STAGECOACH FUNDS INC /AK/, 497, 1996-09-16

STAGECOACH FUNDS INC /AK/
497, 1996-09-16

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STAGECOACH FUNDS, INC.

Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER 6, 1996

ARIZONA TAX-FREE FUND
BALANCED FUND
CALIFORNIA TAX-FREE BOND
CALIFORNIA TAX-FREE INCOME
EQUITY VALUE FUND
GOVERNMENT MONEY MARKET MUTUAL FUND
INTERMEDIATE BOND FUND
NATIONAL TAX-FREE FUND
OREGON TAX-FREE FUND
PRIME MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND

CLASS A AND CLASS B

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Stagecoach Funds, Inc. (the "Company") is an open-end, series investment
company. This Statement of Additional Information ("SAI") contains additional
information about two classes of shares generally offered in eleven funds of the
Stagecoach Family of Funds (each, a "Fund" and collectively, the "Funds"). The
ARIZONA TAX-FREE, CALIFORNIA TAX-FREE BOND, CALFORNIA TAX-FREE INCOME, NATIONAL
TAX-FREE and OREGON TAX-FREE FUNDS (sometimes, collectively, the "Tax-Free
Funds"), the GOVERNMENT MONEY MARKET MUTUAL, PRIME MONEY MARKET MUTUAL and
TREASURY MONEY MARKET MUTUAL FUNDS (sometimes, collectively, the "Money Market
Funds") and the BALANCED, EQUITY VALUE and INTERMEDIATE BOND FUNDS all offer
Class A shares. In addition, Class B shares are offered by all except the Money
Market Funds and the California Tax- Free Income Fund. The investment objective
of each Fund is described in the applicable prospectus under "How the Funds Work
- -- Investment Objective(s) and Policies."

This SAI is not a prospectus and should be read in conjunction with the
prospectus applicable to each Fund, dated September 6, 1996. All terms used in
this SAI that are defined in the prospectus for each Fund have the meanings
assigned in that Fund's prospectus. A copy of the prospectus for each Fund may
be obtained without charge by writing Stephens Inc., the Company's sponsor,
administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201 or calling the Company's Transfer Agent at the telephone number indicated
above.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C>
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Additional Permitted Investment Activities . . . . . . . . . . . . . . . . . 10

Special Considerations Affecting Arizona Municipal Obligations . . . . . . . 23

Special Consideration Affecting California Municipal Obligations . . . . . . 25

Special Consideration Affecting Oregon Municipal Obligations . . . . . . . . 25

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Servicing Plans and Agreements . . . . . . . . . . . . . . . . . . . . . . . 43

Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . 50

Additional Purchase and Redemption Information . . . . . . . . . . . . . . . 52

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Tax-Free Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

</TABLE>

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GENERAL

Stagecoach Funds, Inc. (the "Company" and, at times, "Stagecoach") is an
open-end management investment company offering shares in separately managed
investment portfolios. The California Tax-Free Bond and California Tax-Free
Income Funds (sometimes referred to as the "California Funds") were originally
organized as funds of Stagecoach. All other Funds herein are sometimes
referred to as the "New Funds." The Arizona Tax-Free, Intermediate Bond,
National Tax- Free and Oregon Tax-Free Funds were originally organized as
investment portfolios of Westcore Trust under the following names: Arizona
Intermediate Tax-Free, Bonds Plus, Quality Tax-Exempt Income, and Oregon
Tax-Exempt Funds, respectively. On October 1, 1995, each of these Funds was
reorganized as an investment portfolio of Pacifica Funds Trust ("Pacifica" or
the "predecessor Company"). The Balanced, Equity Value, and Government Money
Market Mutual Funds were originally organized as investment portfolios of
Pacifica under the following names: Balanced, Equity Value, and Government
Money Market Funds, respectively. The Prime Money Market Mutual Fund operated
as Pacific American Liquid Assets, Inc. from commencement of operations on
April 30, 1981 until it was reorganized as a portfolio of Pacific American Fund
on October 1, 1985; on October 1, 1994, it was reorganized as the Pacific
American Money Market Portfolio of Pacifica; and, in July of 1995, it was
renamed the Pacifica Prime Money Market Fund. Prior to August 1, 1990, the
Treasury Money Market Mutual Fund was known as the Short-Term Government Fund
and invested in obligations issued or guaranteed by agencies and
instrumentalities of the U.S. Government in accordance with fundamental
policies that were then effective for the Fund. The Fund operated as a
portfolio of Pacific American Fund through October 1, 1994, when it was
reorganized as the Pacific American U.S. Treasury Portfolio, a portfolio of
Pacifica Funds Trust. In July 1995, the Fund was renamed the Pacifica Treasury
Money Market Fund.
On April 25, 1996, the Agreement and Plan of Reorganization of
Pacifica with Stagecoach and the creation of each predecessor portfolio as a
new fund of Stagecoach were approved by the Company's Board of Directors. On
May 17, 1996, the Agreement and Plan of Reorganization of Pacifica with the
Company was approved by Pacifica's Board of Trustees. As part of the recent
reorganization of Pacifica with Stagecoach (the "Reorganization"), each of the
following portfolios of Pacifica was reorganized as the specified Stagecoach
Fund:

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<TABLE>
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PACIFICA FUNDS TRUST PORTFOLIO NAME STAGECOACH FUND NAME
------------------------------------- ------------------------------------
Pacifica Arizona Tax-Exempt Fund Arizona Tax-Free Fund
Pacifica Balanced Fund Balanced Fund
Pacifica Equity Value Equity Value Fund
Pacifica Government Money Market Fund Government Money Market Mutual Fund
Pacifica Intermediate Bond Fund Intermediate Bond Fund
Pacifica National Tax-Exempt Fund National Tax-Free Fund
Pacifica Oregon Tax-Exempt Fund Oregon Tax-Free Fund
Pacifica Prime Money Market Fund Prime Money Market Mutual Fund
Pacifica Treasury Money Market Fund Treasury Money Market Mutual Fund
</TABLE>

INVESTMENT RESTRICTIONS

The Funds are subject to the investment limitations enumerated below
which may be changed with respect to a particular Fund only by a vote of a
majority of the holders of such Fund's outstanding shares (see "Capital Stock"
below).

The Intermediate Bond Fund and the Arizona, National and Oregon
Tax-Free Funds may not:

1. Purchase or sell commodity contracts (including futures contracts
with respect to the Arizona Tax-Free and National Tax-Free Funds), or invest in
oil, gas or mineral exploration or development programs, except that each Fund,
to the extent appropriate to its investment objective, may purchase publicly
traded securities of companies engaging in whole or in part in such activities,
and provided that the Intermediate Bond and Oregon Tax-Free Funds may enter
into futures contracts and related options.

As a matter of non-fundamental policy, the Intermediate Bond Fund may
not invest in mineral leases.

2. Purchase or sell real estate, except that each Fund may purchase
securities of issuers that deal in real estate and may purchase securities that
are secured by interests in real estate.

As a matter of non-fundamental policy, the Intermediate Bond Fund may
not purchase, hold or deal in real estate limited partnerships.

3. Purchase securities of companies for the purpose of exercising
control.

4. Acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization or
acquisition of assets or where otherwise permitted by the 1940 Act.

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5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as a Fund might be deemed to be an
underwriter upon disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of obligations directly from the issuer thereof in accordance with
a Fund's investment objective, policies and limitations may be deemed to be
underwriting.

6. Write or sell put options, call options, straddles, spreads, or
any combination thereof, except that the Oregon Tax-Free Fund may enter into
transactions in futures contracts and related options and except that the
Intermediate Bond Fund may enter into transactions in options on securities,
futures contracts and options on futures contracts.

7. Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of the total assets at the time of
such borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 10% of the value of a Fund's total assets at
the time of such borrowing. None of these Funds will purchase securities while
its borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. Securities held in escrow or separate accounts in
connection with a Fund's investment practices described in this SAI or in its
prospectus are not deemed to be pledged for purposes of this limitation.

The Intermediate Bond Fund may not:

1. Purchase securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities)
if, immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in the securities of such issuer, or more than
10% of the issuer's outstanding voting securities would be owned by the Fund or
the Company, except that up to 25% of the value of the Fund's total assets may
be invested without regard to these limitations.

2. Purchase any securities that would cause 25% or more of the Fund's
total assets at the time of purchase to be invested in the securities of one or
more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; (b) wholly owned finance companies will be considered to be
in the industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services, for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.

3. Make loans, except that the Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an
amount not exceeding 30% of its total assets.

4. Purchase securities on margin, make short sales of securities or
maintain a short position, except that (a) this investment limitation shall not
apply to the Fund's transactions in futures

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contracts and related options, and (b) the Fund may obtain short-term credit as
may be necessary for the clearance of purchases and sales of portfolio
securities.

The Arizona, National and Oregon Tax-Free Funds may not:

1. Purchase securities on margin, make short sales of securities or
maintain a short position, except that the Funds may obtain short-term credit
as may be necessary for the clearance of purchases and sales of portfolio
securities, and except that this limitation shall not apply to the Oregon
Tax-Free Fund's transactions in futures contracts and related options.

2. Invest less than 80% of its net assets in securities the interest
on which is exempt from federal income tax, except during periods of unusual
market conditions. For purposes of this investment limitation, securities the
interest on which is treated as a specific tax preference item under the
federal alternative minimum tax are considered taxable.

3. Make loans, except that each Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies.

The Oregon Tax-Free Fund may not:

1. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, except that (a) up to 50% of the
value of the Fund's total assets may be invested without regard to this 5%
limitation provided that no more than 25% of the value of the Fund's total
assets are invested in the securities of any one issuer and (b) this 5%
limitation does not apply to securities issued or guaranteed by the U.S.
Government, its agencies, authorities, instrumentalities or political
subdivisions. For purposes of this limitation, a security is considered to be
issued by the governmental entity (or entities) whose assets and revenues back
the security, or, with respect to a private activity bond that is backed only
by the assets and revenues of a nongovernmental user, such nongovernmental
user. In certain circumstances, the guarantor of a guaranteed security may also
be considered to be an issuer in connection with such guarantee, except that a
guarantee of a security shall not be deemed to be a security issued by the
guarantor when the value of all securities issued and guaranteed by the
guarantor, and owned by the Fund, does not exceed 10% of the value of the
Fund's total assets.

2. Purchase any securities, except securities issued (as defined in
the preceding Investment Limitation) or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia
or any of their authorities, agencies, instrumentalities or political
subdivisions, which would cause 25% or more of the value of the Fund's total
assets at the time of purchase to be invested in the securities of issuers
conducting their principal business activities in the same industry.

The Arizona Tax-Free Fund may not:

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1. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the issuer's
outstanding voting securities would be owned by the Fund, except that (a) up to
50% of the value of the Fund's total assets may be invested without regard to
these limitations provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is backed only by the assets and revenues of a
nongovernmental user, such nongovernmental user. In certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security shall not
be deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets.

The National Tax-Free Fund may not:

1. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the issuer's
outstanding voting securities would be owned by the Fund, except that (a) up to
50% of the value of the Fund's total assets may be invested without regard to
these limitations provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is backed only by the assets and revenues of a
nongovernmental user, such nongovernmental user. In certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security shall not
be deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets.

2. Purchase any securities that would cause 25% or more of the value
of its total assets at the time of purchase to be invested in municipal
obligations with similar characteristics (such as private activity bonds where
the payment of principal and interest is the ultimate responsibility of issuers
in the same industry, pollution control revenue bonds, housing finance agency
bonds or hospital bonds) or the securities of issuers conducting their
principal business activities in the same industry, provided that there is no
limitation with respect to obligations issued or guaranteed by the

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U.S. Government, the District of Columbia, and their respective agencies,
authorities, instrumentalities or political subdivisions.

The California Tax-Free Income Fund may not:

(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 the 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)
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 (ii) obligations of the United States
Government, its agencies or instrumentalities.

(2) Purchase or sell real estate or real estate limited
partnerships (other than municipal obligations or 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).

(3) Purchase securities on margin (except for short-term
credits necessary for the clearance of transactions) or make short sales of
securities.

(4) Underwrite securities of other issuers, except to the
extent that the purchase of municipal securities or other permitted investments
directly from the issuer thereof or from an underwriter for an issuer and the
later disposition of such securities in accordance with the Fund's investment
program may be deemed to be an underwriting.

(5) Make investments for the purpose of exercising control or
management.

(6) Issue senior securities, 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 its net assets, but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets.

(7) Write, purchase or sell puts, calls, options or any
combination thereof, except that the Fund may purchase securities with put
rights in order to maintain liquidity.

(8) Make loans of portfolio securities having a value that
exceeds 50% of the current value of its total assets provided that, for
purposes of this restriction, loans will not include the purchase of fixed time
deposits, repurchase agreements, commercial paper and other types of debt
instruments commonly sold in a public or private offering.

With respect to fundamental investment policy (8), the Fund does
not intend to loan its portfolio securities during the coming year.

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The California Tax-Free Income Fund is subject to the following
non-fundamental policies.

(1) The Fund may not 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.

(2) The Fund may not purchase interests, leases, or limited
partnership interests in oil, gas, or other mineral exploration or development
programs.

(3) The Fund may not 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.

(4) The Fund may not 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 the Fund's aggregate investment in such classes of
securities will exceed 5% of its total assets.

(5) The Fund may invest not more than 5% of its net assets at
the time of purchase in warrants, and not more than 2% of its net assets in
warrants which are not listed on the New York or American Stock Exchange.

(6) The Fund will 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, and (c) repurchase agreements not terminable within seven
days.

(7) The Fund 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. However, the Fund's investment adviser
will 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. Notwithstanding any other investment policy or
limitation (whether or not fundamental), the 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.

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The California Tax-Free Bond Fund may not:

(2) purchase or sell real estate or real estate limited
partnerships (other than municipal obligations or 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);

(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions with regard to the Fund and except
for margin payments in connection with options, futures and options on futures
or make short sales of securities;

(4) underwrite securities of other issuers, except to the extent
that the purchase of municipal securities or other permitted investments
directly from the issuer thereof or from an underwriter for an issuer and the
later disposition of such securities in accordance with the Fund's investment
program may be deemed to be an underwriting;

(5) make investments for the purpose of exercising control or
management;

(6) issue senior securities, 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 its net assets (but investments may
not be purchased while any such outstanding borrowings exceed 5% of its net
assets); or

(7) write, purchase or sell puts, calls, options or any
combination thereof, except that the Fund may purchase securities with put
rights in order to maintain liquidity.

The Calfornia Tax-Free Bond Fund is subject to the following
non-fundamental policies:

(1) The Fund may not 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 owned beneficially more than 5% of such securities.

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(2) The Fund may not purchase interests, leases, or limited
partnership interests in oil, gas, or other mineral exploration or development
programs.

(6) The 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, the Fund 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. However, the
Fund's investment adviser will 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. These unaffiliated
investment companies must 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 Balanced, Equity Value and Government Money Market Mutual Funds,
except as indicated, may not:

1. With respect to the Government Money Market Mutual Fund, invest
more than 10% of the aggregate value of its total assets in investments that
are illiquid, or not readily marketable (including repurchase agreements having
maturities of more than seven calendar days, variable- and floating-rate demand
notes requiring receipt of principal note amount on more than seven days notice
and securities of foreign issuers that are not listed on a recognized domestic
or foreign securities exchange).

2. Borrow money or pledge or mortgage its assets, except that a Fund
may borrow from banks up to 10% of the current value of its total net assets
for temporary or emergency purposes and those borrowings may be secured by the
pledge of not more than 15% of the current value of its total net assets (but
investments may not be purchased by a Fund while any such borrowings exist).

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3. Make loans, except loans of portfolio securities and except that a
Fund may enter into repurchase agreements with respect to its portfolio
securities and may purchase the types of debt instruments described in the
prospectuses or the SAI. No Fund will invest in repurchase agreements maturing
in more than seven days (unless subject to a demand feature) if any such
investment, together with any illiquid securities (including securities which
are subject to legal or contractual restrictions on resale) held by a Fund,
exceeds 10% of the value of its total assets.

4. Invest in companies for the purpose of exercising control or
management.

5. Knowingly purchase securities of other investment companies,
except (i) in connection with a merger, consolidation, acquisition, or
reorganization; and (ii) the Funds listed above except the Government Money
Market Mutual Fund may invest up to 10% of their net assets in shares of other
investment companies.

6. Invest in real property (including limited partnership interests),
commodities, commodity contracts, or oil, gas and other mineral resource,
exploration, development, lease or arbitrage transactions.

7. Acquire securities subject to restrictions on disposition imposed
by the Securities Act of 1933, if, immediately after and as a result of such
acquisition, the value of such restricted securities and all other illiquid
securities held by a Fund would exceed 10% of the value of the Fund's total
assets.

8. Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933.

9. Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.

10. Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.

11. Mortgage, pledge, or hypothecate any of its assets, except as
described in Investment Restriction No. 2.

12. Purchase or retain the securities of any issuer, if those
individual officers and Directors of the Company, its adviser, the sponsor, or
the distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer.

13. Invest more than 5% of its net assets in warrants which are
unattached to securities, included within that amount, no more than 2% of the
value of a Fund's net assets, may be warrants that are not listed on the New
York or American Stock Exchanges.

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14. Write, purchase or sell puts, calls or combinations thereof,
except that all Funds listed above except the Government Money Market Mutual
Fund may purchase or sell puts and calls as otherwise described in the
prospectus or SAI; however, no Fund will invest more than 5% of its total
assets in these classes of securities.

15. Invest more than 5% of the current value of its total assets in
the securities of companies that, including predecessors, have a record of less
than three years' continuous operation.

The Prime Money Market Mutual and the Treasury Money Market Mutual
Funds may not:

1. Purchase common stocks, and with respect to the Treasury Money
Market Mutual Fund, voting securities, (with respect to the Prime Money Market
Mutual Fund including preferred stocks, warrants or other equity securities
and, with respect to the Treasury Money Market Mutual Fund, including state,
municipal or industrial revenue bonds) except for securities of other
investment companies.

2. Borrow money or issue senior securities, except that a Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of its total assets at the
time of such borrowing. Neither Fund will purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. As a matter of non-fundamental policy, each Fund
intends to limit its investments in reverse repurchase agreements to no more
than 20% of its total assets.

3. Mortgage, pledge, or hypothecate any assets, except in connection
with any such borrowing and in amounts not in excess of one-third of the value
of a Fund's total assets at the time of its borrowing. Securities held in
escrow or separate accounts in connection with a Fund's investment practices
are not deemed to be pledged for purposes of this investment restriction.

4. Purchase securities on margin, except for delayed delivery or
when-issued transactions or such short-term credits as are necessary for the
clearance of transactions; or make short sales of securities or, for the
Treasury Money Market Mutual Fund, maintain a short position.

5. Write put or call options.

6. Underwrite the securities of other issuers, except as a Fund may
be deemed to be an underwriter in connection with the purchase or sale of
portfolio instruments in accordance with its investment objective and portfolio
management policies.

7. Invest in companies for the purpose of exercising control.

8. Make loans, except that a Fund may purchase or hold debt
instruments in accordance with its investment objective and policies and may
enter into loans of portfolio securities and repurchase agreements.

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<PAGE> 14
9. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, acquisition of assets or
where otherwise permitted by the 1940 Act.

10. Lend its portfolio securities in excess of one-third of the value
of its total assets.

As a non-fundamental policy, any loans of portfolio securities will be
made according to guidelines established by the SEC and the Company's Board of
Directors, including maintenance of collateral of the borrower equal at all
times to at least the current market value of the securities loaned.

11. Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
(with respect to the Treasury Money Market Mutual Fund, such obligations only
include U.S. Treasury obligations) and repurchase agreements secured by such
obligations, if immediately after such purchase more than 5% of the value of a
Fund's total assets would be invested in such issuer, except that up to 25% of
the value of its total assets may be invested in any securities without regard
to this 5% limitation.

12. Purchase any securities that cause 25% or more of the value of a
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, provided that there is no limitation with respect to: (a) instruments
that are issued or guaranteed by the United States, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions; (b) with
respect to the Prime Money Market Mutual Fund, instruments issued or guaranteed
by U.S. banks and U.S. branches of foreign banks (provided that, with respect
to U.S. branches of foreign banks, such branches are subject to the same
regulations as domestic branches of U.S. banks and, with respect to foreign
branches of U.S. banks, the domestic parent is unconditionally liable in the
event that the foreign branch fails to pay on its instruments for any reason);
and (c) repurchase agreements secured by the instruments described in clause
(a) and, with respect to the Prime Money Market Mutual Fund, clause (b).

The Prime Money Market Mutual Fund may not:

Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil or gas interests, but this
restriction shall not prevent the Fund from investing directly or indirectly in
instruments secured by real estate or interests therein.

The Treasury Money Market Mutual Fund may not:

1. Purchase or sell real estate.

2. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs.

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<PAGE> 15
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of a Fund's investments will not constitute a violation of such
limitation, except that any borrowing by a Fund that exceeds the fundamental
investment limitations stated above must be reduced to meet such limitations
within the period required by the 1940 Act (currently three days) and the Funds
will not at any time hold more than 15% (10% in the case of the Money Market
Funds) of their net assets in illiquid securities. Otherwise, a Fund may
continue to hold a security even though it causes the Fund to exceed a
percentage limitation because of fluctuation in the value of the Fund's assets.

In addition, in accordance with current SEC regulations, the Money
Market Funds intend, as a non-fundamental policy, to limit their respective
investments in the securities of any single issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements collateralized by such securities) to not more than
5% of the value of their respective total assets at the time of purchase,
except for 25% of the value of their respective total assets which may be
invested in any one issuer for a period of up to three business days.

The Company may make commitments more restrictive than the
restrictions listed above so as to permit the sale of Fund shares in certain
states. Should the Company determine that such a commitment is no longer in the
best interests of the Fund involved and its shareholders, the Company reserves
the right to revoke the commitment by terminating the sale of Fund shares in
the state involved.

Pursuant to state securities regulations, the Treasury Money Market
Mutual Fund has undertaken the following non-fundamental investment limitation:
the Fund will not purchase warrants, valued at the lower of cost or market, in
excess of 5% of the value of its net assets (included within that amount, but
not to exceed 2% of the value of the Fund's net assets, may be warrants that
are not listed on the New York or American Stock Exchanges) except that
warrants acquired by the Fund at any time in units or attached to securities
are not subject to this limitation. Investors should note, however, that
neither the Prime Money Market Mutual Fund nor the Treasury Money Market
Mutual Fund currently intends to purchase any warrants whatsoever, or to
acquire any put option that may be sold, transferred or assigned separately
from the underlying security.

For purposes of determining industry classifications of issuers,
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents, and utilities will be classified according to their
services (for example, gas, gas transmission, electric and gas, and electric
and telephone each will be considered a separate industry). In accordance with
the current views of the staff of the SEC and as a matter of nonfundamental
policy that may be changed without a vote of shareholders, a Fund will treat
all supranational organizations as a single industry and each foreign
government (and all of its agencies) as a separate industry.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

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<PAGE> 16
The prospectuses discuss the investment objectives of the Funds and
the policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment policies and
portfolio strategies that the Funds may utilize, and certain risks attendant to
such investments, policies and strategies.

U.S. Government Obligations. Each New Fund may invest in various
types of U.S. Government obligations in accordance with the policies described
in its prospectus. U.S. Government obligations include securities issued or
guaranteed as to principal and interest by the U.S. Government and supported by
the full faith and credit of the U.S. Treasury. U.S. Treasury obligations
differ mainly in the length of their maturity. Treasury bills, the most
frequently issued marketable government securities, have a maturity of up to
one year and are issued on a discount basis. U.S. Government obligations also
include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some
obligations of such 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 (including government- sponsored enterprises)
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. The Funds may invest in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Examples
of the types of U.S. Government obligations that may be held by the Funds
include U.S. Treasury bonds, notes and bills and the obligations of Federal
Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, Federal National Mortgage Association, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks and Maritime Administration.

Repurchase Agreements. Each New 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 that
involves the acquisition by a Fund of an underlying debt instrument, subject to
the seller's obligation to repurchase, and such Fund's obligation to resell,
the instrument at a fixed price usually not more than one week after its
purchase. The Fund's custodian has custody of, and holds in a segregated
account, securities acquired as collateral by a

15
<PAGE> 17
Fund under a repurchase agreement. Repurchase agreements are considered by the
staff of the Securities and Exchange Commission to be loans by the Fund. The
Funds may enter into repurchase agreements only with respect to securities of
the type in which such Fund may invest, including government securities and
mortgage-related securities, regardless of their remaining maturities, and
requires that additional securities be deposited with the custodian if the
value of the securities purchased should decrease below resale price. Wells
Fargo Bank monitors on an ongoing basis the value of the collateral to assure
that it always equals or exceeds the repurchase price. Certain costs may be
incurred by a Fund in connection with the sale of the underlying securities if
the seller does not repurchase them in accordance with the repurchase
agreement. In addition, if bankruptcy proceedings are commenced with respect
to the seller of the securities, disposition of the securities by a Fund may be
delayed or limited. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delay and costs to a
Fund in connection with insolvency proceedings), it is the policy of each Fund
to limit repurchase agreements to selected creditworthy securities dealers or
domestic banks or other recognized financial institutions. Each New Fund
considers on an ongoing basis the creditworthiness of the institutions with
which it enters into repurchase agreements.

The Prime and Treasury Money Market Mutual Funds may engage in a
repurchase agreement with respect to any security in which they are authorized
to invest, including U.S. Treasury STRIPS, although the underlying security may
mature in more than thirteen months.

Bank Obligations. Each New Fund may invest in bank obligations,
including certificates of deposit, time deposits, bankers' acceptances and
other short-term obligations of domestic banks, foreign subsidiaries of
domestic banks, foreign branches of domestic banks, and domestic and foreign
branches of foreign banks, domestic savings and loan associations and other
banking institutions. With respect to such securities issued by foreign
branches of domestic banks, foreign subsidiaries of domestic banks, and
domestic and foreign branches of foreign banks, a Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. Such risks include possible future political and economic
developments, the possible imposition of foreign withholding taxes on interest
income payable on the securities, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities and
the possible seizure or nationalization of foreign deposits. In addition,
foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting
and recordkeeping standards than those applicable to domestic branches of U.S.
banks.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by a Fund will not benefit from insurance from the
Bank Insurance Fund or the Savings Association Insurance

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<PAGE> 18
Fund administered by the Federal Deposit Insurance Corporation. Bankers'
acceptances are credit instruments evidencing the obligation of a bank to pay a
draft drawn on it by a customer. These instruments reflect the obligation both
of the bank and of the drawer to pay the face amount of the instrument upon
maturity. The other short-term obligations may include uninsured, direct
obligations, bearing fixed, floating- or variable-interest rates.

Commercial Paper. The Funds may invest in commercial paper. Commercial
paper includes short-term unsecured promissory notes, variable rate demand
notes and variable rate master demand notes issued by domestic and foreign bank
holding companies, corporations and financial institutions as well as similar
taxable instruments issued by government agencies and instrumentalities.

Investment Company Securities. Each New Fund may invest in securities
issued by other open-end management investment companies which principally
invest in securities of the type in which such Fund invests. Under the 1940
Act, a Fund's investment in such securities currently is limited to, subject to
certain exceptions, (i) 3% of the total voting stock of any one investment
company, (ii) 5% of such Fund's net assets with respect to any one investment
company and (iii) 10% of such Fund's net assets in the aggregate. Investments
in the securities of other investment companies generally will involve
duplication of advisory fees and certain other expenses and the investment
adviser will 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. The California Funds may invest in such
securities in accordance with their respective investment policies.

Floating- and Variable-Rate Obligations. The New Funds may purchase
floating- and variable-rate obligations as described in the prospectuses. Each
Fund may purchase floating- and variable-rate demand notes and bonds, that are
obligations ordinarily having stated maturities in excess of thirteen months,
but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding thirteen months. Variable-rate demand notes
include master demand notes that are obligations that permit a Fund to invest
fluctuating amounts, which may change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The interest rates
on these notes may fluctuate from time to time. The issuer of such obligations
ordinarily has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. The interest rate on a floating-rate demand obligation is based
on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Accordingly, where these obligations are
not secured by letters of credit or other credit support

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<PAGE> 19
arrangements, a Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies and each Fund may invest in obligations
which are not so rated only if Wells Fargo Bank determines that at the time of
investment the obligations are of comparable quality to the other obligations
in which such Fund may invest. Wells Fargo Bank, on behalf of each Fund,
considers on an ongoing basis the creditworthiness of the issuers of the
floating- and variable-rate demand obligations in such Fund's portfolio. No
Fund will invest more than 15% (10% for each of the Money Market Funds) of the
value of its total net assets in floating- or variable-rate demand obligations
whose demand feature is not exercisable within seven days. Such obligations
may be treated as liquid, provided that an active secondary market exists.

Floating- and variable-rate demand instruments acquired by the
Arizona, National and Oregon Tax-Free Funds may include participations in
municipal obligations purchased from and owned by financial institutions,
primarily banks. Participation interests provide these Funds with a specified
undivided interest (up to 100%) in the underlying obligation and the right to
demand payment of the unpaid principal balance plus accrued interest on the
participation interest from the institution upon a specified number of days'
notice, not to exceed thirty days. Each participation interest is backed by an
irrevocable letter of credit or guarantee of a bank that the adviser has
determined meets the prescribed quality standards for these Funds. The bank
typically retains fees out of the interest paid on the obligation for servicing
the obligation, providing the letter of credit and issuing the repurchase
commitment.

Loans of Portfolio Securities. In accordance with the policies
described in their prospectuses, the Funds (except the Arizona, National and
Oregon Tax-Free Funds) may lend their portfolio securities to brokers, dealers
and financial institutions, provided: (1) the loan is secured continuously by
collateral consisting of U.S. Government securities or cash or letters of
credit maintained on a daily marked-to-market basis in an amount at least equal
to the current market value of the securities loaned; (2) the Funds may at any
time call the loan and obtain the return of the securities loaned within five
business days; (3) the Funds will receive any interest or dividends paid on the
loaned securities; and (4) the aggregate market value of securities loaned will
not at any time exceed 30% (one third, in the case of the Prime and Treasury
Money Market Mutual Funds) of the total assets of a particular Fund. The
Treasury Money Market Mutual Fund does not currently intend to lend its
portfolio securities.

The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Funds may pay
reasonable finders, administrative and custodial fees. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral. When a Fund lends its securities, it
continues to receive interest or dividends on the securities loaned and may
simultaneously earn interest on the collateral received from the borrower or
from the investment of cash collateral in readily marketable, high-quality,
short-term obligations. Although voting rights, or rights to consent, attendant
to securities on loan pass to the borrower, such loans may be called at any
time and will be called so that the securities may be voted by a Fund if a
material event affecting the investment is to occur.

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<PAGE> 20
Unrated Investments. The California Tax-Free Bond and California
Tax-Free Income Funds may purchase instruments that are not rated if, in the
opinion of Wells Fargo Bank, such obligations are of comparable quality to
other rated investments that are permitted to be purchased by such Fund. After
purchase, a security may cease to be rated or its rating may be reduced below
the minimum required for purchase by these Funds. Neither event will require a
sale of such security by the Funds. 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, the Funds will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in the Fund's
Prospectus and in this SAI. The ratings of Moody's and S&P are more fully
described in the SAI Appendix.

Letters of Credit. Certain of the debt obligations (including
municipal securities, certificates of participation, commercial paper and other
short-term obligations) which the California Tax-Free Bond and California Tax-
Free Income Funds may 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. Only banks, savings and loan
associations and insurance companies which, in the opinion of Wells Fargo Bank,
are of comparable quality to issuers of other permitted investments of the
Funds may be used for letter of credit-backed investments.

Pass-Through Obligations. Certain of the debt obligations which the
California Tax-Free Bond and California Tax-Free Income Funds may purchase may
be 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 the Funds. Furthermore, as with any debt
obligation, fluctuations in interest rates will inversely affect the market
value of pass- through obligations. The Funds 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.

Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions. Each Fund may purchase securities on a when-issued or forward
commitment (sometimes called a delayed-delivery) basis, which means that the
price is fixed at the time of commitment, but delivery and payment ordinarily
take place a number of days after the date of the commitment to purchase. A
Fund will make commitments to purchase such securities only with the intention
of actually acquiring the securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. The Fund will not accrue
income in respect of a security purchased on a forward commitment basis prior
to its stated delivery date.

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<PAGE> 21
Securities purchased on a when-issued or forward commitment basis and
certain other securities held in a Fund's investment portfolio are subject to
changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose the relevant Fund to risk
because they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or forward commitment basis can involve
the additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself. A segregated account of each Fund consisting of cash or U.S.
Government securities or other high quality liquid debt securities at least
equal at all times to the amount of the when-issued or forward commitments will
be established and maintained at the Funds' custodian bank. Purchasing
securities on a forward commitment basis when a Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of such
Fund's total net assets and its net asset value per share. In addition,
because a Fund will set aside cash and other high quality liquid debt
securities as described above the liquidity of the Fund's investment portfolio
may decrease as the proportion of securities in the Fund's portfolio purchased
on a when-issued or forward commitment basis increases.

The value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their value, is taken into account when determining a Fund's net asset value
starting on the day the Fund agrees to purchase the securities. A Fund does not
earn interest on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When a Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets, and fluctuations in the value of
the underlying securities are not reflected in the Fund's net asset value as
long as the commitment remains in effect. The California Tax-Free Bond Fund
does not intend to invest more than 5% of its net assets in such securities
during the coming year.

Mortgage-Backed Securities. As stated in the prospectuses, certain
Funds may invest in mortgage-backed securities, including those representing an
undivided ownership interest in a pool of mortgages, such as certificates of
the Government National Mortgage Association ("GNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate,
net of certain fees. The average life of a mortgage- backed security varies
with the underlying mortgage instruments, which generally have maximum
maturities of 40 years. The average life is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of prepayments, mortgage refinancings or foreclosure. Mortgage
prepayment rates are affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions. Such prepayments are passed through to the
registered holder with the regular monthly payments of principal and interest
and have the effect of reducing future payments.

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<PAGE> 22
There are risks inherent in the purchase of mortgage-backed
securities. For example, these securities are subject to a risk that default in
payment will occur on the underlying mortgages. In addition to default risk,
these securities are subject to the risk that prepayment on the underlying
mortgages will occur earlier or later or at a lessor or greater rate than
expected. To the extent that adviser's assumptions about prepayments are
inaccurate, these securities may expose the Funds, to significantly greater
market risks than expected.

Asset-Backed Securities. To the extent described in the prospectuses,
the Funds may purchase asset-backed securities, which are securities backed by
installment contracts, credit-card receivables or other assets. Asset-backed
securities represent interests in "pools" of assets in which payments of both
interest and principal on the securities are made monthly, thus in effect
"passing through" monthly payments made by the individual borrowers on the
assets that underlie the securities, net of any fees paid to the issuer or
guarantor of the securities. The average life of asset- backed securities
varies with the maturities of the underlying instruments and is likely to be
substantially less than the original maturity of the assets underlying the
securities as a result of prepayments. For this and other reasons, an
asset-backed security's stated maturity may be shortened, and the security's
total return may be difficult to predict precisely.

Municipal Obligations. Municipal obligations in which a Fund may
invest subject to the investment policies disclosed in its prospectus include
debt obligations issued by governmental entities to obtain funds for various
public purposes, including the construction of a wide range of public
facilities, the refunding of outstanding obligations, the payment of general
operating expenses and the extension of loans to public institutions and
facilities.

The two principal classifications of municipal obligations that may be
held by a Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the issuer of the
facility being financed. A Fund's portfolio may also include "moral
obligation" securities, which are issued normally by special purpose public
authorities. If the issuer of moral obligation securities is unable to meet its
debt service obligations from current revenues, it may draw on a reserve fund,
the restoration of which is a moral commitment but not a legal obligation of
the state or municipality that created the issuer.

There are, of course, variations in the quality of municipal
obligations both within a particular classification and between
classifications, and the yields on municipal obligations depend upon a variety
of factors, including general money market conditions, the financial condition
of the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue.

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<PAGE> 23
bonds for such purposes in order to encourage corporations to locate within
their communities. Private activity bonds are in most cases revenue securities
and are not payable from the unrestricted revenues of the issuer. Private
activity bonds include industrial development bonds, which are a specific type
of revenue bond backed by the credit and security of a private user. The
credit quality of such bonds is usually directly related to the credit standing
of the corporate user of the facility involved. Private activity bonds issued
by or on behalf of public authorities to finance various privately operated
facilities are considered municipal obligations if the interest received
thereon is exempt from federal income tax but nevertheless subject to the
federal alternative minimum tax. Neither California 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 between
classifications, depending on numerous factors. Some or all of these bonds may
be considered "private activity bonds" for federal income tax purposes.

The Tax-Free Funds may also purchase short-term General Obligation
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, Tax-Exempt Commercial Paper, Construction Loan Notes and other forms of
short-term tax-exempt loans. Such instruments are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.

As stated in the prospectuses, the adviser, under the supervision of
the Board, makes determinations concerning the liquidity of a municipal lease
obligation based on all relevant factors. These factors may include, among
others: (1) the frequency of trades and quotes for the obligation; (2) the
number of dealers willing to purchase or sell the security and the number of
other potential buyers; (3) the willingness of dealers to undertake to make a
market in the security; and (4) the nature of the marketplace trades, including
the time needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer. In addition, the general credit quality of the
municipality and the essentiality to the municipality of the property covered
by the lease may be considered. In evaluating the credit quality of a municipal
lease obligation, the factors to be considered might include: (1) whether the
lease can be canceled; (2) what assurance there is that the assets represented
by the lease can be sold; (3) the strength of the lessee's general credit
(e.g., its debt, administrative, economic, and financial characteristics); (4)
the likelihood that the municipality will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to the
operations of the municipality (e.g., the potential for an "event of the
nonappropriation"); and (5) the legal recourse in the event of failure to
appropriate.

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<PAGE> 24
proposed in the state legislature regarding the state income tax status of
interest on such obligations, or which proposals, if any, might be enacted.
Such proposals, while pending or if enacted, might materially and adversely
affect the availability of municipal obligations generally, or Arizona,
California and Oregon obligations, specifically, for investment by a Fund and
the liquidity and value of the Fund's portfolio. In such an event, the Fund
involved would re- evaluate its investment objective and policies and consider
possible changes in its structure or possible dissolution.

Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds
nor the adviser will review the proceedings relating to the issuance of
municipal obligations or the basis for such opinions.

Certain of the municipal obligations held by a Fund may be insured as
to the timely payment of principal and interest. The insurance policies usually
are obtained by the issuer of the municipal obligation at the time of its
original issuance. In the event that the issuer defaults on interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance does not protect against
market fluctuations caused by changes in interest rates and other factors. The
Tax-Free Funds may, from time to time, invest more than 25% of their assets in
municipal obligations covered by insurance policies.

As stated in the prospectus, the Intermediate Bond Fund may, when
deemed appropriate by the adviser in light of the Fund's investment objective,
invest in obligations issued by state and local governmental issuers. Dividends
paid by the Intermediate Bond Fund that are derived from interest of municipal
obligations would be taxable to the Fund's shareholders for federal income tax
purposes.

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 California Tax-Free Bond and California Tax-Free Income Funds may
each invest up to 5% of its net assets at the time of purchase in warrants
(other than those that have been acquired in units or attached to other
securities), and not more than 2% of its net assets in warrants which are not
listed on the New York or American Stock Exchange. Warrants represent rights
to purchase securities at a specific price valid for a specific period of time.
The prices of warrants do not necessarily correlate with the prices of the
underlying securities. The Funds may only purchase warrants on securities in
which the Funds may invest directly.

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<PAGE> 25
Stand-By Commitments. The Arizona, National and Oregon Tax-Free Funds
may acquire stand-by commitments with respect to municipal obligations held by
such Funds. Under a stand-by commitment, a dealer or bank agrees to purchase
from a Fund, at the Fund's option, specified municipal obligations at a
specified price. The amount payable to a Fund upon its exercise of a stand-by
commitment is normally (i) the Fund's acquisition cost of the municipal
obligations (excluding any accrued interest that the Fund paid on their
acquisition), less any amortized market premium plus any amortized market or
original issue discount during the period the Fund owned the securities, plus
(ii) all interest accrued on the securities since the last interest payment
date during that period. Stand-by commitments may be sold, transferred or
assigned by a Fund only with the underlying instrument.

Each Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). Where a Fund pays any
consideration directly or indirectly for a stand-by commitment, its cost would
be reflected as unrealized depreciation for the period during which the
commitment was held by the Fund.

Each Fund intends to enter into stand-by commitments only with
dealers, banks and broker-dealers which, in the adviser's opinion, present
minimal credit risks. Each Fund's reliance upon the credit of these dealers,
banks and broker-dealers will be secured by the value of the underlying
municipal obligations that are subject to the commitment. In evaluating the
creditworthiness of the issuer of a stand-by commitment, the adviser will
review periodically the issuer's assets, liabilities, contingent claims and
other relevant financial information.

Each Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment will not affect the
valuation or assumed maturity of the underlying municipal obligations, which
will continue to be valued in accordance with the ordinary method of valuation
employed by the Funds. Stand-by commitments acquired by a Fund will be valued
at zero in determining net asset value.

Foreign Securities. Because certain Funds may invest in securities
denominated in currencies other than the U.S. dollar and may temporarily hold
funds in bank deposits or other money market investments denominated in foreign
currencies, they may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. Changes in foreign currency exchange rates influence values within a
Fund from the perspective of U.S. investors. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned,
gains and losses realized on the sale of securities, and any net investment
income and gains to be distributed to shareholders by a Fund. The rate of
exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of

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<PAGE> 26
payments and other economic and financial conditions, government intervention,
speculation and other factors.

The Equity Value and Balanced Funds may enter into foreign currency
exchange contracts in order to protect against uncertainty in the level of
future foreign exchange rates. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are entered into the interbank market conducted between currency
traders (usually large commercial banks) and their customers. Forward foreign
currency exchange contracts may be bought or sold to protect a Fund against a
possible loss resulting from an adverse change in the relationship between
foreign currencies and the U.S. dollar, or between foreign currencies. Although
such contracts are intended to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such currency increase.

The Equity Value and Balanced Funds may also invest in ADRs. ADRs are
receipts issued by an American bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer. ADRs may be listed on a
national securities exchange or may trade in the over-the-counter market. ADR
prices are denominated in U.S. dollars, although the underlying security may be
denominated in a foreign currency. The underlying security may be subject to
foreign government taxes which could reduce the yield on such securities. Some
institutions issuing ADRs may not be sponsored by the issuer. A non-sponsored
depository may not provide the same shareholder information that a sponsored
depository may be required to provide under its contractual arrangement with
the issuer.

Investments in foreign securities also involve certain inherent risks,
such as political or economic instability of the issuer or the country of
issue, the difficulty of predicting international trade patterns and the
possibility of imposition of exchange controls. Such securities may also be
subject to greater fluctuations in price than securities of domestic
corporations. In addition, there may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies.
Investments in foreign securities and forward contracts may also be subject to
withholding and other taxes imposed by foreign governments. With respect to
certain foreign countries, there is also a possibility of expropriation or
confiscatory taxation, or diplomatic developments which could affect
investments in those countries.

Options Trading. Certain Funds may buy put and call options and write
covered call and secured put options. Options trading is a highly specialized
activity which entails greater than ordinary investment risk. Options may be
more volatile than the underlying instruments, and therefore, on a percentage
basis, an investment in options may be subject to greater fluctuation than an
investment in the underlying instruments themselves.

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<PAGE> 27
the expiration of the option, regardless of the market price of the security.
The premium paid to the writer is in consideration for undertaking the
obligation under the option contract. A put option for a particular security
gives the purchaser the right to sell the security at the stated exercise price
at any time prior to the expiration date of the option, regardless of the
market price of the security. Options on indices provide the holder with the
right to make or receive a cash settlement upon exercise of the option. With
respect to options on indices, the amount of the settlement equals the
difference between the closing price of the index at the time of exercise and
the exercise price of the option expressed in dollars, times a specified
multiple.

The Funds will write call options only if they are "covered." In the
case of a call option on a security or currency, the option is "covered" if a
Fund owns the instrument underlying the call or has an absolute and immediate
right to acquire that instrument without additional cash consideration (or, if
additional cash consideration is required, cash, U.S. Government securities or
other liquid high grade debt obligations, in such amount are held in a
segregated account by the Fund's custodian) upon conversion or exchange of
other securities held by it. For a call option on an index, the option is
covered if a Fund maintains with its custodian a diversified portfolio of
securities comprising the index or liquid assets equal to the contract value. A
call option is also covered if a Fund holds a call on the same instrument or
index as the call written where the exercise price of the call held is (i)
equal to or less than the exercise price of the call written, or (ii) greater
than the exercise price of the call written provided the difference is
maintained by the Fund in liquid assets in a segregated account with its
custodian. The Funds will write put options only if they are "secured" by
liquid assets maintained in a segregated account by the Funds' custodian in an
amount not less than the exercise price of the option at all times during the
option period.

A Fund's obligation to sell an instrument subject to a covered call
option written by it, or to purchase an instrument subject to a secured put
option written by it, may be terminated prior to the expiration date of the
option by the Fund's execution of a closing purchase transaction, which is
effected by purchasing on an exchange an option of the same series (i.e., same
underlying instrument, exercise price and expiration date) as the option
previously written. Such a purchase does not result in the ownership of an
option. A closing purchase transaction is ordinarily effected to realize a
profit on an outstanding option, to prevent an underlying instrument from being
called, to permit the sale of the underlying instrument or to permit the
writing of a new option containing different terms on such underlying
instrument. The cost of such a liquidation purchase plus transaction costs may
be greater than the premium received upon the original option, in which event
the Fund will have incurred a loss in the transaction. There is no assurance
that a liquid secondary market will exist for any particular option. An option
writer, unable to effect a closing purchase transaction, will not be able to
sell the underlying instrument (in the case of a covered call option) or
liquidate the segregated account (in the case of a secured put option) until
the option expires or the optioned instrument or currency is delivered upon
exercise with the result that the writer in such circumstances will be subject
to the risk of market decline or appreciation in the instrument during such
period.

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<PAGE> 28
and liabilities as a deferred credit. The amount of this asset or deferred
credit will be subsequently marked-to-market to reflect the current value of
the option purchased or written. The current value of the traded option is the
last sale price or, in the absence of a sale, the current bid price. If an
option purchased by a Fund expires unexercised the Fund realizes a loss equal
to the premium paid. If a Fund enters into a closing sale transaction on an
option purchased by it, the Fund realizes a gain if the premium received by the
Fund on the closing transaction is more than the premium paid to purchase the
option, or a loss if it is less. If an option written by a Fund expires on the
stipulated expiration date or if a Fund enters into a closing purchase
transaction, it realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option is eliminated. If an option written by a
Fund is exercised, the proceeds of the sale are increased by the net premium
originally received and the Fund realizes a gain or loss.

There are several risks associated with transactions in options. For
example, there are significant differences between the securities, currency and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In
addition, a liquid secondary market for particular options, whether traded
over-the-counter or on an exchange, may be absent for reasons that include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities or currencies; unusual or unforeseen circumstances may interrupt
normal operations on an exchange; the facilities of an exchange or the Options
Clearing Corporation may not be adequate at all times to handle current
trading value; or one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of
options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. A Fund is likely to
be unable to control losses by closing its position where a liquid secondary
market does not exist. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected events.

Stock Index Futures Contracts and Options on Stock Index Futures
Contracts (The Equity Value and Balanced Funds). A stock index futures contract
is an agreement in which one party agrees to deliver to the other an amount of
cash equal to a specific dollar amount multiplied by the difference between the
value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. As the aggregate market
value of the stocks in the index changes, the value of the index also changes.
In the event that the index level rises above the level at which the stock
index futures contract was sold, the seller of the stock index futures contract
realizes a loss determined by the difference between the two index levels at
the time of expiration of the stock index futures contract, and the purchaser
realizes a gain in that amount. In the event the index level falls below the
level at which the stock index futures contract was sold, the seller recognizes
a gain determined by the difference between the two index levels at

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<PAGE> 29
the expiration of the stock index futures contract, and the purchaser realizes
a loss. Stock index futures contracts expire on a fixed date, currently one to
seven months from the date of the contract, and are settled upon expiration of
the contract.

Stock index futures contracts may be purchased to protect a Fund
against an increase in the prices of stocks that the Fund intends to purchase.
If the Fund is unable to invest its cash (or cash equivalents) in stock in an
orderly fashion, the Fund may purchase a stock index futures contract to offset
any increase in the price of the stock. However, it is possible that the market
may decline instead, resulting in a loss on the stock index futures contract.
If the Fund then concludes not to invest in stock at that time, or if the price
of the securities to be purchased remains constant or increases, the Fund
realizes a loss on the stock index futures contract that is not offset by a
reduction in the price of securities purchased. The Funds also may buy or sell
stock index futures contracts to close out existing futures positions.

The Equity Value and Balanced Funds may also purchase put options on
stock index futures contracts. Sales of such options may also be made to close
out an open option position. The Funds may, for example, purchase a put option
on a particular stock index futures contract or stock index to protect against
a decline in the value of the common stocks it holds. If the stocks in the
index decline in value, the put should become more valuable and the Funds could
sell it to offset losses in the value of the common stocks. In this way, put
options may be used to achieve the same goals the Funds seek in selling futures
contracts. A put option on a stock index future gives the purchaser the right,
in return for a premium paid, to assume a short (i.e., the right to sell stock
index futures) position in a stock index futures contract at a specified
exercise price ("strike price") at any time during the period of the option. If
the option is exercised by the holder before the last trading date during the
option period, the holder receives the futures position, as well as any balance
in the futures margin account. If an option is exercised on the last trading
day prior to the expiration date of the option, the settlement is made entirely
in cash in an amount equal to the difference between the strike price and the
closing level of the relevant index on the expiration date.

Wells Fargo Bank expects that an increase or decrease in the index in
relation to the strike price level would normally correlate to an increase or
decrease (but not necessarily to the same extent) in the value of a Fund's
common stock portfolio against which the option was written. Thus, any loss in
the option transaction may be offset by an increase in the value of the common
stock portfolio to the extent changes in the index correlate to changes in the
value of that portfolio. The Funds may liquidate the put options they have
purchased by effecting a closing sale transaction rather than exercising the
option. This is accomplished by selling an option of the same series as the
option previously purchased. There is no guarantee that the Funds will be able
to effect the closing sale transaction. The Funds realize a gain from a closing
sale transaction if the price at which the transaction is effected exceeds the
premium paid to purchase the option and, if less, the Funds realize a loss.

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<PAGE> 30
price), it will place in a segregated custodial account liquid assets such as
U.S. Government securities or other liquid high-grade debt securities having a
value equal to or greater than the repurchase price (including accrued
interest) and will subsequently monitor the account to ensure that such value
is maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by a Fund may decline below the price at which the
Fund is obligated to repurchase the securities. Reverse repurchase agreements
are considered to be borrowings under the 1940 Act.

Nationally Recognized Statistical Ratings Organizations. The ratings
of Moody's Investors Service, Inc., Standard & Poor's Ratings Group, Division
of McGraw Hill, Duff & Phelps Credit Rating Co., Fitch Investors Service, Inc.
Thomson Bank Watch and IBCA Inc. represent their opinions as to the quality of
debt securities. It should be emphasized, however, that ratings are general and
not absolute standards of quality, and debt securities with the same maturity,
interest rate and rating may have different yields while debt securities of the
same maturity and interest rate with different ratings may have the same yield.
Subsequent to purchase by a Fund, an issue of debt securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by a Fund. The adviser will consider such an event in determining
whether the Fund involved should continue to hold the obligation.

The payment of principal and interest on debt securities purchased by
the Funds depends upon the ability of the issuers to meet their obligations. An
issuer's obligations under its debt securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by federal or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or, in the case of governmental entities, upon the ability
of such entities to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest and principal of its debt securities
may be materially adversely affected by litigation or other conditions.
Further, it should also be, noted with respect to all municipal obligations
issued after August 15, 1986 (August 31, 1986 in the case of certain bonds),
the issuer must comply with certain rules formerly applicable only to
"industrial development bonds" which, if the issuer fails to observe them,
could cause interest on the municipal obligations to become taxable retroactive
to the date of issue.

Rule 144A. It is possible that unregistered securities, purchased by
the Prime Money Market Fund in reliance upon Rule 144A under the Securities Act
of 1933, could have the effect of increasing the level of the Fund's
illiquidity to the extent that qualified institutional buyers become, for a
period, uninterested in purchasing these securities.

SPECIAL CONSIDERATIONS AFFECTING ARIZONA MUNICIPAL OBLIGATIONS

The concentration of the Arizona Tax-Free Fund in securities issued by
governmental units of only one state exposes the Fund to risks greater than
those of a more diversified portfolio holding securities issued by governmental
units of different states and different regions of the country.

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Under its constitution, the State of Arizona is not permitted to issue
general obligation bonds secured by the full faith and credit of the State.
However, certain agencies and instrumentalities of the State are authorized to
issue bonds secured by revenues from specific projects and activities. The
State enters into certain lease transactions that are subject to annual renewal
at the option of the State. Local governmental units in the State are also
authorized to incur indebtedness. The major source of financing for such local
government indebtedness is an ad valorem property tax. In addition, in order
to finance public projects, local governments in the State can issue revenue
bonds payable from the revenues of a utility or enterprise or from the proceeds
of an excise tax, or assessment bonds payable from special assessments. Arizona
local governments have also financed public projects through leases which are
subject to annual appropriation at the option of the local government.

There is a statutory restriction on the amount of annual increases in
taxes that can be levied by the various taxing jurisdictions in the State
without voter approval. This restriction does not apply to taxes levied to pay
general obligation debt.

There are periodic attempts in the form of voter initiatives and
legislative proposals to further limit the amount of annual increases in taxes
that can be levied by the various taxing jurisdictions without voter approval,
or to restructure the State's revenue mix among sales, income, property and
other taxes. It is possible that if any such proposals were enacted, there
would be an adverse impact on State or local government financing. It is not
possible to predict whether any such proposals will be enacted in the future or
what would be their possible impact on state or local government financing.

Arizona is required by law to maintain a balanced budget. To achieve
this objective, the State has, at various times in the past, utilized a
combination of spending reductions or reductions in the rate of growth in
spending, and tax increases. In recent years, the State's fiscal situation has
improved even while tax reduction measures have been enacted each year since
1992. In 1992, Arizona voters passed a measure that requires a two-thirds vote
of the legislature to increase state revenue. Accordingly, it will be more
difficult to reverse tax reductions, which may adversely affect state fund
balances and fiscal conditions over time.

Arizona state government general fund revenue growth in fiscal year
1996 is forecast to increase just 2.3%, although growth would be projected at
9.1% but for legislative changes, principally an income tax reduction measure
enacted in 1995. The 7.1% adjusted projected increase in sales tax revenue
reflects continued strong economic growth in the state. With revenue growth
outpacing increased expenditures, the state general fund is projected to end
fiscal year 1996 with a total general fund balance of approximately $493
million. The amount of this balance is approximately 11% of total general fund
expenditures for fiscal year 1996. Included in the total balance is a general
fund ending balance of approximately $265 million, and a budget stabilization
("rainy day") fund balance of approximately $228 million.

The fiscal year 1997 budget adopted by the legislature assumes that
the total general fund balance carried forward from fiscal year 1996 will be
drawn down by approximately $265 million

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during the course of fiscal year 1997. Based on this assumption, the total
general fund balance at the end of fiscal year 1997 should be lower than for
fiscal year 1996.

Additionally, the 1995 legislature enacted a $200 million income tax
reduction package and has committed to enact a $200 million property tax
reduction package in 1996, although efforts to enact this package during the
regular legislative session were not successful. One or more special sessions
of the legislature may be held later in 1996 to address property tax reduction
and school finance issues, and the 1996 general election ballot may include one
or more questions related to these issues and the State's tax structure
generally. The outcomes of any special legislative sessions or election issues
of this nature may adversely affect State fund balances and fiscal conditions.

Arizona has a diversified economic base that is not dependent on any
single industry. Principal economic sectors include services, manufacturing,
mining, tourism, and the military. Agriculture, which was at one time a major
sector, now plays a much smaller role in the State's economy. For several
decades, the population of the State has grown at a substantially higher rate
than the population of the United States. While the State's economy flourished
during the early 80's, a substantial amount of overbuilding occurred, adversely
affecting Arizona-based financial institutions, many of which were placed under
the control of the Resolution Trust Corporation. Spillover effects produced
further weakening in the State's economy. The Arizona economy has begun to grow
again, albeit at a slower pace than experienced before the real estate
collapse. The North American Free Trade Agreement is generally viewed as
beneficial to the State. However, current and proposed reductions in federal
military expenditures may adversely affect the Arizona economy.

SPECIAL CONSIDERATIONS AFFECTING CALIFORNIA MUNICIPAL OBLIGATIONS

Certain debt obligations held by the California Tax-Free Bond and
California Tax-Free Income Funds 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 service on
obligations held by the 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.

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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 Fund 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 the Funds would not be paid
in a timely manner.

Certain debt obligations held by the Funds may be obligations
which are 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.

SPECIAL CONSIDERATIONS AFFECTING OREGON MUNICIPAL OBLIGATIONS

The concentration of the Oregon Tax-Free Fund in Oregon obligations
raises additional considerations for investors in that portfolio, as discussed
below.

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State Bonds and Revenues

As of March 1, 1996, $3.76 billion in general obligation bonds issued
by the State of Oregon and its agencies and instrumentalities were outstanding,
including $91.9 million in general obligation bonds supported by the budget for
the State's general fund and $3.65 billion of self-supporting general
obligation bonds. The State's self-supporting general obligation bonds include
$2.90 billion of State veteran's bonds, which, in the event of poor economic
conditions resulting in an increased number of mortgage defaults, could cease
to be self-supporting. All of the existing and outstanding general obligation
bonds of the State have been issued under specific State constitutional
provisions that authorize the issuance of such bonds and provide authority for
ad valorem taxation to pay the principal of and interest on such bonds. With
the exception of the veteran's bonds, for which no more than two mills on each
dollar valuation may be levied to pay principal and interest, the authority of
the State to tax property for the payment of its general obligation bonds is
unlimited. Since at least 1950, the State has not imposed ad valorem tax for
the payment of any of its obligations because other revenues, including those
generated by the self-supporting bonds, have been sufficient.

In addition to general obligation bonds, various State statutes
authorize the issuance of State revenue bonds and certificates of
participation. These limited obligations of the State or its agencies or
instrumentalities may be payable from a specific project or source, including
lease rentals. The State is not authorized to impose ad valorem taxes on
property for the payment of principal and interest on these bonds, so they are
more sensitive to changes in the economy. There can be no assurance that future
economic problems will not adversely affect the market value of Oregon
obligations held by the Fund or the ability of the respective obligors (both
private and governmental) to make required payments on such obligations.

Oregon does not have a sales tax. As a result, State tax revenues are
particularly sensitive to economic recessions. The principal sources of State
tax revenues are personal income and corporate income taxes. As of March 1,
1996, approximately 96.7% of the State's revenues for the 1995-97 were
projected to come from combined income taxes, insurance taxes, gift and
inheritance taxes, and cigarette and tobacco taxes. Since 1983 State revenues
have improved substantially, and in recent years the State has granted tax
refunds because of budget surpluses, as required by statute. The State's March
1996 economic and revenue forecast predicts that State General Fund revenues
will exceed the legislatively approved budget forecast by approximately $127.7
million (or 1.8%).

The Economy

Oregon's economy maintained its momentum through the end of 1995.
Oregon remains one of the fastest growing states in the country. High
technology manufacturing and the service sector are the primary engines driving
the State economy. Despite the positive overall tone at year end, there were
definite signs of slowing in construction and manufacturing outside the
electronics industry.

33
<PAGE> 35
The Oregon economy appears to have ample momentum to continue growing
through 1997, though the pace is likely to be slower than the previous two-year
period. Expansion of the State's semiconductor industry and its suppliers will
likely remain the key engine driving growth in the State. Rising wages and a
continuing flow of new residents are expected to generate jobs in the State's
service and trade sectors. The primary factors likely to slow growth over the
next two years are dwindling supply of skilled labor and rising housing costs.

Oregon's income, employment and population are expected to increase
faster than the country as a whole, as they have since 1987. However, job
growth is expected to slow in 1996 and 1997. The State's population is
projected to grow by 114,000 over the next two years.

Oregon has successfully restructured from an economy highly dependent
on the timber industry to one in which high technology manufacturing and
services also play a prominent role. The fundamentals appear to be in place
for the State to continue growing faster than the overall U.S. economy through
2001. Despite the generally favorable long-term outlook, rising housing and
labor costs are expected to begin pushing the State's growth rate back toward
the national average. Moreover, the State's growing dependence on the
semiconductor industry is likely to lead to some unstable conditions as the
industry expands and contracts in response to national and international
pressures.

Recent Environmental Developments

In 1991 and 1992, in response to concerns over diminishing salmon
runs, three populations of Snake River salmon were placed on the Endangered
Species list. More recently, the National Marine Fisheries Service and the U.S.
Fish and Wildlife Service have commenced status reviews of hundreds of
additional salmon and trout populations in the Columbia Basin and throughout
Western Oregon. The Snake River salmon listings have already had substantial
economic impacts, primarily through increased electricity rates and related
impacts on rate-sensitive industries such as the aluminum industry. Efforts to
protect salmon and steelhead populations may eventually affect a wide variety
of industrial, recreational and land use activities, with corresponding impacts
on long-term economic growth; however, the magnitude and extent of any future
environmental action is impossible to predict at this time. The State's
economic forecasts do not address the potential impact of endangered species
problems on Oregon's economy.

Recent Developments Affecting Government Revenues.

Ballot Measure 5. Article XI, section 11b of the Oregon Constitution,
adopted by Oregon's voters in November 1990 ("Ballot Measure 5"), imposes an
aggregate limit on the rate of property taxes, including ad valorem taxes, that
may be levied against any real or personal property. The limit is subject to
certain exceptions and is being phased in over a five-year period. Beginning
with the tax year that starts on July 1, 1996, the final year of the phase-in
period, not more than $15 per $1,000 of real market value can be levied against
any piece of property. Of this amount, $5 may be used for public education, and
the remaining $10 may be used for general governmental purposes.

34
<PAGE> 36
The limitations of Ballot Measure 5 do not apply to taxes imposed to
pay the principal of and interest on bonded indebtedness authorized by a
specific provision of the State Constitution. Therefore, the ability of the
State to levy taxes to service its general obligation bonds is not subject to
the limit. In addition, because the State currently receives its revenues from
sources other than property taxes, Ballot Measure 5 has not directly affected
State revenues.

Ballot Measure 5 does affect the financial condition of the State,
however, since it (1) requires the State to replace losses to school funds
caused by its restriction on the levy of ad valorem taxes for education through
fiscal year 1995-96, and (2) restricts the ability of Oregon local governments
to raise revenues through the imposition of property tax increases. The State's
Legislative Revenue Office estimates that the State will make payments in
excess of its obligations to replace school revenues during the 1993-95
biennium and the 1995-96 fiscal year. The State's obligation to replace school
revenues terminates after fiscal year 1995-96.

Where two or more general governmental units have overlapping taxing
jurisdiction over a particular property, their tax levies are in competition if
the property's aggregate tax levy for general government exceeds $10 per $1,000
(in the case of taxes imposed to fund the public school system from
pre-kindergarten through post-graduate training, competition is for the
remaining $5 per $1,000 allowable under Ballot Measure 5). In such cases, each
governmental unit's tax levy is decreased on a pro rata basis, and the amount
of tax received is less than the amount budgeted. To date, only a few local
governments have experienced this problem. However, as governmental expenses
increase, local governments may experience increasing budget pressures unless
property values also increase. Ballot Measure 5 does not apply to ad valorem
taxes imposed to pay the principal and interest on general obligation bonds for
capital construction or improvements if the bonds were either: (1) issued on or
prior to November 6, 1990, or (2) approved by the electors of the issuing
governmental unit.

The effect that Ballot Measure 5 ultimately will have on local
government revenues is difficult to predict. Since passage of Ballot Measure
5, property values have been adjusted to more closely approximate real market
values. If the trend of increased property values in Oregon continues, the real
market value base of property against which the limited tax rate may be imposed
may be more than enough to support the needs of Oregon governments.

The tax limitations of Ballot Measure 5 do not apply to user fees,
licenses, excise or income taxes and incurred charges for local improvements.
Therefore, since 1990 local governments have begun to rely more heavily on such
fees and taxes to finance certain services and improvements.

The Initiative Process. The Oregon Constitution reserves to the people
of the State initiative and referendum power pursuant to which measures
designed to amend the State Constitution or enact legislation, can be placed on
the statewide general election ballot for consideration by the voters.
"Referendum" generally means measures referred to the electors by a legislative
body such as the State Legislative Assembly or the governing body of a city,
county or other political subdivision, while "initiative" generally means a
measure placed before the voters as a result of a petition circulated by one or
more private citizens.

35
<PAGE> 37
Any person may file a proposed initiative with the Oregon Secretary of
State's office. The Oregon Attorney General is required by law to draft a
proposed ballot title for the initiative, and interested parties may submit
comments on the legal sufficiency of the proposed ballot title and on whether
the proposed initiative complies with a "one subject only" rule for initiative
measures. After considering any public comments, the Attorney General must
either certify or revise the draft ballot title. In general, any elector who
timely submitted written comments on the draft ballot title may petition the
Oregon Supreme Court seeking a revision of the certified ballot title.

To have an initiative placed on a general election ballot, the
proponents of the proposed initiative must submit to the Secretary of State
initiative petitions signed by a number of qualified voters equal to a
specified percentage of the total number of votes cast for all candidates for
governor in the most recent gubernatorial election. The initiative petition
must be filed with the Secretary of State not less than four months prior to
the general election at which the proposed measure is to be voted. State law
permits persons circulating initiative petition to pay money to persons
obtaining signatures for the petition.

Over the past decade Oregon has witnessed increasing activity in the
number of initiative petitions that have qualified for the statewide general
election. As of June 1, 1996, no initiatives had qualified to be placed on the
November 1996 general election ballot. In recent years, a number of initiatives
involving the fiscal operations of the State were proposed and placed on the
ballot. One of these initiatives was approved by the voters and has had a
significant impact on the fiscal operations of the State. See "Recent
Developments Affecting Government Revenues - Ballot Measure 5." Other
initiatives, had they been approved by the voters, also may have had
significant impacts on the fiscal operations of the State.

It is difficult to predict with certainty either the likelihood of a
proposed initiative measure obtaining the required number of valid initiative
petition signatures or the likelihood of an initiative that has acquired the
necessary number of valid signatures being approved by the voters. There can be
no assurance that an initiative that will have a material adverse impact on the
financial condition of the State or the State's ability to collect the revenues
required to repay its general obligation bonds will not be proposed, placed on
the ballot, or be approved by the voters.

Judicial challenges seeking interpretations and clarifications of the
scope and application of Ballot Measure 5 to specific situations, such as what
constitutes "capital construction and improvements," continue to be filed. If
it is judicially determined that certain statutes adopted by the Oregon
legislature to implement Ballot Measure 5 do not adequately implement the
restrictions contained in that measure, local governments may have to seek new
funding sources for certain items, such as significant facility repairs and
equipment, which have been traditionally financed in part through the issuance
of voter approved ad valorem tax supported indebtedness.

The Oregon Bond Market. There is a relatively small active market for
municipal bonds of Oregon issuers other than the general obligations of the
State itself, and the market price of such other bonds may therefore be
volatile. If the Oregon Tax-Free Fund were forced to sell a large volume of
Oregon Obligations owned by it for any reason, such as to meet redemption
requests for

36
<PAGE> 38
a large number of its shares, there is a risk that the large sale itself would
adversely affect the value of the Oregon Tax-Free Fund's portfolio.

MANAGEMENT

The following information supplements and should be read in
conjunction with the section in the prospectus entitled "The Funds and
Management." 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, Age and Address Position During Past 5 Years
- --------------------- -------- ---------------------
<S> <C> <C>
Jack S. Euphrat, 74 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.

*R. Greg Feltus, 45 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
Inc.; and President of
Investor Brokerage
Insurance Inc.

Thomas S. Goho, 54 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, 47 Director Senior Vice President
of Stephens and
</TABLE>

37
<PAGE> 39
<TABLE>
<S> <C> <C>
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource
Management.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

*J. Tucker Morse, 52 Director Private Investor; Real
10 Legrae Street Estate Developer;
Charleston, SC 29401 Chairman of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.

Richard H. Blank, Jr., 40 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary and Director of Stephens
Treasurer Sports Management Inc.;
and Director of Capo Inc.
</TABLE>

COMPENSATION TABLE
For the 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
</TABLE>

38
<PAGE> 40
<TABLE>
<S> <C> <C>
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 directors and officers of Overland
Express Funds, Inc. and MasterWorks Funds Inc. (formerly, 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, prior to January 1, 1996 and the reorganization of WFNIA, was
considered to be in the same "fund complex," as such term is defined in Form
N-1A under the 1940 Act, as the Company. Effective January 1, 1996,
MasterWorks Funds Inc., Master Investment Portfolio, and Managed Series
Investment Trust are considered to be members of the same fund complex and are
no longer part of the same fund complex as Stagecoach Funds, Inc., Overland
Express Funds, Inc., Stagecoach Trust, Life & Annuity Trust and Master
Investment Trust. The Directors are compensated by other companies and trusts
within the fund complex for their services as directors/trustees to such
companies 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.

39
<PAGE> 41
each Fund. Pursuant to the advisory contracts, Wells Fargo Bank also has
agreed to furnish to the Board of Directors periodic reports on the investment
strategy and performance of each Fund.

Wells Fargo Bank has agreed to provide to the Funds, 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. As compensation for its advisory services, Well Fargo Bank is
entitled to receive a monthly fee at the annual rates indicated below, of the
average daily value of each Fund's net assets during the preceding month.

<TABLE>
<CAPTION>
Annual Rate
Fund Name (as percentage of net assets)
--------- -----------------------------
<S> <C> <C>
o Arizona Tax-Free 0.50%
o Balanced 0.60%
o California Tax-Free Bond 0.50%
o California Tax-Free Income 0.50%
o Equity Value 0.50%
o Government Money Market Mutual 0.25%
o Intermediate Bond 0.50%
o National Tax-Free 0.50%
o Oregon Tax-Free 0.50%
o Prime Money Market Mutual 0.25%
o Treasury Money Market Mutual 0.25%
</TABLE>

The advisory contracts continue in effect for more than two years
provided the continuance is approved annually (i) by the holders of a majority
of a Fund's outstanding voting securities or (ii) by the Company's Board of
Directors and by a majority of the Directors of the Company who are not parties
to the advisory contracts 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:

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-
California Tax-Free $ 38,402 $ 122,967 -0- $ 279,496 $ 236,632 $ 31,013
Income
</TABLE>

40
<PAGE> 42
Prior to the Reorganization, Wells Fargo Investment Management, Inc.
("WFIM") and its predecessor, First Interstate Capital Management, Inc.
("FICM") served as adviser to the predecessor portfolios of Pacifica. For the
six- month period beginning October 1, 1995 and ending March 31, 1996,
WFIM/FICM were entitled to receive, and waived or reimbursed advisory fees paid
by the predecessor Funds as follows:

Investment Advisory Fees
<TABLE>
<CAPTION>
Fees Waived and
Fees Earned Expenses Reimbursed
Six-Month Period Six-Month Period
FUND Ended March 31, 1996 Ended March 31, 1996
------------------------------------------------------------------------------------
<S> <C> <C>
Arizona Tax-Free $0 $61,642
Balanced $390,798 $4,608
Equity Value $700,233 $0
Government Money Market Mutual $146,024 $0
Intermediate Bond $97,358 $39,513
National Tax-Free $0 $35,773
Oregon Tax-Free $64,479 $57,377
Prime Money Market Mutual $812,609 $916,740
Treasury Money Market Mutual $1,136,476 $1,132,651
</TABLE>

Prior to October 1, 1995, First Interstate Bank of Oregon, N.A. and
First Interstate Bank of Washington, N.A. served as co-advisers to the
predecessor portfolios of the National Tax-Free Fund; First Interstate Bank of
Oregon, N.A. served as adviser to the predecessors of the Intermediate Bond
Fund and Oregon Tax-Free Fund; and First Interstate Bank of Arizona, N.A.
served as adviser to the predecessor of the Arizona Tax-Free Fund. For the
periods ended September 30, 1995, May 31, 1995 and May 31, 1994, the prior
advisers for these Funds were entitled to receive advisory fees from the Funds
at the same annual rates as those that were in effect for WFIM. For these
periods, the prior advisers was entitled to receive the following amounts in
advisory fees:

Investment Advisory Fees

<TABLE>
<CAPTION>
Period Ended
September 30, Period Ended Period Ended
Fund 1995* May 31, 1995 May 31, 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $41,159 $124,904 $128,905
Intermediate Bond $94,698 $275,948 $318,000
National Tax-Free $24,173 $ 67,845 $ 57,059
Oregon Tax-Free $84,999 $256,430 $269,574
</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

41
<PAGE> 43

For the periods ended September 30, 1995, May 31, 1995 and May 31,
1994, the prior advisers for the predecessors of the Arizona Tax-Free,
Intermediate Bond, National Tax-Free and Oregon Tax-Free Funds waived advisory
fees and reimbursed expenses in the following amounts:

Investment Advisory Fees Waived
and Expenses Reimbursed by Adviser

<TABLE>
<CAPTION>
Period Ended
September 30, Period Ended Period Ended
Fund 1995* May 31, 1995 May 31, 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $66,373 $166,803 $172,383
Intermediate Bond $0 $0 $0
National Tax-Free $68,667 $145,244 $141,590
Oregon Tax-Fre$43,995 $84,770 $104,948

</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

Prior to March 18, 1994, the adviser for the Balanced, Equity Value
and Government Money Market Mutual Funds was San Diego Financial Capital
Management, Inc. ("San Diego Financial"), which was a wholly owned subsidiary
of San Diego Trust & Savings Bank ("San Diego Trust"), which in turn was a
wholly owned subsidiary of San Diego Financial Corporation ("SDFC"). On that
date, SDFC merged into First Interstate Bancorp and San Diego Trust merged into
First Interstate Bank of California ("FICAL"). As a result of these
transactions, San Diego Financial became an indirect wholly-owned subsidiary of
FICAL. On January 12, 1995, San Diego Financial merged into First Interstate
Investment Services, Inc., a direct wholly-owned subsidiary of FICAL, which has
since changed its name to First Interstate Capital Management, Inc.

During the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993, the adviser (and prior adviser, as the case may be) was
entitled to receive advisory fees from the Balanced, Equity Value and
Government Money Market Mutual Funds at the same annual rates as those
currently in effect. For such fiscal years, the adviser (and prior adviser, as
the case may be) was entitled to receive the following amounts in advisory
fees:

42
<PAGE> 44
Investment Advisory Fees

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced $579,850 $683,626 $503,720
Equity Value $992,870 $953,400 $701,500
Government Money Market $383,269 $442,842 $534,447
</TABLE>
During the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993, the adviser (or prior adviser, as the case may be)
waived advisory fees and reimbursed expenses for the Balanced, Equity Value and
Government Money Market Mutual Funds in the following amounts:

Investment Advisory Fees Waived
and Expenses Reimbursed by Adviser

During the fiscal year ended September 30, 1995, the six-month period
ended September 30, 1994 and the fiscal years ended March 31, 1994 and 1993,
the advisory fees paid to the adviser by the predecessor portfolios of the
Prime Money Market Mutual Fund and the Treasury Money Market Mutual Fund were
as follows:
Investment Advisory Fees Paid*

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 May 31, 1994 May 31, 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Money Market Mutual $ 693,315 $ 330,715 $ 737,811 $ 640,620
Treasury Money Market Mutual $ 1,160,424 $ 454,029 $ 900,919 $ 629,121
</TABLE>

*These amounts reflect voluntary fee waivers and expense reimbursements
by the adviser. Prior to October 1, 1994, all of these fees were, in turn,
paid by the adviser to its affiliates which served as sub-investment advisors
during the periods indicated.

43
<PAGE> 45
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 a Fund together with those ordinary clerical and bookkeeping
services that are not furnished by Wells Fargo Bank. Stephens also pays the
compensation of the Company's Directors, Officers and employees who are
affiliated with Stephens. The Administration Agreement and the Amended
Distribution Agreement were approved by the Company's Board of Directors April
25, 1996.

For the fiscal years ended December 31, 1993, 1994 and 1995, the Funds
paid administrative fees to Stephens 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
</TABLE>

Prior to April 1, 1996, the administrator of the Pacifica predecessor
portfolios (Furman Selz LLC) provided management and administrative services
necessary for the operation of such Funds, pursuant to an Administrative
Services Contract. For these services, the former administrator was entitled to
receive a fee, payable monthly, at the annual rate of 0.15% of the average
daily net assets of the predecessors of all such Funds except the Prime Money
Market Mutual and Treasury Money Market Mutual Funds, which had a different
former administrator (the Dreyfus Corporation) at the annual rate of 0.10% of
each Fund's average daily net assets. The following table reflects the
administration fees to which the respective former administrators of the
predecessors of the following Funds were entitled, and the amounts of fee
waivers, during the indicated period:

Administration Fees

<TABLE>
<CAPTION>
Fees Earned Fees Waived
Period Ended Period Ended
FUND March 31, 1996 March 31, 1996
----------------------------------------------------------------------
<S> <C> <C>
Arizona Tax-Free $15,157 $3,340
Balanced $81,357 $16,342
Equity Value $148,263 $26,795
Government Money Market Mutual $49,075 $23,937
Intermediate Bond $32,598 $6,698
National Tax-Free $9,048 $1,684
Oregon Tax-Free $30,839 $5,718
Prime Money Market Mutual $677,174 $0
Treasury Money Market Mutual $947,063 $0
</TABLE>

44
<PAGE> 46
Prior to October 1, 1995, ALPS served as the administrator for the
Arizona Tax-Free, Intermediate Bond, National Tax-Free and Oregon Tax-Free
Funds. For its administration services, ALPS was entitled to receive the
following amounts for the fiscal periods ended September 30, 1995, May 31, 1995
and May 31, 1994:

Administration Fees

<TABLE>
<CAPTION>
Period Ended
September 30, Year Ended Year Ended
FUND 1995* May 31, 1995 May 31, 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $4,116 $12,490 $12,890
Intermediate Bond $9,470 $27,595 $31,800
National Tax-Free $2,417 $6,785 $5,706
Oregon Tax-Free $8,500 $25,643 $26,957
</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

For the fiscal periods ended September 30, 1995, May 31, 1995 and May
31, 1994, ALPS waived administration fees for the Arizona Tax-Free,
Intermediate Bond, National Tax-Free and Oregon Tax-Free Funds in the following
amounts:

Administration Fees Waived

<TABLE>
<CAPTION>
Period Ended
September 30, Year Ended Year Ended
FUND 1995* May 31, 1995 May 31, 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $0 $0 $0
Intermediate Bond $0 $0 $0
National Tax-Free $0 $2,018 $4,210
Oregon Tax-Free $0 $0 $0
</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

During the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993, Furman Selz was entitled to receive administration
services fees from the Balanced, Equity Value, and Government Money Market
Mutual Funds in the following amounts:

Administration Fees

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced $193,283 $227,896 $167,907
Equity Value $330,957 $317,992 $233,834
Government Money Market Mutual $255,512 $295,228 $356,611
</TABLE>

45
<PAGE> 47
For the fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993, Furman Selz waived administration fees for the Balanced,
Equity Value, and Government Money Market Mutual Funds in the following
amounts:

Administration Fees Waived

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced $19,328 $22,808 $21,652
Equity Value $33,096 $31,972 $16,972
Government Money Market Mutual $25,550 $29,523 $23,652
</TABLE>

During the fiscal year ended September 30, 1995, the six-month period ended
September 30, 1994 and the fiscal years ended March 31, 1994 and 1993, the
administration fees paid to the Dreyfus Corporation by the Prime Money Market
Mutual Fund and the Treasury Money Market Mutual Fund were as follows:
Administration Fees Paid

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Mar. 31, 1994 Mar. 31, 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Money Market Mutual $577,763 $275,596 $614,901 $533,850
Treasury Money Market Mutual $921,886 $347,499 $690,137 $524,268
</TABLE>

The advisory contracts and administration agreement for the Funds
provide that if, in any fiscal year, the total expenses of a Fund incurred by,
or allocated to, such 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 the Plan but including the fees
provided for in the applicable advisory contract and the administration
agreement) exceed the most restrictive expense limitation applicable to a Fund
imposed by the securities laws or regulations of the states in which the Fund's
shares are registered for sale, Wells Fargo Bank and Stephens shall waive their
fees proportionately under the advisory contract and the administration
agreement, respectively, for the 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 contracts and the administration agreement for the Funds
further provide that a 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. Currently,
California is the only state imposing limitations on the expenses of the Funds.
Those expense limitations are 2-1/2 percent of the first $30 million of a
Fund's average net assets, 2 percent of the next $70 million and 1-1/2 percent
of a Fund's remaining average net assets.

46
<PAGE> 48
Shareholder Servicing Agent. As discussed in each Fund's prospectus
under the heading "Shareholder Servicing Agent," the Funds approved Servicing
Plans and have entered into related shareholder servicing agreements with
financial institutions, including Wells Fargo Bank. For providing these
services, a Servicing Agent is entitled to a fee from the applicable Fund, not
to exceed 0.25% (and with respect to the California Funds, not to exceed 30%),
on an annualized basis, of the average daily net assets of the class of shares
owned of record or beneficially by the customers of the Servicing Agent during
the period for which payment is being made. The Servicing Plans and related
shareholder servicing agreements were approved by the Company's Board of
Directors and provide that a Fund shall not be obligated to make any payments
under such Plans or related Agreements that exceed the maximum amounts payable
under Article III, Section 26 of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (NASD).

The dollar amount of shareholder servicing fees paid by each of the Funds
to Wells Fargo Bank or its affiliates for the fiscal year ended December 31,
1995 was as follows:

<TABLE>
<CAPTION>
FUND 1995
----------------------------------------------------------------
<S> <C>
California Tax-Free Bond Fund $59,642
California Tax-Free Income Fund $0
</TABLE>

For the six months ended March 31, 1996, and under a similar service
agreement, payments have been made to First Intestate Bancorp for the following
funds: $4,555 for the Arizona Tax-Free Fund, $41,210 for the Balanced Fund,
$52,636 for the Equity Value Fund, $19,923 for the Government Money Market
Mutual Fund, $759 for the National Tax-Free Fund and $19,146 for the Oregon
Tax-Free Fund. For the same period, and under similar service agreements with
certain institutions, including affiliates of FICM, payments have been made to
various institutions in the amounts of $1,055,708 for the Prime Money Market
Mutual Fund of which $637,228 was waived, and $1,326,718 for the Treasury Money
Market Mutual Fund of which $1,040,940 was waived.

Custodian And Transfer And Dividend Disbursing Agent. Wells Fargo
Bank has been retained to act as custodian and transfer and dividend disbursing
agent for the Funds, pursuant to a Custody Agreement and an Agency Agreement
with the Company on behalf of the Funds. The custodian, among other things,
maintains a custody account or accounts in the name of a Fund, receives and
delivers all assets for the Fund upon purchase and upon sale or maturity,
collects and receives all income and other payments and distributions on
account of the assets of the Fund and pays all expenses of the Fund. For its
services as custodian, Wells Fargo Bank is entitled to receive fees as follows:
a net asset charge at the annual rate of 0.0167%, payable monthly, plus
specified transaction charges. Wells Fargo Bank also will provide portfolio
accounting services under the Custody Agreement as follows: a monthly base fee
of $2,000 plus a net asset fee at the annual rate of 0.070% of the first
$50,000,000 of a Fund's average daily net assets, 0.045% of the next
$50,000,000, and 0.020% of the average daily net assets in excess of
$100,000,000.

47
<PAGE> 49
For its services as transfer and dividend disbursing agent for the
Class A and B shares of the Funds, Wells Fargo Bank is entitled to receive
monthly payments at the annual rate of 0.07% of the average daily net assets of
each Fund. For the year ended December 31, 1995, the California Tax-Free Bond
and California Tax-Free Income Funds did not pay any custody or transfer and
dividend disbursing agency fees to Wells Fargo.

FICAL, located at 707 Wilshire Blvd., Los Angeles, California 90017,
acted as custodian of the predecessor portfolios of Pacifica, but played no
role in making decisions as to the purchase or sale of portfolio securities for
the predecessor portfolios. FICAL was entitled to receive a fee from Pacifica,
computed daily and payable monthly, at the annual rate of 0.021% of the first
$5 billion in aggregate average daily net assets of the Funds; 0.0175% of the
next $5 billion in aggregate average daily net assets of the Funds; and 0.015%
of the aggregate average daily net assets of the Funds in excess of $10
billion.

For the six months ended March 31, 1996, the custodian fees to FICAL
have amounted to $2,476 for the Arizona Tax-Free Fund, $13,458 for the Balanced
Fund, $27,023 for the Equity Value Fund, $10,809 for the Government Money
Market Mutual Fund, $5,533 for the Intermediate Bond Fund, $0 for the National
Tax-Free Fund (the Fund earned credits on its balances held by FICAL in an
amount sufficient to reduce FICAL's custodian fee to zero), $5,505 for the
Oregon Tax-Free Fund, $145,468 for the Prime Money Market Mutual Fund and
$206,288 for the Treasury Money Market Mutual Fund.

Furman Selz acted as transfer agent for the predecessor portfolios.
Pacifica compensated Furman Selz for providing personnel and facilities to
perform transfer agency related services for Pacifica at a rate intended to
represent the cost of providing such services.

Underwriting Commissions. For the fiscal years ended December 31,
1993 and 1994, with respect to the Company's funds except the New Funds, the
Company's distributor retained $26,215,173 and $5,415,227, respectively in
underwriting commissions (front-end sales loads and CDSCs, if any) in
connection with the purchase or redemption of each fund's shares. For the
fiscal years ended December 31, 1993 and 1994, Wells Fargo Securities Inc.
("WFSI"), an affiliated broker-dealer of the Company, and its registered
representatives received $378,895 and $904,274, respectively, in underwriting
commissions in connection with the purchase or redemption of each fund's
shares. y For the year ended December 31, 1995, with respect to the
Company's funds except the New Funds, the aggregate amount of underwriting
commissions on sales/redemptions of the Company's shares was $1,584,545.
Stephens retained $1,251,311 of such commissions. WFSI and its registered
representatives retained $333,234 of such commissions.

DISTRIBUTION PLANS

Stephens Inc. (the "Distributor"), at 111 Center Street, Little Rock,
Arkansas 72201, serves as sponsor, administrator and distributor for the
Funds. The following information

48
<PAGE> 50
supplements and should be read in conjunction with the Prospectus under
"Distribution Plans." As indicated in each Fund's Prospectus, each Fund has
adopted a distribution plan (a "Plan") under Section 12(b) of the 1940 Act and
Rule 12b-1 thereunder (the "Rule") for each class of its shares. The Plans for
the Class A shares and Class B shares of the Funds, as the case may be, were
adopted by the Company's Board of Directors, including a majority of the
Directors who were not "interested persons" (as defined in the 1940 Act) of the
Funds and who had no direct or indirect financial interest in the operation of
the Plans or in any agreement related to the Plans (the "Non-Interested
Directors").

Under the Plans and pursuant to the Distribution Agreement, the Funds
may pay the Distributor as compensation for distribution-related activities
and services provided and related expenses incurred, a monthly fee at an annual
rate up to 0.05% of the average daily net assets of the Intermediate Bond Fund,
Tax-Free Funds and Money Market Funds and 0.10% of the average daily net assets
of the Balanced and Equity Value Funds, attributable to Class A shares; 0.75%
of the average daily net assets of the Arizona, National and Oregon Tax-Free
Funds, Intermediate Bond, Balanced and Equity Value Funds and 70% of the
average daily net assets of the California Tax-Free Bond Fund, attributable to
Class B shares.

The actual fee payable to the Distributor is determined, within such
limits, from time to time by mutual agreement between the Company and the
Distributor and will not exceed the maximum sales charges payable by mutual
funds sold by members of the NASD under the NASD Rules of Fair Practice. the
Distributor may enter into selling agreements with one or more selling agents
(which may include Wells Fargo Bank and its affiliates) under which such agents
may receive compensation for distribution-related services from the
Distributor, including, but not limited to, commissions or other payments to
such agents based on the average daily net assets of Fund shares attributable
to their customers. The Distributor may retain any portion of the total
distribution fee payable thereunder to compensate it for distribution-related
services provided by it or to reimburse it for other distribution-related
expenses.

Pursuant to Rule 12b-1, a distribution plan must be initially approved
(and reapproved annually thereafter) by the Board of Directors, including a
majority of the Non-Interested Directors of the Company. Agreements related
to the Plans also must be approved by such vote of the Directors and
Non-Interested Directors. Selling agreements will terminate automatically if
assigned and may be terminated at any time, without payment of any penalty, by
a vote of a majority of the outstanding voting securities of the relevant class
of a Fund or by vote of a majority of the Non- Interested Directors on not more
than 60 days' written notice. Each Plan may not be amended to increase
materially the amounts payable thereunder without the approval of a majority of
the outstanding voting securities of the relevant class of a Fund, and no
material amendment to the Plans may be made except by a majority of both the
Directors of the Company and the Non-Interested Directors.

Each Plan requires the Company to provide the Directors, and the
Directors to review, at least quarterly, a written report of the amounts
expended (and purposes therefor) under such Plan. The Rule also requires that
the selection and nomination the Non-Interested Directors of the Company be
made by such non-interested directors.

49
<PAGE> 51
Wells Fargo Bank, an interested person (as that term is defined in
Section 2(a)(19) of the 1940 Act) of the Company, acts as a selling agent for
the Funds' Class A and B shares pursuant to selling agreements with Stephens
authorized under the Plans. As a selling agent, Wells Fargo Bank has an
indirect financial interest in the operation of the Plans. The Board of
Directors has concluded that the Plans are reasonably likely to benefit the
Funds and their shareholders because the Plans authorize the relationships with
selling agents, including Wells Fargo Bank, that have previously developed
distribution channels and relationships with the retail customers that the
Class A and B shares of the Funds are designed to serve. These relationships
and distribution channels are believed by the Board to provide potential for
increased Fund assets and ultimately corresponding economic efficiencies (i.e.,
lower per-share transaction costs and fixed expenses) that are generated by
increased assets under management.

For the year ended December 31, 1995, the Funds' distributor received
the following amounts of 12b-1 fees for the specified purposes set forth below
under each Fund's Plan.

<TABLE>
<CAPTION>
PRINTING & COMPENSATION
MAILING MARKETING TO
FUND TOTAL PROSPECTUS BROCHURES UNDERWRITERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California Tax-Free Bond
Class A $ 110,033 $ 24,390 $ 85,643 N/A
Class B $ 82,030 N/A N/A $ 82,030
California Tax-Free
Income Fund $ 13,063 $ 10,246 $ 2,817 N/A

</TABLE>

For the year ended December 31, 1995, WFSI and its registered
representatives received no compensation under each Fund's Plans.

Prior to April 1, 1996, Pacifica Funds Distributor Inc. ("PFD"), a
subsidiary of Furman Selz, served as principal underwriter for the shares of
the predecessor portfolios pursuant to a Distribution Contract as of October 1,
1995.

Prior to October 1, 1995, ALPS Mutual Funds Service, Inc. ("ALPS")
served as the distributor to the predecessor portfolios of the Intermediate
Bond Fund and the Arizona, National and Oregon Tax-Free Funds. ALPS was not
entitled to any compensation for its services as distributor for these
portfolios.

Under a distribution plan adopted for the predecessor portfolios'
Investor shares, PFD was entitled to be paid directly or reimbursed monthly in
amounts described in the prospectuses for costs and expenses of marketing the
Investor shares of the predecessor portfolios of the Equity Value, Intermediate
Bond and Arizona, National and Oregon Tax-Free Funds. Under a separate
distribution plan for the Money Market Funds, Pacifica, on behalf of the
predecessor portfolios paid directly or reimbursed PFD monthly in amounts
described in the prospectus for costs and expenses of marketing their shares.

50
<PAGE> 52
During the fiscal year ended September 30, 1995, the predecessor
portfolios of the following Funds reimbursed PFD, pursuant to their predecessor
plans, in the following amounts:

<TABLE>
<CAPTION>
Equity Government
Value Balanced Money Market
Fund Fund Mutual Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Advertising and Promotional Materials
$ 10,769 $ 3,303 $ 74,215
Printing and mailing of financial statements
and prospectus to other than current
shareholders $ 7,068 $ 6,177 $ 6,448
Compensation to underwriters 0 0 0
Compensation to broker/dealers 0 0 0
Compensation to sales personnel 0 0 0
Financing charges 0 0 0
Total $ 17,837 $ 9,480 $ 80,663
</TABLE>

51
<PAGE> 53
SERVICING PLANS AND AGREEMENTS

The Company's Board of Directors adopted a shareholder servicing
agreement for each Fund and a servicing plan (collectively, with the
shareholder servicing agreement, the "Servicing Plans") with respect to each
class of New Fund shares and with respect to Class B shares for the California
Tax-Free Bond Fund. The Board of Directors included a majority of the
Directors who were not "interested persons" (as defined in the Act) of each
Fund and who had no direct or indirect financial interest in the operation of
the Servicing Plan or in any agreement related to the Servicing Plan (the
"Servicing Plan Non-Interested Directors").

Under the Servicing Plan and pursuant to the shareholder servicing
agreements for the Class A or B shares, a Fund may pay one or more servicing
agents, as compensation for performing certain services, a fee at an annual
rate of up to 0.25% of the average daily net assets of the New Funds' Class A
or B shares, and 0.30% of the average daily net assets of the California
Tax-Free Bond Fund's Class B shares, attributable to the servicing agent's
customers. The actual fee payable to servicing agents is determined, within
such limits, from time to time by mutual agreement between the Company and each
servicing agent and will not exceed the maximum service fees payable by mutual
funds sold by members of the NASD under the NASD Rules of Fair Practice.

Each Servicing Plan continues in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Servicing Plan Non-Interested Directors. Any form of servicing
agreement related to the Servicing Plan also must be approved by such vote of
the Directors and the Servicing Plan Non-Interested Directors. Servicing
agreements may be terminated at any time, without payment of any penalty, by
vote of a majority of the Servicing Plan Non-Interested Directors. No material
amendment to the Servicing Plans may be made except by a majority of both the
Directors of the Company and the Servicing Plan Non-Interested Directors.

Each Servicing Plan requires that the administrator shall provide to
the Directors, and the Directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Servicing
Plan.

PERFORMANCE CALCULATIONS

The following information supplements and should be read in
conjunction with the sections in each prospectus entitled "Determination of Net
Asset Value" and "Performance Data."

The Funds may advertise certain total return information computed in
the manner described in the prospectus. As and to the extent required by the
SEC, an 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 ("P") over a period of years ("n") according to the
following formula: P(1+T)n = ERV. In addition, as indicated in each
prospectus, each Fund also may, at times, calculate total return based on net
asset value per share (rather than the public offering price),

52
<PAGE> 54
in which case the figures would not reflect the effect of any sales charges
that would have been paid by an investor, or based on the assumption that a
sales charge other than the maximum sales charge (reflecting a Volume Discount)
was assessed, provided that total return data derived pursuant to the
calculation described above also are presented.

The average annual total return on shares of the California Tax-Free
Income Fund for the one year ended December 31, 1995, assuming a 3.00% sales
load, was 5.91%. The average annual total return for the same period, assuming
no sales load, was 9.14%. The average annual total return on shares of the
California Tax-Free Income Fund for the period since inception (November 18,
1992) to December 31, 1995, assuming a 3.00% sales load, was 4.01%. The
average annual total return for the same period, assuming no sales load, was
5.03%.

The average annual total return of the Class A Shares of the
California Tax-Free Bond Fund from inception (January 1, 1992) to December 31,
1995, assuming a 4.50% sales charge, was 7.09%. The average annual total
return for the same period, assuming no sales charge, was 8.33%. The average
annual total return for the Class A shares of the California Tax-Free Bond Fund
for the year ended December 31, 1995, assuming the maximum 4.50% sales charge,
was 12.96%. The average annual total return of such shares for the same
period, assuming no sales charge, was 18.24%.

The average annual total return for the Class B shares of the
California Tax-Free Bond Fund for the year ended December 31, 1995, assuming
the maximum CDSC, was 14.72%. The average annual total return for the Class B
shares of the California Tax-Free Bond Fund for the year ended December 31,
1995, assuming no sales charge, was 17.72%.

During the periods shown below, the predecessor portfolios of the
Equity Value, Balanced and Intermediate Bond Funds and the Arizona, National
and Oregon Tax-Free Funds offered one class of shares with a sales charge (with
certain exceptions) to both retail and institutional investors.

For the fiscal year ended September 30, 1995, the average annual total
returns of the predecessor portfolios of the Funds listed below were as
follows:

<TABLE>
<CAPTION>
Commencement of
Year Ended Five Years Ended Operations to
9/30/95 9/30/95 9/30/95*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermediate Bond Fund** 6.93% 7.81% 8.06%
Oregon Tax-Free Fund** 5.01% 6.71% 6.69%
Arizona Tax-Free Fund** 4.98% N/A 5.84%
National Tax-Free Fund** 5.55% N/A 3.91%
- ---------------------
</TABLE>
* The Arizona Tax-Free and National Tax-Free Funds commenced operations
on March 2, 1992 and January 15, 1993, respectively. The other Funds
listed above commenced operations on June 1, 1988.

** Prior to October 1, 1995, each Fund offered one class of shares to
both retail and institutional shareholders.

53
<PAGE> 55
For the fiscal year ended September 30, 1995, the average annual total
returns of the predecessor portfolios of the Funds listed below were as
follows:

<TABLE>
<CAPTION>
Commencement of
Year Ended Five Years Ended Operations to
9/30/95 9/30/95 9/30/95*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund 11.36% 15.79% 11.44%
Balanced Fund 5.64% 11.26% 9.63%
- ---------------------
</TABLE>
* Each Fund commenced operations on July 2, 1990.

The Funds also may advertise cumulative total return for a specified
period, such as one month, three months or year-to-date periods. Cumulative
total return is computed on a per share basis and assumes the reinvestment of
dividends and distributions over the period presented. The cumulative total
return for such periods is based on the overall percentage change in value of a
hypothetical investment in the Fund, assuming all Fund dividends and capital
gains distributions are reinvested, without reflecting the effect of any sales
charge that would be paid by an investor, and is not annualized.
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.

The cumulative total return of the Class A shares of the California
Tax-Free Bond Fund from inception (January 1, 1992) to December 31, 1995,
assuming a 4.50% sales charge, was 31.53%. The cumulative total return on the
Class A shares for the same period, assuming no sales charge, was 37.71%.

The cumulative total return on shares of the California Tax-Free Income
Fund for the period since inception (November 18, 1992) to December 31, 1995,
assuming a 3.00% sales load, was 13.07%. The cumulative total return for the
same period, assuming no sales load, was 16.58%.

The Funds may, from time to time, include their yields, tax-equivalent
yields (if applicable) and average annual total returns in advertisements or
reports to shareholders or prospective investors. Quotations of yield for the
Intermediate Bond Fund and the Tax-Free Funds is based on the investment income
per share earned during a particular 30- day period, less expenses accrued
during a period ("net investment income") and is computed by dividing net
investment income by the maximum offering price per share on the last day of
the period, according to the following formula:

(6)
YIELD - 2[(a - b + 1) -1]
-----
cd

where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares outstanding during the period that

54
<PAGE> 56
were entitled to receive dividends, and d = the maximum offering price per
share on the last day of the period. The net investment income of the
California Tax-Free Bond Fund 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 the California Tax-Free Bond Fund's
net investment income. For purposes of sales literature, yield on each class
of shares of the Bond Fund also may be calculated on the basis of the net asset
value per share rather than the public offering price, provided that the yield
data derived pursuant to the calculation described above also are presented.

The yields on shares of the California Tax-Free Income Fund for the
30-day period ended December 31, 1995, assuming the maximum 3.00% sales charge
and no sales charge, were 3.55% and 3.66%, respectively.

The yield for the Class A shares of the California Tax-Free Bond Fund
for the 30-day period ended December 31, 1995, assuming the maximum 4.50% sales
charge, was 4.54%. The yield on such shares during the same period, assuming
no sales charge, was 4.75%. The yield for the Class B shares of the Bond Fund
for the thirty-day period ended December 31, 1995, assuming no CDSC was 4.09%.

For the 30-day period ended September 30, 1995, the yields of the
predecessor portfolios of the Funds listed below were as follows:

<TABLE>
<CAPTION>
FUND 30-DAY YIELD
- -------------------------------------------------
<S> <C>
Intermediate Bond Fund* 5.61%
Oregon Tax-Free Fund* 5.04%
Arizona Tax-Free Fund* 4.37%
National Tax-Free Fund* 4.37%
</TABLE>

- ---------------
* Prior to October 1, 1995, these portfolios only offered a single class of
shares to both retail and institutional shareholders.

Quotations of tax-equivalent yield for a Tax-Free Fund are calculated
according to the following formula:

TAX EQUIVALENT YIELD = ( E ) + t
-----
1 - p

E = Tax-exempt yield
p = stated income tax rate
t = taxable yield

55
<PAGE> 57
The tax-equivalent yield for the California Funds also is computed by
dividing that portion of the yield of the Fund which 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.

The tax-equivalent yields of the California Tax-Free Income Fund for
the 30-day period ended December 31, 1995, assuming the maximum 3.00% sales
charge and no sales charge, were 6.60% and 6.81%, respectively (based on a
46.24% assumed federal and state tax rate).

The tax-equivalent yield of the Class A shares of the California
Tax-Free Bond Fund for the 30-day period ended December 31, 1995, assuming the
maximum 4.50% sales charge, was 7.88% (based on a 42.40% assumed federal and
state tax rate). The tax-equivalent yield for such shares during the same
period, assuming no sales charge and the same tax rate, was 8.25%. The
tax-equivalent yield for Class B shares during the same period, assuming no
CDSC and the same tax rate, was 7.10%.

For the 30-day period ended September 30, 1995, the tax-equivalent
yield of the predecessor portfolios of the Funds listed below were as follows:

<TABLE>
<CAPTION>
FUND TAX-EQUIVALENT YIELD
- --------------------------------------------------------------------------
<S> <C>
Oregon Tax-Free Fund* 8.00%**
Arizona Tax-Free Fund* 6.52%**
National Tax-Free Fund* 6.26%**
- ----------------------
</TABLE>
* Prior to October 1, 1995, these portfolios only offered a single class
of shares to both retail and institutional shareholders.

** Based on a combined federal and state income tax rate of 37% and 33%
for the Oregon Tax-Free Fund and the Arizona Tax-Free Fund,
respectively, and a federal income tax rate of 28% for the National
Tax-Free Fund.

Current yields for the Money Market Funds are based on the change in
the value of a hypothetical investment (exclusive of capital changes) over a
particular seven-day period, less a pro-rata share of each Fund's expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
"Effective yield" for the Money Market Funds assumes that all dividends
received during an annual period have been reinvested. Calculation of
"effective yield" begins with the same "base period return" used in the
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:

Effective Yield = [(Base Period Return +1)365/7]-1.

56
<PAGE> 58
For the seven-day period ended September 30, 1995, the yield and
effective yield for the predecessor portfolio of the Government Money Market
Mutual Fund were 5.00% and 4.97%, respectively.

Prior to October 1, 1995, neither of the predecessor portfolios of the
Prime or the Treasury Money Market Mutual Funds sold any Class A shares to the
public. For the seven-day period ended September 30, 1995, the Prime Money
Market Mutual Fund's yield and effective yield on Service Class shares were
5.46% and 5.60%, respectively, and on Institutional Class shares were 5.67% and
5.83%, respectively. For the seven-day period ended September 30, 1995, the
Treasury Money Market Mutual Fund's yield and effective yield on Service Class
shares were 5.29% and 5.42% respectively, and on Institutional Class shares
were 5.52% and 5.66%, respectively.

During this seven-day period, the predecessor adviser and predecessor
shareholder servicing agents waived portions of their fees amounting to 0.23%
and 0.43% of the average daily net assets of the Prime Money Market Mutual Fund
for Service Class shares and Institutional Class shares, respectively, and
0.23% and 0.43% of the average daily net assets of the Treasury Money Market
Mutual Fund for Service Class shares and Institutional Class shares,
respectively. With respect to the Prime Money Market Mutual Fund, had these
expenses not been waived, the yield and effective yield for the same period
would have been, 5.23 and 5.37%, respectively, for the Service Class shares and
5.24% and 5.40%, respectively, for Institutional Class shares. With respect to
the Treasury Money Market Mutual Fund, had these expenses not been waived, the
yield and effective yield for the same period would have been 5.06% and 5.19%,
respectively, for the Service Class shares and 5.09% and 5.23% respectively,
for Institutional Class shares.

Quotations of yield and total return reflect only the performance of a
hypothetical investment in a Fund or class of shares during the particular time
period shown. Yield and total return vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.

In connection with communicating its yields or total return to current
or prospective shareholders, these figures may also be compared to the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs. y 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 performance or price-earning ratios in
advertising and other types of literature as compared with the performance of
the Lehman Brothers Municipal Bond Index, 1-Year Treasury Bill Rate, S&P Index,
the Dow Jones Industrial Average, the Lehman Brothers 20+ Years Treasury Index,
the Lehman Brothers 5-7 Year Treasury Index, IBC/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 the World Gold Council), Bank Averages (which is 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

57
<PAGE> 59
Statistical Releases or the Bank Rate Monitor), the Salomon One Year Treasury
Benchmark Index, the Consumer Price Index (as published by the U.S. Bureau of
Labor Statistics), Ten Year U.S. Government Bond Average, S&P's Corporate Bond
Yield Averages, Schabacter Investment Management Indices, Salomon Brothers High
Grade Bond Index, Lehman Brothers Long-Term High Quality Government/Corporate
Bond Index, other managed or unmanaged indices or performance data of bonds,
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 Fund or a class of shares also may be compared to
the performance 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 that monitor the
performance of mutual funds. Any such comparisons may be useful to investors
who wish to compare a Fund's past performance with that of its 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.

In addition, the Company also may use, in advertisements and other
types of literature, information and statements showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth. The Company also may include in
advertising and other types of literature information and other data from
reports and studies prepared by the Tax Foundation, including information
regarding federal and state tax levels and the related "Tax Freedom Day."

The Company also may use the following information in advertisements
and other types of literature, only to the extent the information is
appropriate for a class of shares of a Fund: (i) the Consumer Price Index may
be used to assess the real rate of return from an investment in a class of
shares of 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 a class of shares or the general economic, business,
investment, or financial environment in which the Fund operates; (iii) the
effect of tax-deferred compounding on the investment returns of a Fund or a
class of shares, 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 a class of shares (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 the historical performance of the Fund or a class or current or
potential value with respect to the particular industry or sector.

The Company also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such

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as S&P or Moody's. Such rating would assess the creditworthiness of the
investments held by a Fund. The assigned rating would not be a recommendation
to purchase, sell or hold any class of a Fund's shares since the rating would
not comment on the market price of a Fund's shares or the suitability of a Fund
for a particular investor. In addition, the assigned rating would be subject
to change, suspension or withdrawal as a result of changes in, or
unavailability of, information relating to a Fund or its investments. The
Company may compare a Fund's performance with other investments that are
assigned ratings by NRSROs. Any such comparisons may be useful to investors
who wish to compare a Fund's past performance with other rated investments.

From time to time the Company may reprint, reference or otherwise use
material from magazines, newsletters, newspapers and books including, but not
limited to the Wall Street Journal, Money Magazine, Barrons, Kiplingers,
Business Week, Fortune, Forbes, the San Francisco Chronicle, the San Jose
Mercury News, The New York Times, the Los Angeles Times, the Boston Globe, the
Washington Post, the Chicago Sun-Times, Investor Business Daily, Worth, Bank
Investor, American Banker, Smart Money, the 100 Best Mutual Funds (Adams
Publishing), Morningstar or Value Line.

The Company also may disclose in sales literature, the distribution
rate on the shares of a Fund or a class of shares. 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.

The Company also may disclose, in advertising statements and other
types of literature, information and statements that the Company's investment
adviser, Wells Fargo Bank, is listed in Nelson Publications' ("Nelson's") "Top
20" performance rankings as published in the 1994 edition of "America's Best
Money Managers." The Nelson survey ranks the performance of money managers in
over 30 asset/style categories and is based on analysis of performance
composites and surveys of institutional money managers.

The Company also may disclose in advertising and other types of sales
literature the assets and categories of assets under management by the
Company's investment adviser and the total amount of assets under management by
Wells Fargo Investment Management Group ("IMG") or the amount of assets and
mutual fund assets managed by Wells Fargo Bank. As of June 30, 1996, Wells
Fargo Bank and its affiliates provided investment Advisory services for
approximately $56 billion of assets of individuals, trusts, estates and
institutions and $17 billion of mutual fund assets.

The Company may disclose in advertising and other types of literature
that investors can open and maintain Sweep Accounts over the Internet or
through other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available
to investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the
first major bank to offer an on-line application for a mutual fund account that
can be filled out completely through Electronic Channels. Advertising and other
literature may disclose that Wells Fargo Bank may maintain Web sites, pages or
other information sites accessible through Electronic Channels (an "Information
Site") and may describe the contents and features of the Information Site and
instruct investors on how to access the Information Site and open a Sweep
Account. Advertising and other literature may also disclose the procedures
employed by Wells Fargo Bank to secure information provided by investors,
including disclosure and discussion of the tools and services for accessing
Electronic Channels. Such advertising or other literature may include
discussions of the advantages of establishing and maintaining a Sweep Account
through Electronic Channels and testimonials from Wells Fargo Bank customers or
employees and may also include descriptions of locations where product
demonstrations may occur. The Company may also disclose the ranking of Wells
Fargo Bank as one of the largest money managers in the United States.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the prospectus section under "Purchase of shares." Net asset
value per share or class of shares of a non-money market Fund is determined by
the Funds' Custodian on each day the Exchange is open for trading as of the
close of regular trading on the Exchange, which is currently 1:00 p.m. Pacific
time.

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<PAGE> 61
Securities of a Fund for which market quotations are available are
valued at latest prices. Any security for which the primary market is an
exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the latest bid price quoted on
such day. 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. The assets of a Fund
other than money market instruments maturing in 60 days or less are valued at
latest quoted bid prices. Prices may be furnished by a reputable independent
pricing service approved by the Company's 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 a Fund for which current market
quotations are not readily available are valued at fair value as determined in
good faith by the Company's Board of Directors and in accordance with
procedures adopted by the Directors.

Expenses and fees, including advisory fees, are accrued daily and are
taken into account for the purpose of determining the net asset value of a
Fund's shares.

Net asset value per share or class of shares of a Money Market Fund is
determined as of 12:00 noon and 1:00 p.m. Pacific time on each Business Day as
described in the prospectus.

The Money Market Funds' instruments are valued on the basis of
amortized cost. This technique involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price a Money Market Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of a Money Market Fund computed as described above may tend to be higher
than a like computation made by a fund with identical investments utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its instruments. Thus, if the use of amortized cost by a Money Market
Fund resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in a Money Market Fund would be able to obtain a somewhat
higher yield than would result from investment in a fund utilizing solely
market values and existing investors in a Money Market Fund would receive less
investment income. The converse would apply in a period of rising interest
rates.

The valuation of each Money Market Funds' instruments, based upon
their amortized cost and the concomitant maintenance by each Fund of a net
asset value of $1.00, is permitted in accordance with Rule 2a-7 under the Act,
pursuant to which a Money Market Fund must adhere to certain conditions. Each
Money Market Fund must maintain a dollar- weighted average maturity of 90 days
or less, purchase only instruments having remaining maturities of 397 days
(thirteen months) or less, and invest only in securities that are determined to
present minimal credit risks pursuant to guidelines adopted by the Directors or
the adviser under guidelines approved by the Directors. Instruments having
variable or floating interest rates or demand features may be deemed

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<PAGE> 62
to have remaining maturities as follows: (a) a government security with a
variable rate of interest readjusted no less frequently than every thirteen
months may be deemed to have a maturity equal to the period remaining until the
next readjustment of the interest rate; (b) an instrument with a variable rate
of interest, the principal amount of which is scheduled on the face of the
instrument to be paid in thirteen months or less, may be deemed to have a
maturity equal to the period remaining until the next readjustment of the
interest rate; (c) an instrument with a variable rate of interest that is
subject to a demand feature may be deemed to have a maturity equal to the
longer of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand; (d) an instrument with a floating rate of interest that is subject to a
demand feature may be deemed to have a maturity equal to the period remaining
until the principal amount can be recovered through demand; and (e) a
repurchase agreement may be deemed to have a maturity equal to the period
remaining until the date on which the repurchase of the underlying securities
is scheduled to occur or, where no date is specified but the agreement is
subject to demand, the notice period applicable to a demand for the repurchase
of the securities.

The Company's Board of Directors has established valuation procedures
designed to stabilize, to the extent reasonably possible, each Money Market
Fund's price per share as computed for the purpose of sales and redemptions.
Such procedures include the determination, at such intervals as the Directors
deem appropriate, of the extent to which each such Fund's NAV as calculated by
using available market quotations deviates from $1.00 per share, such deviation
may result in material dilution or other unfair results to existing
shareholders or investors. In the event the Directors determine that such a
material deviation exists, they have agreed to take such corrective action as
they regard as necessary and appropriate, which may include selling portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding dividends; redeeming shares in kind or
without monetary or other consideration; or establishing a net asset value per
share by using available market quotations. It is the intention of the Money
Market Funds to maintain a per share net asset value of $1.00, but there can be
no assurance that each Fund will do so.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Payment for shares may, in the discretion of the adviser, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Funds will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by a
Fund and that such Fund receives satisfactory assurances that (i) it will have
good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which

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disposal or valuation of portfolio securities is not reasonably practicable, or
for such periods as the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to reimburse
the Funds for any losses sustained by reason of the failure of a shareholders
to make full payment for shares purchased or to collect any charge relating to
a transaction effected for the benefit of a shareholder which is applicable to
shares of a Fund as provided from time to time in the Prospectus.

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 Balanced and
Equity Value Funds, 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, money market securities, ARMs
and CMOs 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 Tax-Free 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 Balanced and Equity Value Funds, 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,
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 assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Balanced and Equity Value Funds to pay a
broker/dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker/dealer for
effecting the same transaction, provided that Wells Fargo Bank determines in
good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker/dealer, viewed in
terms of either the particular transaction or the overall responsibilities of
Wells Fargo Bank. Such brokerage and research services might consist of reports
and statistics relating to specific companies or industries, general summaries
of groups of stocks or bonds and their comparative earnings and yields, or
broad overviews of the stock, bond, and government securities markets and the
economy.

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Supplementary research information so received is in addition to, and
not in lieu of, services required to be performed by Wells Fargo Bank and does
not reduce the advisory fees payable by the Funds. The Board of Directors will
periodically review the commissions paid by the Funds to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Funds. It is possible that certain of
the supplementary research or other services received will primarily benefit one
or more other investment companies or other accounts for which investment
discretion is exercised. Conversely, the Funds may be the primary beneficiary of
the research or services received as a result of portfolio transactions effected
for such other account or investment company.

Under Section 28(e) of the Securities Exchange Act of 1934, an adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), an adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to a Fund in any transaction may be less favorable than that
available from another broker/dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.

Broker/dealers utilized by Wells Fargo Bank may furnish statistical,
research and other information or services which are deemed by Wells Fargo Bank
to be beneficial to a Fund's investment programs. Research services received
from brokers supplement Wells Fargo Bank's own research and may include the
following types of information: statistical and background information on
industry groups and individual companies; forecasts and interpretations with
respect to U.S. and foreign economies, securities, markets, specific industry
groups and individual companies; information on political developments;
portfolio management strategies; performance information on securities and
information concerning prices of securities; and information supplied by
specialized services to Wells Fargo Bank and to the Company's Directors with
respect to the performance, investment activities and fees and expenses of
other mutual funds. Such information may be communicated electronically, orally
or in written form. Research services may also include the providing of
equipment used to communicate research information, the arranging of meetings
with management of companies and the providing of access to consultants who
supply research information.

The outside research assistance is useful to Wells Fargo Bank since the
brokers utilized by Wells Fargo Bank as a group tend to follow a broader
universe of securities and other matters than the staff of Wells Fargo Bank can
follow. In addition, this research provides Wells Fargo Bank with a diverse
perspective on financial markets. Research services which are provided to Wells
Fargo Bank by brokers are available for the benefit of all accounts managed or
advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank that this
material is beneficial in supplementing their research and analysis; and,
therefore, it may benefit the Funds by improving the quality of Wells Fargo
Bank's investment advice. The advisory fees paid by the Funds are not reduced
because Wells Fargo Bank receives such services.

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Brokerage Commissions. During the years ended December 31, 1993, 1994
and 1995, the California Funds did not pay any brokerage commissions on
portfolio transactions. During the fiscal periods ended September 30, 1995,
May 31, 1995 and May 31, 1994, the predecessor portfolios of the Intermediate
Bond Fund and the Arizona, National and Oregon Tax-Free Funds did not pay any
brokerage commissions, because all of their portfolio transactions occurred in
the over- the-counter market.

Subject to the general supervision and approval of the Board of
Directors, the adviser makes decisions with respect to and places orders for
all purchases and sales of securities for the Prime and Treasury Money Market
Mutual Funds. Securities are generally purchased and sold either directly from
the issuer or from dealers who specialize in money market instruments. Such
purchases are usually effected as principal transactions and therefore do not
involve the payment of brokerage commissions.

During the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993, the predecessor portfolio of the Government Money
Market Mutual Fund did not pay any brokerage commissions, because all of its
portfolio transactions occurred in the over-the-counter market. During the same
time periods, the Equity Value and Balanced Funds paid the following amounts in
brokerage commissions:

Brokerage Commissions Paid

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund $619,124 $247,218 $368,789
Balanced Fund $197,751 $104,835 $149,294
</TABLE>

During the time periods stated above, no brokerage commissions were
paid by the Funds to an affiliated broker.

Securities of Regular Broker/Dealers. The Funds may from time to time
purchase securities issued by their regular broker/dealers. As of December 31,
1995, the California Funds did not own any securities of their "regular
brokers or dealers" or their parents, as defined in the Act. Furman Selz, the
administrator to the predecessor portfolios, did not report in their N-SAR for
the fiscal year ended September 30, 1995, that any of the Funds held securities
of their regular broker/dealers or of their parents that derive more than 15%
of gross revenues from securities-related activities.

Portfolio Turnover Rate. Changes may be made in the portfolios
consistent with the investment objectives and policies of the Funds whenever
such changes are believed to be in the best interests of the Funds and their
shareholders. The portfolio turnover rate is calculated by

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dividing the lesser of purchases or sales of portfolio securities by the
average monthly value of the Fund's portfolio securities. For purposes of this
calculation, portfolio securities exclude all securities having a maturity when
purchased of one year or less. Portfolio turnover generally involves some
expenses to the Funds, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover also can generate short-term capital gain tax
consequences. Portfolio turnover rate is not a limiting factor when Wells
Fargo Bank deems portfolio changes appropriate.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens, the
Company bears 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, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, 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, unless otherwise payable pursuant to a Plan),
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 a Fund assets. General expenses of the Company are
allocated among all of the funds of the Company, including a Fund, in a manner
proportionate to the net assets of each Fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.

TAXES

The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the SAI includes additional information
concerning taxes.

Qualification as a "regulated investment company" under the Code
requires, among other things, that (a) at least 90% of each 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, foreign
currencies or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to each Fund's business of
investing in such securities or currencies; (b) each Fund generally derives
less than 30% of its gross income from gains from the sale or other disposition
of certain assets held for less than 3 months, such as (i) stock or securities;
(ii) options, futures, and forward contracts (other than those on foreign
currencies), and (iii) foreign currencies (including options, futures, and
forward contracts on such currencies) not directly related to the Fund's
principal business of investing in stock or securities (or options and futures
with respect to stocks or securities)); and (c) each Fund diversifies its
holdings so that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of each Fund's assets is represented by cash, U.S.
government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of each 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 is not
subject to federal income tax on its net investment income and net capital
gains distributed to its shareholders, provided that it distributes to its
shareholders at least 90% of its net investment income (including its net
tax-exempt income) earned in each year.

Generally, dividends and capital gain distributions are taxable to
shareholders when they are received. However, such dividends and distributions
declared payable as of a record date in October, November or December of any
calendar year are deemed under the Code to have been paid by a Fund and
received by the shareholder on December 31 of that calendar year if the
dividend is actually paid in the following January. Such dividends and
distributions will, accordingly, be taxable to the recipient shareholders in
the year in which the record date falls. In addition, a 4% nondeductible
excise tax will be imposed on each Fund (other than to the extent of a Fund's
tax-exempt income, if any) to the extent it does not meet certain minimum

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distribution requirements by the end of each calendar year. Each Fund will
either actually or be deemed to distribute substantially all of its net
investment income and net capital gains by the end of each calendar year and,
thus, expects not to be subject to the excise tax.

All income received by a Fund from sources within foreign countries
(e.g., interest and dividends) may be subject to withholding and other taxes
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, no Fund will be able to "pass through" foreign tax credits
to shareholders.

Gains or losses on sales of portfolio securities by a Fund generally
will be long-term capital gains or losses if the securities have been held by
it for more than one year, except in certain cases including where the Fund
acquires a put or grants a call 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 generally 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. Other gains or losses on the sale of
securities will generally 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 capital gain distributions 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 a designated capital gain distribution on a
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
gain distribution. In addition, any loss realized by a shareholder upon the
sale or redemption of Fund shares held less than six months will be disallowed
to the extent of any tax-exempt interest dividends received by the shareholder
thereon. These rules shall not apply to losses incurred under a periodic
redemption plan.

As of the printing of this SAI, the maximum individual tax rate
applicable to ordinary income is 39.6% (marginal rates may be higher for some
individuals due to phase out of exemptions and elimination of deductions); the
maximum individual tax rate applicable to net capital gains is 28%; and the
maximum corporate tax rate applicable to ordinary income and net capital gains
is 35% (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 income 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 tax of up to
$100,000).

Sales charges incurred to acquire Fund shares with reinvestment rights
are not taken into account when calculating the gain or loss on the disposition
of such Fund shares if the shares are

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disposed of within 90 days of acquisition and Fund shares or shares of another
regulated investment company are purchased subsequently at a reduced or
eliminated sales charge, pursuant to the reinvestment rights attendant with the
initial acquisition of Fund shares. Any sales charge not taken into account is
treated as having been incurred in the subsequent acquisition. In addition,
any loss realized on a redemption or exchange of shares of a Fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the
disposition date of such Fund shares.

If an option granted by a Fund lapses or is terminated through a
closing transaction, such as a repurchase by such Fund of the option from its
holder, the Fund will realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction. Recognition of capital losses may be deferred if
they result from a position which is part of a tax "straddle," discussed below.
If securities are sold by a Fund pursuant to the exercise of a call option
granted by it, the Fund will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on the sale. If
securities are purchased by a Fund pursuant to the exercise of a put option
granted by it, the Fund will subtract the premium received from its cost basis
in the securities purchased.

Under Section 1256 of the Code, gain or loss recognized by a Fund from
certain financial forward, futures and options transactions is treated as 60%
long-term capital gain (or loss) and 40% short-term capital gain (or loss) (the
"60%/40% rule"). Gain or loss may arise upon the exercise or lapse of such
forward contracts, futures and options as well as from closing transactions.
In addition, any of such forward contracts, futures or options remaining
unexercised at the end of the regulated investment company's taxable year are
treated as sold for their then fair market value, resulting in additional gain
or loss to the Fund characterized in the manner described above (the
"marked-to-market rule"). Transactions that qualify as designated hedges are
excepted from the marked-to-market rule and 60%/40% rule. All or a portion of
the gain or loss from the disposition of non-U.S. dollar denominated
securities (including debt instruments, certain financial forward, futures and
option contracts, and certain preferred stock) may be treated as ordinary
income or loss under Section 988 of the Code (relating to the taxation of
foreign currency transactions). Furthermore, all or a portion of the gain
realized from engaging in "conversion transactions" may be treated as ordinary
income under Section 1258. Conversion transactions are defined to include
certain forward, futures, option and straddle transactions, transactions
marketed or sold to produce capital gains, or transactions described in
Treasury regulations to be issued in the future.

If a Fund purchases an equity interest in a "passive foreign
investment company" ("PFIC"), the Fund may be subject to an interest charge by
the IRS upon distributions from the PFIC or the Fund's disposition of its
interest in the PFIC. If a Fund invests in a PFIC, the Fund intends to make an
available election under which the Fund will not be subject to the interest
charge, but must annually include its allocable share of income from the PFIC,
regardless of whether the Fund receives any distributions from the PFIC.

Offsetting positions held by a Fund involving certain financial
forward, futures or option contracts may be considered, for tax purposes, to
constitute straddles. Straddles are defined to

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<PAGE> 69
include "offsetting positions" in actively traded personal property. The tax
treatment of straddles is governed by Section 1092 of the Code which, in
certain circumstances, overrides or modifies the provisions of Section 1256.
If a Fund were treated as entering into straddles by reason of its engaging in
certain financial forward, futures or option contracts, such straddles could be
characterized as "mixed straddles" if the futures, forwards, or options
comprising a part of such straddles were governed by Section 1256. The Fund
may make one or more elections with respect to mixed straddles, and, depending
upon which elections are made, if any, the tax consequences with respect to the
transaction may differ. Generally, to the extent the straddle rules apply to
positions established by the regulated investment company, losses realized by
the regulated investment company may be deferred to the extent of unrealized
gain in any offsetting positions. Moreover, as a result of the straddle and
the conversion transaction rules, short-term capital loss on straddle positions
may be recharacterized as long-term capital loss, and long-term capital gain
may be characterized as short-term capital gain or ordinary income.

Foreign Shareholders. Under the Code, distributions of net investment
income by a 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 generally not subject to tax withholding.

If, in the opinion of a 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.

The Tax Free Funds intend that at least 50% of the value of their
total assets at the close of each quarter of their taxable years will consist
of obligations the interest on which is exempt from federal income tax, so that
they will qualify under the Code to pay "exempt-interest dividends." Moreover,
if at the close of each quarter of a California Fund's taxable year, at least
50% of the value of its 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
which will be exempt from California personal income tax (hereinafter referred
to as "California exempt-interest dividends"). The portion of total dividends
paid by a Tax Free Fund with respect to any taxable year that constitutes
exempt-interest dividends will be the same for all shareholders receiving
dividends during such year. Long-term and/or short-term capital gain
distributions will not constitute exempt-interest dividends and will be taxed
as capital gain or ordinary income dividends, respectively. 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, the Arizona, California
and Oregon Tax-Free Funds also intend that a substantial

68
<PAGE> 70
portion of their dividends qualify for exemption from Arizona, California and
Oregon personal income tax, respectively.)

Not later than 60 days after the close of its taxable year, a Tax-Free
Fund will notify its shareholders of the portion of the dividends paid with
respect to such taxable year which constitutes exempt-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. Finally, interest on
indebtedness incurred to purchase or carry shares of a Tax-Free Fund will not
be deductible to the extent that these Funds' distributions are exempt from
federal income tax.

In addition, the IRS has devised federal alternative minimum tax
("AMT") rules to ensure that at least a minimum amount of tax is paid by
taxpayers who obtain significant benefit from certain tax deductions and
exemptions. Some of these deductions and exemptions have been designated "tax
preference items" which must be added back to taxable income for purposes of
calculating AMT. Among the tax preference items is tax-exempt interest from
"private activity bonds" issued after August 7, 1986. To the extent that a
Tax-Free Fund invests in private activity bonds, its 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
Fund. 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 a Tax-Free Fund.
Furthermore, shareholders will not be permitted to deduct any of their share of
a Tax-Free Fund's expenses in computing their AMT. With respect to a corporate
shareholder of such Funds, exempt-interest dividends paid by a Fund is included
in the corporate shareholder's "adjusted current earnings" as part of its AMT
calculation, and may also affect its federal "environmental tax" liability. As
of the printing of this SAI, individuals are subject to an AMT at a maximum
rate of 28% and corporations at a maximum rate of 20%. Shareholders with
questions or concerns about AMT should consult their tax advisors.

Shares of a Tax-Free Fund generally 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 Funds. Such dividends would be ultimately
taxable to the beneficiaries when distributed to them.

Other Matters. Investors should be aware that the investments to be
made by a Fund may involve sophisticated tax rules such as the original issue
discount and real estate mortgage investment conduit ("REMIC") rules that would
result in income or gain recognition by the Fund, without corresponding cash
receipts. Although a Fund will seek to avoid significant noncash income, such
noncash income could be recognized by the Fund, in which case a Fund may
distribute cash derived from other sources in order to meet the minimum
distribution requirements described above.

69
<PAGE> 71
CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Funds and
Management."

The Funds are eleven of the funds of the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of the following funds: Aggressive Growth, Arizona
Tax-Free, Asset Allocation, Balanced, California Tax-Free Bond, California
Tax-Free Income, California Tax-Free Money Market Mutual, Corporate Stock,
Diversified Income, Equity Value, Intermediate Bond, Ginnie Mae, Government
Money Market Mutual, Growth and Income, Money Market Mutual, Money Market Trust,
National Tax-Free, National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime
Money Market Mutual, Short-Intermediate U.S. Government Income, Small Cap,
Treasury Money Market Mutual, and U.S. Government Allocation Funds. The Arizona
Tax-Free, Balanced, California Tax-Free Bond, Equity Value, Ginnie Mae, Growth
and Income, Intermediate Bond, Money Market Mutual, National Tax-Free, Oregon
Tax-Free, Prime Money Market Mutual, Small Cap and Treasury Money Market Mutual
Funds each offer three classes of shares. The Aggressive Growth, Asset
Allocation, California Tax-Free Income, Diversified Income, Short-Intermediate
U.S. Government Income and U.S. Government Allocation Funds each offer two
classes of shares. The California Tax-Free Money Market Mutual, Corporate
Stock, Government Money Market Mutual, Money Market Trust, and National Tax-Free
Money Market Mutual Funds each offer one class of shares. Most of the Company's
funds are authorized to issue multiple classes of shares, one class generally
subject to a front-end sales charge and, in some cases, a class subject to a
contingent-deferred sales charge, that are offered to retail investors. Certain
of the Company's funds also are authorized to issue other classes of shares,
which are sold primarily to institutional investors.

With respect to matters that affect one class of a Fund's shares but
not another, shareholders vote as a class; for example, the approval of a Plan.
Subject to the foregoing, on any matter submitted to a vote of shareholders,
all shares then entitled to vote are voted separately by series unless
otherwise required by the Act, in which case all shares are voted in the
aggregate. For example, a change in a series' fundamental investment policy
affects only one series and are voted upon only by shareholders of the series
and not by shareholders of the Company's other series. Additionally, approval
of an advisory contract is a matter to be determined separately by each series.
Approval by the shareholders of one series is effective as to that series
whether or not sufficient votes are received from the shareholders of the other
series to approve the proposal as to those series. As used in the prospectus
and in this SAI, the term "majority" when referring to approvals to be obtained
from shareholders of a class of a Fund, means the vote of the lesser of (i) 67%
of the shares of such class of the Fund represented at a meeting if the holders
of more than 50% of the outstanding shares of such class of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of such class of the Fund. The term "majority," when referring to the
approvals to be obtained from shareholders of the Company as a whole, means the
vote of the lesser of (i) 67% of the Company's shares represented at a meeting
if the holders of more than 50% of the Company's outstanding shares are present
in person or by proxy, or (ii) more than 50% of the Company's outstanding
shares. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held. The Company may dispense with an

70
<PAGE> 72
annual meeting of shareholders in any year in which it is not required to elect
directors under the 1940 Act.

Each share of a class of a Fund represents an equal proportional
interest in the Fund with each other share in the same class 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 or class are entitled to receive the assets attributable to the Fund or
class 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.

Shares have no preemptive rights or subscription. All shares, when
issued for the consideration described in the prospectus, are fully paid and
non-assessable by the Company.

Pacifica was a Massachusetts business trust established under a
Declaration of Trust dated July 17, 1984, consisting of series of separately
managed portfolios which are described in this SAI. The capitalization of
Pacifica consisted solely of an unlimited number of shares of beneficial
interest with a par value of $0.001 each.

As of June 14, 1996, none of the New Funds had issued any shares. As
of September 6, 1996, Stephens is expected to be the beneficial owner of 100%
of the outstanding voting securities of each New Fund and, as such, could be
considered a "controlling person" of such Funds for purposes of the 1940 Act.
Upon commencement of the public offering of the New Fund's shares it is
expected that Stephens will own a significantly smaller percentage of the New
Fund's shares and will no longer be considered a controlling person.

As of February 29, 1996, no shareholders were known by the Company to
own 5% or more of the outstanding Class A or B shares of the California Funds.

Below is the name, address and share ownership of each person known to
Pacifica to have beneficial or record ownership with respect to 5% or more of a
class of the Predecessor Portfolio as of May 15, 1996:

PACIFICA PORTFOLIOS -- 5% OWNERSHIP AS OF MAY 15, 1996

<TABLE>
<CAPTION>
CLASS; AMOUNT OF PERCENTAGE PERCENTAGE PERCENTAGE
PACIFICA NAME AND SHARES OWNED; OF OF OF PORTFOLIO
PORTFOLIO ADDRESS TYPE OF OWHERSHIP CLASS PORTFOILO POST-CLOSING
--------- -------- ----------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ARIZONA TAX- Virg. & Co. Institutional 98.58% 65.36% 65.36%
EXEMPT FUND Attn: MF Dept A88-4 Class; 1,495,905.67
P.O. Box 9800 Shares; Record
Clabasas, CA 91372 Holder

Jennifer Dean Blair 6.65% 2.25% 2.25%
10274 N. Foxhunt Ln. Investor Class;
Tucson, AZ 85737 51,422.97 Shares;
Benefically Owned
</TABLE>

71
<PAGE> 73
<TABLE>
<S> <C> <C> <C> <C> <C>
BALANCED FUND Hep & Co. Institutional Class; 60.85% 43.27% 43.27%
Attn: MF Dept. A88-4 4,332,628.31 Shares
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Dim & Co. Institutional Class; 5.94% 4.22% 4.22%
Attn: MF Dept. A88-4 422,872.94 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

First Interstate Bank TTEE Institutional Class; 27.1% 19.32% 19.32%
ChoiceMaster 1,934,634.92 Shares;
Attn: Mutual Funds A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372

FI Pacifica Balanced Fund Institutional Class; 5.1% 3.67% 3.67%
c/o Pam Carney 367,512.71 Shares;
707 Wilshire Blvd. Benefically Owned
MAC #2818-101
Los Angeles, CA 90017

EQUITY VALUE Virg. & Co. Institutional Class; 6.95% 6.37% 6.37%
FUND Attn: MF Dept A88-4 1,076,614.80 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Hep & Co. Institutional Class; 37.38% 34.24% 34.24%
Attn: MF Dept A88-4 5,790.801.04 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Dim & Co. Institutional Class; 37.71% 34.53% 34.53%
Attn: MF Dept A88-4 5,840,952.45 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

First Interstate Bank TTEE Institutional Class; 13.53% 12.39% 12.39%
ChoiceMaster 2,095,985.41 Shares;
Attn: Mutual Funds A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372

FI Subfund A - Pacifica Institutional Class; 7.07% 6.48% 6.48%
Equity Value Fund 1,095,176.59 Shares;
c/o Pam Carney Benefically Owned
707 Wilshire Blvd.
MAC #2818-101
Los Angeles, CA 90017

GOVERNMENT First Interstate Bank 26,079,721.11 Shares; 28.04% 28.04% 28.04%
MONEY MARKET Attn: Sally Bourdamis Record Holder
FUND First Interstate Plaza
Investment Operations LL#788
100 W. Washington St.
Phoenix, AZ 85003

First Interstate Bank of 36,976,937.64 Shares; 39.75% 39.75% 39.75%
California Record Holder
Attn: Fund Accounting ACM
Desk
26610 W. Agoura Road
Calabasas, CA 91302

</TABLE>

72
<PAGE> 74
<TABLE>
<S> <C> <C> <C> <C> <C>
First Interstate Bank TTEE 16,804,465.15 18.07% 18.07% 18.07%
ChoiceMaster Shares;
Attn: Mutual Funds A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372

Barona Band Childrens 9,752,056.89 Shares; 10.48% 10.48% 10.48%
Savings Plan Record Holder
Barona Band of Mission
Islands
Barona Indian Reservation
1095 Barona Road
Lakeside, CA 92040

Lusardi Construction Co. 8,408,234.97 Shares; 9.04% 9.04% 90.04%
Inc. Benefically Owned
Attn: Lee Froehle
1570 Linda Vista Drive
San Marcos, CA 92069

INTERMEDIATE Virg & Co. Institutional Class; 32.74% 31.02% 31.02%
BOND FUND Attn MF Dept A88-4 1,163,317.82 Shares
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Hep & Co. Institutional Class; 65.70% 62.26% 62.26%
Attn: MF Dept. A88-4 2,334,684.21 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Macall Oil Salaried Pension Institutional Class; 71.15% 6.79% 6.79%
c/o Wells Fargo Bank 254,626.36 Shares;
201 3rd Street Benefically Owned
11th Floor
San Francisco, CA 94163

Mercedes Benz Credit Corp. Institutional Class; 6.40% 6.07% 6.07%
c/o Wells Fargo Bank 227,739.89 Shares;
201 3rd Street Benefically Owned
11th Floor
San Francisco, CA 94163

Investors Fiduciary Trust Investor Class; 9.12% 0.46% 0.46%
Co. 17,077.73 Shares;
Cust. for the IRA of John Benefically Owned
W. Pryor
4625 Studio Lane
Oceanside, CA 92057

NATIONAL TAX- Virg & Co. Institutional Class; 65.51% 37.45% 37.45%
EXEMPT FUND Attn: MF Dept A88-4 326,365.61 Shares
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Firnap & Co. Institutional Class; 34.30% 19.61% 19.61%
c/o First Interstate Bank of 170,899.04 Shares;
CA Benefically Owned
Mutual Fund Dept
CA-A88-4
P.O. Box 9800
Calabasas, CA 91372

Stephens Greg Institutional Class; 6.09% 3.48% 3.48%
c/o Wells Fargo Bank 30,333.85 Shares;
201 3rd Street Benefically Owned
11th Floor
San Francisco, CA 94163

</TABLE>
73

<PAGE> 75

<TABLE>
<S> <C> <C> <C> <C> <C>
Byrne Family Trust #2 Investor Class; 5.87% 2.51% 2.51%
9011 W. Little York 21,912.30 Shares
Houston, TX 77040 Benefically Owned

OREGON TAX Firnap & Co. Institutional Class; 73.62% 14.52% 14.52%
-EXEMPT FUND c/o First Interstate 397,891.83 Shares;
Bank of CA Benefically Owned
Mutual Fund Dept
CA-A88-4
P.O. Box 9800
Calabasas, CA 91372

Firnap & Co. Institutional Class; 20.54% 4.05% 4.05%
c/o First Interstate 110,998.73 Shares;
Bank of CA Benefically Owned
Mutual Fund Dept.
CA-A88-4
P.O. Box 9800
Calabasas, CA 91372

Dim & Co. Institutional Class; 5.84% 1.15% 1.15%
Attn: MF Dept. A88-4 31,551.70 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Gordon L. Claude Institutional Class; 7.91% 1.56% 1.56%
c/o Wells Fargo Bank 42,774.69 Shares
201 3rd Street Benefically Owned
11th Floor
San Francisco, CA 94163

Susan Furnish Institutiuonal Class; 6.80% 1.34% 1.34%
Dep Wscrow 36,739.82 Shares;
6415 SW Parkhill Way Benefically Owned
Portland, OR 97201

Flavel W Temple Institutional Class; 6.39% 1.26% 1.26%
c/o Wells Fargo Bank 34,544.15 Shares;
201 3rd Street Benefically Owned
11th Floor
San Francisco, CA 94163

Wakefield FBO Institutional Class; 5.84% 1.15% 1.15%
Anne McCandless 31,551.70 Shares
c/o Wells Fargo Bank Benefically Owned
201 3rd Street
11th Floor
San Francisco, CA 94163

Douglas and Joyce Garlon Institutional Class 5.64% 1.11% 1.11%
c/o Wells Fargo Bank 30,506.41 Shares
201 3rd Street Benefically Owned
11th Floor
San Francisco, CA 94163

PRIME MONEY Virg. & Co. Institutional Class; 93.87% 30.50% 30.50%
MARKET FUND Attn: MF Dept A88-4 395,533,609.29 Shares
P.O. Box 9800 Record Holder
Calabasas, CA 91372

First Interstate Bank Institutional Class; 5.22% 1.70% 1.70%
of Oregon N.A. 22,000,000.00 Shares;
Attn: Investment Record Holder
Sweep T-15
1300 S.W. Fifth Avenue
Portland, OR 97201

</TABLE>

74
<PAGE> 76

<TABLE>
<S> <C> <C> <C> <C> <C>
Cocopah Bingo and Casino Institutional Class; 7.01% 2.28% 2.28%
Cocopah Indian Tribe 29,536,848.22
Bingo/Casino Shares
Attn: Sherry Cordova Benefically Owned
County 15
Avenue G
Somerton, AZ 85350

Virg & Co Investor Class; 94.16% 21.48% 21.48%
Attn: MF Dept A88-4 278,614,885.48 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Virg & Co. Investor Class; 99.10% 44.32% 44.32%
Attn: MF Dept A88-4 574,814,322.95 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Private Banking PAF-MM Service Class; 14.52% 6.49% 6.49%
Corps 84,191,778.17 Shares;
#100000814-01 Benefically Owned
Attn: A. Katz
16633 Ventura Blvd.
Suite 1400
Encino, CA 91436

SC UFCW JT TR FDS- Service Class; 9.21% 4.12% 4.12%
Benefit Operating 53,401,635.58 Shares
c/o Wells Fargo Bank Benefically Owned
201 3rd Street
11th Floor
San Francisco, CA 94163

Operating Engineers Service Class; 5.74% 2.57% 2.57%
Health & Welfare 33,287,747 Shares;
c/o Wells Fargo Bank Benefically Owned
201 3rd Street
11th Floor
San Francisco, CA 94163

TREASURY Virg & Co. Institutional Class; 91.89% 35.86% 35.86%
MONEY MARKET Attn: MF Dept. A88-4 749,978,141.17 Shares;
FUND P.O. Box 9800 Record Holder
Calabasas, CA 91372

DCIA Fund Institutional Class; 5.93% 2.32% 2.32%
c/o Wells Fargo Bank 48,435,199.92
201 3rd Street Benefically Owned
11th Floor
San Francisco, CA 94163

Lumber Employees & W. Investor Class; 10.54% 0.31% 0.31%
Counc/Columbia Co. 6,545,875.34 Shares;
P.O. Box 1350 Benefically Owned
Portland, OR 97207

CH2M Hill Pension Investor Class 7.71% 0.23% 0.23%
TR/Becker Institutional 4,785,242.82 Shares
Shareholder Services at Benefically Owned
VAS/279/Becker
7200 Wisconsin Ave.
Suite 1001
Bethesda, MD 20814

Nick Bunick Investor Class; 5.27% 0.16% 0.16%
c/o Wells Fargo Bank 3,271,282.65 Shares;

</TABLE>
75
<PAGE> 77
<TABLE>
<S> <C> <C> <C> <C> <C>
201 3rd Street Benefically Owned
11th Floor
San Francisco, CA 94163

Virg & Co. Investor Class; 89.55% 2.66% 2.66%
Attn: MF Dept A88-4 55,623,936.25 Shares
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Virg & Co. Investor Class; 99.16% 57.52% 57.52%
Attn: MF Dept A88-4 1,202,807,089.22 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Spears Manufacturing Co. Service Class; 8.14% 0.24% 0.24%
P.O. Box 9203 5,051,733.03 Shares;
Sylmar, CA 91392 Record Holder

Access Services Service Class; 10.15% 0.30% 0.30%
Incorporated 6,299,590.78 Shares
P.O. Box 71684 Record Holder
Los Angeles, CA 90071

San Fernando Community Service Class; 5.69% 0.17% 0.17%
Hospital 3,531,226.35 Shares
14580 Roscoe Blvd. Record Holder
Panorama City, CA 91402

Novalogic Inc. Service Class 5.68% 0.17% 0.17%
26010 Mureau Road 3,529,277.78 Shares
Suite #200 Record Holder
Calabasas, CA 91302
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more that 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class, or is identified as the holder of record of
more that 25% of a class and has voting and/or investment powers, it may be
presumed ot control such class.

OTHER

This Registration Statement, including the prospectus for each Fund,
the SAI and the exhibits filed therewith, may be examined at the office of the
SEC in Washington, D.C. Statements contained in a prospectus or the SAI as to
the contents of any contract or other document referred to herein or in the
prospectus 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.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent auditors
for the Company. KPMG Peat Marwick LLP provides audit services, tax return
preparation and

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<PAGE> 78
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.

Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071 served as the independent auditors for the predecessor portfolios of
Pacifica until the Reorganization. The audited financial statements
incorporated by reference into this SAI and the audited financial highlights
that appear in the prospectuses for the fiscal year ended September 30, 1995
for the Equity Value, Balanced, Prime Money Market Mutual and Treasury Money
Market Mutual Funds have been audited by Ernst & Young LLP. The audited
financial statements incorporated by reference into this SAI and the audited
financial highlights that appear in the prospectuses for the fiscal year ended
September 30, 1995 for the Intermediate Bond, Arizona Tax-Free, National
Tax-Free and Oregon Tax-Free Funds have been audited by Deloitte & Touche LLP.

FINANCIAL INFORMATION

The portfolio of investments, financial statements and independent
auditors' report for the California Funds contained in Post-Effective Amendment
No. 21 to the Company's Registration Statement, as filed with the SEC on Form
N-1A on February 29, 1996, are hereby incorporated by reference into this SAI.

The unaudited statements of assets and liabilities, including the
statements of investments, of the former Pacifica portfolios (Pacifica
Government Money Market, Pacifica Prime Money Market, Pacifica Treasury Money
Market, Pacifica Equity Value and Pacifica Balanced Funds) as of March 31,
1996, and the related unaudited statements of operations for the six-month
period ended March 31, 1996, and the statements of changes in net assets and
the financial highlights for each of the periods indicated, as filed on EDGAR
with the SEC on June 7, 1996, are incorporated by reference into this SAI.

The statements of assets and liabilities, including the statements of
investments, of the former Westcore Trust Funds (The Arizona Intermediate
Tax-Free, Bonds Plus, Quality Tax-Exempt Income and Oregon Tax-Exempt Funds) as
of September 30, 1995, and the related statements of operations for the
four-month period ended September 30, 1995, and the statements of changes in
net assets and the financial highlights for each of the periods indicated, are
incorporated by reference into this SAI. These financial statements have been
audited by Deloitte and Touche LLP, independent auditors, as stated in their
report, which has also been incorporated by reference in this SAI and has been
so included upon the report of such firm given upon their authority as experts
in accounting and auditing.

The statements of investments, audited financial statements and
independent auditors' report are included with the SAI delivered to current or
prospective shareholders.

77
<PAGE> 79
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 "VMIG
3" are of "favorable quality," with all security elements accounted for, but
lacking the strength of the preceding grades.

A-1
<PAGE> 80
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."

<PAGE> 81
STAGECOACH FUNDS, INC.

Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER 6, 1996

MONEY MARKET TRUST

----------------------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end investment
company. This Statement of Additional Information ("SAI") contains additional
information about shares offered in one of the funds of the Stagecoach Family
of Funds -- MONEY MARKET TRUST (the "Fund"). The Fund offers a single class of
shares. The investment objective of the Fund is described in its prospectus
under "How the Fund Works -- Investment Objective and Policies."

This SAI is not a prospectus and should be read in conjunction with
the Fund's prospectus also dated September 6, 1996, as may be revised from time
to time (the "Prospectus"). All terms used in this SAI that are defined in the
Prospectus have the meanings assigned in the Prospectus. A copy of the
Prospectus may be obtained without charge by writing Stephens Inc., the
Company's sponsor, administrator and distributor, at 111 Center Street, Little
Rock, Arkansas 72201 or calling the Company's Transfer Agent at the telephone
number indicated above.

----------------------------------------------

<PAGE> 82
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 1

Additional Permitted Investment Activities . . . . . . . . . . . . . . 2

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . 13

Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . 17

Additional Purchase and Redemption Information . . . . . . . . . . . . 18

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . 19

Federal Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 25

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . 26

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

i
<PAGE> 83
GENERAL

Prior to the Reorganization (defined below), the Fund was an
investment portfolio (the "Predecessor Portfolio") of the predecessor company,
Pacifica Funds Trust ("Pacifica"), an open-end management investment company.
Pacifica was organized on July 17, 1984 under the name "Fund Source." Pacifica
changed its name to "Pacifica Funds Trust" on February 9, 1993. The Fund
originally commenced operations on September 17, 1990 as a separate investment
portfolio of Westcore Trust called the "Prime Money Market Fund." On October 1,
1995, the Fund was reorganized as a portfolio of Pacifica.

On April 25, 1996, the Agreement and Plan of Reorganization and the
creation of the Predecessor Portfolio as a new fund of Stagecoach were
approved by the Company's Board of Directors. On May 17, 1996, the
Reorganization was approved by Pacifica's Board of Trustees. As part of the
Reorganization of Pacifica with the Company (the "Reorganization"), the
Predecessor Portfolio of Pacifica was reorganized as the Company's Money Market
Trust.

INVESTMENT RESTRICTIONS

In addition to the investment limitations disclosed in the Prospectus,
the Fund is subject to the following investment limitations which may be
changed only by a vote of the holders of a majority of the outstanding shares
of the Fund (as defined in "Other Information").

The Fund may not:

1. Purchase securities of any one issuer, other than obligations of
the U.S. Government, its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of the
Fund's total assets would be invested in such issuer, except that
up to 25% of the value of the Fund's total assets may be invested
without regard to such 5% limitation.

2. Purchase or sell real estate, except that the Fund may, to the
extent appropriate to its investment objective, purchase
securities issued by companies which invest in real estate or
interests therein.

3. Purchase securities on margin, make short sales of securities
or maintain a short position.

4. Underwrite the securities of other issuers.

5. Purchase or sell commodity contracts (including futures
contracts), or invest in oil, gas or mineral exploration or
development programs.

1
<PAGE> 84
6. Buy common stocks or voting securities, or state, municipal or
industrial revenue bonds.

7. Write or purchase put or call options.

In order to permit the sale of the Fund's shares in certain states,
the Company may make commitments with respect to the Fund that are more
restrictive than the investment policies listed above and in the Prospectus.
Should the Company determine that the commitments made to permit the sale of
the Fund's shares in any state are no longer in the best interests of the Fund,
it will revoke the commitment by terminating sales of the Fund's shares in the
state involved.

The Fund is not permitted to engage in securities lending in
accordance with a fundamental policy prohibiting loans as described in the
prospectus. In the event that this fundamental policy is changed, the Fund has
a non-fundamental operating policy to engage in securities lending only in
compliance with the requirements and limitations of the Securities and Exchange
Commission (the "SEC") and in compliance with related state blue sky
regulations.

If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of the Fund's investments will not constitute a violation of such
limitation, however, the Fund will not at any time hold more than 10% of its
net assets in illiquid securities. Otherwise, the Fund may continue to hold a
security even though it causes the Fund to exceed a percentage limitation
because of fluctuation in the value of the Fund's assets.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

The Prospectus discusses the investment objective of the Fund and the
policies to be employed to achieve that objective. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Fund may invest, the investment policies and portfolio
strategies that the Fund may utilize, and certain risks attendant to such
investments, policies and strategies.

General. The assets of the Fund consist only of obligations maturing
within thirteen months from the date of acquisition (as determined in
accordance with the regulations of the SEC), and the dollar-weighted average
maturity of the Fund may not exceed 90 days.

The securities in which the Fund may invest will not yield as high a level
of current income as may be achieved from securities with less liquidity and
less safety. There can be no assurance that the Fund's investment objective
will be realized as described in the Prospectus.

Subsequent to its purchase by the Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Directors or the Adviser, pursuant to
guidelines established by the Board, will consider such an event in determining
whether the Fund should continue to hold the security in accordance with the
interests of the Fund and applicable regulations of the SEC.

2
<PAGE> 85
Subject to the general supervision and approval of the Board of Directors,
the Adviser makes decisions with respect to and places orders for all purchases
and sales of securities for the Fund. Securities are generally purchased and
sold either directly from the issuer or from dealers who specialize in money
market instruments. Such purchases are usually effected as principal
transactions and therefore do not involve the payment of brokerage commissions.

Repurchase Agreements. The Fund may engage in a repurchase agreement
with respect to any security in which the Fund is authorized to invest,
including U.S. Treasury STRIPS, although the underlying security may mature in
more than thirteen months. 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 which involve the
acquisition by the Fund of an underlying debt instrument, subject to the
seller's obligation to repurchase, and the Fund's obligation to resell, the
instrument at a fixed price usually not more than one week after its purchase.
The Fund's custodian has custody of, and holds in a segregated account,
securities acquired as collateral by the Fund under a repurchase agreement.
Repurchase agreements are considered by the staff of the Securities and
Exchange Commission to be loans by the Fund. The Fund may enter into
repurchase agreements only with respect to securities of the type in which the
Fund may invest, including government securities and mortgage-related
securities, regardless of their remaining maturities, and requires that
additional securities be deposited with the custodian if the value of the
securities purchased should decrease below resale price. Wells Fargo Bank
monitors on an ongoing basis the value of the collateral to assure that it
always equals or exceeds the repurchase price. Certain costs may be incurred
by the Fund in connection with the sale of the underlying securities if the
seller does not repurchase them in accordance with the repurchase agreement.
In addition, if bankruptcy proceedings are commenced with respect to the seller
of the securities, disposition of the securities by the Fund may be delayed or
limited. While it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility of a decline in the
market value of the underlying securities, as well as delay and costs to the
Fund in connection with insolvency proceedings), it is the policy of the Fund
to limit repurchase agreements to selected creditworthy securities dealers or
domestic banks or other recognized financial institutions. The Fund considers
on an ongoing basis the creditworthiness of the institutions with which it
enters into repurchase agreements. Repurchase agreements are considered to be
loans by the Fund under the Investment Company Act of 1940 (the "1940 Act").

Reverse Repurchase Agreements. The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements with financial
institutions such as banks and broker-dealers in accordance with the investment
limitations described in the Prospectus. Pursuant to such an agreement, the
Fund would sell portfolio securities and agree to repurchase them at a mutually
agreed upon date and price. The Fund intends to enter into reverse repurchase
agreements to avoid otherwise having to sell securities during unfavorable
market conditions in order to meet redemptions. At the time the Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account liquid

3
<PAGE> 86
assets such as U.S. Government securities or other liquid high-quality debt
securities having a value equal to or greater than the repurchase price
(including accrued interest) and will subsequently monitor the account to
ensure that such equivalent value is maintained. Reverse repurchase agreements
involve the risk that the market value of the securities sold by the Fund may
decline below the price of the securities the Fund is obligated to repurchase.
Reverse repurchase agreements are considered to be borrowings by the Fund under
the 1940 Act.

Floating and Variable-Rate Obligations. The Fund may purchase floating-
and variable-rate obligations as described in the prospectuses. The Fund may
purchase floating- and variable-rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of thirteen months,
but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding thirteen months. Variable rate demand notes
include master demand notes which are obligations that permit the Fund to
invest fluctuating amounts, which may change daily without penalty, pursuant to
direct arrangements between the Fund, as lender, and the borrower. The
interest rates on these notes fluctuate from time to time. The issuer of such
obligations ordinarily has a corresponding right, after a given period, to
prepay in its discretion the outstanding principal amount of the obligations
plus accrued interest upon a specified number of days' notice to the holders of
such obligations. The interest rate on a floating- rate demand obligation is
based on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Accordingly, where these obligations are
not secured by letters of credit or other credit support arrangements, the
Fund's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. Such obligations frequently are not rated by
credit rating agencies and each Fund may invest in obligations which are not so
rated only if Wells Fargo Bank determines that at the time of investment the
obligations are of comparable quality to the other obligations in which the
Fund may invest. Wells Fargo Bank, on behalf of the Fund, considers on an
ongoing basis the creditworthiness of the issuers of the floating- and
variable-rate demand obligations in such Fund's portfolio. The Fund will not
invest more than 10% of the value of its total net assets in floating- or
variable-rate demand obligations whose demand feature is not exercisable within
seven days. Such obligations may be treated as liquid, provided that an active
secondary market exists.

Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions. The Fund may purchase securities on a when-issued or forward
commitment (sometimes called a delayed-delivery) basis, which means that the
price is fixed at the time of commitment, but delivery and payment ordinarily
take place a number of days after the date of the commitment to purchase. The
Fund will make

4
<PAGE> 87
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. The Fund will not accrue income in
respect of a security purchased on a forward commitment basis prior to its
stated delivery date.

Securities purchased on a when-issued or forward commitment basis and
certain other securities held in the Fund's investment portfolio are subject to
changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose the relevant Fund to risk
because they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or forward commitment basis can involve
the additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself. A segregated account of the Fund consisting of cash or U.S. Government
securities or other high quality liquid debt securities at least equal at all
times to the amount of the when-issued or forward commitments will be
established and maintained at the Fund's custodian bank. Purchasing securities
on a forward commitment basis when the Fund is fully or almost fully invested
may result in greater potential fluctuation in the value of the Fund's total
net assets and its net asset value per share. In addition, because the Fund
will set aside cash and other high quality liquid debt securities as described
above the liquidity of the Fund's investment portfolio may decrease as the
proportion of securities in the Fund's portfolio purchased on a when-issued or
forward commitment basis increases.

The value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their value, is taken into account when determining the Fund's net asset value
starting on the day the Fund agrees to purchase the securities. The Fund does
not earn interest on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When the Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets, and fluctuations in the value of
the underlying securities are not reflected in the Fund's net asset value as
long as the commitment remains in effect.

Rule 144A. It is possible that unregistered securities purchased by
the Fund in reliance upon Rule 144A under the Securities Act of 1933, could
have the effect of increasing the level of the Fund's illiquidity to the extent
that qualified institutional buyers become, for a period, uninterested in
purchasing these securities.

5
<PAGE> 88
MANAGEMENT

Thomas S. Goho, 54 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.
</TABLE>

6
<PAGE> 89
<TABLE>
<S> <C> <C>
*Zoe Ann Hines, 47 Director Senior Vice President
of Stephens and
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource
Management.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

*J. Tucker Morse, 52 Director Private Investor;
10 Legrae Street Real Estate Developer;
Charleston, SC 29401 Chairman of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.

COMPENSATION TABLE
For the Year Ended December 31, 1995

7
<PAGE> 90

<TABLE>
<S> <C> <C>
*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 directors and officers of Overland
Express Funds, Inc. and MasterWorks Funds Inc. (formerly, 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, prior to January 1, 1996 and the reorganization of WFNIA, was
considered to be in the same "fund complex," as such term is defined in Form
N-1A under the 1940 Act, as the Company. Effective January 1, 1996,
MasterWorks Funds, Inc., Master Investment Portfolio, and Managed Series
Investment Trust are considered to be members of the same fund complex and are
no longer part of the same fund complex as Stagecoach Funds, Inc., Overland
Express Funds, Inc., Stagecoach Trust, Life & Annuity Trust and Master
Investment Trust. The Directors are compensated by other companies and trusts
within the fund complex for their services as directors/trustees to such
companies 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 Fund is advised by Wells Fargo Bank pursuant
to an advisory contract under which Wells Fargo Bank has agreed to furnish
investment

8
<PAGE> 91
guidance and policy direction in connection with the daily portfolio management
of the Fund. On behalf of the Fund, the Company's Board of Directors approved
the advisory contract with Wells Fargo Bank on April 25, 1996, for an initial
two-year period. Pursuant to the advisory contract, Wells Fargo Bank also
has agreed to furnish to the Board of Directors periodic reports on the
investment strategy and performance of the Fund.

Wells Fargo Bank has agreed to provide to the Fund, 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 maturity of the Fund. As
compensation for its advisory services, Well Fargo Bank is entitled to receive
a monthly fee at the annual rate of 0.30% of the first $500 million of the
Fund's average daily net assets, 0.25% of the next $500 million, and 0.20% on
the average daily net assets in excess of $1 billion

The advisory contract continues in effect for more than two years provided
the continuance is approved annually (i) by the holders of a majority of the
Fund's outstanding voting securities or (ii) by the Company's Board of
Directors and by a majority of the Directors of the Company who are not parties
to the advisory contracts 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.

Prior to April 1, 1996, Wells Fargo Investment Management, Inc. ("WFIM")
and its predecessor, First Interstate Capital Management, Inc. ("FICM") served
as adviser to the predecessor portfolio of Pacifica. FICM was a wholly-owned
subsidiary of First Interstate Bank of California ("FICAL"), located at 707
Wilshire Blvd., Los Angeles, California 90017. FICAL was the largest banking
subsidiary of First Interstate Bancorp. As compensation for services rendered
by FICM to the Fund, FICM was entitled to a fee, computed daily and paid
monthly, at an annual rate of 0.30% of the first $500 million of the average
daily net assets of the Fund, 0.25% of the next $500 million of the Fund's
average daily net assets, and 0.20% of the Fund's average daily net assets in
excess of $1 billion. For the six-month period beginning October 1, 1995 and
ending March 31, 1996, WFIM/FICM were entitled to receive, and waived or
reimbursed advisory fees paid by the Fund as follows:

Money Market Trust
Investment Advisory Fees
<TABLE>
<CAPTION>
Fees Waived and
Fiscal Period Fees Earned Expenses Reimbursed
- ------------- ------------ -------------------
<S> <C> <C>
Six-Month Period
Ended March 31, 1996 $820,280 $820,280
</TABLE>

9
<PAGE> 92
Prior to October 1, 1995, First Interstate of Oregon, N.A. (the
"Predecessor Adviser") served as the investment adviser to the Fund. For the
four-month period ended September 30, 1995, and fiscal years ended May 31,
1995, 1994 and 1993, the Predecessor Adviser was entitled to receive and waived
or reimbursed advisory fees paid by the Fund as follows:

Money Market Trust
Investment Advisory Fees
<TABLE>
<CAPTION>
Fees Waived and
Fiscal Period Fees Earned Expenses Reimbursed
- ------------- ------------ -------------------
<S> <C> <C>
Four-Month Period Ended
September 30, 1995 $662,983 $662,983

Year Ended May 31, 1995 $1,932,733 $2,120,794

Year Ended May 31, 1994 $1,193,856 $1,104,228

Year Ended May 31, 1993 $570,505 $387,505
</TABLE>

The advisory contracts and administration agreement for the Funds provide
that if, in any fiscal year, the total expenses of a Fund incurred by, or
allocated to, such 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 the Plan but including the fees
provided for in the applicable advisory contract and the administration
agreement) exceed the most restrictive expense limitation applicable to a Fund
imposed by the securities laws or regulations of the states in which the Fund's
shares are registered for sale, Wells Fargo Bank and Stephens shall waive their
fees proportionately under the advisory contract and the administration
agreement, respectively, for the 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 contracts and the administration agreement for the Funds
further provide that a 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. Currently,
California is the only state imposing limitations on the expenses of the Funds.
Those expense limitations are 2-1/2 percent of the first $30 million of a
Fund's average net assets, 2 percent of the next $70 million and 1-1/2 percent
of a Fund's remaining average net assets.

Expenses incurred in the organization and operation of the Fund, including
taxes, interest, penalties, brokerage and other fees and commissions, if any,
fees and expenses of Directors, SEC fees and related expenses, state Blue Sky
qualification fees, advisory fees, administration fees, charges of custodians,
costs of transfer and dividend disbursing agents, certain insurance premiums,
outside auditing and legal expenses, costs of maintenance of

10
<PAGE> 93
Company existence, costs of independent pricing services, investor services,
preparation and printing of prospectuses for regulatory purposes and for
distribution to shareholders, shareholders' reports and shareholders' meetings,
and extraordinary expenses, are borne by the Fund.

Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, (a)
prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 (the "Holding Company Act") or any bank or non-bank
affiliate thereof from sponsoring, organizing, or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from underwriting securities, but (b) do not
prohibit such a bank holding company or affiliate generally from acting as
investment adviser, transfer agent, or custodian to such an investment company,
or from purchasing shares of such a company as agent for and upon the order of
a customer. In some states, banks or other institutions through which
transactions in Fund shares are effected, may be required to register as
dealers pursuant to state law.

Administrator and Distributor. The Company has retained Stephens as
administrator and distributor on behalf of the Fund. Under the Administration
Agreement between Stephens and the Company on behalf of the Fund, Stephens
agreed to provide as administrative services, among other things: (i) general
supervision of the Fund's operation, including coordination of the services
performed by its investment adviser, transfer and dividend disbursing agent,
custodian, shareholder servicing agent(s), independent public accountants 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 the Fund's proxy statements and
shareholder reports; 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 Fund's business
together with those ordinary clerical and bookkeeping services that are not
furnished by Wells Fargo Bank. Stephens also pays the compensation of the
Company's Directors, Officers and employees who are affiliated with Stephens.
The Administration Agreement and the Amended Distribution Agreement were
approved by the Company's Board of Directors on April 25, 1996.

Prior to the Reorganization, Furman Selz provided management and
administrative services necessary for the operation of the Fund, pursuant to an
Administrative Services Contract. For these services, Furman Selz was entitled
to receive a fee, payable monthly, at the annual rate of 0.15% of the average
daily net assets of the Fund. Furman Selz received and waived administrative
fees from the Fund as follows:

11
<PAGE> 94
Money Market Trust
Administrative Fees

<TABLE>
<CAPTION>
Fiscal Period Fees Received Fees Waived
- ------------- ------------- -----------
<S> <C> <C>
Six-Month Period
Ended March 31, 1996 $349,357 $60,783
</TABLE>

Prior to October 1, 1995, ALPS served as the administrator to the Fund. For
the four-month period ended September 30, 1995 and the fiscal years ended May
31, 1995, 1994 and 1993, ALPS received and waived administrative fees from the
Fund as follows:

Money Market Trust
Administrative Fees

<TABLE>
<CAPTION>
Fiscal Period Fees Received Fees Waived
- ------------- ------------- -----------
<S> <C> <C>
Four-Month Period Ended
September 30, 1995 $132,597 $0

Year Ended May 31, 1995 $387,803 $86,188

Year Ended May 31, 1994 $241,778 $146,794

Year Ended May 31, 1993 $114,101 $69,276
</TABLE>

Prior to April 1, 1996, Pacifica had retained Pacifica Funds Distributor,
Inc., a subsidiary of Furman Selz, to serve as principal underwriter for the
shares of the Fund pursuant to a Distribution Contract. The Distribution
Contract provided that the distributor was not entitled to any payments from
the Fund for its distribution services.

Prior to October 1, 1995, ALPS Mutual Funds Services, Inc. ("ALPS") served
as distributor for the Fund. ALPS was not entitled to any compensation for its
services as distributor.

Custodian And Transfer And Dividend Disbursing Agent. Wells Fargo Bank
has been retained to act as custodian and transfer and dividend disbursing
agent for the Fund, pursuant to a Custody Agreement and an Agency Agreement
with the Company on behalf of the Fund. The custodian, among other things,
maintains a custody account or accounts in the name of the Fund, receives and
delivers all assets for the Fund upon purchase and upon sale or maturity,
collects and receives all income and other payments and distributions on
account of the assets of the Fund and pays all expenses of the Fund. For its
services as custodian, Wells Fargo Bank is entitled to receive fees as follows:
a net asset charge at the

12
<PAGE> 95
annual rate of 0.0167%, payable monthly, plus specified transaction charges.
Wells Fargo Bank also will provide portfolio accounting services under the
Custody Agreement as follows: a monthly base fee of $2,000 plus a net asset fee
at the annual rate of 0.070% of the first $50,000,000 of a Fund's average daily
net assets, 0.045% of the next $50,000,000, and 0.020% of the average daily net
assets in excess of $100,000,000.

For its services as transfer and dividend disbursing agent for the Fund,
Wells Fargo Bank is entitled to receive monthly payments at the annual rate of
0.07% of the Fund's average daily net assets.

Prior to April 1, 1996, FICAL acted as custodian of the predecessor
portfolio, but played no role in making decisions as to the purchase or sale of
portfolio securities for the predecessor portfolio. FICAL was entitled to
receive a fee from Pacifica, computed daily and payable monthly, at the annual
rate of 0.021% of the first $5 billion in aggregate average daily net assets of
the Fund; 0.0175% of the next $5 billion in aggregate average daily net assets
of the Fund; and 0.015% of the aggregate average daily net assets of the Fund
in excess of $10 billion.

Prior to the Reorganization, Furman Selz acted as transfer agent for the
predecessor portfolio. Pacifica compensated Furman Selz for providing personnel
and facilities to perform transfer agency related services for Pacifica at a
rate intended to represent the cost of providing such services.

Underwriting Commissions. The Fund does not charge any front-end sales
loads or contingent deferred sales charges in connection with the purchase and
redemption of its shares, and therefore pays no underwriting commissions to
the Distributor.

PERFORMANCE CALCULATIONS

The following information supplements and should be read in conjunction
with the sections in each prospectus entitled "Determination of Net Asset
Value" and "Performance Data."

The Fund may, from time to time, include its yield or effective yield in
advertisements or reports to shareholders or prospective investors.

Current yield for the Fund will be based on the change in the value of a
hypothetical investment (exclusive of capital changes) over a particular
seven-day period, less a pro-rata share of the Fund's expenses accrued over
that period (the "base period"), and stated as a percentage of the investment
at the start of the base period (the "base period return"). The base period
return is then annualized by multiplying by 365/7, with the resulting yield
figure carried to at least the nearest hundredth of one percent. "Effective
yield" for the Fund assumes that all dividends received during an annual period
have been reinvested. Calculation of "effective yield" begins with the same
"base period return" used in the

13
<PAGE> 96
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:

Effective Yield = [(Base Period Return +1)365/7]-1.

For the seven-day period ended September 30, 1995, the yield of the Fund
was 5.62%, and the effective yield was 6.80%.

Yield information may be useful in reviewing the Fund's performance and for
providing a basis for comparison with other investment alternatives. However,
yields fluctuate, unlike investments which pay a fixed yield for a stated
period of time. Yields for the Fund are calculated on the same basis as other
money market funds as required by applicable regulations. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.

Quotations of yield reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Yield varies
based on changes in market conditions and the level of a Fund's expenses, and
no reported performance figure should be considered an indication of
performance which may be expected in the future.

Investors should recognize that in periods of declining interest rates, the
Fund's yields will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates, the Fund's yields will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new money to
the Fund from the continuous sale of its shares will likely be invested in
instruments producing lower yields than the balance of the Fund, thereby
reducing the current yields of the Fund. In periods of rising interest rates,
the opposite can be expected to occur.

In connection with communicating its yields to current or prospective
shareholders, these figures may also be compared to the performance of other
mutual funds tracked by mutual fund rating services or to unmanaged indices
which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.

From time to time and only to the extent the comparison is appropriate for
the Fund, the Company may quote performance or price-earning ratios in
advertising and other types of literature as compared with the performance of
the Lehman Brothers Municipal Bond Index, 1-Year Treasury Bill Rate, S&P Index,
the Dow Jones Industrial Average, the Lehman Brothers 20+ Years Treasury Index,
the Lehman Brothers 5-7 Year Treasury Index, IBC/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 the World Gold Council), Bank Averages (which is 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 Salomon One Year Treasury
Benchmark Index, the Consumer Price Index (as published

14
<PAGE> 97
by the U.S. Bureau of Labor Statistics), Ten Year U.S. Government Bond Average,
S&P's Corporate Bond Yield Averages, Schabacter Investment Management Indices,
Salomon Brothers High Grade Bond Index, Lehman Brothers Long-Term High Quality
Government/Corporate Bond Index, other managed or unmanaged indices or
performance data of bonds, 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 the Fund also may be compared to the performance 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 that monitor the performance of mutual funds. Any
such comparisons may be useful to investors who wish to compare the Fund's past
performance with that of its 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.

In addition, the Company also may use, in advertisements and other types of
literature, information and statements showing that bank savings accounts offer
a guaranteed return of principal and a fixed rate of interest, but no
opportunity for capital growth. The Company also may include in advertising
and other types of literature information and other data from reports and
studies prepared by the Tax Foundation, including information regarding federal
and state tax levels and the related "Tax Freedom Day."

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 the Fund; (ii) other government statistics,
including, but not limited to, The Survey of Current Business, may be used to
illustrate investment attributes of the Fund or the general economic, business,
investment, or financial environment in which the Fund operates; (iii) the
effect of tax-deferred compounding on the investment returns of the 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 the Fund or a class of shares (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 the Fund invests may be compared to relevant
indices of stocks or surveys (e.g., S&P Industry Surveys) to evaluate the
historical performance of the Fund or current or potential value with respect
to the particular industry or sector.

15
<PAGE> 98
The Company also may discuss in advertising and other types of literature
that the Fund has been assigned a rating by a nationally recognized statistical
rating organization ("NRSRO"), such as S&P or Moody's. Such rating would
assess the creditworthiness of the investments held by the Fund. The assigned
rating would not be a recommendation to purchase, sell or hold any class of the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of the Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating to the Fund or its investments. The Company may compare the Fund's
performance with other investments that are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare the Fund's past
performance with other rated investments.

The Company also may disclose in sales literature, the distribution rate on
the Fund's shares. 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.

The Company also may disclose, in advertising statements and other types of
literature, information and statements that the Company's investment adviser,
Wells Fargo Bank, is listed in Nelson Publications' ("Nelson's") "Top 20"
performance rankings as published in the 1994 edition of "America's Best Money
Managers." The Nelson survey ranks the performance of money managers in over
30 asset/style categories and is based on analysis of performance composites
and surveys of institutional money managers.

The Company may also disclose in advertising and other types of sales
literature the assets and categories of assets under management by the
Company's investment adviser and the total amount of assets under management by
Wells Fargo Investment Management Group ("IMG") or the amount of assets and
mutual fund assets managed by Wells Fargo Bank. As of December 31, 1995, IMG
had $30.1 billion in assets under management. As of June 30, 1996, Wells Fargo
Bank and its affiliates provided investment advisory services for approximately
$56 billion of assets of individuals, trusts, estates and institutions and $17
billion of mutual fund assets.

16
<PAGE> 99
DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in conjunction
with the prospectus section under "Purchase of Shares."

Expenses and fees, including advisory fees, are accrued daily and are taken
into account for the purpose of determining the net asset value of a Fund's
shares.

Net asset value per share for the Fund is determined as of 9:00 a.m. and
1:00 p.m. Pacific time on each Business Day as described in the prospectus.

The Fund's instruments are valued on the basis of amortized cost. This
technique involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than
the price a Fund would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on Fund shares computed as described
above may tend to be higher than a like computation made by a fund with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for all of its instruments. Thus, if the use of
amortized cost by the Fund resulted in a lower aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from investment in a fund utilizing
solely market values and existing investors in the Fund would receive less
investment income. The converse would apply in a period of rising interest
rates.

The valuation of the Fund's instruments, based upon their amortized cost
and the concomitant maintenance by the Fund of a net asset value of $1.00, is
permitted in accordance with Rule 2a-7 under the Act, pursuant to which the
Fund must adhere to certain conditions. The Fund must maintain a
dollar-weighted average maturity of 90 days or less, purchase only instruments
having remaining maturities of 397 days (thirteen months) or less, and invest
only in securities that are determined to present minimal credit risks pursuant
to guidelines adopted by the Directors or the adviser under guidelines approved
by the Directors. Instruments having variable or floating interest rates or
demand features may be deemed to have remaining maturities as follows: (a) a
government security with a variable rate of interest readjusted no less
frequently than every thirteen months may be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate; (b) an
instrument with a variable rate of interest, the principal amount of which is
scheduled on the face of the instrument to be paid in thirteen months or less,
may be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (c) an instrument with a variable rate of
interest that is subject to a demand feature may be deemed to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand; (d) an instrument with a floating rate of interest
that is subject to a demand feature may be deemed to have a maturity equal to
the period

17
<PAGE> 100
remaining until the principal amount can be recovered through demand; and (e) a
repurchase agreement may be deemed to have a maturity equal to the period
remaining until the date on which the repurchase of the underlying securities
is scheduled to occur or, where no date is specified but the agreement is
subject to demand, the notice period applicable to a demand for the repurchase
of the securities.

The Company's Board of Directors has established valuation procedures
designed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions. Such procedures
include the determination, at such intervals as the Directors deem appropriate,
of the extent to which the Fund's NAV as calculated by using available market
quotations deviates from $1.00 per share, such deviation may result in material
dilution or other unfair results to existing shareholders or investors. In the
event the Directors determine that such a material deviation exists, they have
agreed to take such corrective action as they regard as necessary and
appropriate, which may include selling portfolio instruments prior to maturity
to realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; redeeming shares in kind or without monetary or other
consideration; or establishing a net asset value per share by using available
market quotations. It is the intention of the Fund to maintain a per share net
asset value of $1.00, but there can be no assurance that the Fund will do so.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Payment for shares may, in the discretion of the adviser, be made in the
form of securities that are permissible investments for the Fund as described
in the Prospectuses. For further information about this form of payment please
contact Stephens. In connection with an in-kind securities payment, the Fund
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Fund and that the
Fund receives satisfactory assurances that (i) it will have good and marketable
title to the securities received by it; (ii) that the securities are in proper
form for transfer to the Fund; and (iii) adequate information will be provided
concerning the basis and other matters relating to the securities.

Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption payments
for such periods as are permitted under the 1940 Act. The Company may also
redeem shares involuntarily or make payment for redemption in securities or
other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

18
<PAGE> 101
In addition, the Company may redeem shares involuntarily to reimburse the
Fund for any losses sustained by reason of the failure of a shareholders to
make full payment for shares purchased or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
shares of the Fund as provided from time to time in the Prospectus.

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 Fund's 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 Fund will
not necessarily be paying the lowest spread or commission available.

Purchase and sale orders of the securities held by the Fund 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 the Fund and other accounts
managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate those
transactions among the participants equitably.

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 Fund also purchases
portfolio securities in underwritten offerings and may purchase securities
directly from the issuer. Generally, municipal obligations and taxable money
market securities are traded on a net basis and do not involve brokerage
commissions. The cost of executing the 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 Fund may purchase certain obligations from underwriting syndicates of
which Stephens or Wells Fargo Bank 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.

Wells Fargo Bank, as the Fund's 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

19
<PAGE> 102
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 is 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 are not
necessarily 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 the 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 the Funds.

Consistent with the Rules of Fair Practice of the NASD, and subject to
seeking the most favorable price and execution available and such other
policies as the Directors may determine, the adviser may consider sales of Fund
shares as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.

Brokerage Commissions. Subject to the general supervision and approval
of the Board of Directors, the adviser makes decisions with respect to and
places orders for all purchases and sales of securities for the Fund.
Securities are generally purchased and sold either directly from the issuer or
from dealers who specialize in money market instruments. Such purchases are
usually effected as principal transactions and therefore do not involve the
payment of brokerage commissions.

During the fiscal periods ended September 30, 1995, May 31, 1995, May 31,
1994 and May 31, 1993, the predecessor portfolio of the Fund did not pay any
brokerage commissions, because all of its portfolio transactions occurred in
the over-the-counter market.

Securities of Regular Broker Dealers. The Fund may from time to time
purchase securities issued by its regular broker/dealers. Prior to October 1,
1995, ALPS Mutual Funds Services, Inc. ("ALPS") served as
administrator/distributor for the Fund, and reported no holdings of securities
by the Fund of its regular broker/dealers or of their parents that derive more
than 15% of gross revenues from securities-related activities.

Portfolio Turnover Rate. The portfolio turnover rate is not a limiting
factor when Wells Fargo Bank deems portfolio changes appropriate. Because the
Fund's portfolio consists of securities with relatively short-term maturities,
it can expect to experience high portfolio turnovers. A high portfolio
turnover rate should not adversely affect the Fund, however, because portfolio
transactions ordinarily will be made directly with principals on a net basis
and, consequently, the Fund usually will not incur brokerage expenses.

FEDERAL INCOME TAX

The Prospectus describes generally the tax treatment of distributions by
the Fund. This section of the SAI includes additional information concerning
taxes.

20
<PAGE> 103
Qualification as a "regulated investment company" under the Code requires,
among other things, that (a) at least 90% of the 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 stock, securities or foreign
currencies or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to the Fund's business of
investing in such stock, securities or currencies; (b) the Fund generally
derives less than 30% of its gross income from the sale or other disposition of
certain assets held for less than 3 months, such as (i) stock or securities;
(ii) options, futures, and forward contracts (other than those on foreign
currencies), and (iii) foreign currencies (including options, futures, and
forward contracts on such currencies) not directly related to the Fund's
principal business of investing in stock or securities (or options and futures
with respect to stocks or securities)); and (c) the Fund diversifies its
holdings so that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash, U.S.
Government obligations, the securities of other regulated investment companies,
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the
Fund's total assets is invested in the securities of any one issuer (other than
U.S. Government obligations or 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, the Fund will not be
subject to federal income tax on its net investment income and net capital
gains distributed to its shareholders, provided that it distributes to its
shareholders at least 90% of its net investment income (including its net
tax-exempt income) earned in each year.

Generally, dividends and capital gain distributions are taxable to
shareholders when they are received. However, dividends and distributions
declared payable as of a record date in October, November or December of any
calendar year are deemed under the Code to have been paid by the Fund and
received by the shareholder on December 31 of that calendar year if the
dividend is actually paid in the following January. Such dividends and
distributions will, accordingly, be taxable to the recipient shareholders in
the year in which the record date falls. In addition, a nondeductible 4%
excise tax will be imposed on the 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. The Fund will either actually
or be deemed to distribute substantially all of its net investment income and
net capital gains by the end of each calendar year and, thus, expects not to be
subject to the excise tax.

All income received by the Fund from sources within foreign countries
(e.g., interest dividends) may be subject to withholding and other taxes
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 the Fund is expected to consist of securities
of foreign issuers, the Fund will not be able to "pass through" foreign tax
credits to shareholders.

21
<PAGE> 104
Gains or losses on sales of portfolio securities by the Fund generally will
be long-term capital gains or losses if the securities have been held by it for
more than one year, except in certain cases including where the Fund acquires a
put or grants a call thereon. Gain recognized on the disposition of a debt
obligation (including tax-exempt obligations purchased after April 30, 1993)
purchased by the Fund at a market discount (generally, at a price less than its
principal amount) will generally 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. Other gains or losses on the sale of securities
will generally be short-term capital gains or losses. To the extent that the
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 capital gain distributions in
a written notice mailed by the Fund to shareholders not later than 60 days
after the close of the Fund's taxable year.

As of the printing of this SAI, the maximum individual tax rate applicable
to ordinary income is 39.6% (marginal rates may be higher for some individuals
due to phase out of exemptions and elimination of deductions); the maximum
individual tax rate applicable to net capital gains is 28%; and the maximum
corporate tax rate applicable to ordinary income and net capital gains is 35%
(except that corporations with taxable income in excess of $100,000 for a
taxable year must pay an additional amount of income tax of up to $11,750 and
corporations with taxable income in excess of $15,000,000 for a taxable year
must pay an additional amount of tax of up to $100,000).

Sales charges incurred to acquire Fund shares with reinvestment rights are
not taken into account when calculating the gain or loss on the disposition of
such Fund shares if (i) the shares are disposed of within 90 days of
acquisition and (ii) Fund shares or shares of another regulated investment
company are purchased subsequently at a reduced or eliminated sales charge,
pursuant to the reinvestment rights attendant with the initial acquisition of
Fund shares. Any sales charge not taken into account is treated as having been
incurred in the subsequent acquisition. In addition, any loss realized on a
redemption or exchange of shares of the Fund will be disallowed to the extent
substantially identical shares are reacquired within the 61-day period
beginning 30 days before and ending 30 days after the disposition date of such
Fund shares.

Foreign Shareholders. Under the Code, distributions of net investment
income by the 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.

22
<PAGE> 105
withholding tax at a rate of 30% or lower treaty tax rate, if applicable.
Withholding will not apply if a dividend paid by the 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 generally not subject to tax withholding.

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.

Other Matters. Investors should be aware that the investments to be made
by the Fund may involve sophisticated tax rules such as the original issue
discount and real estate mortgage investment conduit ("REMIC") rules that would
result in income or gain recognition by the Fund, without corresponding cash
receipts. Although the Fund will seek to avoid significant noncash income,
such noncash income could be recognized by the Fund, in which case the Fund may
distribute cash derived from other sources in order to meet the minimum
distribution requirements described above.

CAPITAL STOCK

The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "The Funds and Management."

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 48,000,000,000 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 twenty-three series of shares, each representing an interest in one
of the following funds -- the Aggressive Growth, Arizona Tax-Free, Asset
Allocation, Balanced, California Tax-Free Bond, California Tax-Free Income,
California Tax-Free Money Market Mutual, Corporate Stock, Diversified Income,
Equity Value, Ginnie Mae, Government Money Market Mutual, Growth and Income,
Intermediate Bond, Money Market Mutual, Money Market Trust, National Tax-Free,
National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime Money Market
Mutual, Short-Intermediate U.S. Government Income, Small Cap, Treasury Money
Market Mutual and U.S. Government Allocation Funds -- and the Board of
Directors may, in the future, authorize the issuance of other series of capital
stock representing shares of additional investment portfolios.

Pacifica was a Massachusetts business trust established under a Declaration
of Trust dated July 17, 1984, consisting of series of separately managed
portfolios. The capitalization of Pacifica consisted solely of an unlimited
number of shares of beneficial interest with a par value of $0.001 each.

23
<PAGE> 106
Voting. On any matter submitted to a vote of shareholders, all shares then
entitled to vote are voted separately by series unless otherwise required by
the Act, in which case all shares are voted in the aggregate. For example, a
change in a series' fundamental investment policy affects only one series and
are voted upon only by shareholders of the series and not by shareholders of
the Company's other series. Additionally, approval of an advisory contract is
a matter to be determined separately by each series. Approval by the
shareholders of one series is effective as to that series whether or not
sufficient votes are received from the shareholders of the other series to
approve the proposal as to those series. As used in the prospectus and in this
SAI, the term "majority" when referring to approvals to be obtained from
shareholders of the Fund, means the vote of the lesser of (i) 67% of the Fund
shares represented at a meeting if the holders of more than 50% of the
outstanding Fund shares are present in person or by proxy, or (ii) more than
50% of the outstanding shares of the Fund. The term "majority," when
referring to the approvals to be obtained from shareholders of the Company as a
whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares. Shareholders are entitled to one vote for
each full share held and fractional votes for fractional shares held. The
Company may dispense with an annual 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
each 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 the 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.

Shares have no preemptive rights or subscription. All shares, when issued
for the consideration described in the prospectus, are fully paid and
non-assessable by the Company.

Below is the name, address and share ownership of each person known to
Pacifica to have beneficial or record ownership with respect to 5% or more of a
class of a Predecessor Portfolio as of May 15, 1996.

<TABLE>
<CAPTION>
Pacifica Name and Address Amount of Shares Owned; Percentage Percentage of Percentage of
Portfolio Type of Ownership of Class Portfolio Portfolio
Post-Closing
<S> <C> <C> <C> <C> <C>
Money Virg & Co. 901,016,484 Shares 100% 100% 100%
Market Attn: MF Dept. A88-4 Record Holder
Trust P.O. Box 9800
Calabasas, CA 91372
</TABLE>

24
<PAGE> 107
<TABLE>
<S> <C> <C> <C> <C>
Short-Term Investment Fund 90,897,113 Shares 11.09% 11.09% 11.09%
c/o Wells Fargo Bank Beneficially Owned
201 3rd Street
11th Floor
San Francisco, CA 94163

DCIA Fund 92,210,981 Shares 10.23% 10.23% 10.23%
#2/PACTRUST Beneficially Owned
c/o Wells Fargo Bank
201 3rd Street
11th Floor
San Francisco, CA 94163

Short-Term Income Fund 55,636,951 Shares 6.18% 6.18% 6.18%
c/o Wells Fargo Bank Beneficially Owned
201 3rd Street
11th Floor
San Francisco, CA 94163

Employee Benefit Reserve 46,978,171 Shares 5.21% 5.21% 5.21%
Fund Beneficially Owned
c/o Wells Fargo Bank
201 3rd Street
11th Floor
San Francisco, CA 94163
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class or is identified as the holder of record or
more than 25% of a class and has voting and/or investment powers, it may be
presumed to control such class.

25
<PAGE> 108
OTHER

This Registration Statement, including the prospectus for each Fund, the
SAI and the exhibits filed therewith, may be examined at the office of the SEC
in Washington, D.C. Statements contained in a prospectus or the SAI as to the
contents of any contract or other document referred to herein or in the
prospectus 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.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent auditors 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.

Other auditors served as the independent auditors for the predecessor
portfolio until the Reorganization. The audited financial statements
incorporated by reference into this SAI and the audited financial highlights
that appear in the Prospectus have been audited by the Fund's former
independent auditors, Deloitte & Touche LLP.

FINANCIAL INFORMATION

The unaudited financial statement of assets and liabilities, including the
statement of investments, of the former Pacifica Money Market Trust portfolio
as of March 31, 1996, and the related unaudited statement of operations for
the six-month period ended March 31, 1996, and the statement of changes in net
assets and the financial highlights for the period indicated, as filed with the
SEC on June 7, 1996, are incorporated by reference into this SAI.

The statement of assets and liabilities, including the statement of
investments, of the former Westcore Trust Fund (The Prime Money Market Fund) as
of September 30, 1995 and the related statement of operations for the
four-month period ended September 30, 1995, and the statements of changes in
net assets and the financial highlights for each of the periods indicated are
incorporated by reference in this SAI. These financial statements have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which has also been incorporated by reference in this SAI, and has been
so included upon the report of such firm given upon their authority as experts
in accounting and auditing.

The statements of investments, audited financial statements and independent
auditors' report are included with the SAI delivered to current or prospective
shareholders.

26
<PAGE> 109
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

A-1
<PAGE> 110
group." Notes rated "MIG 3" or "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.

A-2
<PAGE> 111

STAGECOACH FUNDS, INC.

Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated September 6, 1996

PRIME MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND

Service Class

---------------------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end investment
company. This Statement of Additional Information ("SAI") contains information
about two of the funds in the Stagecoach Family of Funds -- the PRIME MONEY
MARKET MUTUAL FUND and the TREASURY MONEY MARKET MUTUAL FUND (each a "Fund" and
collectively, the "Funds"). The Funds offer three classes of shares -- Class
A, Institutional and Service shares. This SAI relates only to the Service
class of shares ("Service Class shares") of the Funds. The investment
objective of each Fund is described in its Prospectus under the section
entitled "How the Funds Work -- Investment Objectives and Policies."

This SAI is not a prospectus and should be read in conjunction
with each Fund's Prospectus dated September 6, 1996. All terms used in this
SAI that are defined in the Prospectus for each Fund will have the meanings
assigned in that Fund's Prospectus. A copy of the Prospectus for each Fund may
be obtained without charge by writing Stephens Inc., the Company's sponsor,
administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201 or calling the Transfer Agent at the telephone number indicated above.

---------------------------------
<PAGE> 112
TABLE OF CONTENTS

Page
----

General . . . . . . . . . . . . . . . . . . . . . . 1

Investment Restrictions . . . . . . . . . . . . . . . 1

Additional Permitted Investment Activities . . . . . 5

Management . . . . . . . . . . . . . . . . . . . . . 8

Servicing Plans . . . . . . . . . . . . . . . . . . . 14

Performance Calculations . . . . . . . . . . . . . . 15

Determination of Net Asset Value . . . . . . . . . . 18

Additional Purchase and Redemption Information . . . 20

Portfolio Transactions . . . . . . . . . . . . . . . 20

Federal Income Tax . . . . . . . . . . . . . . . . . 22

Capital Stock . . . . . . . . . . . . . . . . . . . . 23

Other . . . . . . . . . . . . . . . . . . . . . . 27

Independent Auditors . . . . . . . . . . . . . . . . 27

Financial Information . . . . . . . . . . . . . . . . 28

Appendix . . . . . . . . . . . . . . . . . . . . . . A-1

i
<PAGE> 113

GENERAL

Stagecoach Funds, Inc. (the "Company" and, at times, "Stagecoach") is
an open-end management investment company offering shares in separately managed
investment portfolios. The Prime Money Market Mutual Fund operated as Pacific
American Liquid Assets, Inc. from commencement of operations on April 30, 1981
until it was reorganized as a portfolio of Pacific American Fund on October 1,
1985; on October 1, 1994, it was reorganized as the Pacific American Money
Market Portfolio of Pacifica; and, in July of 1995, it was renamed the Pacifica
Prime Money Market Fund. Prior to August 1, 1990, the Treasury Money Market
Mutual Fund was known as the Short-Term Government Fund and invested in
obligations issued or guaranteed by agencies and instrumentalities of the U.S.
Government in accordance with fundamental policies that were then effective for
the Fund. The Fund operated as a portfolio of Pacific American Fund through
October 1, 1994, when it was reorganized as the Pacific American U.S. Treasury
Portfolio, a portfolio of Pacifica Funds Trust. In July 1995, the Fund was
renamed the Pacifica Treasury Money Market Fund.

On April 25, 1996, the Agreement and Plan of Reorganization of
Pacifica with Stagecoach, and the creation of each Fund as a new fund of
Stagecoach were approved by the Company's Board of Directors. On May 17, 1996,
the Agreement and Plan of Reorganization of Pacifica with Stagecoach was
approved by Pacifica's Board of Trustees. As part of the recent Reorganization
of Pacifica with Stagecoach (the "Reorganization"), each of the following
portfolios of Pacifica was reorganized as the specified Stagecoach Fund:

PACIFICA FUNDS TRUST PORTFOLIO NAME STAGECOACH FUND NAME
- ----------------------------------- --------------------

Pacifica Prime Money Market Fund Prime Money Market Mutual Fund

Pacifica Treasury Money Market Fund Treasury Money Market Mutual Fund

INVESTMENT RESTRICTIONS

The Prospectuses summarize certain fundamental investment restrictions
that have been adopted for the Funds. All of the Funds' restrictions are
stated in full herein and cannot be changed with respect to a Fund without
approval by the holders of a majority, as defined in the 1940 Act, of the
Fund's outstanding voting shares.

The Funds are subject to the following investment restrictions, all of
which are fundamental policies, unless expressly indicated otherwise.

The Funds may not:

1
<PAGE> 114

5. Write put or call options.

7. Invest in companies for the purpose of exercising control.

9. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, acquisition of assets or
where otherwise permitted by the 1940 Act.

10. Lend its portfolio securities in excess of one-third of the value
of its total assets.

2
<PAGE> 115

The Prime Money Market Mutual Fund may not:

The Treasury Money Market Mutual Fund may not:

1. Purchase or sell real estate.

2. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs.

If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of a Fund's investments will not constitute a violation of such
limitation, except that any borrowing by a Fund that exceeds the fundamental
investment limitations stated above must be reduced to meet such limitations
within the period required by the 1940 Act (currently three days) and the Funds
will not at any time hold more than 15% of their net assets in illiquid
securities. Otherwise, a Fund may continue to hold a security even though it
causes the Fund to exceed a percentage limitation because of fluctuation in the
value of the Fund's assets.

3
<PAGE> 116

In addition, in accordance with current SEC regulations, the Funds
intend, as a non-fundamental policy, to limit their respective investments in
the securities of any single issuer (other than securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and repurchase
agreements collateralized by such securities) to not more than 5% of the value
of their respective total assets at the time of purchase, except for 25% of the
value of their respective total assets which may be invested in any one issuer
for a period of up to three business days.

Pursuant to state securities regulations, the Treasury Money Market
Mutual Fund has undertaken the following non-fundamental investment limitation:
the Fund will not purchase warrants, valued at the lower of cost or market, in
excess of 5% of the value of its net assets (included within that amount, but
not to exceed 2% of the value of the Fund's net assets, may be warrants that
are not listed on the New York or American Stock Exchanges) except that
warrants acquired by the Fund at any time in units or attached to securities
are not subject to this limitation. Investors should note, however, that
neither Fund currently intends to purchase any warrants whatsoever, or to
acquire any put option that may be sold, transferred or assigned separately
from the underlying security.

As a non-fundamental investment policy: each Fund currently intends to
limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made:
(i) not more than 5% of the value of the Fund's total assets will be invested
in the securities of any one investment company; (ii) 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; and (iii) not more than 3% of the outstanding
voting securities of any one investment company will be owned by a Fund or by
the Company as a whole.

4
<PAGE> 117

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

A description of the securities in which each of the Funds may invest
is set forth in their Prospectuses, to which reference is hereby made.
Additional information about these instruments follows.

Loans of Portfolio Securities. The Prime Money Market Mutual Fund may
lend its securities to brokers, dealers and financial institutions, provided
(1) the loan is secured continuously by collateral consisting of cash, U.S.
Treasury securities, or other U.S. Government securities or a letter of credit
which is marked to market daily to ensure that each loan is fully
collateralized at all times; (2) the Fund may at any time call the loan and
obtain the return of the securities loaned within five business days; (3) the
Fund will receive any interest or dividends paid on the securities loaned; and
(4) the aggregate market value of securities loaned will not at any time exceed
one-third of the total assets of the Fund. The Fund may earn income in
connection with securities loans either through the reinvestment of the cash
collateral or the payment of fees by the borrower. The Treasury Money Market
Mutual Fund does not currently intend to lend its portfolio securities.

Repurchase Agreements. Each Fund may engage in a repurchase agreement
with respect to any security in which that Fund is authorized to invest,
including U.S. Treasury STRIPS, although the underlying security may mature in
more than thirteen months. Each 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 that involves the
acquisition by a Fund of an underlying debt instrument, subject to the seller's
obligation to repurchase, and such Fund's obligation to resell, the instrument
at a fixed price usually not more than one week after its purchase. The Fund's
custodian has custody of, and holds in a segregated account, securities
acquired as collateral by a Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the SEC to be loans by the Fund. The
Funds may enter into repurchase agreements only with respect to securities of
the type in which such Fund may invest, including government securities and
mortgage-related securities, regardless of their remaining maturities, and
requires that additional securities be deposited with the custodian if the
value of the securities purchased should decrease below resale price. Wells
Fargo Bank monitors on an ongoing basis the value of the collateral to assure
that it always equals or exceeds the repurchase price. Certain costs may be
incurred by a Fund in connection with the sale of the underlying securities if
the seller does not repurchase them in accordance with the repurchase
agreement. In addition, if bankruptcy proceedings are commenced with respect
to the seller of the securities, disposition of the securities by a Fund may be
delayed or limited. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delay and costs to a
Fund in connection with insolvency proceedings), it is the policy of each Fund
to limit repurchase agreements to selected creditworthy securities dealers or
domestic banks or other recognized financial institutions. Each Fund considers
on an ongoing basis the creditworthiness of the institutions with which it
enters into repurchase agreements. Repurchase agreements are considered to be
loans by a Fund under the Investment Company Act of 1940 (the "1940 Act").

Floating- and Variable-Rate Obligations. The Funds may purchase floating-
and variable-rate

5
<PAGE> 118

obligations as described in the prospectuses. Each Fund may purchase floating-
and variable-rate demand notes and bonds, which are obligations ordinarily
having stated maturities in excess of thirteen months, but which permit the
holder to demand payment of principal at any time, or at specified intervals
not exceeding thirteen months. Variable rate demand notes include master
demand notes that are obligations that permit a Fund to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The interest rates
on these notes fluctuate from time to time. The issuer of such obligations
ordinarily has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. The interest rate on a floating-rate demand obligation is based
on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Accordingly, where these obligations are
not secured by letters of credit or other credit support arrangements, a Fund's
right to redeem is dependent on the ability of the borrower to pay principal
and interest on demand. Such obligations frequently are not rated by credit
rating agencies and each Fund may invest in obligations which are not so rated
only if Wells Fargo Bank determines that at the time of investment the
obligations are of comparable quality to the other obligations in which such
Fund may invest. Wells Fargo Bank, on behalf of each Fund, considers on an
ongoing basis the creditworthiness of the issuers of the floating- and
variable-rate demand obligations in such Fund's portfolio. No Fund will invest
more than 10% of the value of its total net assets in floating- or
variable-rate demand obligations whose demand feature is not exercisable within
seven days. Such obligations may be treated as liquid, provided that an active
secondary market exists.

Securities purchased on a when-issued or forward commitment basis and
certain other securities held in a Fund's investment portfolio are subject to
changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose the relevant Fund to risk
because they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or

6
<PAGE> 119

forward commitment basis can involve the additional risk that the yield
available in the market when the delivery takes place actually may be higher
than that obtained in the transaction itself. A segregated account of each
Fund consisting of cash or U.S. Government obligations or other high quality
liquid debt securities at least equal at all times to the amount of the
when-issued or forward commitments will be established and maintained at the
Funds' custodian bank. Purchasing securities on a forward commitment basis
when a Fund is fully or almost fully invested may result in greater potential
fluctuation in the value of such Fund's total net assets and its net asset
value per share. In addition, because a Fund will set aside cash and other
high quality liquid debt securities as described above the liquidity of the
Fund's investment portfolio may decrease as the proportion of securities in the
Fund's portfolio purchased on a when-issued or forward commitment basis
increases.

Rule 144A. It is possible that unregistered securities, purchased by the
Prime Money Market Mutual Fund in reliance upon Rule 144A under the Securities
Act of 1933, could have the effect of increasing the level of the Fund's
illiquidity to the extent that qualified institutional buyers become, for a
period, uninterested in purchasing these securities.

General. The assets of each of the Funds consist only of obligations
maturing within thirteen months from the date of acquisition (as determined in
accordance with the regulations of the SEC), and the dollar-weighted average
maturity of each Fund may not exceed 90 days.

The securities in which each Fund may invest will not yield as high a
level of current income as may be achieved from securities with less liquidity
and less safety. There can be no assurance that each Fund's investment
objective will be realized as described in the Funds' Prospectuses.

Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Directors or the Adviser, pursuant to
guidelines established by the Board, will consider such an event in determining
whether the Fund involved should continue to hold the security in accordance
with the interests of the Fund and applicable regulations of the SEC.

7
<PAGE> 120

MANAGEMENT

Principal Occupations
Name, Age and Address Position During Past 5 Years
- --------------------- -------- ---------------------

Jack S. Euphrat, 74 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.

*Zoe Ann Hines, 47 Director Senior Vice President
of Stephens and
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource Management.

8
<PAGE> 121

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

*J. Tucker Morse, 52 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., 4 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary and Director of Stephens
Treasurer Sports Management
Inc.; and Director of
Capo Inc.

COMPENSATION TABLE
For the Year Ended December 31, 1995
------------------------------------

Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
- ----------------- ------------------------- ------------------

Jack S. Euphrat $10,188 $39,750
Director

*R. Greg Feltus 0 0
Director

Thomas S. Goho 10,188 39,750
Director

9
<PAGE> 122

*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

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 directors and officers of Overland Express Funds,
Inc. and MasterWorks Funds Inc. (formerly, 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, prior to January 1, 1996 and the reorganization of WFNIA, was
considered to be in the same "fund complex," as such term is defined in Form
N-1A under the 1940 Act, as the Company. Effective January 1, 1996,
MasterWorks Funds, Inc., Master Investment Portfolio, and Managed Series
Investment Trust are considered to be members of the same fund complex and are
no longer part of the same fund complex as Stagecoach Funds, Inc., Overland
Express Funds, Inc., Stagecoach Trust, Life & Annuity Trust and Master
Investment Trust. The Directors are compensated by other companies and trusts
within the fund complex for their services as directors/trustees to such
companies 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 an advisory contract for each Fund under which Wells Fargo Bank has agreed
to furnish investment guidance and policy direction in connection with the
daily portfolio management of the Fund. On behalf of each Fund, the Company's
Board of Directors approved the advisory contracts with Wells Fargo Bank on
April 25, 1996, for an initial two-year period. Pursuant to the advisory
contracts, Wells Fargo Bank also has agreed to furnish to the Board of
Directors periodic reports on the investment strategy and performance of each
Fund.

10
<PAGE> 123

Wells Fargo Bank has agreed to provide to the Funds, 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. As
compensation for its advisory services, Well Fargo Bank is entitled to receive
a monthly fee at the annual rates of 0.25% of the average daily value of each
Fund's net assets during the preceding month.

Prior to the Reorganization, Wells Fargo Investment Management, Inc.
("WFIM") and its predecessor, First Interstate Capital Management, Inc.
("FICM") served as former adviser to the predecessor portfolios of Pacifica.
For the six-month period beginning October 1, 1995 and ending March 31, 1996,
WFIM/FICM were entitled to receive, and waived or reimbursed advisory fees paid
by the predecessor portfolios to the Funds as follows:

Investment Advisory Fees
<TABLE>
<CAPTION>
Fees Waived and
Fees Earned Expenses Reimbursed
Six-Month Period Six-Month Period Ended
FUND Ended March 31, 1996 Ended March 31, 1996
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Prime Money Market Mutual $812,609 $916,740
Treasury Money Market Mutual $1,136,476 $1,132,651
</TABLE>

During the fiscal year ended September 30, 1995, the six-month period
ended September 30, 1994 and the fiscal years ended March 31, 1994 and 1993,
the advisory fees paid to the former adviser by the predecessor portfolios of
the Prime Money Market Mutual Fund and the Treasury Money Market Mutual Fund
were as follows:

Investment Advisory Fees Paid*

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Mar. 31, 1994 Mar. 31, 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Money Market Mutual $693,315 $330,715 $737,811 $640,620
Treasury Money Market Mutual $1,160,424 $454,029 $900,919 $629,121
</TABLE>

*These amounts reflect voluntary fee waivers and expense reimbursements
by the adviser. Prior to October 1, 1994, all of these fees were, in turn,
paid by the adviser to its affiliates which served as investment sub-advisers
during the periods indicated.

11
<PAGE> 124

Administrator and Distributor. The Company has retained Stephens as
administrator and distributor on behalf of each Fund. Under the Administration
Agreement between Stephens and the Company on behalf of each Fund, Stephens
agreed to provide as administrative services, among other things: (i) general
supervision of the operation of a Fund, including coordination of the services
performed by a Fund's investment adviser, transfer and dividend disbursing
agent, custodian, shareholder servicing agent(s), independent public
accountants 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 a 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 a Fund together with those ordinary clerical and bookkeeping
services that are not furnished by Wells Fargo Bank. Stephens also pays the
compensation of the Company's Directors, Officers and employees who are
affiliated with Stephens. The Administration Agreement and the Amended
Distribution Agreement were approved by the Company's Board of Directors on
April 25, 1996.

Prior to April 1, 1996, the Dreyfus Corporation ("Dreyfus") provided
management and administrative services necessary for the operation of the
Funds, pursuant to an Administrative Services Contract. For these services,
Dreyfus was entitled to receive a fee, payable monthly, at the annual rate of
0.10% of the average daily net assets of the predecessor portfolios. The
following table reflects the administration fees to which Dreyfus was entitled,
and the amounts of fee waivers, during the indicated period:

<TABLE>
<CAPTION>
Administration Fees
-------------------

Fees Earned Fees Waived
Period Ended Period Ended
FUND March 31, 1996 Ended March 31, 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Prime Money Market Mutual $677,174 $0
Treasury Money Market Mutual $947,063 $0
</TABLE>

During the fiscal year ended September 30, 1995, the six-month period ended
September 30, 1994 and the fiscal years ended March 31, 1994 and 1993, the
administration fees paid to Dreyfus by the Prime Money Market Mutual Fund and
the Treasury Money Market Mutual Fund were as follows:

Administration Fees Paid

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Mar. 31, 1994 Mar. 31, 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Money Market Mutual $577,763 $275,596 $614,901 $533,850
Treasury Money Market Mutual $921,886 $347,499 $690,137 $524,268
</TABLE>

12
<PAGE> 125

The advisory contracts and administration agreement for the Funds provide
that if, in any fiscal year, the total expenses of a Fund incurred by, or
allocated to, such 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 the Plan but including the fees
provided for in the applicable advisory contract and the administration
agreement) exceed the most restrictive expense limitation applicable to a Fund
imposed by the securities laws or regulations of the states in which the Fund's
shares are registered for sale, Wells Fargo Bank and Stephens shall waive their
fees proportionately under the advisory contract and the administration
agreement, respectively, for the 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 contracts and the administration agreement for the Funds
further provide that a 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. Currently,
California is the only state imposing limitations on the expenses of the Funds.
Those expense limitations are 2-1/2 percent of the first $30 million of a
Fund's average net assets, 2 percent of the next $70 million and 1-1/2 percent
of a Fund's remaining average net assets.

Shareholder Servicing Agent. As discussed in each Fund's Prospectus
under the heading "Shareholder Servicing Agent," the Funds approved Servicing
Plans and have entered into related Shareholder Servicing Agreements with
financial institutions, including Wells Fargo Bank. For providing these
services, a Servicing Agent is entitled to a fee from the applicable Fund, not
to exceed 0.25%, on an annualized basis, of the average daily net assets of the
class of shares owned of record or beneficially by the customers of the
Servicing Agent during the period for which payment is being made. The
Servicing Plans and related form of shareholder servicing agreement were
approved by the Company's Board of Directors on April 25, 1996 and provide
that a Fund shall not be obligated to make any payments under such Plans or
related Agreements that exceed the maximum amounts payable under Article III,
Section 26 of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (NASD). For the six months ended March 31, 1996 and
under similar service agreements with certain institutions, including
affiliates of FICM, the Prime Money Market Mutual Fund and the Treasury Money
Market Mutual Fund made payments to various institutions totaling $1,055,708,
of which $637,228 was waived, and $1,326,718, of which $1,040,940 was waived,
respectively.

Custodian And Transfer And Dividend Disbursing Agent. Wells Fargo Bank
has been retained to act as custodian and transfer and dividend disbursing
agent for the Funds, pursuant to a Custody Agreement and an Agency Agreement
with the Company on behalf of the Funds. The custodian, among other things,
maintains a custody account or accounts in the name of a Fund, receives and
delivers all assets for the Fund upon purchase and upon sale or maturity,
collects and receives all income and other payments and distributions on
account of the assets of the Fund and pays all expenses of the Fund. For its
services as custodian, Wells Fargo Bank is entitled to receive fees as follows:
a net asset charge at the annual rate of 0.0167%, payable monthly, plus
specified transaction charges. Wells Fargo Bank also will provide portfolio
accounting services under the Custody Agreement as follows: a monthly base fee
of $2,000 plus a net asset fee at the annual

13
<PAGE> 126

rate of 0.070% of the first $50,000,000 of a Fund's average daily net assets,
0.045% of the next $50,000,000, and 0.020% of the average daily net assets in
excess of $100,000,000.

For its services as transfer and dividend disbursing agent for the
Service Class shares of the Funds, Wells Fargo Bank is entitled to receive
monthly payments at the annual rate of 0.07% of the average daily net assets of
each Fund.

Underwriting Commissions. Pacifica's distributor did not retain fees in
underwriting commissions in connection with the purchase and redemption of
shares of the predecessor portfolios of the Funds, since the Funds do not have
front-end sales loads or contingent deferred sales charges.

SERVICING PLANS

As indicated in each Fund's Prospectus, the Company's Board of Directors,
on behalf of each Fund, adopted a Servicing Plan ("Servicing Plan") on April
25, 1996, with respect to each class of the Funds' shares. The Board of
Directors included a majority of the Directors who were not "interested
persons" (as defined in the Act) of each Fund and who had no direct or indirect
financial interest in the operation of the Servicing Plan or in any agreement
related to the Servicing Plan (the "Servicing Plan Non-Interested Directors").

Under the Servicing Plan and pursuant to the shareholder servicing
agreements for the Service Class shares, each Fund may pay one or more
servicing agents, as compensation for performing certain services, a fee at an
annual rate of up to 0.20% of the average daily net assets of the Fund's
Service Class shares attributable to the servicing agent's customers. The
actual fee payable to servicing agents is determined, within such limits, from
time to time by mutual agreement between the Company and each servicing agent
and will not exceed the maximum service fees payable by mutual funds sold by
members of the NASD under the NASD Rules of Fair Practice.

14
<PAGE> 127

Each Servicing Plan requires that the administrator shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Servicing Plan.

PERFORMANCE CALCULATIONS

The following information supplements and should be read in conjunction
with the sections in each Prospectus entitled "Determination of Net Asset
Value" and "Performance Data."

The "yields" and "effective yields" of each Fund described in the
Prospectuses are calculated according to formulas prescribed by the SEC. The
standardized seven-day yields for the respective classes of shares of a Fund
are computed separately for each class by determining the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account in the
Fund having a balance of one share at the beginning of the period, dividing the
net change in account value by the value of the account at the beginning of the
base period to obtain the base period return, and multiplying the base period
return by (365/7). The net change in the value of an account in each Fund
includes the value of additional shares purchased with dividends from the
original share, and dividends declared on both the original share and any such
additional shares, and all fees, other than non-recurring account or sales
charges, that are charged to all shareholder accounts in proportion to the
length of the base period and the Fund's average account size. The capital
changes to be excluded from the calculation of the net change in account value
are realized gains and losses from the sale of securities and unrealized
appreciation and depreciation. The effective annualized yields for a Fund are
also computed separately for each class by compounding the unannualized base
period return (calculated as above) by adding 1 to the base period return,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from
the result. The fees which may be imposed by Banks for cash management services
in connection with investments in shares of the Funds are not reflected in the
Funds' yields, and any such fees, if charged, will reduce the actual return
received by Customers for their investments.

For the seven-day period ended March 31, 1996, the Prime Money Market
Mutual Fund's yield and effective yield on Service Class shares were 5.25% and
5.37%, respectively. Similarly, for the seven-day period ended March 31, 1996,
the Treasury Money Market Mutual Fund's yield and effective yield on Service
Class shares were 5.10% and 5.22% respectively.

15
<PAGE> 128

For the seven-day period ended September 30, 1995, the Prime Money Market
Mutual Fund's yield and effective yield on Service Class shares were 5.46% and
5.60%, respectively. Similarly, for the seven-day period ended September 30,
1995, the Treasury Money Market Mutual Fund's yield and effective yield on
Service Class shares were 5.29% and 5.42% respectively.

During the seven-day period ended September 30, 1995, the Investment
Adviser and Service Organizations waived portions of their fees amounting to
0.23% and 0.43% of the average daily net assets of the Prime Money Market
Mutual Fund for Service Class shares, and 0.23% and 0.43% of the average daily
net assets of the Treasury Money Market Mutual Fund for Service Class shares.

With respect to the Prime Money Market Mutual Fund, had these expenses
not been waived, the yield and effective yield for the same period would have
been, 5.23% and 5.37%, respectively, for the Service Class shares. With respect
to the Treasury Money Market Mutual Fund, had these expenses not been waived,
the yield and effective yield for the same period would have been 5.06% and
5.19%, respectively, for the Service Class shares.

Yield information may be useful in reviewing the Funds' performance and
for providing a basis for comparison with other investment alternatives.
However, yields fluctuate, unlike investments which pay a fixed yield for a
stated period of time. Yields for the Funds are calculated on the same basis as
other money market funds as required by applicable regulations. Investors
should give consideration to the quality and maturity of the portfolio
securities of the respective investment companies when comparing investment
alternatives.

Investors should recognize that in periods of declining interest rates,
the Funds' yields will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, the Funds' yields will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Funds from the continuous sale of their shares will likely be
invested in instruments producing lower yields than the balance of the Funds,
thereby reducing the current yields of the Funds. In periods of rising interest
rates, the opposite can be expected to occur.

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 performance or
price-earning ratios in advertising and other types of literature as compared
with the performance of the Lehman Brothers Municipal Bond Index, 1-Year
Treasury Bill Rate, S&P Index, the Dow Jones Industrial Average, the Lehman
Brothers 20+ Years Treasury Index, the Lehman Brothers 5-7 Year Treasury Index,
IBC/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 the World Gold Council), Bank Averages (which
is 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 Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), Ten Year U.S. Government Bond Average, S&P's
Corporate Bond Yield Averages, Schabacter Investment Management Indices,
Salomon Brothers High Grade Bond Index, Lehman Brothers Long-Term High Quality
Government/Corporate Bond Index, other managed or unmanaged indices or
performance data of

16
<PAGE> 129

bonds, 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 of other criteria. The S&P Index
and the Dow Jones Industrial Average are unmanaged indices of selected common
stock prices.

In addition, the Company also may use, in advertisements and other types
of literature, information and statements showing that bank savings accounts
offer a guaranteed return of principal and a fixed rate of interest, but no
opportunity for capital growth. The Company also may include in advertising
and other types of literature information and other data from reports and
studies prepared by the Tax Foundation, including information regarding federal
and state tax levels and the related "Tax Freedom Day."

The Company also may use the following information in advertisements and
other types of literature, only to the extent the information is appropriate
for a class of shares of a Fund: (i) the Consumer Price Index may be used to
assess the real rate of return from an investment in a class of shares of 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 a class of shares or the general economic, business, investment, or
financial environment in which the Fund operates; (iii) the effect of
tax-deferred compounding on the investment returns of a Fund or a class of
shares, 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 a class of shares (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 the historical performance of the Fund or a class or current or
potential value with respect to the particular industry or sector.

The Company also may discuss in advertising and other types of literature
that a Fund has been assigned a rating by a nationally recognized statistical
rating organization ("NRSRO"), such as S&P or Moody's. Such rating would
assess the creditworthiness of the investments held by a Fund. The assigned
rating would not be a recommendation to purchase, sell or hold any class of a
Fund's shares since the rating would not comment on the market price of a
Fund's shares or the suitability of a Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating

17
<PAGE> 130
to a Fund or its investments. The Company may compare a Fund's performance
with other investments that are assigned ratings by NRSROs. Any such
comparisons may be useful to investors who wish to compare a Fund's past
performance with other rated investments.

The Company also may disclose in sales literature, the distribution rate
on the shares of a Fund or a class of shares. 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.

The Company also may disclose, in advertising statements and other types
of literature, information and statements that the Company's investment
adviser, Wells Fargo Bank, is listed in Nelson Publications' ("Nelson's") "Top
20" performance rankings as published in the 1994 edition of "America's Best
Money Managers." The Nelson survey ranks the performance of money managers in
over 30 asset/style categories and is based on analysis of performance
composites and surveys of institutional money managers.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in conjunction
with the Prospectus section under "Purchase of Shares."

Expenses and fees, including advisory fees, are accrued daily and are
taken into account for the purpose of determining the net asset value of a
Fund's shares.

Net asset value per share for a class of shares is determined as of 9:00
a.m. and 1:00 p.m. Pacific time on each Business Day as described in the
Prospectus.

18
<PAGE> 131

The Funds' instruments are valued on the basis of amortized cost. This
technique involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than
the price a Fund would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on shares of a Fund computed as
described above may tend to be higher than a like computation made by a fund
with identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its instruments. Thus, if the
use of amortized cost by a Fund resulted in a lower aggregate portfolio value
on a particular day, a prospective investor in a Fund would be able to obtain a
somewhat higher yield than would result from investment in a fund utilizing
solely market values and existing investors in a Fund would receive less
investment income. The converse would apply in a period of rising interest
rates.

The valuation of each Funds' instruments, based upon their amortized cost
and the concomitant maintenance by each Fund of a net asset value of $1.00, is
permitted in accordance with Rule 2a-7 under the Act, pursuant to which a Fund
must adhere to certain conditions. Each Fund must maintain a dollar-weighted
average maturity of 90 days or less, purchase only instruments having remaining
maturities of 397 days (thirteen months) or less, and invest only in securities
that are determined to present minimal credit risks pursuant to guidelines
adopted by the Directors or the adviser under guidelines approved by the
Directors. Instruments having variable or floating interest rates or demand
features may be deemed to have remaining maturities as follows: (a) a
government security with a variable rate of interest readjusted no less
frequently than every thirteen months may be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate; (b) an
instrument with a variable rate of interest, the principal amount of which is
scheduled on the face of the instrument to be paid in thirteen months or less,
may be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (c) an instrument with a variable rate of
interest that is subject to a demand feature may be deemed to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand; (d) an instrument with a floating rate of interest
that is subject to a demand feature may be deemed to have a maturity equal to
the period remaining until the principal amount can be recovered through
demand; and (e) a repurchase agreement may be deemed to have a maturity equal
to the period remaining until the date on which the repurchase of the
underlying securities is scheduled to occur or, where no date is specified but
the agreement is subject to demand, the notice period applicable to a demand
for the repurchase of the securities.

The Company's Board of Directors has established valuation procedures
designed to stabilize, to the extent reasonably possible, each Fund's price per
share as computed for the purpose of sales and redemptions. Such procedures
include the determination, at such intervals as the Directors deem appropriate,
of the extent to which each such Fund's NAV as calculated by using available
market quotations deviates from $1.00 per share, such deviation may result in
material dilution or other unfair results to existing shareholders or
investors. In the event the Directors determine that such a material deviation
exists, they have agreed to take such corrective action as they regard as
necessary and appropriate, which may include selling portfolio instruments
prior to maturity to

19
<PAGE> 132

realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; redeeming shares in kind or without monetary or other
consideration; or establishing a net asset value per share by using available
market quotations. It is the intention of the Funds to maintain a per share net
asset value of $1.00, but there can be no assurance that each Fund will do so.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Payment for shares may, in the discretion of the adviser, be made in the
form of securities that are permissible investments for the Funds as described
in the Prospectuses. For further information about this form of payment please
contact Stephens. In connection with an in-kind securities payment, the Funds
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by a Fund and that such
Fund receives satisfactory assurances that (i) it will have good and marketable
title to the securities received by it; (ii) that the securities are in proper
form for transfer to the Fund; and (iii) adequate information will be provided
concerning the basis and other matters relating to the securities.

The Company may suspend redemption rights or postpone redemption payments
for such periods as are permitted under the 1940 Act. The Company may also
redeem shares involuntarily or make payment for redemption in securities or
other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to reimburse the
Funds for any losses sustained by reason of the failure of a shareholders to
make full payment for shares purchased or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
shares of a Fund as provided from time to time in the Prospectus.

PORTFOLIO TRANSACTIONS

20
<PAGE> 133

competitive spreads or commissions, the Funds will not necessarily be paying
the lowest spread or commission available.

Purchases and sales of securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. The
Funds also will purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, municipal obligations
and taxable money market securities are traded on a net basis and do not
involve brokerage commissions. The cost of executing a Fund's portfolio
securities transactions will consist 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 Funds may purchase municipal obligations from underwriting
syndicates of which Stephens or Wells Fargo Bank 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.

Wells Fargo Bank, as the investment adviser of each Fund, 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.

Consistent with the Rules of Fair Practice of the NASD, and subject to
seeking the most favorable price and execution available and such other
policies as the Directors may determine, the adviser may consider sales of
shares of the Funds as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds.

21
<PAGE> 134

Brokerage Commissions. Subject to the general supervision and
approval of the Board of Directors, the adviser makes decisions with respect to
and places orders for all purchases and sales of securities for the Funds.
Securities are generally purchased and sold either directly from the issuer or
from dealers who specialize in money market instruments. Such purchases are
usually effected as principal transactions and therefore do not involve the
payment of brokerage commissions.

Securities of Regular Broker Dealers. The Funds may from time to time
purchase securities issued by their regular dealers. At September 30, 1995, the
Funds held securities issued by Goldman Sachs & Co., J.P. Morgan Securities,
Inc., Salomon Brothers Inc., and HSBC Securities Inc., valued at $159,111,345,
$200,000,000, $126,043,763 and $160,000,000, respectively.

Portfolio Turnover. The portfolio turnover rate is not a limiting
factor when Wells Fargo Bank deems portfolio changes appropriate. Because the
Funds' portfolios consist of securities with relatively short-term maturities,
the Funds can expect to experience high portfolio turnovers. A high portfolio
turnover rate should not adversely affect such Funds, however, because
portfolio transactions ordinarily will be made directly with principals on a
net basis and, consequently, the Funds usually will not incur brokerage
expenses.

FEDERAL INCOME TAX

Each Fund has qualified and intends to continue to qualify each year
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended. By so qualifying, the Funds will not be subject to
federal income taxes to the extent that they distribute their taxable net
investment income and net realized capital gains, if any. Net investment income
and net realized capital gains, if any, will be distributed to investors of the
Fund that realized the income or gain. Distributions of net investment income
and capital gains are taxable to those investors who are not exempt from
federal income taxes. It is expected that each Fund will distribute any net
realized short-term gains (unless negligible in amount) at least annually.
Neither Fund expects to realize any long-term capital gains. Each Fund will be
treated separately for federal tax-purposes.

Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of the gain
realized from the disposition of certain market discount bonds will be treated
as ordinary income under Section 1276 of the Code.

The Prime Money Market Mutual Fund has an unused capital loss
carryover of approximately $103,100 available for federal income tax purposes
to be applied against future profits from sales of securities, if any, realized
subsequent to September 30, 1995. If not applied, $46,700 expires on September
30, 1999 and $56,400 expires on September 30, 2000.

For federal income tax purposes, an exchange of shares is a taxable
event and, accordingly, a capital gain or loss may be recognized. Please
consult a tax or other financial Adviser to determine the tax consequences of a
particular exchange.

22
<PAGE> 135

Dividends derived from net investment income, together with
distributions from the excess, if any, of net realized short-term gains over
net realized long-term losses and gains from the sale or other disposition of
certain market discount bonds paid by each Fund to a foreign investor generally
are subject to U.S. nonresident withholding taxes at the rate of 30%, unless
the foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from the excess, if any, of net realized long-term
securities gains over net realized short-term securities losses paid by each
Fund to a foreign investor will not be subject to any U.S. withholding taxes.
However, such distributions may be subject to backup withholding, as described
in the Fund's Prospectuses, unless the foreign investor certifies his non-U.S.
residency status. Different tax consequences may apply to foreign investors
engaged in a U.S. trade or business. Foreign investors should consult their Tax
Advisors regarding the U.S. and foreign tax consequences of investing in the
Funds.

CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Funds and
Management."

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 48,000,000,000 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 twenty-three series of shares, each representing an
interest in one of the following funds -- the Aggressive Growth, Arizona
Tax-Free, Asset Allocation, Balanced, California Tax-Free Bond, California
Tax-Free Income, California Tax-Free Money Market Mutual, Corporate Stock,
Diversified Income, Equity Value, Ginnie Mae, Government Money Market Mutual,
Growth and Income, Intermediate Bond, Money Market Mutual, Money Market Trust,
National Tax-Free, National Tax-Free Money Market Mutual, Oregon Tax-Free,
Prime Money Market Mutual, Short-Intermediate U.S. Government Income, Treasury
Money Market Mutual and U.S. Government Allocation Funds -- and the Board of
Directors may, in the future, authorize the issuance of other series of capital
stock representing shares of additional investment portfolios.

Voting Rights. With respect to matters that affect one class of a
Fund's shares but not another, shareholders vote as a class; for example, the
approval of a Plan. Subject to the foregoing, on any matter submitted to a
vote of shareholders, all shares then entitled to vote are voted separately by
series unless otherwise required by the Act, in which case all shares are voted
in the aggregate. For example, a change in a series' fundamental investment
policy affects only one series and are voted upon only by shareholders of the
series and not by shareholders of the Company's other series. Additionally,
approval of an advisory contract is a matter to be determined separately by
each series. Approval by the shareholders of one series is effective as to
that series whether or not sufficient votes are received from the shareholders
of the other series to approve the proposal as to those series. As used in the
Prospectus and in this SAI, the term "majority" when referring to approvals to
be obtained from shareholders of a class of a Fund, means the vote of the
lesser of (i) 67% of the shares of such class of the Fund represented at a
meeting if the holders of more than 50% of the outstanding shares of such class
of the Fund are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of such class of the Fund. The term "majority," when
referring to the approvals to be obtained from shareholders of the Company as a
whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than

23
<PAGE> 136

50% of the Company's outstanding shares are present in person or by proxy, or
(ii) more than 50% of the Company's outstanding shares. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held. The Company may dispense with an annual meeting of
shareholders in any year in which it is not required to elect directors under
the 1940 Act.

Shares have no preemptive rights or subscription. All shares, when
issued for the consideration described in the Prospectus, are fully paid and
non-assessable by the Company.

Pacifica was a Massachusetts business trust established under a
Declaration of Trust dated July 17, 1984, consisting of series of separately
managed portfolios which are described in this SAI. Prior to February 9, 1993
the name of Pacifica was Fund Source. This SAI relates only to the Service
Class shares of two of those portfolios -- the Prime Money Market Mutual Fund
and the Treasury Money Market Mutual Fund. The capitalization of Pacifica
consisted solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each.

PRIME MONEY Virg & Co. Institutional Class; 93.87% 30.50% 30.50%
MARKET FUND Attn: MF Dept. A88-4 395,533,609.29
P.O. Box 9800 Shares; Record Holder
Calabasas, CA 91372
</TABLE>

24
<PAGE> 137

<TABLE>
<CAPTION>
CLASS; AMOUNT OF
SHARES OWNED; PERCENTAGE PERCENTAGE PERCENTAGE
PACIFICA TYPE OF OF OF OF PORTFOLIO
PORTFOLIO NAME AND ADDRESS OWNERSHIP CLASS PORTFOLIO POST-CLOSING
<S> <C> <C> <C> <C> <C>
First Interstate Bank Institutional Class; 5.22% 1.70% 1.70%
of Oregon N A 22,000,000.00 Shares:
Attn: Investment Sweep Record Holder
T-15
1300 S.W. Fifth Avenue
Portland, OR 97201

Cocopah Bingo & Casino Institutional Class; 7.01% 2.28% 2.28%
Cocopah Indian Tribe 29,536,848.22 Shares;
Bingo/Casino Beneficially Owned
Attn: Sherry Cordova
County 15
Avenue G
Somerton, AZ 85350

Virg & Co. Investor Class; 94.16% 21.48% 21.48%
Attn: MF Dept. A88-4 278,614,885.48
P.O. Box 9800 Shares;
Calabasas, CA 91372 Record Holder

Virg & Co. Investor Class; 99.10% 44.32% 44.32%
Attn: MF Dept. A88-4 574,814.322.95
P.O. Box 9800 Shares;
Calabasas, CA 91372 Record Holder

Private Banking PAF-MM Service Class; 14.52% 6.49% 6.49%
Corps 84,191,778.17 Shares
#100000814-01 Beneficially Owned
Attn: A. Katz
16633 Ventura Blvd.
Suite 1400
Encino, CA 91436

SC UFCW JT TR FDS- Service Class; 9.21% 4.12% 4.12%
Benefit Operating 53,401,635.58 Shares;
c/o Wells Fargo Bank Beneficially Owned
201 3rd Street
11th Floor
San Francisco, CA 94163

Operating Engineers Service Class; 5.74% 2.57% 2.57%
Health & Welfare 33,287,647.99 Shares;
c/o Wells Fargo Bank Beneficially Owned
201 3rd Street
11th Floor
San Francisco, CA 94163

TREASURY MONEY Virg & Co. Institutional Class; 91.89% 35.86% 35.86%
Attn: MF Dept. A88-4 749,978,141.17
P.O. Box 9800 Shares;
Calabasas, CA 91372 Record Holder

</TABLE>

25
<PAGE> 138

<TABLE>
<CAPTION>
CLASS; AMOUNT OF
SHARES OWNED; PERCENTAGE PERCENTAGE PERCENTAGE
PACIFICA TYPE OF OF OF OF PORTFOLIO
PORTFOLIO NAME AND ADDRESS OWNERSHIP CLASS PORTFOLIO POST-CLOSING
<S> <C> <C> <C> <C> <C>
MARKET FUND DCIA Fund Institutional Class 5.93% 2.32% 2.32%
c/o Wells Fargo Bank 48,435,199.92 Shares;
201 3rd Street Beneficially Owned
11th Floor
San Francisco, CA 94163

Lumber Employees & W. Investor Class; 10.54% 0.31% 0.31%
Counc/Columbia Co. 6,545,875.34 Shares;
P.O. Box 1350 Beneficially Owned
Portland, OR 97207

CH2M Hill Pension Investor Class; 7.71% 0.23% 0.23%
R/Becker Institutional 4,785,242.82 Shares;
Shareholder Services at Beneficially Owned
VAS/279/Becker
7200 Wisconsin Ave.
Suite 1001
Bethesda, MD 20814

Nick Bunick Investor Class; 5.27% 0.16% 0.16%
c/o Wells Fargo Bank 3,271,282.65 Shares;
201 3rd Street Beneficially Owned
11th Floor
San Francisco, CA 94163

Virg & Co. Investor Class; 89.55% 2.66% 2.66%
Attn: MF Dept. A88-4 55,623,936.25 Shares;
P.. Box 9800 Record Holder
Calabasas, CA 91372

Virg & Co. Investor Class; 99.16% 57.52% 57.52%
Attn: MF Dept. A88-4 1,202,807,089.44
P.. Box 9800 Shares;
Calabasas, CA 91372 Record Holder

Spears Manufacturing Service Class; 8.14% 0.24% 0.24%
Company 5,051,733.03 Shares:
P.O. Box 9203 Record Holder
Sylmar, CA 91392

Access Services Service Class; 10.15% 0.30% 0.30%
Incorporated 6,299,59078 Shares;
P.O. Box 71684 Record Holder
Los Angeles, CA 90071

</TABLE>

26
<PAGE> 139

<TABLE>
<CAPTION>
CLASS; AMOUNT OF
SHARES OWNED; PERCENTAGE PERCENTAGE PERCENTAGE
PACIFICA TYPE OF OF OF OF PORTFOLIO
PORTFOLIO NAME AND ADDRESS OWNERSHIP CLASS PORTFOLIO POST-CLOSING
<S> <C> <C> <C> <C> <C>
San Fernando Community Service Class; 5.69% 0.17% 0.17%
Hospital 3,531,226.35 Shares;
14580 Roscoe Blvd. Record Holder
Panorama City, CA 91402

Novalogic Inc. Service Class; 5.68% 0.17% 0.17%
26010 Mureau Road 3,529,277.78 Shares;
Suite #200 Record Holder
Calabasas, CA 91302

</TABLE>

For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class, or is identified as the holder of record of
more than 25% of a class and has voting and/or investment powers, it may be
presumed to control such class.

OTHER

This Registration Statement, including the Prospectus for each Fund,
the SAI and the exhibits filed therewith, may be examined at the office of the
SEC in Washington, D.C. Statements contained in a Prospectus or the SAI as to
the contents of any contract or other document referred to herein or in the
Prospectus 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.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent auditors
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.

Ernst & Young LLP, 515 South Flower Street, Los Angeles, California
90071 served as the independent auditors for the predecessor Funds of Pacifica
until the Reorganization. The audited financial statements which are
incorporated by reference into this SAI and the audited financial information
which appears in the Funds' Prospectuses under the heading "Financial History,"
for the fiscal year ended September 30, 1995 and the six-month fiscal period
ended September 30, 1994 have been audited by Ernst & Young LLP. The audited
financial statements for the year

27
<PAGE> 140

ended March 31, 1994 which are incorporated by reference into this SAI and the
audited financial information which appears in the Funds' Prospectuses under the
heading "Financial History," for each of the four years in the period ended
March 31, 1994 for the Funds have been audited by the Funds' former independent
accountants, Price Waterhouse LLP. The audited financial statements that have
been incorporated by reference herein and included in the Funds' Prospectuses
are so included or incorporated in reliance on the reports of Ernst & Young LLP
and Price Waterhouse LLP given upon the authority of such firms as experts in
accounting and auditing.

FINANCIAL INFORMATION

The portfolio of investments, financial statements and independent
auditors' report of the predecessor portfolios for the fiscal period ended
March 31, 1996, are incorporated by reference to Pacifica's Semi-Annual Report
to Shareholders as filed on EDGAR with the SEC on June 7, 1996.

The portfolio of investments, financial statements and independent
auditors' report of the predecessor portfolios for the fiscal year ended
September 30, 1995 are incorporated by reference to Pacifica's Annual Report to
Shareholders.

The portfolio of investments, audited financial statements and
independent auditors' report are attached to all SAIs delivered to current or
prospective shareholders.

28
<PAGE> 141
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

Municipal Notes

A-1
<PAGE> 142

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

2
<PAGE> 143
STAGECOACH FUNDS(R), INC.

Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER 6, 1996

ARIZONA TAX-FREE FUND
BALANCED FUND
EQUITY VALUE FUND
INTERMEDIATE BOND FUND
NATIONAL TAX-FREE FUND
OREGON TAX-FREE FUND
PRIME MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND

INSTITUTIONAL CLASS

-------------------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end investment company.
This Statement of Additional Information ("SAI") contains additional
information about one class of shares offered in eight funds of the Stagecoach
Family of Funds (each, a "Fund" and collectively, the "Funds"): the ARIZONA
TAX-FREE FUND, NATIONAL TAX-FREE FUND and OREGON TAX-FREE FUND (collectively,
the "Tax-Free Funds"), the PRIME MONEY MARKET MUTUAL FUND and TREASURY MONEY
MARKET MUTUAL FUND (each, a "Money Market Fund" and collectively, the "Money
Market Funds") and the BALANCED FUND, EQUITY VALUE FUND and INTERMEDIATE BOND
FUND. This SAI relates only to the Institutional Class shares offered by the
Funds. The investment objective of each Fund is described in the applicable
prospectus under "How the Funds Work -- Investment Objective(s) and Policies."

----------------------------------
<PAGE> 144
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Additional Permitted Investment Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Special Considerations Affecting Arizona Municipal Obligations . . . . . . . . . . . . . . . . . . 23

Special Consideration Affecting Oregon Municipal Obligations . . . . . . . . . . . . . . . . . . . 25

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Servicing Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Additional Purchase and Redemption Information . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Tax-Free Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

</TABLE>

i
<PAGE> 145
GENERAL

Stagecoach Funds, Inc. (the "Company" and, at times, "Stagecoach") is
an open-end management investment company offering shares in separately managed
investment portfolios. The Arizona Tax-Free, Intermediate Bond, National
Tax-Free and Oregon Tax-Free Funds were originally organized as investment
portfolios of Westcore Trust under the following names: Arizona Intermediate
Tax-Free, Bonds Plus, Quality Tax-Exempt Income, and Oregon Tax-Exempt Funds,
respectively. On October 1, 1995, each Fund was reorganized as an investment
portfolio of Pacifica Funds Trust ("Pacifica" or the "predecessor Company").
The Balanced Fund and Equity Value Fund were originally organized as investment
portfolios of Pacifica under the same names. The Prime Money Market Mutual
Fund operated as Pacific American Liquid Assets, Inc. from commencement of
operations on April 30, 1981 until it was reorganized as a portfolio of Pacific
American Fund on October 1, 1985; on October 1, 1994, it was reorganized as the
Pacific American Money Market Portfolio of Pacifica; and, in July of 1995, it
was renamed the Pacifica Prime Money Market Fund. Prior to August 1, 1990, the
Treasury Money Market Mutual Fund was known as the Short-Term Government Fund
and invested in obligations issued or guaranteed by agencies and
instrumentalities of the U.S. Government in accordance with fundamental
policies that were then effective for the Fund. The Fund operated as a
portfolio of Pacific American Fund through October 1, 1994, when it was
reorganized as the Pacific American U.S. Treasury Portfolio, a portfolio of
Pacifica Funds Trust. In July 1995, the Fund was renamed the Pacifica Treasury
Money Market Fund.

On April 25, 1996, the Agreement and Plan of Reorganization of
Pacifica with Stagecoach and the creation of each Fund as a new fund of
Stagecoach were approved by the Company's Board of Directors. On May 17, 1996,
the Agreement and Plan of Reorganization of Pacifica with the Company was
approved by Pacifica's Board of Trustees. As part of the recent reorganization
of Pacifica with Stagecoach (the "Reorganization"), each of the following
portfolios of Pacifica was reorganized as the specified Stagecoach Fund:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
PACIFICA FUNDS TRUST PORTFOLIO NAME STAGECOACH FUND NAME
-----------------------------------------------------------------------------------------
<S> <C>
Pacifica Arizona Tax-Exempt Fund Arizona Tax-Free Fund
-----------------------------------------------------------------------------------------
Pacifica Balanced Fund Balanced Fund
-----------------------------------------------------------------------------------------
Pacifica Equity Value Equity Value Fund
-----------------------------------------------------------------------------------------
Pacifica Intermediate Bond Fund Intermediate Bond Fund
-----------------------------------------------------------------------------------------
Pacifica National Tax-Exempt Fund National Tax-Free Fund
-----------------------------------------------------------------------------------------
Pacifica Oregon Tax-Exempt Fund Oregon Tax-Free Fund
-----------------------------------------------------------------------------------------
Pacifica Prime Money Market Fund Prime Money Market Mutual Fund
-----------------------------------------------------------------------------------------
Pacifica Treasury Money Market Fund Treasury Money Market Mutual Fund
-----------------------------------------------------------------------------------------
</TABLE>

1
<PAGE> 146
INVESTMENT RESTRICTIONS

The Intermediate Bond Fund and the Tax-Free Funds may not:

2. Purchase or sell real estate, except that each Fund may purchase
securities of issuers that deal in real estate and may purchase securities that
are secured by interests in real estate.

3. Purchase securities of companies for the purpose of exercising
control.

5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as a Fund might be deemed to be an
underwriter upon disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of obligations directly from the issuer thereof in accordance with
a Fund's investment objective, policies and limitations may be deemed to be
underwriting.

2
<PAGE> 147
The Intermediate Bond Fund may not:

4. Purchase securities on margin, make short sales of securities or
maintain a short position, except that (a) this investment limitation shall not
apply to the Fund's transactions in futures contracts and related options, and
(b) the Fund may obtain short-term credit as may be necessary for the clearance
of purchases and sales of portfolio securities.

The Tax-Free Funds may not:

3. Make loans, except that each Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies.

3
<PAGE> 148
The Oregon Tax-Free Fund may not:

The Arizona Tax-Free Fund may not:

1. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the issuer's
outstanding voting securities would be owned by the Fund, except that (a) up to
50% of the value of the Fund's total assets may be invested without regard to
these limitations provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is backed only by the assets and revenues of a
nongovernmental user, such nongovernmental user. In certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security shall not
be deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets.

4
<PAGE> 149
purchase to be invested in the securities of issuers conducting their principal
business activities in the same industry.

The National Tax-Free Fund may not:

1. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the issuer's
outstanding voting securities would be owned by the Fund, except that (a) up to
50% of the value of the Fund's total assets may be invested without regard to
these limitations provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is backed only by the assets and revenues of a
nongovernmental user, such nongovernmental user. In certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security shall not
be deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets.

The Balanced Fund and Equity Value Funds except as indicated, may
not:

1. Borrow money or pledge or mortgage its assets, except that a Fund
may borrow from banks up to 10% of the current value of its total net assets
for temporary or emergency purposes and those borrowings may be secured by the
pledge of not more than 15% of the current value of its total net assets (but
investments may not be purchased by a Fund while any such borrowings exist).

2. Make loans, except loans of portfolio securities and except that a
Fund may enter into repurchase agreements with respect to its portfolio
securities and may purchase the types of debt instruments described in the
prospectuses or the SAI.

3. Invest in companies for the purpose of exercising control or
management.

4. Knowingly purchase securities of other investment companies,
except (i) in connection with a merger, consolidation, acquisition, or
reorganization; and (ii) may invest up to 10% of their net assets in shares of
other investment companies.

5
<PAGE> 150
5. Invest in real property (including limited partnership interests),
commodities, commodity contracts, or oil, gas and other mineral resource,
exploration, development, lease or arbitrage transactions.

6. Acquire securities subject to restrictions on disposition imposed
by the Securities Act of 1933, if, immediately after and as a result of such
acquisition, the value of such restricted securities and all other illiquid
securities held by a Fund would exceed 10% of the value of the Fund's total
assets.

7. Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933.

8. Make loans, except that the Funds may purchase readily marketable
debt securities and invest in repurchase agreements and make loans of portfolio
securities. No Fund will invest in repurchase agreements maturing in more than
seven days (unless subject to a demand feature) if any such investment,
together with any illiquid securities (including securities which are subject
to legal or contractual restrictions on resale) held by a Fund, exceeds 10% of
the value of its total assets.

9. Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.

10. Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.

11. Mortgage, pledge, or hypothecate any of its assets, except as
described in Investment Restriction No. 2.

14. Write, purchase or sell puts, calls or combinations thereof,
except that the Funds may purchase or sell puts and calls as otherwise
described in the prospectus or SAI; however, no Fund will invest more than 5%
of its total assets in these classes of securities.

15. Invest more than 5% of the current value of its total assets in
the securities of companies that, including predecessors, have a record of less
than three years' continuous operation.

6
<PAGE> 151
The Prime Money Market Mutual and the Treasury Money Market Mutual
Funds may not:

5. Write put or call options.

7. Invest in companies for the purpose of exercising control.

9. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, acquisition of assets or
where otherwise permitted by the 1940 Act.

10. Lend its portfolio securities in excess of one-third of the value
of its total assets.

As a non-fundamental policy, any loans of portfolio securities will be
made according to guidelines established by the SEC and the Company's Board of
Directors, including maintenance of

7
<PAGE> 152
collateral of the borrower equal at all times to at least the current market
value of the securities loaned.

The Prime Money Market Mutual Fund may not:

The Treasury Money Market Mutual Fund may not:

1. Purchase or sell real estate.

2. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs.

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In addition, in accordance with current SEC regulations, the Money
Market Funds intend, as a non-fundamental policy, to limit their respective
investments in the securities of any single issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements collateralized by such securities) to not more than
5% of the value of their respective total assets at the time of purchase,
except for 25% of the value of their respective total assets which may be
invested in any one issuer for a period of up to three business days.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

The prospectuses discuss the investment objectives of the Funds and
the policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment policies and
portfolio strategies that the Funds may utilize, and certain risks attendant to
such investments, policies and strategies.

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U.S. Government Obligations. The Funds may invest in various types of
U.S. Government obligations with remaining maturities of up to one year. U.S.
Government obligations include securities issued or guaranteed as to principal
and interest by the U.S. Government and supported by the full faith and credit
of the U.S. Treasury. U.S. Treasury obligations differ mainly in the length
of their maturity. Treasury bills, the most frequently issued marketable
government securities, have a maturity of up to one year and are issued on a
discount basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or instrumentalities, including government-
sponsored enterprises. Some obligations of such 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 (including
government- sponsored enterprises) 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. The Funds may invest
in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Examples of the types of U.S. Government obligations that
may be held by the Funds include U.S. Treasury bonds, notes and bills and the
obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land
Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, Federal National Mortgage
Association, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, Federal Home Loan Mortgage
corporation, Federal Intermediate Credit Banks and Maritime Administration.

Repurchase Agreements. Each 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 which involve the
acquisition by a Fund of an underlying debt instrument, subject to the seller's
obligation to repurchase, and such Fund's obligation to resell, the instrument
at a fixed price usually not more than one week after its purchase. The Fund's
custodian has custody of, and holds in a segregated account, securities
acquired as collateral by a Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Fund. The Funds may enter into repurchase
agreements only with respect to securities of the type in which such Fund may
invest, including government securities and mortgage-related securities,
regardless of their remaining maturities, and requires that additional
securities be deposited with the custodian if the value of the securities
purchased should decrease below resale price. Wells Fargo Bank monitors on an

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ongoing basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. Certain costs may be incurred by a Fund in
connection with the sale of the underlying securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the
securities, disposition of the securities by a Fund may be delayed or limited.
While it does not presently appear possible to eliminate all risks from these
transactions (particularly the possibility of a decline in the market value of
the underlying securities, as well as delay and costs to a Fund in connection
with insolvency proceedings), it is the policy of each Fund to limit repurchase
agreements to selected creditworthy securities dealers or domestic banks or
other recognized financial institutions. Each Fund considers on an ongoing
basis the creditworthiness of the institutions with which it enters into
repurchase agreements.

Bank Obligations. Each Fund may invest in bank obligations, including
certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations of domestic banks, foreign subsidiaries of domestic
banks, foreign branches of domestic banks, and domestic and foreign branches of
foreign banks, domestic savings and loan associations and other banking
institutions. With respect to such securities issued by foreign branches of
domestic banks, foreign subsidiaries of domestic banks, and domestic and
foreign branches of foreign banks, a Fund may be subject to additional
investment risks that are different in some respects from those incurred by a
fund which invests only in debt obligations of U.S. domestic issuers. Such
risks include possible future political and economic developments, the possible
imposition of foreign withholding taxes on interest income payable on the
securities, the possible establishment of exchange controls or the adoption of
other foreign governmental restrictions which might adversely affect the
payment of principal and interest on these securities and the possible seizure
or nationalization of foreign deposits. In addition, foreign branches of U.S.
banks and foreign banks may be subject to less stringent reserve requirements
and to different accounting, auditing, reporting and recordkeeping standards
than those applicable to domestic branches of U.S. banks.

Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.

Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Time deposits which
may be held by a Fund will not benefit from insurance from the Bank Insurance
Fund or the Savings Association Insurance Fund administered by the Federal
Deposit Insurance Corporation. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the face amount of the instrument upon maturity. The other short-term
obligations may include uninsured, direct obligations, bearing fixed, floating-
or variable-interest rates.

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Commercial Paper. The Funds may invest in commercial paper. Commercial
paper includes short-term unsecured promissory notes, variable rate demand
notes and variable rate master demand notes issued by domestic and foreign bank
holding companies, corporations and financial institutions as well as similar
taxable instruments issued by government agencies and instrumentalities.

Investment Company Securities. Each Fund may invest in securities
issued by other open-end management investment companies which principally
invest in securities of the type in which such Fund invests. Under the 1940
Act, a Fund's investment in such securities currently is limited to, subject to
certain exceptions, (i) 3% of the total voting stock of any one investment
company, (ii) 5% of such Fund's net assets with respect to any one investment
company and (iii) 10% of such Fund's net assets in the aggregate. Investments
in the securities of other investment companies generally will involve
duplication of advisory fees and certain other expenses and the investment
adviser will 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.

Floating- and Variable-Rate Obligations. The Funds may purchase
floating- and variable-rate obligations as described in the prospectuses. Each
Fund may purchase floating- and variable-rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of thirteen months,
but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding thirteen months. Variable-rate demand notes
include master demand notes which are obligations that permit a Fund to invest
fluctuating amounts, which may change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The interest rates
on these notes fluctuate from time to time. The issuer of such obligations
ordinarily has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. The interest rate on a floating- rate demand obligation is based
on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Accordingly, where these obligations are
not secured by letters of credit or other credit support arrangements, the
Master Portfolio's right to redeem is dependent on the ability of the borrower
to pay principal and interest on demand. Such obligations frequently are not
rated by credit rating agencies and each Fund may invest in obligations which
are not so rated only if Wells Fargo Bank determines that at the time of
investment the obligations are of comparable quality to the other obligations
in which such Fund may invest. Wells Fargo Bank, on behalf of each Fund,
considers on an ongoing basis the creditworthiness of the issuers of the
floating- and variable-rate demand obligations in such Fund's portfolio. No
Fund will invest more than 10% of the value of its total net assets in
floating- or variable-rate demand obligations whose demand feature is not
exercisable within seven days. Such obligations may be treated as liquid,
provided that an

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active secondary market exists.

Floating and variable-rate demand instruments acquired by the Tax-Free
Funds may include participations in municipal obligations purchased from and
owned by financial institutions, primarily banks. Participation interests
provide these Funds with a specified undivided interest (up to 100%) in the
underlying obligation and the right to demand payment of the unpaid principal
balance plus accrued interest on the participation interest from the
institution upon a specified number of days' notice, not to exceed thirty days.
Each participation interest is backed by an irrevocable letter of credit or
guarantee of a bank that the adviser has determined meets the prescribed
quality standards for these Funds. The bank typically retains fees out of the
interest paid on the obligation for servicing the obligation, providing the
letter of credit and issuing the repurchase commitment.

Loans of Portfolio Securities. In accordance with the policies
described in their prospectuses, the Funds may lend their portfolio securities
to brokers, dealers and financial institutions, provided: (1) the loan is
secured continuously by collateral consisting of U.S. Government securities or
cash or letters of credit maintained on a daily marked-to-market basis in an
amount at least equal to the current market value of the securities loaned; (2)
the Funds may at any time call the loan and obtain the return of the securities
loaned within five business days; (3) the Funds will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value of
securities loaned will not at any time exceed 30% (one third, in the case of
the Prime Money Market Mutual Fund) of the total assets of a particular Fund.
The Treasury Money Market Mutual Fund does not currently intend to lend its
portfolio securities.

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Securities purchased on a when-issued or forward commitment basis and
certain other securities held in a Fund's investment portfolio are subject to
changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose the relevant Fund to risk
because they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or forward commitment basis can involve
the additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself. A segregated account of each Fund consisting of cash or U.S.
Government securities or other high quality liquid debt securities at least
equal at all times to the amount of the when-issued or forward commitments will
be established and maintained at the Funds' custodian bank. Purchasing
securities on a forward commitment basis when a Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of such
Fund's total net assets and its net asset value per share. In addition,
because a Fund will set aside cash and other high quality liquid debt
securities as described above the liquidity of the Fund's investment portfolio
may decrease as the proportion of securities in the Fund's portfolio purchased
on a when-issued or forward commitment basis increases.

There are risks inherent in the purchase of mortgage-backed
securities. For example, these securities are subject to a risk that default in
payment will occur on the underlying mortgages. In

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addition to default risk, these securities are subject to the risk that
prepayment on the underlying mortgages will occur earlier or later or at a
lessor or greater rate than expected. To the extent that adviser's assumptions
about prepayments are inaccurate, these securities may expose the Funds, to
significantly greater market risks than expected.

Asset-Backed Securities. To the extent described in the prospectuses,
the Funds may purchase asset-backed securities, which are securities backed by
installment contracts, credit-card receivables or other assets. Asset-backed
securities represent interests in "pools" of assets in which payments of both
interest and principal on the securities are made monthly, thus in effect
"passing through" monthly payments made by the individual borrowers on the
assets that underlie the securities, net of any fees paid to the issuer or
guarantor of the securities. The average life of asset- backed securities
varies with the maturities of the underlying instruments and is likely to be
substantially less than the original maturity of the assets underlying
the-securities as a result of prepayments. For this and other reasons, an
asset-backed security's stated maturity may be shortened, and the security's
total return may be difficult to predict precisely.

Municipal Obligations. Municipal obligations include debt obligations
issued by governmental entities to obtain funds for various public purposes,
including the construction of a wide range of public facilities, the refunding
of outstanding obligations, the payment of general operating expenses and the
extension of loans to public institutions and facilities.

The two principal classifications of municipal obligations that may be
held by a Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the issuer of the
facility being financed. a Fund's portfolio may also include "moral obligation"
securities, which are issued normally by special purpose public authorities. If
the issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality that created the issuer.

Private activity bonds are issued to obtain funds to provide privately
operated housing facilities, pollution control facilities, convention or trade
show facilities, mass transit, airport, port or parking facilities and certain
local facilities for water supply, gas, electricity or sewage or solid waste
disposal. State and local governments are authorized in most states to issue
private activity bonds for such purposes in order to encourage corporations to
locate within their communities. Private activity bonds are in most cases
revenue securities and are not payable from the unrestricted revenues of the
issuer. The credit quality of such bonds is usually directly related to the
credit

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standing of the corporate user of the facility involved. Private activity bonds
issued by or on behalf of public authorities to finance various privately
operated facilities are considered municipal obligations if the interest paid
thereon is exempt from federal income tax, but nevertheless, subject to federal
alternative minimum tax.

From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. For example, under federal tax legislation
enacted in 1986, interest on certain private activity bonds must be included in
an investor's alternative minimum taxable income, and corporate investors must
treat all tax-exempt interest as an item of tax preference. Moreover, with
respect to Oregon obligations and Arizona obligations, the Funds cannot predict
what legislation, if any, may be proposed in the state legislature regarding
the state income tax status of interest on such obligations, or which
proposals, if any, might be enacted. Such proposals, while pending or if
enacted, might materially and adversely affect the availability of municipal
obligations generally, or Oregon obligations and Arizona obligations,
specifically, for investment by a Fund and the liquidity and value of the
Fund's portfolio. In such an event, the Fund involved would re- evaluate its
investment objective and policies and consider possible changes in its
structure or possible dissolution.

Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds
nor Wells Fargo Bank will review the proceedings relating to the issuance of
municipal obligations or the bases for such opinions.

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Certain of the municipal obligations held by a Fund may be insured as
to the timely payment of principal and interest. The insurance policies usually
are obtained by the issuer of the municipal obligation at the time of its
original issuance. In the event that the issuer defaults on interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance does not protect against
market fluctuations caused by changes in interest rates and other factors. The
Tax-Free Funds may, from time to time, invest more than 25% of their assets in
municipal obligations covered by insurance policies.

Stand-By Commitments. Each Tax-Free Fund may acquire stand-by
commitments with respect to municipal obligations held by it. Under a stand-by
commitment, a dealer or bank agrees to purchase from a Fund, at the Fund's
option, specified municipal obligations at a specified price. The amount
payable to a Fund upon its exercise of a stand-by commitment is normally (i)
the Fund's acquisition cost of the municipal obligations (excluding any accrued
interest that the Fund paid on their acquisition), less any amortized market
premium plus any amortized market or original issue discount during the period
the Fund owned the securities, plus (ii) all interest accrued on the securities
since the last interest payment date during that period. Stand-by commitments
may be sold, transferred or assigned by a Fund only with the underlying
instrument.

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employed by the Funds. Stand-by commitments acquired by a Fund will be valued
at zero in determining net asset value.

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to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, or diplomatic developments which could affect
investments in those countries. Further, income received from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries.

A call option for a particular security gives the purchaser of the
option the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price at any time prior to the expiration of
the option, regardless of the market price of the security. The premium paid to
the writer is in consideration for undertaking the obligation under the option
contract. A put option for a particular security gives the purchaser the right
to sell the security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security.
Options on indices provide the holder with the right to make or receive a cash
settlement upon exercise of the option. With respect to options on indices, the
amount of the settlement equals the difference between the closing price of the
index at the time of exercise and the exercise price of the option expressed in
dollars, times a specified multiple.

The Funds will write call options only if they are "covered." In the
case of a call option on a security or currency, the option is "covered" if a
Fund owns the instrument underlying the call or has an absolute and immediate
right to acquire that instrument without additional cash consideration (or, if
additional cash consideration is required, cash, U.S. Government securities or
other liquid high grade debt obligations, in such amount are held in a
segregated account by the Fund's custodian) upon conversion or exchange of
other securities held by it. For a call option on an index, the option is
covered if a Fund maintains with its custodian a diversified portfolio of
securities comprising the index or liquid assets equal to the contract value. A
call option is also covered if a Fund holds a call on the same instrument or
index as the call written where the exercise price of the call held is (i)
equal to or less than the exercise price of the call written, or (ii) greater
than the exercise price of the call written provided the difference is
maintained by the Fund in liquid assets in a segregated account with its
custodian. The Funds will write put options only if they are "secured" by
liquid assets maintained in a segregated account by the Funds, custodian in an
amount not less than the exercise price of the option at all times during the
option period.

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different terms on such underlying instrument. The cost of such a liquidation
purchase plus transaction costs may be greater than the premium received upon
the original option, in which event the Fund will have incurred a loss in the
transaction. There is no assurance that a liquid secondary market will exist
for any particular option. An option writer, unable to effect a closing
purchase transaction, will not be able to sell the underlying instrument (in
the case of a covered call option) or liquidate the segregated account (in the
case of a secured put option) until the option expires or the optioned
instrument or currency is delivered upon exercise with the result that the
writer in such circumstances will be subject to the risk of market decline or
appreciation in the instrument during such period.

When a Fund purchases an option, the premium paid by it is recorded as
an asset of the Fund. When a Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by a Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of this asset or deferred credit will be
subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the current bid price. If an option
purchased by a Fund expires unexercised the Fund realizes a loss equal to the
premium paid. If a Fund enters into a closing sale transaction on an option
purchased by it, the Fund realizes a gain if the premium received by the Fund
on the closing transaction is more than the premium paid to purchase the
option, or a loss if it is less. If an option written by a Fund expires on the
stipulated expiration date or if a Fund enters into a closing purchase
transaction, it realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option is eliminated. If an option written by a
Fund is exercised, the proceeds of the sale are increased by the net premium
originally received and the Fund realizes a gain or loss.

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Stock Index Futures Contracts and Options on Stock Index Futures
Contracts (The Equity Value and Balanced Funds). A stock index futures contract
is an agreement in which one party agrees to deliver to the other an amount of
cash equal to a specific dollar amount multiplied by the difference between the
value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. As the aggregate market
value of the stocks in the index changes, the value of the index also changes.
In the event that the index level rises above the level at which the stock
index futures contract was sold, the seller of the stock index futures contract
realizes a loss determined by the difference between the two index levels at
the time of expiration of the stock index futures contract, and the purchaser
realizes a gain in that amount. In the event the index level falls below the
level at which the stock index futures contract was sold, the seller recognizes
a gain determined by the difference between the two index levels at the
expiration of the stock index futures contract, and the purchaser realizes a
loss. Stock index futures contracts expire on a fixed date, currently one to
seven months from the date of the contract, and are settled upon expiration of
the contract.

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Thus, any loss in the option transaction may be offset by an increase in the
value of the common stock portfolio to the extent changes in the index
correlate to changes in the value of that portfolio. The Funds may liquidate
the put options they have purchased by effecting a closing sale transactions
rather than exercising the option. This is accomplished by selling an option of
the same series as the option previously purchased. There is no guarantee that
the Funds will be able to effect the closing sale transaction. The Funds
realize a gain from a closing sale transaction if the price at which the
transaction is effected exceeds the premium paid to purchase the option and, if
less, the Funds realize a loss.

Borrowing and Reverse Repurchase Agreements. Each Fund intends to
limit its borrowings (including reverse repurchase agreements) during the
current fiscal year to not more than 10% of its net assets. At the time a Fund
enters into a reverse repurchase agreement (an agreement under which the Fund
sells portfolio securities and agrees to repurchase them at an agreed-upon date
and price), it will place in a segregated custodial account liquid assets such
as U.S. Government securities or other liquid high-grade debt securities having
a value equal to or greater than the repurchase price (including accrued
interest) and will subsequently monitor the account to ensure that such value
is maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by a Fund may decline below the price at which the
Fund is obligated to repurchase the securities. Reverse repurchase agreements
are considered to be borrowings under the 1940 Act.

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Rule 144A. It is possible that unregistered securities, purchased by
the Prime Money Market Fund in reliance upon Rule 144A under the Securities Act
of 1933, could have the effect of increasing the level of the Fund's
illiquidity to the extent that qualified institutional buyers become, for a
period, uninterested in purchasing these securities.

SPECIAL CONSIDERATIONS AFFECTING ARIZONA MUNICIPAL OBLIGATIONS

Under its constitution, the State of Arizona is not permitted to issue
general obligation bonds secured by the full faith and credit of the State.
However, certain agencies and instrumentalities of the State are authorized to
issue bonds secured by revenues from specific projects and activities. The
State enters into certain lease transactions that are subject to annual renewal
at the option of the State. Local governmental units in the State are also
authorized to incur indebtedness. The major source of financing for such local
government indebtedness is an ad valorem property tax. In addition, in order
to finance public projects, local governments in the State can issue revenue
bonds payable from the revenues of a utility or enterprise or from the proceeds
of an excise tax, or assessment bonds payable from special assessments. Arizona
local governments have also financed public projects through leases which are
subject to annual appropriation at the option of the local government.

Arizona is required by law to maintain a balanced budget. To achieve
this objective, the State has, at various times in the past, utilized a
combination of spending reductions or reductions in the rate of growth in
spending, and tax increases. In recent years, the State's fiscal situation has
improved even while tax reduction measures have been enacted each year since
1992. In 1992, Arizona voters passed a measure that requires a two-thirds vote
of the legislature to increase State revenue. Accordingly, it will be more
difficult to reverse tax reductions, which may adversely affect State fund
balances and fiscal conditions over time.

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Arizona state government general fund revenue growth in fiscal year
1996 is forecast to increase just 2.3%, although growth would be projected at
9.1% but for legislative changes, principally an income tax reduction measure
enacted in 1995. The 7.1% adjusted projected increase in sales tax revenue
reflects continued strong economic growth in the state. With revenue growth
outpacing increased expenditures, the state general fund is projected to end
fiscal year 1996 with a total general fund balance of approximately $493
million. The amount of this balance is approximately 11% of total general fund
expenditures for fiscal year 1996. Included in the total balance is a general
fund ending balance of approximately $265 million, and a budget stabilization
("rainy day") fund balance of approximately $228 million.

The fiscal year 1997 budget adopted by the legislature assumes that
the total general fund balance carried forward from fiscal year 1996 will be
drawn down by approximately $265 million during the course of fiscal year 1997.
Based on this assumption, the total general fund balance at the end of fiscal
year 1997 should be lower than for fiscal year 1996.

SPECIAL CONSIDERATIONS AFFECTING OREGON MUNICIPAL OBLIGATIONS

The concentration of the Oregon Tax-Free Fund in Oregon Obligations
raises additional considerations for investors in that portfolio, as discussed
below.

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State Bonds and Revenues

As of March 1, 1996, $3.74 billion in general obligation bonds issued
by the State of Oregon and its agencies and instrumentalities were outstanding,
including $91.9 million in general obligation bonds supported by the budget for
the State's general fund and $3.65 billion of self-supporting general
obligation bonds. The State's self-supporting general obligation bonds include
$2.90 billion of State veteran's bonds, which, in the event of poor economic
conditions resulting in an increased number of mortgage defaults, could cease
to be self-supporting. All of the existing and outstanding general obligation
bonds of the State have been issued under specific State constitutional
provisions that authorize the issuance of such bonds and provide authority for
ad valorem taxation to pay the principal of and interest on such bonds. With
the exception of the veteran's bonds, for which no more than two mills on each
dollar valuation may be levied to pay principal and interest, the authority of
the State to tax property for the payment of its general obligation bonds is
unlimited. Since at least 1950, the State has not imposed ad valorem tax for
the payment of any of its obligations because other revenues, including those
generated by the self-supporting bonds, have been sufficient.

Oregon does not have a sales tax. As a result, State tax revenues are
particularly sensitive to economic recessions. The principal sources of State
tax revenues are personal income and corporate income taxes. As of March 1,
1996, approximately 96.7% of the State's revenues for the 1995-97 biennium were
projected to come from combined income taxes, insurance taxes, gift and
inheritance taxes, and cigarette and tobacco taxes. Since 1983 State revenues
have improved substantially, and in recent years the State has granted tax
refunds because of budget surpluses, as required by statute. The State's March
1996 economic and revenue forecast predicts that State General Fund revenues
will exceed the legislatively approved budget forecast by approximately $127.7
million (or 1.8%).

The Economy

25
<PAGE> 170
The Oregon economy appears to have ample momentum to continue growing
through 1997, though the pace is likely to be slower than the previous two-year
period. Expansion of the State's semiconductor industry and its suppliers will
likely remain the key engine driving growth in the State. Rising wages and a
continuing flow of new residents are expected to generate jobs in the State's
service and trade sectors. The primary factors likely to slow growth over the
next two years are dwindling supply of skilled labor and rising housing costs.

Recent Environmental Developments

Recent Developments Affecting Government Revenues.

26
<PAGE> 171
The limitations of Ballot Measure 5 do not apply to taxes imposed to
pay the principal of and interest on bonded indebtedness authorized by a
specific provision of the State Constitution. Therefore, the ability of the
State to levy taxes to service its general obligation bonds is not subject to
the limit. In addition, because the State currently receives its revenues from
sources other than property taxes, Ballot Measure 5 has not directly affected
State revenues.

27
<PAGE> 172
Any person may file a proposed initiative with the Oregon Secretary of
State's office. The Oregon Attorney General is required by law to draft a
proposed ballot title for the initiative, and interested parties may submit
comments on the legal sufficiency of the proposed ballot title and on whether
the proposed initiative complies with a "one subject only" rule for initiative
measures. After considering any public comments, the Attorney General must
either certify or revise the draft ballot title. In general, any elector who
timely submitted written comments on the draft ballot title may petition the
Oregon Supreme Court seeking a revision of the certified ballot title.

28
<PAGE> 173
a large number of its shares, there is a risk that the large sale itself would
adversely affect the value of the Oregon Tax-Free Fund's portfolio.

MANAGEMENT

Thomas S. Goho, 54 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.
</TABLE>

29
<PAGE> 174

<TABLE>
<S> <C> <C>
*Zoe Ann Hines, 47 Director Senior Vice President
of Stephens and
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource
Management.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

30
<PAGE> 175
<TABLE>
<S> <C> <C>
Richard H. Blank, Jr., 40 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary and Director of Stephens
Treasurer Sports Management
Inc.; and Director of
Capo Inc.
</TABLE>

COMPENSATION TABLE
<TABLE>
<CAPTION>
For the Year Ended December 31, 1995
------------------------------------

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>

31
<PAGE> 176
and Managed Series Investment Trust, each of which is a registered open-end
management investment company and each of which, prior to January 1, 1996 and
the reorganization of WFNIA, was considered to be in the same "fund complex,"
as such term is defined in Form N-1A under the 1940 Act, as the Company.
Effective January 1, 1996, MasterWorks Funds, Inc., Master Investment
Portfolio, and Managed Series Investment Trust are considered to be members of
the same fund complex and are no longer part of the same fund complex as
Stagecoach Funds, Inc., Overland Express Funds, Inc., Stagecoach Trust, Life &
Annuity Trust and Master Investment Trust. The Directors are compensated by
other companies and trusts within the fund complex for their services as
directors/trustees to such companies 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 an advisory contract for each Fund under which Wells Fargo Bank has
agreed to furnish investment guidance and policy direction in connection with
the daily portfolio management of the Fund. On behalf of each Fund, the
Company's Board of Directors approved the advisory contracts with Wells Fargo
Bank on April 25, 1996, for an initial two-year period. Pursuant to the
advisory contracts, Wells Fargo Bank also has agreed to furnish to the Board of
Directors periodic reports on the investment strategy and performance of each
Fund.

<TABLE>
<CAPTION>
Annual Rate
Fund Name (as percentage of net assets)
--------- -----------------------------
<S> <C>
o Arizona Tax-Free 0.50%
o Balanced 0.60%
o Equity Value 0.50%
o Intermediate Bond 0.50%
o National Tax-Free 0.50%
o Oregon Tax-Free 0.50%
o Prime Money Market Mutual 0.25%
o Treasury Money Market Mutual 0.25%
</TABLE>

The advisory contracts continue in effect for more than two years
provided the continuance is approved annually (i) by the holders of a majority
of a Fund's outstanding voting

32
<PAGE> 177
securities or (ii) by the Company's Board of Directors and by a majority of
the Directors of the Company who are not parties to the advisory contracts 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.

Prior to the Reorganization, Wells Fargo Investment Management, Inc.
("WFIM") and its predecessor, First Interstate Capital Management, Inc.
("FICM") served as adviser to the predecessor portfolios of Pacifica. WFIM is
located at 7501 E. McCormick Parkway, Scottsdale, Arizona 85258. For the
six-month period beginning October 1, 1995 and ending March 31, 1996, WFIM/FICM
were entitled to receive, and waived or reimbursed advisory fees paid by the
predecessor Funds as follows:

Investment Advisory Fees

Fees Waived and
Fees Earned Expenses Reimbursed
Six-Month Period Six-Month Period Ended
FUND Ended March 31, 1996 Ended March 31, 1996
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Arizona Tax-Free $ 0 $ 61,642
Balanced $ 390,798 $ 4,608
Equity Value $ 700,233 $ 0
Intermediate Bond $ 136,871 $ 39,513
National Tax-Free $ 0 $ 35,773
Oregon Tax-Free $ 64,479 $ 57,377
Prime Money Market Mutual $ 812,609 $ 916,740
Treasury Money Market Mutual $1,136,476 $1,132,651
</TABLE>

Prior to October 1, 1995, First Interstate Bank of Oregon, N.A. and
First Interstate Bank of Washington, N.A. served as co-advisers to the
predecessor portfolios of the National Tax-Free Fund; First Interstate Bank of
Oregon, N.A. served as adviser to the predecessors of the Intermediate Bond
Fund and Oregon Tax-Free Fund; and First Interstate Bank of Arizona, N.A.
served as adviser to the predecessor of the Arizona Tax-Free Fund. For the
periods ended September 30, 1995, May 31, 1995 and May 31, 1994, the prior
advisers for these Funds were entitled to receive advisory fees from the Funds
at the same annual rates as those that were in effect for WFIM. For these
periods, the prior advisers were entitled to receive the following amounts in
advisory fees:

33
<PAGE> 178
Investment Advisory Fees

<TABLE>
<CAPTION>
Period Ended
September 30, Period Ended Period Ended
Fund 1995* May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $41,159 $124,904 $128,905
Intermediate Bond $94,698 $275,948 $318,000
National Tax-Free $24,173 $ 67,845 $ 57,059
Oregon Tax-Free $84,999 $256,430 $269,574
</TABLE>

* The Funds changed their fiscal year end from May 31 to September 30.

Investment Advisory Fees Waived
and Expenses Reimbursed by Adviser

<TABLE>
<CAPTION>
Period Ended
September 30, Period Ended Period Ended
Fund 1995* May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $66,373 $166,803 $172,383
Intermediate Bond $ 0 $ 0 $ 0
National Tax-Free $68,667 $145,244 $141,590
Oregon Tax-Free $43,995 $ 84,770 $104,948

</TABLE>

* The Funds changed their fiscal year end from May 31 to September 30.

Prior to March 18, 1994, the adviser for the Balanced Fund and Equity
Value Fund was San Diego Financial Capital Management, Inc. ("San Diego
Financial"), which was a wholly owned subsidiary of San Diego Trust & Savings
Bank ("San Diego Trust"), which in turn was a wholly owned subsidiary of San
Diego Financial Corporation ("SDFC"). On that date, SDFC merged into First
Interstate Bancorp and San Diego Trust merged into First Interstate Bank of
California ("FICAL"). As a result of these transactions, San Diego Financial
became an indirect wholly-owned subsidiary of FICAL. On January 12, 1995, San
Diego Financial merged into First Interstate Investment Services, Inc., a
direct wholly-owned subsidiary of FICAL, which has since changed its name to
First Interstate Capital Management, Inc.

34
<PAGE> 179
During the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993, the adviser (and prior adviser, as the case may be) was
entitled to receive advisory fees from the Balanced and Equity Value Funds at
the same annual rates as those currently in effect. For such fiscal years, the
adviser (and prior adviser, as the case may be) were entitled to receive the
following amounts in Advisory fees:

Investment Advisory Fees

During the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993, the adviser (or prior adviser, as the case may be)
waived advisory fees and reimbursed expenses for the Balanced and Equity Value
Funds in the following amounts:

Investment Advisory Fees Waived
and Expenses Reimbursed by Adviser

Investment Advisory Fees Paid*

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Mar. 31, 1994 Mar. 31, 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Money Market Mutual $ 693,315 $330,715 $737,811 $640,620
Treasury Money Market Mutual $1,160,424 $454,029 $900,919 $629,121
</TABLE>

35
<PAGE> 180
Administrator and Distributor. The Company has retained Stephens as
administrator and distributor on behalf of each Fund. Under the Administration
Agreement between Stephens and the Company on behalf of each Fund, Stephens
agreed to provide as administrative services, among other things: (i) general
supervision of the operation of a Fund, including coordination of the services
performed by a Fund's investment adviser, transfer and dividend disbursing
agent, custodian, shareholder servicing agent(s), independent public
accountants 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 a 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 a Fund together with those ordinary clerical and bookkeeping
services that are not furnished by Wells Fargo Bank. Stephens also pays the
compensation of the Company's Directors, Officers and employees who are
affiliated with Stephens. The Administration Agreement and the Amended
Distribution Agreement were approved by the Company's Board of Directors on
April 25, 1996.

Prior to April 1, 1996, Furman Selz provided management and
administrative services necessary for the operation of the Funds, pursuant to
an Administrative Services Contract. For these services, Furman Selz was
entitled to receive a fee, payable monthly, at the annual rate of 0.15% of the
average daily net assets of the predecessors of all Funds except the Prime
Money Market Mutual and Treasury Money Market Mutual Funds, which were
administered by the Dreyfus Corporation at the annual rate of 0.10% of each
Fund's average daily net assets. The following table reflects the
administration fees to which the respective Administrators of the predecessors
of the following Funds were entitled, and the amounts of fee waivers, during
the indicated period:

Administration Fees

<TABLE>
<CAPTION>
Fees Earned Fees Waived
Period Ended Period Ended
FUND March 31, 1996 Ended March 31, 1996
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Arizona Tax-Free $ 15,157 $ 3,340
Balanced $ 97,699 $16,342
Equity Value $175,058 $26,795
Intermediate Bond $ 39,296 $ 6,698
National Tax-Free $ 9,048 $ 1,684
Oregon Tax-Free $ 30,839 $ 5,718
Prime Money Market Mutual $677,174 $ 0
Treasury Money Market Mutual $947,063 $ 0
</TABLE>

Prior to October 1, 1995, ALPS served as the administrator for the
Arizona Tax-Free, Intermediate Bond, National Tax-Free and Oregon Tax-Free
Funds. For its administration services,

36
<PAGE> 181
ALPS was entitled to receive the following amounts for the fiscal periods ended
September 30, 1995, May 31, 1995 and May 31, 1994:

Administration Fees

<TABLE>
<CAPTION>
Period Ended
September 30, Year Ended Year Ended
FUND 1995* May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $4,116 $12,490 $12,890
Intermediate Bond $9,470 $27,595 $31,800
National Tax-Free $2,417 $ 6,785 $ 5,706
Oregon Tax-Free $8,500 $25,643 $26,957
</TABLE>

* The Funds changed their fiscal year end from May 31 to September 30.

Administration Fees Waived

<TABLE>
<CAPTION>
Period Ended
September 30, Year Ended Year Ended
FUND 1995* May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $0 $ 0 $ 0
Intermediate Bond $0 $ 0 $ 0
National Tax-Free $0 $2,018 $4,210
Oregon Tax-Free $0 $ 0 $ 0
</TABLE>

* The Funds changed their fiscal year end from May 31 to September 30.

During the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993, Furman Selz was entitled to receive administration
services fees from the Balanced and Equity Value Funds in the following
amounts:

Administration Fees

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced $193,283 $227,896 $167,907
Equity Value $330,957 $317,992 $233,834
</TABLE>

37
<PAGE> 182
For the fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993, Furman Selz waived administration fees for the Balanced and
Equity Value Funds in the following amounts:

Administration Fees Waived

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced $19,328 $22,808 $21,652
Equity Value $33,096 $31,972 $16,972
</TABLE>

Administration Fees Paid

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Mar. 31, 1994 Mar. 31, 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Money Market Mutual $577,763 $275,596 $614,901 $533,850
Treasury Money Market Mutual $921,886 $347,499 $690,137 $524,268,
</TABLE>

38
<PAGE> 183
limitations are 2-1/2 percent of the first $30 million of a Fund's average net
assets, 2 percent of the next $70 million and 1-1/2 percent of a Fund's
remaining average net assets.

Shareholder Servicing Agent. As discussed in each Fund's prospectus
under the heading "Shareholder Servicing Agent," the Funds approved Servicing
Plans and have entered into related shareholder servicing agreements with
financial institutions, including Wells Fargo Bank. For providing these
services, a Servicing Agent is entitled to a fee from the applicable Fund, not
to exceed 0.25%, on an annualized basis, of the average daily net assets of the
class of shares owned of record or beneficially by the customers of the
Servicing Agent during the period for which payment is being made. The
Servicing Plans and related shareholder servicing agreements were approved by
the Company's Board of Directors on April 25, 1996 and provide that a Fund
shall not be obligated to make any payments under such Plans or related
Agreements that exceed the maximum amounts payable under Article III, Section
26 of the Rules of Fair Practice of the National Association of Securities
Dealers, Inc (NASD).

For the six months ended March 31, 1996, and under a similar service
agreement, payments have been made to First Intestate Bancorp for the following
funds: $4,555 for the Arizona Tax-Free Fund, $41,210 for the Balanced Fund,
$52,636 for the Equity Value Fund, $759 for the National Tax-Free Fund and
$19,146 for the Oregon Tax-Free Fund. For the same period, and under similar
service agreements with certain institutions, including affiliates of FICM,
payments have been made to various institutions in the amounts of $1,055,708
for the Prime Money Market Mutual Fund of which $637,228 was waived, and
$1,326,718 for the Treasury Money Market Mutual Fund of which $1,040,940 was
waived.

For its services as transfer and dividend disbursing agent for the
Funds, Wells Fargo Bank is entitled to receive monthly payments at the annual
rate of 0.07% of the average daily net assets of the Institutional Class
shares of each Fund, except that with respect to the Prime and Treasury Money
Market Mutual Funds, Wells Fargo is entitled to receive monthly payments at the
annual rate of 0.02% of the average daily net assets of each such Fund's
Institutional Class Shares.

FICAL, located at 707 Wilshire Blvd., Los Angeles, California 90017,
acted as custodian of the predecessor portfolios of Pacifica, but played no
role in making decisions as to the purchase or

39
<PAGE> 184
sale of portfolio securities for the predecessor portfolios. FICAL was entitled
to receive a fee from Pacifica, computed daily and payable monthly, at the
annual rate of 0.021% of the first $5 billion in aggregate average daily net
assets of the Funds; 0.0175% of the next $5 billion in aggregate average daily
net assets of the Funds; and 0.015% of the aggregate average daily net assets
of the Funds in excess of $10 billion.

For the six months ended March 31, 1996, the custodian fees to FICAL
have amounted to $2,476 for the Arizona Tax-Free Fund, $13,458 for the Balanced
Fund, $27,023 for the Equity Value Fund, $5,533 for the Intermediate Bond Fund,
$0 for the National Tax-Free Fund (the Fund earned credits on its balances held
by FICAL in an amount sufficient to reduce FICAL's custodian fee to zero),
$5,505 for the Oregon Tax-Free Fund, $145,468 for the Prime Money Market Mutual
Fund and $206,288 for the Treasury Money Market Mutual Fund.

SERVICING PLANS

As indicated in each Fund's prospectus, the Company's Board of
Directors, on behalf of each Fund (except for the Prime and Treasury Money
Market Mutual Funds), adopted a Servicing Plan ("Servicing Plan") and related
forms of Shareholder Servicing Agreements on April 25, 1996, with respect to
each class of the Funds' shares. The Board of Directors included a majority of
the Directors who were not "interested persons" (as defined in the Act) of each
Fund and who had no direct or indirect financial interest in the operation of
the Servicing Plan or in any agreement related to the Servicing Plan (the
"Servicing Plan Non-Interested Directors").

Under the Servicing Plan and pursuant to the shareholder servicing
agreements for the Institutional Class shares, each Fund may pay one or more
servicing agents, as compensation for performing certain services, a fee at an
annual rate of up to 0.25% of the average daily net assets of the Fund's
Institutional Class shares attributable to the servicing agent's customers.
The actual fee payable to servicing agents is determined, within such limits,
from time to time by mutual agreement between the Company and each servicing
agent and will not exceed the maximum service fees payable by mutual funds sold
by members of the NASD under the NASD Rules of Fair Practice.

40
<PAGE> 185
Each Servicing Plan requires that the administrator shall provide to
the Directors, and the Directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Servicing
Plan.

PERFORMANCE CALCULATIONS

The following information supplements and should be read in
conjunction with the sections in each prospectus entitled "Determination of Net
Asset Value" and "Performance Data."

As indicated in each prospectus, the Funds may advertise certain total
return information computed in the manner described in the prospectus. As and
to the extent required by the SEC, an average annual compound rate of return
("T") will be computed by using the redeemable value at the end of a specified
period ("ERV") of a hypothetical initial investment ("P") over a period of
years ("n") according to the following formula: P(1+T)n = ERV. In addition,
as indicated in each prospectus, each Fund also may, at times, calculate total
return based on net asset value per share (rather than the public offering
price), in which case the figures would not reflect the effect of any sales
charges that would have been paid by an investor, or based on the assumption
that a sales charge other than the maximum sales charge (reflecting a Volume
Discount) was assessed, provided that total return data derived pursuant to the
calculation described above also are presented.

The Funds may, from time to time, include their yields, tax equivalent
yields and average annual total returns in advertisements or reports to
shareholders or prospective investors. During the periods shown below, the
predecessor Funds of the Equity Value, Balanced, Intermediate Bond and Tax-Free
Funds offered one class of shares with a sales charge to both retail and
institutional investors.

Current yield for the Money Market Funds is based on the change in the
value of a hypothetical investment (exclusive of capital changes) over a
particular seven-day period, less a pro-rata share of each Fund's expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
"Effective yield" for the Money Market Funds assumes that all dividends
received during an annual period have been reinvested. Calculation of
"effective yield" begins with the same "base period return" used in the
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:

Effective Yield = [(Base Period Return +1)365/7]-1.

For the seven-day period ended September 30, 1995, the Prime Money
Market Fund's yield and effective yield on Institutional Shares were 5.67% and
5.83%, respectively.

For the seven-day period ended September 30, 1995, the Treasury Money
Market Mutual Fund's yield and effective yield on Institutional Shares were
5.52% and 5.66%, respectively.

41
<PAGE> 186
During this seven-day period, the Investment Adviser and Service
Organizations waived portions of their fees amounting to 0.43% of the average
daily net assets of the Prime Money Market Mutual Fund for Institutional
Shares, and 0.43% of the average daily net assets of the Treasury Money Market
Mutual Fund for Institutional Shares.

With respect to the Prime Money Market Mutual Fund, had these expenses
not been waived, the yield and effective yield for the same period would have
been 5.24% and 5.40%, respectively, for Institutional Shares.

With respect to the Treasury Money Market Mutual Fund, had these
expenses not been waived, the yield and effective yield for the same period
would have been 5.09% and 5.23% respectively, for Institutional Shares.

Quotations of yield for the Intermediate Bond Fund and the Tax-Free
Funds is based on the investment income per share earned during a particular
30-day period, less expenses accrued during a period ("net investment income")
and is computed by dividing net investment income by the maximum offering price
per share on the last day of the period, according to the following formula:

6
YIELD - 2[(a - b + 1) -1]
-----
cd

where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period.

For the 30-day period ended September 30, 1995, the yields of the
predecessor portfolios of the Funds listed below were as follows:

<TABLE>
<CAPTION>
FUND 30-DAY YIELD
- -----------------------------------------------------------------------------
<S> <C>
Intermediate Bond Fund* 5.61%
Oregon Tax-Free Fund* 5.04%
Arizona Tax-Free Fund* 4.37%
National Tax-Free Fund* 4.37%
</TABLE>

- ---------------
* Prior to October 1, 1995, these portfolios only offered a single class
of shares to both retail and institutional shareholders.

42
<PAGE> 187
Quotations of tax-equivalent yield for a Tax-Free Fund is calculated
according to the following formula:

TAX EQUIVALENT YIELD = ( E ) + t
-----
1 - p

E = Tax-exempt yield
p = stated income tax rate
t = taxable yield

For the 30-day period ended September 30, 1995, the tax-equivalent
yield of the predecessor portfolios of the Funds listed below were as follows:

<TABLE>
<CAPTION>
FUND TAX-EQUIVALENT YIELD
- -------------------------------------------------------------------------------------------------
<S> <C>
Oregon Tax-Free Fund* 8.00%**
Arizona Tax-Free Fund* 6.52%**
National Tax-Free Fund* 6.26%**
</TABLE>

- ----------------------

* Prior to October 1, 1995, these portfolios only offered a single class
of shares to both retail and institutional shareholders.

Quotations of average annual total return are expressed in terms of
the average annual compounded rate of return of a hypothetical investment in a
Fund over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:

P (1 + T)n = ERV

(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures reflect the deduction of the maximum applicable sales charge and
a proportional share of Fund expenses (net of certain reimbursed expenses) on
an annual basis and assume that all dividends and distributions are reinvested
at net asset value.

For the fiscal year ended September 30, 1995, the average annual total
returns of the predecessor portfolios of the Funds listed below were as
follows:

43
<PAGE> 188
<TABLE>
<CAPTION>
Commencement of
Year Ended Five Years Ended Operations to
9/30/95 9/30/95 9/30/95*
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermediate Bond Fund** 6.93% 7.81% 8.06%
Oregon Tax-Free Fund** 5.01% 6.71% 6.69%
Arizona Tax-Free Fund** 4.98% N/A 5.84%
National Tax-Free Fund** 5.55% N/A 3.91%
- ---------------------
</TABLE>
* The Arizona Tax-Free and National Tax-Free Funds commenced operations
on March 2, 1992 and January 15, 1993, respectively. The other Funds
listed above commenced operations on June 1, 1988.

** Prior to October 1, 1995, each Fund offered one class of shares to
both retail and institutional shareholders.

For the fiscal year ended September 30, 1995, the average annual total
returns of the predecessor portfolios of the Funds listed below were as
follows:

<TABLE>
<CAPTION>
Commencement of
Year Ended Five Years Ended Operations to
9/30/95 9/30/95 9/30/95*
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund 11.36% 15.79% 11.44%
Balanced Fund 5.64% 11.26% 9.63%
- ---------------------
</TABLE>
* Each Fund commenced operations on July 2, 1990.

44
<PAGE> 189
the World Gold Council), Bank Averages (which is 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 Salomon One Year Treasury
Benchmark Index, the Consumer Price Index (as published by the U.S. Bureau of
Labor Statistics), Ten Year U.S. Government Bond Average, S&P's Corporate Bond
Yield Averages, Schabacter Investment Management Indices, Salomon Brothers High
Grade Bond Index, Lehman Brothers Long-Term High Quality Government/Corporate
Bond Index, other managed or unmanaged indices or performance data of bonds,
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.

45
<PAGE> 190
The Company also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as S&P or Moody's. Such rating
would assess the creditworthiness of the investments held by a Fund. The
assigned rating would not be a recommendation to purchase, sell or hold any
class of a Fund's shares since the rating would not comment on the market price
of a Fund's shares or the suitability of a Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating to a Fund or its investments. The Company may compare a Fund's
performance with other investments that are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare a Fund's past
performance with other rated investments.

The Company may also disclose in advertising and other types of sales
literature the assets and categories of assets under management by the
Company's investment adviser and the total amount of assets under management by
Wells Fargo Investment Management Group ("IMG") or the amount of assets and
mutual fund assets managed by Wells Fargo Bank. As of December 31, 1995, IMG
had $30.1 billion in assets under management. As of June 30, 1996, Wells Fargo
Bank and its affiliates provided investment Advisory services for approximately
$56 billion of assets of individuals, trusts, estates and institutions and $17
billion of mutual fund assets.

46
<PAGE> 191
DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the prospectus section under "Purchase of Shares." Net asset
value per share for a Fund or a class of shares of a non-money market Fund is
determined by the Funds' Custodian on each day the Exchange is open for trading
as of the close of regular trading on the Exchange, which is currently 4:00
p.m. New York time.

Securities of a Fund for which market quotations are available are
valued at latest prices. Any security for which the primary market is an
exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the latest bid price quoted on
such day. 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. The assets of a Fund
other than money market instruments maturing in 60 days or less are valued at
latest quoted bid prices. Prices may be furnished by a reputable independent
pricing service approved by the Company's 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 a Fund for which current market
quotations are not readily available are valued at fair value as determined in
good faith by the Company's Board of Directors and in accordance with
procedures adopted by the Directors.

Expenses and fees, including Advisory fees, are accrued daily and are
taken into account for the purpose of determining the net asset value of a
Fund's shares.

Net asset value per share for a Fund or a class of shares of a Money
Market Fund is determined as of 9:00 a.m. and 1:00 p.m. Pacific time on each
Business Day as described in the prospectus.

47
<PAGE> 192
The valuation of each Money Market Funds' instruments, based upon
their amortized cost and the concomitant maintenance by each Fund of a net
asset value of $1.00, is permitted in accordance with Rule 2a-7 under the Act,
pursuant to which a Money Market Fund must adhere to certain conditions. Each
Money Market Fund must maintain a dollar- weighted average maturity of 90 days
or less, purchase only instruments having remaining maturities of 397 days
(thirteen months) or less, and invest only in securities that are determined to
present minimal credit risks pursuant to guidelines adopted by the Directors or
the adviser under guidelines approved by the Directors. Instruments having
variable or floating interest rates or demand features may be deemed to have
remaining maturities as follows: (a) a government security with a variable rate
of interest readjusted no less frequently than every thirteen months may be
deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (b) an instrument with a variable rate of
interest, the principal amount of which is scheduled on the face of the
instrument to be paid in thirteen months or less, may be deemed to have a
maturity equal to the period remaining until the next readjustment of the
interest rate; (c) an instrument with a variable rate of interest that is
subject to a demand feature may be deemed to have a maturity equal to the
longer of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand; (d) an instrument with a floating rate of interest that is subject to a
demand feature may be deemed to have a maturity equal to the period remaining
until the principal amount can be recovered through demand; and (e) a
repurchase agreement may be deemed to have a maturity equal to the period
remaining until the date on which the repurchase of the underlying securities
is scheduled to occur or, where no date is specified but the agreement is
subject to demand, the notice period applicable to a demand for the repurchase
of the securities.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

48
<PAGE> 193
Payment for shares may, in the discretion of the adviser, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Funds will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by a
Fund and that such Fund receives satisfactory assurances that (i) it will have
good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

PORTFOLIO TRANSACTIONS

The Arizona, National and Oregon Tax-Free 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.

49
<PAGE> 194

<PAGE> 195
Brokerage Commissions. During the fiscal years ended September 30,
1995, May 31, 1995 and May 31, 1994, the predecessor portfolios of the
Intermediate Bond Fund and the Tax-Free Funds did not pay any brokerage
commissions, because all of their portfolio transactions occurred in the
over-the-counter market.

During the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993, the predecessor portfolios of the Equity Value and
Balanced Funds paid the following amounts in brokerage commissions:

Brokerage Commissions Paid

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund $619,124 $247,218 $368,789
Balanced Fund $197,751 $104,835 $149,294
</TABLE>

During the time periods stated above, no brokerage commissions were
paid by the Funds to an affiliated broker.

Securities of Regular Broker/Dealers. The Funds may from time to time
purchase securities issued by their regular broker/dealers. Furman Selz, the
administrator to the predecessor portfolios, did not report in their N-SAR for
the fiscal year ended September 30, 1995, that any of the Funds held
securities of their regular broker/dealers or of their parents that derive more
than 15% of gross revenues from securities-related activities.

Portfolio Turnover Rate. Changes may be made in the portfolios
consistent with the investment objectives and policies of the Funds whenever
such changes are believed to be in the

51
<PAGE> 196
best interests of the Funds and their shareholders. The portfolio turnover rate
is calculated by dividing the lesser of purchases or sales of portfolio
securities by the average monthly value of the Fund's portfolio securities. For
purposes of this calculation, portfolio securities exclude all securities
having a maturity when purchased of one year or less.

TAXES

The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the SAI includes additional information
concerning taxes.

Qualification as a "regulated investment company" under the Code
requires, among other things, that (a) at least 90% of each 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 stock, securities or
foreign currencies or other income (including but not limited to gains from
options, futures, or forward contracts) derived with respect to each Fund's
business of investing in such stock, securities or currencies; (b) each Fund
generally derives less than 30% of its gross income from the sale or other
disposition of certain assets held for less than 3 months, such as (i) stock or
securities; (ii) options, futures, and forward contracts (other than those on
foreign currencies), and (iii) foreign currencies (including options, futures,
and forward contracts on such currencies) not directly related to the Fund's
principal business of investing in stock or securities (or options and futures
with respect to stocks or securities)); and (c) each Fund diversifies its
holdings so that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of each Fund's assets is represented by cash, U.S.
Government obligations, the securities of other regulated investment companies,
and other securities limited in respect of any one issuer to an amount not
greater than 5% of each Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the
Fund's total assets is invested in the securities of any one issuer (other than
U.S. Government obligations or 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 that it distributes to its
shareholders at least 90% of its net investment income (including its net
tax-exempt income) earned in each year.

Generally, dividends and capital gain distributions are taxable to
shareholders when they are received. However, dividends and distributions
declared payable as of a record date in October, November or December of any
calendar year are deemed under the Code to have been paid by the Fund and
received by the shareholder on December 31 of that calendar year if the
dividend is actually paid in the following January. Such dividends and
distributions will, accordingly, be taxable to the recipient shareholders in
the year in which the record date falls. In addition, a nondeductible 4%
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 actually
or be deemed to distribute substantially

52
<PAGE> 197
all of its net investment income and net capital gains by the end of each
calendar year and, thus, expects not to be subject to the excise tax.

All income received by each Fund from sources within foreign countries
(e.g., interest and dividends) may be subject to withholding and other taxes
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, no Fund will be able to "pass through" foreign tax credits
to shareholders.

Gains or losses on sales of portfolio securities by each Fund
generally will be long-term capital gains or losses if the securities have been
held by it for more than one year, except in certain cases including where a
Fund acquires a put or grants a call 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 generally 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. Other gains or losses on
the sale of securities will generally 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 capital gain
distributions 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 a designated capital gain distribution on a
Fund share and such Fund share is held for six months or less, then any loss on
the sale or exchange of that Fund share will be treated as a long-term capital
loss (unless otherwise disallowed) to the extent of the designated capital gain
distribution. In addition, any loss realized by a shareholder upon the sale or
redemption of Fund shares held less than six months will be disallowed to the
extent of any tax-exempt dividends received by the shareholder thereon. These
rules shall not apply to losses incurred under a periodic redemption plan.

As of the printing of this SAI, the maximum individual tax rate
applicable to ordinary income is 39.6% (marginal rates may be higher for some
individuals due to phase out of exemptions and elimination of deductions); the
maximum individual tax rate applicable to net capital gains is 28%; and the
maximum corporate tax rate applicable to ordinary income and net capital gains
is 35% (except that corporations with taxable income in excess of $100,000 for
a taxable year must pay an additional amount of income tax of up to $11,750 and
corporations with taxable income in excess of $15,000,000 for a taxable year
must pay an additional amount of tax of up to $100,000).

Sales charges incurred to acquire Fund shares with reinvestment rights
are not taken into account when calculating the gain or loss on the disposition
of such Fund shares if the shares are disposed of within 90 days of acquisition
and Fund shares or shares of another regulated investment company are purchased
subsequently at a reduced or eliminated sales charge, pursuant to the

53
<PAGE> 198
reinvestment rights attendant with the initial acquisition of Fund shares. Any
sales charge not taken into account is treated as having been incurred in the
subsequent acquisition. In addition, any loss realized on a redemption or
exchange of shares of a Fund will be disallowed to the extent substantially
identical shares are reacquired within the 61-day period beginning 30 days
before and ending 30 days after the disposition date of such Fund shares.

If an option granted by a Fund lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction. Recognition of capital losses may be deferred if
they result from a position which is part of a tax "straddle," as discussed
below. If securities are sold by a Fund pursuant to the exercise of a call
option granted by the Fund, the Fund will add the premium received to the sale
price of the securities delivered in determining the amount of gain or loss on
the sale. If securities are purchased by a Fund pursuant to the exercise of a
put option granted by it, the Fund will subtract the premium received from its
cost basis in the securities purchased.

Under Section 1256 of the Code, gain or loss recognized by a Fund from
certain financial forward, futures and options transactions is treated as 60%
long-term capital gain (or loss) and 40% short-term capital gain (or loss) (the
"60%/40% rule"). Gain or loss may arise upon the exercise or lapse of such
forward contracts, futures and options as well as from closing transactions.
In addition, any of such forward contracts, futures or options remaining
unexercised at the end of the regulated investment company's taxable year are
treated as sold for their then fair market value, resulting in additional gain
or loss to the Fund characterized in the manner described above (the
"marked-to-market rule"). Transactions that qualify as designated hedges are
excepted from the marked-to-market rule and the 60%/40% rule. All or a portion
of the gain or loss from the disposition of non-U.S. dollar denominated
securities (including debt instruments, certain financial forward, futures and
option contracts, and certain preferred stock) may be treated as ordinary
income or loss under Section 988 of the Code (relating to the taxation of
foreign currency transactions). Furthermore, all or a portion of the gain
realized from engaging in "conversion transactions" may be treated as ordinary
income under Section 1258. Conversion transactions are defined to include
certain forward, futures, option and straddle transactions, transactions
marketed or sold to produce capital gains, or transactions described in
Treasury regulations to be issued in the future.

Offsetting positions held by a Fund involving certain financial
forward, futures or option contracts may be considered to constitute straddles
for tax purposes. Straddles are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of straddles is governed
by Section 1092 of the Code which, in certain circumstances, overrides or
modifies the

54
<PAGE> 199
provisions of Section 1256. If a Fund were treated as entering into straddles
by reason of its engaging in certain financial forward, futures or option
contracts, such straddles could be characterized as "mixed straddles" if the
futures, forwards, or options comprising a part of such straddles were governed
by Section 1256. The Fund may make one or more elections with respect to mixed
straddles, and, depending upon which elections are made, if any, the tax
consequences with respect to the transaction may differ. Generally, to the
extent the straddle rules apply to positions established by the regulated
investment company, losses realized by the regulated investment company may be
deferred to the extent of any unrealized gain in any offsetting positions.
Moreover, as a result of the straddle and the conversion transaction rules,
short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gain may be characterized as
short-term capital gain or ordinary income.

Foreign Shareholders. Under the Code, distributions of net investment
income by a 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 lower
treaty tax rate, if applicable. 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 generally not subject
to tax withholding.

The Arizona Tax-Free Fund, the National Tax-Free Fund, and the Oregon
Tax-Free Fund (the "Tax-Free Funds"). The Tax Free Funds intend that at least
50% of the value of their total assets at the close of each quarter of their
taxable years will consist of obligations the interest on which is exempt from
federal income tax, so that they will qualify under the Code to pay
"exempt-interest dividends." The portion of total dividends paid by a Tax Free
Fund with respect to any taxable year that constitutes exempt-interest
dividends will be the same for all shareholders receiving dividends during such
year. Long-term and/or short-term capital gain distributions will not
constitute exempt-interest dividends and will be taxed as capital gain or
ordinary income dividends, respectively. 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, the Arizona Tax-Free Fund and the
Oregon Tax-Free Fund also intend that a substantial portion of their dividends
qualify for exemption from Arizona personal income tax and Oregon personal
income tax, respectively.) Not later than 60 days after the close of its
taxable year, a Tax-Free Fund will notify its shareholders of the portion of
the dividends paid with respect to such taxable year which constitutes
exempt-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. Finally, interest on indebtedness

55
<PAGE> 200
incurred to purchase or carry shares of a Tax-Free Fund will not be deductible
to the extent that these Funds' distributions are exempt from federal income
tax.

Shares of a Tax-Free 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 Funds. Such dividends would be ultimately
taxable to the beneficiaries when distributed to them.

Other Matters. Investors should be aware that the investments to be
made by a Fund may involve sophisticated tax rules such as the original issue
discount and real estate mortgage investment conduit ("REMIC") rules that would
result in income or gain recognition by the Fund, without corresponding cash
receipts. Although the Funds will seek to avoid significant noncash income,
such noncash income could be recognized by the Funds, in which case a Fund may
distribute cash derived from other sources in order to meet the minimum
distribution requirements described above.

CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Funds and
Management."

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

56
<PAGE> 201
48,000,000,000 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
twenty-three series of shares, each representing an interest in one of the
following funds -- the Aggressive Growth, Arizona Tax-Free, Asset Allocation,
Balanced, California Tax-Free Bond, California Tax-Free Income, California
Tax-Free Money Market Mutual, Corporate Stock, Diversified Income, Equity
Value, Ginnie Mae, Government Money Market Mutual, Growth and Income,
Intermediate Bond, Money Market Mutual, Money Market Trust, National Tax-Free,
National Tax-Free Money Market Mutual, Oregon Tax-Free, Prime Money Market
Mutual, Short- Intermediate U.S. Government Income, Treasury Money Market
Mutual and U.S. Government Allocation Funds -- and the Board of Directors may,
in the future, authorize the issuance of other series of capital stock
representing shares of additional investment portfolios.

Shares have no preemptive rights or subscription. All shares, when
issued for the consideration described in the prospectus, are fully paid and
non-assessable by the Company.

57
<PAGE> 202
Pacifica was a Massachusetts business trust established under a
Declaration of Trust dated July 17, 1984, consisting of series of separately
managed portfolios which are described in this SAI. The capitalization of
Pacifica consisted solely of an unlimited number of shares of beneficial
interest with a par value of $0.001 each.

The name, address and share ownership of each person known to Pacifica
to have beneficial or record ownership with respec to 5% or more of a class of
a Predecessor Portfolio as of May 15, 1996.

PACIFICA PORTFOLIOS -- 5% OWNERSHIP AS OF MAY 15, 1996

<TABLE>
<CAPTION>
CLASS; AMOUNT OF PERCENTAGE PERCENTAGE PERCENTAGE
PACIFICA NAME AND SHARES OWNED; OF OF OF PORTFOLIO
PORTFOLIO ADDRESS TYPE OF OWNERSHIP CLASS PORTFOLIO POST-CLOSING
--------- ------- ----------------- ----- --------- ------------

<S> <C> <C> <C> <C> <C>
BALANCED FUND Hep & Co. Institutional Class; 60.85% 43.27% 43.27%
Attn: MF Dept. A8-4 4,332,628,31 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Dim & Co. Institutional Class; 5.94% 4.22% 4.22%
Attn: MF Dept. A88-4 422,872.94 Shares:
P.O. Box 9800 Record Holder
Calabasas, CA 91372

First Interstate Bank Institutional Class; 27.17% 19.32% 19.32%
TTEE 1,934,634.92 Shares;
ChoiceMaster Record Holder
Attn: Mutual Funds
A88-4
P.O. Box 9800
Calabasas, CA 92372

FI Pacifica Balanced Institutional Class; 5.16% 3.67% 3.67%
Fund 367,512.71 Shares
c/o. Pam Carney Beneficially Owned
707 Wilshire Blvd.
MAC# 2818-101
Los Angeles, CA
90017

EQUITY VALUE Virg & Co. Institutional Class; 6.95% 6.37% 6.37%
FUND Attn: MF Dept A88-4 1,076,614.80 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Hep & Co. Institutional Class; 37.38% 34.24% 34.24%
Attn: MF Dept. A88-4 5,790,801.04 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Dim & Co. Institutional Class; 37.71% 34.53% 34.53%
Attn: MF Dept. A88-4 5,840,952.45 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

First Interstate Bank Institutional Class; 13.53% 12.39% 12.39%
TTEE 2,095,985.41 Shares;
ChoiceMaster Record Holder
Attn: Mutual Fund
A88-4
P.O. Box 9800
Calabasas, CA 91372

FI Subfund A - Institutional Class; 7.07% 6.48% 6.48%
Pacifica 1,095,176.59 Shares;
Equity Value Fund Beneficially Owned

</TABLE>

58
<PAGE> 203

<TABLE>
<S> <C> <C> <C> <C> <C>
c/o Pam Carney Beneficially Owned
707 Wilshire Blvd.
MAC# 2818-101
Los Angeles, CA
90017

INTERMEDIATE Virg. & Co. Institutional Class; 32.74% 31.02% 31.02%
BOND FUND Attn: MF Dept. A88-4 1,163,317.82 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Hep & Co. Institutional Class; 65.70% 62.26% 62.26%
Attn: MF Dept. A88-4 2,334,684.21 Shares
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Macal Oil Salaried Institutional Class 7.15% 6.79% 6.79%
Pension 254,626.36 Shares
c/o Wells Fargo Bank Beneficially Owned
201 3rd Street
11th Floor
San Francisco, CA
94163

Mercedes Benz Credit Institutional Class; 6.40% 6.07% 6.07%
Corp. 227,739,89 Shares;
c/o Wells Fargo Bank Beneficially Owned
201 3rd Street
11th Floor
San Francisco, CA
94163

Investors Fiduciary Investor Class 9.12% 0.46% 0.46%
Trust Co. 17,077.73 Shares;
Cust. for the IRA of Beneficially Owned
John W. Pryor
4625 Studio Lane
Oceanside, CA 92057

NATIONAL TAX- Virg. & Co. Institutional Class; 65.51% 37.45% 37.45%
EXEMPT FUND Attn: MF Dept. A88-4 326,365.61 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Firnap & Co. Institutional Class 34.30% 19.61% 19.61%
c/o First Interstate 170,899.04 Shares;
Bank of CA Beneficially Owned
Mutual Fund Dept.
CA-A88-4
P.O. Box 9800
Calabasas, CA 91372

Stephens Greg Institutional Class; 6.09% 3.48% 3.48%
c/o Wels Fargo Bank 30,333.85 Shares
201 3rd Street Beneficially Owned
11th Floor
San Francisco, CA
94163

Byrne Family Trust #2 Investor Class; 5.87% 2.51% 2.51%
9011 W. Little York 21,912.30 Shares
Houston, TX 77040 Beneficially Owned

OREGON TAX- Firnap & Co. Institutional Class; 73.62% 14.52% 14.52%
EXEMPT FUND c/o First Interstate 397,891.83 Shares;
Bank of Beneficially Owned
CA
Mutual Fund Dept.
CA-A8804
P.O. Box 9800
Calabasas, CA 91372

Firnap & Co. Institutional Class; 20.54% 4.05% 4.05%
c/o First Interstate 110,998.73 Shares;

</TABLE>

59
<PAGE> 204

<TABLE>
<S> <C> <C> <C> <C> <C>
Bank of Beneficially Owned
CA
Mutual Fund Dept.
CA-A8804
P.O. Box 9800
Calabasas, CA 91372

Dim & Co. Institutional Class 5.84% 1.15% 1.15%
Attn: MF Dept. A88-4 31,551.70 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Gordon L. Claude Institutional Class; 7.91% 1.56% 1.56%
c/o Wells Fargo Bank 42,774.69 Shares
201 3rd Street Beneficially Owned
11th Floor
San Francisco, CA
94163

Susan Furnish Institutional Class; 6.80% 1.34% 1.34%
Dep Escrow 36,739,82 Shares;
6415 SW Parkhill Way Beneficially Owned
Portland, OR 97201

Flavel W. Temple Institutional Class; 6.39% 1.26% 1.26%
c/o Wells Fargo Bank 34,544.15 Shares;
201 3rd Street Beneficially Owned
11th Floor
San Francisco, CA
94163

Wakefield FBO Institutional Class; 5.84% 1.15% 1.15%
Anne McCandless 31,551,70 Shares;
c/o Wells Fargo Bank
201 3rd Street
11th Floor
San Francisco, CA
94163

Douglas and Joyce Institutional Class; 5.64% 1.11% 1.11%
Garlon 30,506.41 Shares
c/o Wells Fargo Bank Beneficially Owned
201 3rd Street
11th Floor
San Francisco, CA
94163
PRIME MONEY Virg. & Co. Institutional Class; 93.87% 30.50% 30.50%
MARKET FUND Attn: MF Dept A88-4 30,506.41 Shares;
P.O. Box 9800 Record Holder
Calabasas, CA 91372
Institutional Class;
First Interstate Bank 395,533,609.29 5.22% 1.70% 1.70%
of Shares
Oregon N.A. Record Holder
Attn: Investment
Sweep T-15
1300 S.W. Fifth
Avenue
Portland, OR 97201

Cocopah Bingo & Institutional Class; 7.01% 2.28% 2.28%
Casino 29,536,848.22
Cocopah Indian Tribe Shares;
Bingo/Casino Beneficially Owned
Attn: Sherry Cordova
County 15
Avenue G
Somerton, AZ 85350

Virg & Co. Investor Class; 94.16% 21.48% 21.48%
Attn: MF Dept A88-4 278,614,885.48
P.O. Box 9800 Shares;
Calabasas, CA 92372 Record Holder

</TABLE>

60
<PAGE> 205

<TABLE>
<S> <C> <C> <C> <C> <C>
Virg & Co. Investor Class 99.10% 44.32% 44.32%
Attn: MF Dept A88-4 574,814,322.95
P.O. Box 9800 Shares
Calabasas, CA 92372 Record Holder

Private Banking PAF- Service Class; 14.52% 6.49% 6.49%
MM 84,191,778.17
Corps. Shares;
#100000814-01 Beneficially Owned
Attn: A. Katz
16633 Ventura Blvd.
Suite 1400
Encino, CA 91436

SC UFCW JT TR FDS Service Class; 9.21% 4.12% 4.12%
Benefit Operating 53,401,635.58
c/o Wells Fargo Bank Shares;
201 3rd Street Beneficially Owned
11th Floor
San Francisco, CA
94163
5.74% 2.57% 2.57%
Operating Engineers Service Class;
Health & Welfare 33,287,647.99
c/o Wells Fargo Bank Shares;
201 3rd Street Beneficially Owned
11th Floor
San Francisco, CA
94163
TREASURY MONEY Virg. & Co. Institutional Class; 91.89% 35.86% 35.86%
MARKET Attn: MF Dept. A88-4 749,978,141.17
FUND P.O. Box 9800 Shares;
Calabasas, CA 91372 Record Holder

DCIA Fund Institutional Class 5.93% 2.32% 2.32%
c/o Wells Fargo Bank 48,435,199.92
201 3rd Street Beneficially Owned
11th Floor
San Francisco, CA
94163

Lumber Employees & W. Investor Class; 10.54% 0.31% 0.31%
Counc/Columbia Co. 6,545,875.34 Shares;
P.O. Box 1350 Beneficially Owned
Portland, OR 97207

CH2M Hill Pension Investor Class; 7.71% 0.23% 0.23%
TR/Becker 4,785,242.82 Shares;
Institutional Beneficially Owned
Shareholder Services
at VAS/279/Becker
7200 Wisconsin Ave.
Suite 1001
Bethesda, MD 20814

Nick Bunick Investor Class; 5.27% 0.16% 0.16%
c/o. Wells Fargo Bank 3,271,282.65 Shares;
201 3rd Street Beneficially Owned
11th Floor
San Francisco, CA
94163

Virg. & Co. Investor Class; 89.55% 2.66% 2.66%
Attn: MF Dept A88-4 55,623,936.25
P.O. Box 9800 Shares;
Calabasas, CA 91372 Record Holder

Virg. & Co. Investor Class; 99.16% 57.52% 57.52%
Attn: MF Dept. A88-4 1,202,807,089.44
P.O. Box 9800 Shares;
Calabasas, CA 91372 Record Holder

</TABLE>

61
<PAGE> 206

<TABLE>
<S> <C> <C> <C> <C>
Spears Manufacturing Service Class; 8.14% 0.24% 0.24%
Company 5,051,733.03 Shares;
P.O. Box 9203 Record Holder
Sylmar, CA 91392

Access Services Service Class; 10.15% 0.30% 0.30%
Incorporated 6,299,590.78 Shares;
P.O. Box 71684 Record Holder
Los Angeles, CA
90071

San Fernando Service Class; 5.69% 0.17% 0.17%
Community 3,531,226.34 Shares;
Hospital Record Holder
14580 Roscoe Blvd.
Panorama City, CA
91402

Novalogic, Inc. Service Class; 5.68% 0.17% 0.17%
26010 Mureau Road 3,529,277.78 Shares;
Suite #200 Record Holder
Calabasas, CA 91302
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is defined as the beneficial
holder of more than 25% of a class, or is identified as the holder of record of
more that 25% of a class and has voting and/or investment powers, it may be
presumed to control such class.

OTHER

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent auditors
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.

62
<PAGE> 207
audited by Ernst & Young LLP. The audited financial statements incorporated by
reference into this SAI and the audited financial highlights that appear in the
prospectuses for the fiscal year ended September 30, 1995 for the Intermediate
Bond, Arizona Tax-Free, National Tax-Free and Oregon Tax-Free Funds have been
audited by Deloitte & Touche LLP.

FINANCIAL INFORMATION

The unaudited statements of assets and liabilities, including the
statements of investments, of the former Pacifica portfolios (Pacifica Prime
Money Market, Pacifica Treasury Money Market, Pacifica Equity Value and
Pacifica Balanced Funds) as of March 31, 1996, and the related unaudited
statements of operations for the six-month period ended March 31, 1996, and the
statements of changes in net assets and the financial highlights for each of
the periods indicated, as filed on EDGAR with the SEC on June 7, 1996, are
incorporated by reference into this SAI.

The statements of investments, audited financial statements and
independent auditors' report are included with the SAI delivered to current or
prospective shareholders.

63
<PAGE> 208
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

Municipal Notes

A-1
<PAGE> 209
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

A-2
<PAGE> 210

STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated September 6, 1996

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

INSTITUTIONAL CLASS

-----------------------------------

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 dated September 6, 1996. 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> 211
TABLE OF CONTENTS

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Permitted Investment Activities . . . . . . . . . . . . . . 7
Special Considerations Affecting
California Municipal Obligations . . . . . . . . . . . . . . . . . . . 13
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . 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

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<PAGE> 212

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> 213

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> 214

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> 215

(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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<PAGE> 216

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

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<PAGE> 217

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> 218

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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<PAGE> 219

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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<PAGE> 220

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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<PAGE> 221

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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<PAGE> 222

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.

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.

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<PAGE> 223

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.

* * *

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 section in the prospectus entitled "Management of the
Fund." 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.

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<PAGE> 224
<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position During Past 5 Years
- --------------------- -------- ---------------------
<S> <C> <C>
Jack S. Euphrat, 74 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.

Thomas S. Goho, 54 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, 47 Director Senior Vice President
of Stephens and
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource
Management.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
</TABLE>

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<PAGE> 225
<TABLE>
<S> <C> <C>
*J. Tucker Morse, 52 Director Private Investor;
10 Legrae Street Real Estate Developer;
Charleston, SC 29401 Chairman of Renaissance
Properties Ltd.;
President of Morse
Investment Corporation;
and Co-Managing Partner of
Main Street Ventures.

COMPENSATION TABLE
For the Year Ended December 31, 1995

*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

</TABLE>

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<PAGE> 226

<TABLE>
<S> <C> <C>
*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 directors and officers of Overland
Express Funds, Inc. and MasterWorks Funds Inc. (formerly, 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, prior to January 1, 1996 and the reorganization of Wells Fargo
Nikko Investment Advisors, a former affiliate of Wells Fargo, was considered to
be in the same "fund complex," as such term is defined in Form N-1A under the
1940 Act, as the Company. Effective January 1, 1996, the Company, Overland
Express Funds, Inc., Stagecoach Trust, Life & Annuity Trust and Master
Investment Trust are considered to be members of the same fund complex and are
no longer part of the same fund complex as MasterWorks Funds Inc., Master
Investment Portfolio and Managed Series Investment Trust. The Directors are
compensated by other companies and trusts within the fund complex for their
services as directors/trustees to such companies 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 $ 2,157,487 $0 $ 368,134 $ 1,728,107 $ 1,542,893 $0
Bond 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>

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<PAGE> 227

<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>

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<PAGE> 228

<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>

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<PAGE> 229
<TABLE>
<CAPTION>
FUND 1995
----------------------------------------------------------------
<S> <C>
California Tax-Free Bond Fund $ -0-
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>

PERFORMANCE CALCULATIONS

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

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<PAGE> 230

reimbursements); c = the average daily number of shares outstanding during the
period that were 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

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<PAGE> 231

rates (from the Federal Reserve G-13 Statistical Releases or the Bank Rate
Monitor), the 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

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<PAGE> 232

the sales literature. Distribution rate will be accompanied by the standard
30-day yield as required by the SEC.

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 ("IMG"). As of December 31, 1995, IMG had $30.1
billion in assets under management. The Company also may disclose in
advertising and other types of sales literature the amount of assets and mutual
fund assets managed by Wells Fargo Bank. As of June 30, 1996, Wells Fargo Bank
and its affiliates provided investment Advisory services for approximately $56
billion of assets of individuals, trusts, estates and institutions and $17
billion of mutual fund assets.

The Company may disclose in advertising and other types of
literature that investors can open and maintain Sweep Accounts over the Internet
or through other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available to
investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the first
major bank to offer an on-line application for a mutual fund account that can be
filled out completely through Electronic Channels. Advertising and other
literature may disclose that Wells Fargo Bank may maintain Web sites, pages or
other information sites accessible through Electronic Channels (an "Information
Site") and may describe the contents and features of the Information Site and
instruct investors on how to access the Information Site and open a Sweep
Account. Advertising and other literature may also disclose the procedures
employed by Wells Fargo Bank to secure information provided by investors,
including disclosure and discussion of the tools and services for accessing
Electronic Channels. Such advertising or other literature may include
discussions of the advantages of establishing and maintaining a Sweep Account
through Electronic Channels and testimonials from Wells Fargo Bank customers or
employees and may also include descriptions of locations where product
demonstrations may occur. The Company may also disclose the ranking of Wells
Fargo Bank as one of the largest money managers in the United States.

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

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<PAGE> 233

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 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

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, money market securities, ARMs and CMOs 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.

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<PAGE> 234

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, 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 assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Growth Fund to pay a broker/dealer
which furnishes brokerage and research services a higher commission than that
which might be charged by another broker/dealer for effecting the same
transaction, provided that Wells Fargo Bank determines in good faith that such
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker/dealer, viewed in terms of either the
particular transaction or the overall responsibilities of Wells Fargo Bank.
Such brokerage and research services might consist of reports and statistics
relating to specific companies or industries, general summaries of groups of
stocks or bonds and their comparative earnings and yields, or broad overviews
of the stock, bond, and government securities markets and the economy.

Supplementary research information so received is in addition to, and
not in lieu of, services required to be performed by Wells Fargo Bank and does
not reduce the advisory fees payable by the Fund. The Board of Directors will
periodically review the commissions paid by the Fund to consider whether the
commissions paid over representative periods of time appear to be reasonable
in relation to the benefits inuring to the Fund. It is possible that certain
of the supplementary research or other services received will primarily benefit
one or more other investment companies or other accounts for which investment
discretion is exercised. Conversely, the Fund may be the primary beneficiary
of the research or services received as a result of portfolio transactions
effected for such other account or investment company.

Broker/dealers utilized by Wells Fargo Bank may furnish statistical,
research and other information or services which are deemed by Wells Fargo Bank
to be beneficial to a Fund's investment programs. Research services received
from brokers supplement Wells Fargo Bank's own research and may include the
following types of information: statistical and background information on
industry groups and individual companies; forecasts and interpretations with
respect to U.S. and foreign economies, securities, markets, specific industry
groups and individual companies; information on political developments;
portfolio management strategies; performance information on securities and
information concerning prices of securities; and information supplied by
specialized services to Wells Fargo Bank and to the Company's Directors with
respect to the performance, investment activities and fees and expenses of other
mutual funds. Such information may be communicated electronically, orally or
in written form. Research services may also include the providing of equipment
used to communicate research information, the arranging of meetings with
management of companies and the providing of access to consultants who supply
research information.

The outside research assistance is useful to Wells Fargo Bank since the
brokers utilized by Wells Fargo Bank as a group tend to follow a broader
universe of securities and other matters than the staff of Wells Fargo Bank can
follow. In addition, this research provides Wells Fargo Bank with a diverse
perspective on financial markets. Research services which are provided to
Wells Fargo Bank by brokers are available for the benefit of all accounts
managed or advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank
that this material is beneficial in supplementing their research and analysis;
and, therefore, it may benefit the Funds by improving the quality of Wells
Fargo Bank's investment advice. The advisory fees paid by the Funds are not
reduced because Wells Fargo Bank receives such services.

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

</TABLE>

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<PAGE> 235

<TABLE>
<S> <C> <C> <C>
Money Market Mutual Fund $0 $0 $0
Ginnie Mae Fund $0 $0 $0
</TABLE>

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.

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<PAGE> 236

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> 237

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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<PAGE> 238

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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<PAGE> 239

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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<PAGE> 240

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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<PAGE> 241

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.

INDEPENDENT AUDITORS

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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
"VMIG 3" are of "favorable quality," with all security elements accounted for,
but lacking the strength of the preceding grades.

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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

A-2