Mutual Funds, which are open-end management investment companies.
(b) Information with respect to each director and officer of
the principal underwriter is incorporated by reference to Form ADV and
Schedules A and D filed by Stephens Inc. with the Securities and Exchange
Commission pursuant to the Investment Advisers Act of 1940 (file No.
501-15510).
(c) Not Applicable.
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<PAGE> 187
Item 30. Location of Accounts and Records.
(a) The Registrant maintains accounts, books and other
documents required by Section 31(a) of the Investment Company Act of 1940 and
the rules thereunder (collectively, "Records") at the offices of Stephens Inc.,
111 Center Street, Little Rock, Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its
services as investment adviser and custodian and transfer and dividend
disbursing agent at 525 Market Street, San Francisco, California 94105.
(c) WFNIA and Wells Fargo Institutional Trust Company, N.A.
maintain all Records relating to their services as sub-adviser and custodian,
respectively, for the period prior to January 1, 1996, at 45 Fremont Street,
San Francisco, California 94105.
(d) BGFA and BGI maintain all Records relating to their
services as sub-adviser and custodian, respectively, for the period beginning
January 1, 1996 at 45 Fremont Street, San Francisco, California 94105.
(e) Stephens maintains all Records relating to its services as
sponsor, administrator and distributor at 111 Center Street, Little Rock,
Arkansas 72201.
Item 31. Management Services.
Other than as set forth under the captions "The Funds and
Management" and "Management and Servicing Fees" in the Prospectuses
constituting Part A of this Registration Statement and "Management" in the
Statements of Additional Information constituting Part B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant
to the provisions set forth above in response to Item 27, or
otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in
such Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in
C-18
<PAGE> 188
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue
(d) Not Applicable.
(e) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its most current
annual report to shareholders, upon request and without
charge.
C-19
<PAGE> 189
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Little Rock, State of
Arkansas on the 3rd day of April, 1996.
STAGECOACH FUNDS, INC.
By /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the date
indicated:
Signature Title
--------- -----
* Director, Chairman and President
------------------------- (Principal Executive Officer)
(R. Greg Feltus)
/s/Richard H. Blank Jr. Secretary and Treasurer (Principal
------------------------- Financial Officer)
(Richard H. Blank, Jr.)
* Director
-------------------------
(Jack S. Euphrat)
* Director
-------------------------
(Thomas S. Goho)
* Director
-------------------------
(Zoe Ann Hines)
* Director
-------------------------
(W. Rodney Hughes)
* Director
-------------------------
(Robert M. Joses)
* Director
-------------------------
(J. Tucker Morse)
April 3, 1996
*By Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
<PAGE> 190
STAGECOACH FUNDS, INC.
FILE NOS. 33-42927; 811-6419
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EX-99.B10 - Opinion and Consent of Counsel
<PAGE> 1
April 4, 1996
(202) 887-1500
Stagecoach Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Issuance of Institutional Class Shares
of Common Stock of Stagecoach Funds, Inc.
Ladies/Gentlemen:
Stagecoach Funds, Inc. (the "Company") has requested our opinion
in connection with the issuance by the Company of newly classified
Institutional Class shares of capital stock authorized in the Money Market
Mutual, California Tax-Free Bond, California Tax-Free Income, Ginnie Mae,
Growth and Income and Short-Intermediate U.S. Government Income Funds, each a
separate series of the Company (collectively, the "Shares").
We have been requested by the Company to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined documents relating to the organization of the
Company and its series and classes thereof, and the authorization and issuance
of shares of its series and classes thereof.
Based upon and subject to the foregoing, we are of the opinion
that:
The issuance of the Shares by the Company, upon approval by the
Company's Board of Directors, will be duly and validly authorized by all
appropriate corporate action and, assuming delivery by sale or in accord with
the Company's dividend reinvestment plan in accordance with the description set
forth in the Funds' current prospectuses under the Securities Act of 1933, the
Shares will be legally issued, fully paid and nonassessable by the Company.
<PAGE> 2
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to our firm under the caption "Legal Counsel" and the description of
advice rendered by our firm under the heading "The Funds and Management" in the
Prospectus, which is included as part of the Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
