<PAGE> 1
As filed with the Securities and Exchange Commission
on March 29, 1996
Registration No. 33-42927; 811-6419
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
[X]
Post-Effective Amendment No. 22
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 23 [X]
(Check appropriate box or boxes)
--------------------
STAGECOACH FUNDS, INC.
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
--------------------
Registrant's Telephone Number, including Area Code: (800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant [ ] on _________ pursuant
to Rule 485(b), or to Rule 485(b), or
[ ] 60 Days after filing pursuant [ ] on _________ pursuant
to Rule 485(a), or to Rule 485(a)
[ ] 75 days after filing pursuant [ ] on May 1, 1996 pursuant
to paragraph (a)(2) paragraph (a)(2) of Rule 485
<PAGE> 2
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of shares of its Common
Stock, $.001 par value, under the Securities Act of 1933, pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended. The Rule 24f-2
Notice for the fiscal year ending December 31, 1995, was filed with the
Securities and Exchange Commission on February 29, 1996.
This Post-Effective Amendment to the Registrant's Registration Statement also
has been executed by Master Investment Trust (a registered investment company
with separate series in which certain series of the Registrant will invest
substantially all of its assets) and its trustees and principal officers.
<PAGE> 3
EXPLANATORY NOTE
This Post-Effective Amendment No. 22 to the Registration
Statement (the "Amendment") of Stagecoach Funds, Inc. (the "Company") is being
filed to add to the Company's Registration Statement the audited financial
statements and certain related financial information for the year ended
December 31, 1995 for the Company's Money Market Mutual Fund and California
Tax-Free Money Market Mutual Fund and to update the Prospectus describing the
Money Market Mutual Fund (Class A Shares), California Tax-Free Money Market
Mutual Fund and National Tax-Free Money Market Mutual Fund. This Amendment also
provides certain financial information for the year ended December 31, 1995 for
the Company's California Tax-Free Bond Fund. This Amendment does not affect
the Registration Statement for the Company's Aggressive Growth, Asset
Allocation, California Tax-Free Income, Corporate Stock, Diversified Income,
Ginnie Mae, Growth and Income, Short-Intermediate U.S. Government Income and
U.S. Government Allocation Funds.
<PAGE> 4
Cross Reference Sheet
MONEY MARKET MUTUAL FUND-CLASS A SHARES
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND
Form N-1A Item Number
- ---------------------
Part A Prospectus Captions
- ------ -------------------
1 Cover Page
2 Prospectus Summary; Summary of Fund Expenses
3 Financial Highlights
4 The Funds, the Master Portfolio and Management; Prospectus Appendix
- Additional Permitted Investment Activities
5 How the Funds Work; The Funds, the Master Portfolio and
Management; Management, Distribution and Servicing Fees
6 The Funds, the Master Portfolio and Management; Investing in the
Funds
7 Investing in the Funds; Dividends; Taxes; Additional Shareholder
Services
8 How to Redeem Shares
9 Not Applicable
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page
11 Table of Contents
12 Introduction
13 Investment Restrictions; Additional Permitted
Investment Activities; SAI Appendix
14 Management
15 Management
16 Management; Distribution Plan; Custodian and Transfer
and Dividend Disbursing Agent; Independent Auditors
17 Portfolio Transactions
18 Capital Stock; Other
19 Determination of Net Asset Value; Fund Expenses
20 Federal Income Taxes
21 Distribution Plan
22 Calculation of Yield and Total Return
23 Financial Information; Financial Statements
Part C Other Information
- ------ -----------------
24-32 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
<PAGE> 5
[STAGECOACH FUNDS LOGO]
------------------------------
PROSPECTUS
------------------------------
MONEY MARKET MUTUAL FUND - CLASS A SHARES
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND
April 1, 1996
<PAGE> 6
STAGECOACH FUNDS(R)
MONEY MARKET MUTUAL FUND - CLASS A SHARES
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND
Stagecoach Funds, Inc. (the "Company") is an open-end investment company. This
Prospectus contains information about three of the funds in the Stagecoach
Family of Funds-the MONEY MARKET MUTUAL FUND -- CLASS A SHARES, the CALIFORNIA
TAX-FREE MONEY MARKET MUTUAL FUND and the NATIONAL TAX-FREE MONEY MARKET MUTUAL
FUND (each, a "Fund" and collectively, the "Funds" or "Money Market Funds"). THE
NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING SUBSTANTIALLY ALL OF ITS ASSETS IN THE TAX-FREE MONEY
MARKET MASTER PORTFOLIO (THE "MASTER PORTFOLIO") OF MASTER INVESTMENT TRUST (THE
"MASTER TRUST") AN OPEN-END MANAGEMENT INVESTMENT COMPANY, RATHER THAN IN A
PORTFOLIO OF SECURITIES. THE MASTER PORTFOLIO HAS THE SAME INVESTMENT OBJECTIVE
AS THE NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND. THE INVESTMENT EXPERIENCE OF
THE NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND CORRESPONDS DIRECTLY TO THE
INVESTMENT EXPERIENCE OF THE MASTER PORTFOLIO.
AN INVESTMENT IN THE FUNDS AND MASTER PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUNDS OR THE
MASTER PORTFOLIO WILL BE ABLE TO MAINTAIN A CONSTANT $1.00 NET ASSET VALUE PER
SHARE.
Please read this Prospectus and retain it for future reference. It is designed
to provide you with important information and to help you decide if the Funds'
goals match your own. Statements of Additional Information ("SAIs"), dated April
1, 1996, containing additional information about the Funds have been filed with
the Securities and Exchange Commission ("SEC") and are incorporated by reference
into this Prospectus. The SAI for each Fund is available without charge and can
be obtained by writing to Stagecoach Shareholder Services, Wells Fargo Bank,
N.A., P.O. Box 7066, San Francisco, CA 94120-7066 or by calling 1-800-222-8222.
If you hold shares in an IRA, please call 1-800-BEST-IRA (1-800-237-8472) for
information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES CERTAIN
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED
APRIL 1, 1996
PROSPECTUS
<PAGE> 7
The MONEY MARKET MUTUAL FUND seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in high-quality,
short-term instruments. This Prospectus describes the Class A Shares of the
Money Market Mutual Fund.
The CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND seeks to obtain a high level
of income exempt from federal income tax and California personal income tax,
while preserving capital and liquidity, by investing in high-quality, short-term
U.S. dollar-denominated money market instruments, primarily municipal
obligations.
The NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND seeks to provide investors with
a high level of income exempt from federal income tax, while preserving capital
and liquidity. The National Tax-Free Money Market Mutual Fund and the California
Tax-Free Money Market Mutual Fund are sometimes referred to herein as the
"Tax-Free Funds."
The Funds and the Master Portfolio are advised by Wells Fargo Bank, which also
serves as the Funds' transfer and dividend disbursing agent and custodian. In
addition, Wells Fargo Bank is a Shareholder Servicing Agent and a Selling Agent
(each as defined below). Stephens Inc. ("Stephens") is the Funds' sponsor and
administrator and serves as the distributor of the Funds' shares.
WELLS FARGO BANK IS THE INVESTMENT ADVISER TO THE FUNDS AND/OR MASTER
PORTFOLIO AND PROVIDES CERTAIN OTHER SERVICES TO THE FUNDS AND MASTER
PORTFOLIO, FOR WHICH IT IS COMPENSATED. STEPHENS, WHICH IS NOT
AFFILIATED WITH WELLS FARGO BANK, IS THE SPONSOR AND DISTRIBUTOR
FOR THE FUNDS AND PLACEMENT AGENT FOR THE MASTER PORTFOLIO.
PROSPECTUS
<PAGE> 8
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 8
HOW THE FUNDS WORK 10
THE FUNDS, THE MASTER PORTFOLIO AND MANAGEMENT 17
INVESTING IN THE FUNDS 19
DIVIDENDS 26
HOW TO REDEEM SHARES 26
ADDITIONAL SHAREHOLDER SERVICES 31
MANAGEMENT, DISTRIBUTION AND SERVICING FEES 33
TAXES 37
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 9
PROSPECTUS SUMMARY
The Funds provide you with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides you with summary information about each of the Funds. For more
information, please refer specifically to the identified Prospectus sections and
generally to the Prospectus and the SAI for each Fund.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The MONEY MARKET MUTUAL FUND seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in
high-quality, short-term instruments. In pursuing this objective, the Fund
invests in securities with remaining maturities not exceeding thirteen
months, as determined in accordance with Rule 2a-7 under the Investment
Company Act of 1940, as amended (the "1940 Act"). These securities include
obligations of the U.S. Government, its agencies and instrumentalities,
high-quality debt obligations such as corporate debt, certain obligations of
U.S. banks and certain repurchase agreements.
The CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND seeks to obtain a high
level of income exempt from federal income tax and California personal
income tax, while preserving capital and liquidity, by investing in
high-quality, U.S. dollar-denominated money market instruments, primarily
municipal obligations. The Fund, in pursuing its objective, invests in
securities with remaining maturities not exceeding thirteen months, as
determined in accordance with Rule 2a-7 under the 1940 Act. Under normal
market conditions, substantially all of the Fund's assets will be invested
in municipal obligations that are exempt from federal income tax and
California personal income tax. Certain risks may arise from the Fund's
concentration in investments in California municipal obligations.
The NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND seeks to provide investors
with a high level of income exempt from federal income tax, while preserving
capital and liquidity. The Fund seeks to achieve its investment objective by
investing all of its assets in the Tax-Free Money Market Master Portfolio of
the Master Trust, which has the same investment objective as the Fund. The
Master Portfolio seeks to achieve this investment objective by investing in
high-quality, U.S. dollar-denominated money market instruments, primarily
municipal obligations, with remaining maturities not exceeding thirteen
months, as determined in accordance with Rule 2a-7 under the 1940 Act.
See "How the Funds Work -- Investment Objectives and Policies" and
"Prospectus Appendix -- Additional Investment Policies."
1 PROSPECTUS
<PAGE> 10
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the investment adviser to the Money Market Mutual Fund,
the California Tax-Free Money Market Mutual Fund and the Master Portfolio,
manages your investments. A separate investment adviser has not been
retained for the National Tax-Free Money Market Mutual Fund because this
Fund invests all of its assets in the Master Portfolio. Wells Fargo Bank
also provides the Funds and the Master Portfolio with transfer agency,
dividend disbursing agency and custodial services. In addition, Wells Fargo
Bank is a Shareholder Servicing Agent and a Selling Agent (each as defined
below) of the Funds. See "The Funds, the Master Portfolio and Management"
and "Management, Distribution and Servicing Fees."
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT?
A. Investments in the Funds are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the Federal Deposit Insurance Corporation
("FDIC"), nor are they insured or guaranteed against loss of principal.
Therefore, investors should be willing to accept some risk with money
invested in the Funds. Although the Funds and the Master Portfolio seek to
maintain a stable net asset value of $1.00 per share, there is no assurance
that they will be able to do so. Since the California Tax-Free Money Market
Mutual Fund invests primarily in securities issued by California, its
agencies and municipalities, events in California are more likely to affect
this Fund's investments. Also, the California Tax-Free Money Market Mutual
Fund is nondiversified, which means that its assets may be invested among
fewer issuers and therefore the value of its assets may be subject to
greater impact by events affecting one of its investments. As with all
mutual funds, there can be no assurance that the Funds or the Master
Portfolio will achieve their investment objectives. See "How the Funds
Work -- Investment Objectives and Policies" and "Prospectus
Appendix -- Additional Investment Policies."
Q. HOW DO I INVEST?
A. You may invest by purchasing Fund shares at their net asset value ("NAV").
You may open an account by investing at least $2,500, and you may add to
your account by making additional investments of at least $100, with certain
exceptions. Shares of the Funds may be purchased by wire, by mail, or by
electing an automatic investment feature called the AutoSaver Plan on any
day the Funds are open. Shares of the California Tax-Free Money Market
Mutual Fund and the National Tax-Free Money Market Mutual Fund may not be
suitable investments for tax-exempt institutions or tax-exempt retirement
plans, since such investors would not generally benefit from the tax-exempt
status of such Funds' dividends. See "Investing in the Funds." In addition,
California Tax-Free Money Market Mutual Fund shares are not available in all
states. For more details, contact Stephens (the Funds' sponsor and
PROSPECTUS 2
<PAGE> 11
distributor), a Shareholder Servicing Agent (such as Wells Fargo Bank) or a
Selling Agent.
Q. MAY I INVEST IN FUND SHARES THROUGH A WELLS FARGO BANK ACCOUNT?
A. Yes, customers of Wells Fargo Bank may invest in shares of the Funds through
a Wells Fargo Bank Money Market Access or Money Market Checking Account. In
addition, customers of Wells Fargo Bank who hold shares of the California
Tax-Free Money Market Mutual Fund through a Wells Fargo Bank Managed Sweep
Account may open additional Managed Sweep Accounts or acquire additional
shares of the California Tax-Free Money Market Mutual Fund through such
Accounts. Certain of the features described in this Prospectus are not
available to investors purchasing shares through an Account. Investments
through an Account are governed by the terms and conditions of such Account
as set forth in a separate Disclosure Statement provided by Wells Fargo Bank
to each Accountholder. See "Investing in the Funds -- Opening A Wells Fargo
Bank Sweep Account."
Q. HOW ARE THE FUNDS' INVESTMENTS VALUED?
A. The price per share or NAV of a Fund depends upon the total value of
portfolio securities owned by such Fund (plus cash and other assets net of
liabilities) and the number of its shares outstanding. In the case of the
National Tax-Free Money Market Mutual Fund, the NAV depends on the NAV of
the Master Portfolio's shares, which in turn depends on the total value of
portfolio securities owned by the Master Portfolio (plus cash and other
assets net of liabilities) and the number of Master Portfolio shares
outstanding. Wells Fargo Bank calculates the NAV for each Fund and the
Master Portfolio on each day that the Funds and the Master Portfolio are
open. See "Investing in the Funds -- Share Price." Although the Funds and
Master Portfolio seek to maintain a $1.00 price per share based on the NAV,
there can be no assurance that this will be achieved.
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income are declared daily, paid monthly and
automatically reinvested in additional shares of the Funds at NAV unless you
elect to receive dividends in cash. Any capital gains are distributed at
least annually. See "Dividends" and "Additional Shareholder Services."
Q. ARE EXCHANGES TO OTHER FUNDS PERMITTED?
A. Yes. The exchange privilege enables you to exchange Fund shares for shares of
another fund offered by the Company, or shares of certain other funds
offered by other investment companies in the Stagecoach Family of Funds, to
the extent such shares are offered for sale in your state of residence. See
"Additional Shareholder Services -- Exchange Privilege."
3 PROSPECTUS
<PAGE> 12
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares at NAV, without charge by a Fund, by letter, by an
automatic feature called the Systematic Withdrawal Plan, or by telephone
(unless you specifically decline telephone privileges), on any day the
relevant Fund is open for business. See "How To Redeem Shares." For more
details, contact Stephens, a Shareholder Servicing Agent or a Selling Agent
(such as Wells Fargo Bank).
PROSPECTUS 4
<PAGE> 13
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL
MONEY MARKET TAX-FREE MONEY TAX-FREE MONEY
MUTUAL FUND MARKET MUTUAL MARKET MUTUAL
(CLASS A SHARES) FUND FUND
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases
(as a percentage
of offering price).... None None None
Sales Charge Imposed on
Reinvested Dividends.. None None None
Sales Charge Imposed on
Redemptions........... None None None
Exchange Fees........... None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL
MONEY MARKET TAX-FREE MONEY TAX-FREE MONEY
MUTUAL FUND MARKET MUTUAL MARKET MUTUAL
(CLASS A SHARES) FUND FUND1
<S> <C> <C> <C> <C> <C> <C>
Management Fee (after
waivers or
reimbursements)2..... 0.40% 0.50% 0.20%
Rule 12b-1 Fee (after
waivers or
reimbursements)2..... 0.02% 0.03% 0.05%
Other Expenses:
Shareholder
Servicing Fee
(after waivers or
reimbursements)2... 0.27% 0.05% 0.00%
Administrative
Fee................ 0.03% 0.03% 0.05%
Miscellaneous
Expenses (after
waivers or
reimbursements)2. 0.03% 0.04% 0.20%
----- ----- -----
Total Other Expenses
(after waivers or
reimbursements)2:.... 0.33% 0.12% 0.25%
----- ----- -----
TOTAL FUND OPERATING
EXPENSES (after
waivers or
reimbursements)2.... 0.75% 0.65% 0.50%
</TABLE>
- -------------------------------
<TABLE>
<C> <S>
1 Other mutual funds may invest in the Tax-Free Money Market
Master Portfolio and such other funds' expenses and,
correspondingly, investment returns may differ from those of
the National Tax-Free Money Market Mutual Fund.
2 Absent waivers and reimbursements, the percentages shown above
under "Rule 12b-1 Fee," "Shareholder Servicing Fee,"
"Miscellaneous Expenses," "Total Other Expenses" and "Total
Fund Operating Expenses" would be 0.05%, 0.30%, 0.05%, 0.38%
and 0.83%, respectively, for the Class A Shares of the Money
Market Mutual Fund and 0.05%, 0.30%, 0.13%, 0.46% and 1.01%,
respectively, for the California Tax-Free Money Market Mutual
Fund. Absent waivers and reimbursements, "Management Fee,"
"Shareholder Servicing Fee," "Miscellaneous Expenses," "Total
Other Expenses" and "Total Fund Operating Expenses" would be
0.30%, 0.25%, 0.30%, 0.60% and 0.95%, respectively, for the
National Tax-Free Money Market Mutual Fund.
</TABLE>
5 PROSPECTUS
<PAGE> 14
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment
in a Fund, assuming a 5% annual
return and redemption at the end of
each time period indicated:
Money Market Mutual Fund
(Class A Shares)........... $8 $24 $42 $93
California Tax-Free Money
Market Mutual Fund......... $7 $21 $36 $81
National Tax-Free Money
Market Mutual Fund......... $5 $16 N/A N/A
</TABLE>
EXPLANATION OF TABLES
The purpose of the foregoing tables is to help you understand the various
costs and expenses that an investor in the Funds will bear directly or
indirectly. The tables do not reflect any charges that may be imposed by Wells
Fargo Bank directly on its customer accounts in connection with an investment in
a Fund.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell Fund
shares. There are no Shareholder Transaction Expenses for these Funds. However,
the Company reserves the right to impose a charge for wiring redemption
proceeds.
ANNUAL FUND OPERATING EXPENSES for the Class A Shares of the Money Market
Mutual Fund and shares of the California Tax-Free Money Market Mutual Fund are
based on amounts incurred during the most recent fiscal year, restated to
reflect voluntary fee waivers and expense reimbursements that are expected to
continue to reduce expenses during the current fiscal year. Annual Fund
Operating Expenses for the National Tax-Free Money Market Mutual Fund summarize
expenses charged at the Master Portfolio level as well as expenses charged at
the Fund level. The amounts shown above for the National Tax-Free Money Market
Mutual Fund under "Rule 12b-1 Fee" and "Administrative Fee" reflect contract
amounts; the amounts shown above under "Management Fee," "Shareholder Servicing
Fee," "Miscellaneous Expenses," "Total Other Expenses" and "Total Fund Operating
Expenses" reflect certain anticipated voluntary fee waivers and expense
reimbursements for the current fiscal year. Wells Fargo Bank and Stephens may
each elect to waive or reimburse all or a portion of its respective fees charged
to, or expenses paid by, a Fund or the Master Portfolio. Any such waivers or
reimbursements would reduce the total expenses of the Funds or Master Portfolio.
There can be no assurance that such waivers or reimbursements would continue.
For more complete descriptions of the various costs and expenses you can expect
to incur as an investor in each Fund, please see the Prospectus section
captioned "Management and Servicing Fees."
PROSPECTUS 6
<PAGE> 15
EXAMPLE OF EXPENSES is a hypothetical example which illustrates the expenses
associated with a $1,000 investment over the periods shown, based on the
expenses in the table above and an assumed annual rate of return of 5%. This
rate of return should not be considered an indication of actual or expected
performance of a Fund. In addition, the example should not be considered a
representation of past or future expenses; actual expenses and returns may be
greater or lesser than those shown. If current fee waivers and/or reimbursements
are discontinued, the amounts contained in the "Example of Expenses" may
increase.
With regard to the combined fees and expenses of the National Tax-Free Money
Market Mutual Fund and the Master Portfolio, the Board of Directors of the
Company has considered whether various costs and benefits of investing all the
Fund's assets in the Master Portfolio would be more or less than if the Fund
invested in portfolio securities directly, and believes that the Fund should
achieve economic efficiencies by investing in the Master Portfolio.
Additionally, the Board of Directors has determined that the aggregate fees
assessed by this Fund and the Master Portfolio should be less than those
expenses that the Directors believe would be incurred had the Fund invested
directly in the securities held by the Master Portfolio. See "The Funds, the
Master Portfolio and Management" and "Management, Distribution and Servicing
Fees" for more complete descriptions of the various costs and expenses
applicable to investors in this Fund. In addition, if the National Tax-Free
Money Market Mutual Fund were to change its investment strategy and no longer
invest in the Master Portfolio, these expenses could change.
7 PROSPECTUS
<PAGE> 16
FINANCIAL HIGHLIGHTS
The following information relating to the Class A Shares of the Money Market
Mutual Fund and the shares of the California Tax-Free Money Market Mutual Fund
has been derived from the Financial Highlights in the financial statements for
such Funds' year ended December 31, 1995. The financial statements for the year
ended December 31, 1995 are included in the SAI for each such Fund and have been
audited by KPMG Peat Marwick LLP, independent auditors, whose report on
Stagecoach Funds, Inc. dated February 14, 1996 also is included in the SAIs. The
information provided below should be read in conjunction with the 1995 annual
financial statements for these Funds and the notes thereto. The SAI for each of
the Funds has been incorporated by reference into this Prospectus. Financial
information is not provided in connection with the National Tax-Free Money
Market Mutual Fund because the Fund had not begun operations during the periods
presented.
MONEY MARKET MUTUAL FUND
FOR A CLASS A SHARE OUTSTANDING
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(3)
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Net Asset Value Beginning of
Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment
Operations:
Net Investment Income..... 0.05 0.04 0.03 0.02
Net Realized & Unrealized
Gain (Loss) on
Investments............. 0.00 0.00 0.00 0.00
------ ------ ------ ------
Total from Investment
Operations 0.05 0.04 0.03 0.02
Less Distributions:
Dividends from Net
Investment Income....... (0.05) (0.04) (0.03) (0.02)
Distributions from Net
Realized Gain........... 0.00 0.00 0.00 0.00
Total From Distributions.... (0.05) (0.04) (0.03) (0.02)
------ ------ ------ ------
Net Asset Value End of
Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
Total Return (not
annualized)............... 5.34% 3.74% 2.70% 1.50%
Ratios/Supplemental Data:
Net Assets, End of Period
(000's)................. $2,892,621 $2,343,942 $317,474 $236,269
Number of shares
outstanding, End of
Period (000's).......... 2,893,689 2,344,028 317,474 236,270
Ratios to Average Net Assets
(annualized):
Ratio of Expenses to
Average Net Assets(1)... 0.75% 0.69% 0.58% 0.20%
Ratio of Net Investment
Income to Average Net
Assets(2)............... 5.13% 4.12% 2.67% 2.98%
- -------------------
(1) Ratio of Expenses to
Average Net Assets Prior
To Waived Fees and
Reimbursed Expenses..... 0.83% 0.89% 1.00% 0.94%
(2) Ratio of Net Investment
Income to Average Net
Assets Prior To Waived
Fees and Reimbursed
Expenses................ 5.05% 3.92% 2.25% 2.24%
(3) The Fund commenced
operations on July 1,
1992
</TABLE>
PROSPECTUS 8
<PAGE> 17
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
FOR A SHARE OUTSTANDING
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Asset Value
Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment
Operations:
Net Investment
Income.............. 0.03 0.02 0.02 0.03
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.00 0.00 0.00 0.00
------ ------ ------ ------
Total From Investment
Operations............ 0.03 0.02 0.02 0.03
Less Distributions:
Dividends from Net
Investment Income... (0.03) (0.02) (0.02) (0.03)
Distributions From Net
Realized Gain....... 0.00 0.00 0.00 0.00
Total From
Distributions......... (0.03) (0.02) (0.02) (0.03)
------ ------ ------ ------
Net Asset Value, End of
Period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
Total Return (not
annualized)........... 3.23% 2.28% 1.89% 2.81%
Ratios/Supplemental
Data:
Net Assets, End of
Period (000's)......$1,031,004 $869,745 $793,420 $572,906
Number of shares
outstanding, End of
Period (000's)...... 1,031,104 869,824 793,426 572,907
Ratios to Average Net
Assets (annualized):
Ratio of Expenses to
Average Net
Assets(1)........... 0.65% 0.62% 0.55% 0.28%
Ratio of Net
Investment Income to
Average Net
Assets(2)........... 3.18% 2.26% 1.88% 2.41%
- -------------------
(1) Ratio of Expenses to
Average Net Assets
Prior to
Waived Fees and
Reimbursed
Expenses............ 1.01% 1.08% 1.06% 1.03%
(2) Ratio of Net
Investment Income to
Average Net Assets
Prior to Waived Fees
and Reimbursed
Expenses............ 2.82% 1.80% 1.37% 1.66%
</TABLE>
9 PROSPECTUS
<PAGE> 18
HOW THE FUNDS WORK
INVESTMENT OBJECTIVES AND POLICIES
THE MONEY MARKET MUTUAL FUND
The Money Market Mutual Fund seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in high-quality,
short-term instruments. The Fund invests its assets only in U.S.
dollar-denominated, high-quality money market instruments, and may engage in
certain other investment activities as described in this Prospectus. Permitted
investments include short-term U.S. Government obligations, obligations of
domestic and foreign banks, commercial paper, and repurchase agreements. In
pursuing its objective, the Fund invests in instruments with remaining
maturities not exceeding thirteen months, as determined in accordance with Rule
2a-7 under the 1940 Act. As with all mutual funds, there can be no assurance
that the Fund, which is a diversified portfolio, will achieve its investment
objective. A more complete description of these investments and investment
activities is contained in the "Prospectus Appendix - Additional Investment
Policies" and in the SAI.
THE CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
The California Tax-Free Money Market Mutual Fund seeks to obtain a high level
of income exempt from federal income tax and California personal income tax,
while preserving capital and liquidity, by investing in high-quality, short-term
U.S. dollar-denominated money market instruments, primarily municipal
obligations. This investment objective is fundamental and cannot be changed
without shareholder approval. There can be no assurance that the Fund, which is
a nondiversified portfolio, will achieve its investment objective. Wells Fargo
Bank, as investment adviser to the Fund, pursues the Fund's objective by
investing (under normal market conditions) substantially all of the Fund's
assets in the following types of municipal obligations that pay interest which
is exempt from both federal income tax and California personal income tax:
bonds, notes, and commercial paper issued by or on behalf of the State of
California, its cities, municipalities, political subdivisions and other public
authorities with remaining maturities not exceeding thirteen months, as
determined in accordance with Rule 2a-7 under the 1940 Act. These municipal
obligations and the taxable investments described below may bear interest at
rates that are not fixed ("floating- and variable-rate instruments"). The Fund
may also invest in obligations issued by the U.S. Virgin Islands, Puerto Rico
and Guam, the interest on which also is exempt from federal income tax and
California personal income tax.
The California Tax-Free Money Market Mutual Fund may temporarily invest some
of its assets in certain high-quality, taxable money market instruments or may
engage in certain other investment activities as described in this Prospectus.
The Fund may elect to invest temporarily up to 20% of its net assets in certain
permitted taxable investments,
PROSPECTUS 10
<PAGE> 19
which include cash reserves, U.S. Government obligations, obligations of
domestic and foreign banks, foreign securities, rated commercial paper, taxable
municipal obligations, repurchase agreements, and loans of portfolio securities.
Such temporary investments would most likely be made when there is an unexpected
or abnormal level of investor purchases or redemptions of Fund shares or because
of unusual market conditions. The income from these temporary investments and
investment activities may be subject to federal income tax and California
personal income tax. However, as stated above, Wells Fargo Bank seeks to invest
substantially all of the Fund's assets in securities exempt from such taxes. An
additional description of tax-free municipal obligations, taxable money market
instruments, and other investment activities is contained in the "Prospectus
Appendix - Additional Investment Policies" and in the SAI.
As a matter of fundamental policy, at least 80% of the California Tax-Free
Money Market Mutual Fund's net assets are invested (under normal market
conditions) in municipal obligations that pay interest which is exempt from
federal income tax and not subject to the federal alternative minimum tax (or in
other open-end tax-free money market funds with a similar fundamental policy).
At least 65% of the Fund's total assets are invested (under normal market
conditions) in municipal obligations that pay interest which is exempt from
California personal income tax. However, as a matter of general operating
policy, the Fund seeks to have substantially all of its assets invested in such
municipal obligations. The Fund's investment adviser may rely either on the
opinion of counsel to the issuer of the municipal obligations or bond counsel
regarding the tax treatment of these obligations. In addition, the Fund may
invest 25% or more of its assets in California municipal obligations that are
related in such a way that an economic, business or political development or
change affecting one such obligation would also affect the other obligations;
for example, the California Tax-Free Money Market Mutual Fund may own different
municipal obligations which pay interest based on the revenues of similar types
of projects.
THE NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND
The National Tax-Free Money Market Mutual Fund seeks to provide investors with
a high level of income exempt from federal income tax, while preserving capital
and liquidity. The Fund, which is a diversified portfolio, seeks to achieve its
investment objective by investing all of its assets in the Master Portfolio,
which has the same investment objective as the Fund. The Master Portfolio seeks
to achieve its investment objective by investing in high-quality, short-term
U.S. dollar-denominated money market instruments, primarily municipal
obligations, with remaining maturities not exceeding thirteen months.
Since the investment characteristics of the Fund correspond directly to those
of the Master Portfolio, the following is a discussion of the various
investments of, and techniques employed by, the Master Portfolio.
11 PROSPECTUS
<PAGE> 20
Wells Fargo Bank, as investment adviser to the Master Portfolio, pursues the
investment objective of the Master Portfolio by investing (under normal market
conditions) substantially all of the Master Portfolio's assets in the following
types of municipal obligations that pay interest which is exempt from federal
income tax: bonds, notes and commercial paper issued by or on behalf of states,
territories, and possessions of the United States (including the District of
Columbia) and their political subdivisions, agencies, instrumentalities
(including government-sponsored enterprises) and authorities, the interest on
which, in the opinion of counsel to the issuer or bond counsel, is exempt from
federal income tax. These municipal obligations and the taxable investments
described below may bear interest at rates that are not fixed ("floating- and
variable-rate instruments").
The Master Portfolio may temporarily invest some of its assets in cash
reserves or certain high-quality, taxable money market instruments, or may
engage in other investment activities as described in this Prospectus. The
Master Portfolio may elect to invest temporarily up to 20% of its net assets in
certain permitted taxable investments, including cash reserves, U.S. Government
obligations, obligations of domestic banks, commercial paper, taxable municipal
obligations and repurchase agreements. The Master Portfolio may also invest in
U.S. dollar-denominated obligations of foreign banks and foreign securities.
Such temporary investments would most likely be made when there is an unexpected
or abnormal level of investor purchases or redemptions of interests in the
Master Portfolio or because of unusual market conditions. The income from these
temporary investments and investment activities may be subject to federal income
tax. However, as stated above, Wells Fargo Bank seeks to invest substantially
all of the Master Portfolio's assets in securities exempt from such tax. A more
complete description of tax-free municipal obligations, taxable money market
instruments, and other investment activities is contained in the "Prospectus
Appendix -- Additional Investment Policies."
As a matter of fundamental policy, at least 80% of the net assets of the
Master Portfolio are invested (under normal market conditions) in municipal
obligations that pay interest which is exempt from federal income tax and is not
subject to the federal alternative minimum tax. However, as a matter of general
operating policy, the Master Portfolio seeks to invest substantially all of its
assets in such municipal obligations. The Master Portfolio's investment adviser
may rely either on the opinion of counsel to the issuer of the municipal
obligations or bond counsel regarding the tax treatment of these obligations. In
addition, the Master Portfolio may invest 25% or more of its assets in municipal
obligations that are related in such a way that an economic, business or
political development or change affecting one such obligation would also affect
the other obligations; for example, the Master Portfolio may own different
municipal obligations which pay interest based on the revenues of similar types
of projects.
PROSPECTUS 12
<PAGE> 21
MASTER/FEEDER STRUCTURE
The National Tax-Free Money Market Mutual Fund is a feeder fund in a
master/feeder structure, which means that it invests all of its assets in the
Master Portfolio. The Master Portfolio has the same investment objective as the
Fund. The Master Trust is organized as a trust under the Laws of the State of
Delaware. See "How the Funds Work -- Investment Objectives and Policies." In
addition to selling its shares to the Fund, the Master Portfolio may sell its
shares to other mutual funds or qualified investors. Other mutual funds and
other qualified investors may have different expenses and, accordingly, may
experience different investment returns and yields compared with the Fund.
Information regarding additional options, if any, for investments in shares of
the Master Portfolio is available from Stephens and may be obtained by calling
1-800-643-9691 or by calling Wells Fargo Bank at 1-800-222-8222.
The Company's Board of Directors believes that if other investors invest their
assets in the Master Portfolio, certain economic efficiencies may be realized
with respect to the Master Portfolio. For example, fixed expenses that otherwise
would have been borne solely by the Fund would be spread across a potentially
larger asset base provided by more than one fund investing in the Master
Portfolio. The Fund and any other entities investing in the Master Portfolio are
each liable for all obligations of the Master Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Master Trust
itself is unable to meet its obligations. Accordingly, the Company's Board of
Directors believes that neither the Fund nor its shareholders will be adversely
affected by reason of investing the Fund's assets in the Master Portfolio.
However, if a mutual fund or other investor withdraws its investment from the
Master Portfolio, the economic efficiencies (e.g., spreading fixed expenses
across a larger asset base) that the Company's Board of Directors believes
should be available through investment in the Master Portfolio may not be fully
achieved. In addition, given the relatively novel nature of the master/feeder
structure, accounting and operational difficulties, although unlikely, could
occur. See "Management, Distribution and Servicing Fees" for additional
description of the Fund's and Master Portfolio's expenses and management.
The Fund may withdraw its investments in the Master Portfolio only if the
Company's Board of Directors determines that such action is in the best
interests of the Fund and its shareholders. Upon such withdrawal, the Board
would consider alternative investments, including investing all of the Fund's
assets in another investment company with the same investment objective as the
Fund or hiring an investment adviser to manage the Fund's assets in accordance
with the investment policies described in this section with respect to the
Master Portfolio. For a description of the management of the Master Portfolio,
see "The Funds, The Master Portfolio and Management."
The investment objective and other fundamental policies of the National
Tax-Free Money Market Mutual Fund and the Master Portfolio cannot be changed
without approval by the holders of a majority, as defined in the 1940 Act, of
the Fund's or Master
13 PROSPECTUS
<PAGE> 22
Portfolio's, as applicable, outstanding voting securities. Whenever the Fund, as
a Master Portfolio interestholder, is requested to vote on matters pertaining to
any fundamental policy of the Master Portfolio, the Fund will hold a meeting of
its shareholders to consider such matters, and the Fund will cast its votes in
proportion to the votes received from Fund shareholders. The Fund will vote Fund
shares for which it receives no voting instructions in the same proportion as
the votes received from Fund shareholders. In addition, certain policies of the
Master Portfolio which are non-fundamental could be changed by vote of a
majority of the Master Trust's Trustees without interestholder vote. If the
Master Portfolio's investment objective or fundamental or non-fundamental
policies are changed, the Fund could subsequently change its own investment
objective or policies to correspond to those of the Master Portfolio, or the
Fund could redeem its Master Portfolio interests and either seek a new
investment company with a matching objective in which to invest or it could
retain its own investment adviser to manage the Fund's portfolio in accordance
with its investment objective. In the latter case, the Fund's inability to find
a substitute investment company in which to invest or equivalent management
services could adversely affect shareholders' investments in the Fund. The Fund
will provide shareholders with 30 days' written notice prior to the
implementation of any change in the investment objective of such Fund or the
Master Portfolio, to the extent possible. Information on the Fund's and Master
Portfolio's investment objectives, policies and restrictions is included under
"How the Funds Work" and "Prospectus Appendix -- Additional Investment Policies"
in this Prospectus and under "Investment Restrictions" and "Additional Permitted
Investment Activities" in the SAI. Additional information regarding the officers
and directors/trustees of the Company and the Master Trust is included in the
SAI for the National Tax-Free Money Market Mutual Fund under "Management."
RISK FACTORS
Investments in the Funds and Master Portfolio are not bank accounts and are
not insured or guaranteed against loss of principal. Although both the Funds and
the Master Portfolio seek to maintain a stable NAV of $1.00 per share, there is
no assurance that they will be able to do so. As with all mutual funds, there
can be no assurance that the Funds and the Master Portfolio will achieve their
investment objectives. See "Prospectus Appendix -- Additional Investment
Policies" for further discussion of investment objectives and risks.
The Funds and the Master Portfolio, under the 1940 Act, must comply with
certain investment criteria designed to provide liquidity, reduce risk, and
allow the Funds and the Master Portfolio to maintain a stable NAV of $1.00 per
share. The dollar-weighted average portfolio maturity of each of the Funds and
the Master Portfolio must not exceed 90 days. Any security that a Fund or the
Master Portfolio purchases must have a remaining maturity of not more than
thirteen months. In addition, any security that a Fund or the Master Portfolio
purchases must present minimal credit risks and be of high quality (i.e., be
rated in the top two rating categories by the required number of nationally
PROSPECTUS 14
<PAGE> 23
recognized statistical rating organizations ("NRSROs") or, if unrated,
determined to be of comparable quality to such rated securities). These
determinations are made by Wells Fargo Bank, as the Funds' or Master Portfolio's
investment adviser, as the case may be, under guidelines adopted by the Board of
Directors of the Company, or the Master Trust's Board of Trustees, respectively.
The Funds and the Master Portfolio seek to reduce risk by investing their
assets in securities of various issuers. As such, the Money Market Mutual Fund,
the National Tax-Free Money Market Mutual Fund and the Master Portfolio, but not
the California Tax-Free Money Market Mutual Fund, are considered to be
diversified for purposes of the 1940 Act. In addition, the Funds and the Master
Portfolio, since their respective inceptions, have emphasized safety of
principal and high credit quality. In particular, the internal investment
policies of Wells Fargo Bank, the investment adviser to the Funds and Master
Portfolio, have always prohibited the purchase for the Funds and Master
Portfolio of many types of floating-rate instruments commonly referred to as
"derivatives" that are considered potentially volatile. The following types of
derivative instruments ARE NOT permitted investments for the Funds and the
Master Portfolio:
- capped floaters (on which interest is not paid when market rates move above
a certain level);
- leveraged floaters (whose interest-rate reset provisions are based on a
formula that magnifies changes in interest rates);
- range floaters (which do not pay any interest if market interest rates move
outside of a specified range);
- dual index floaters (whose interest-rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, neither the Funds nor the Master Portfolio may invest in
instruments whose interest rate reset provisions are tied to an index that
materially lags short-term interest rates, such as Cost of Funds Index ("COFI")
floaters. The Funds and the Master Portfolio may only invest in floating-rate
instruments that bear interest at a rate that resets quarterly or more
frequently, and which resets based on changes in standard money market rate
indices such as U.S. Government Treasury bills, London Interbank Offered Rate,
the prime rate, published commercial paper rates, federal funds rates, Public
Securities Associates ("PSA") floaters or JJ Kenney index floaters.
Since the California Tax-Free Money Market Mutual Fund invests primarily in
securities issued by California and its agencies and municipalities, events in
California are more likely to affect the Fund's investments. While the
California Tax-Free Money Market Mutual Fund seeks to reduce risk by investing
its assets in securities of various issuers, the Fund is considered to be
nondiversified for purposes of the 1940 Act. However, the
15 PROSPECTUS
<PAGE> 24
California Tax-Free Money Market Mutual Fund will comply with the Internal
Revenue Code of 1986 (the "Code") diversification requirements, as described in
the "Prospectus Appendix -- Additional Investment Policies" section below.
California is experiencing recurring budget deficits caused by lower than
anticipated tax revenues and increased expenditures for certain programs. These
budget deficits have depleted the state's available cash resources, and the
state has recently had to use a series of external borrowings to meet its cash
needs. In addition, since 1992 some of the credit rating agencies have assigned
their third highest rating to certain of the state's debt obligations. On July
15, 1994, three of the ratings agencies rating California's long-term debt
lowered their rating of the state's general obligation bonds. Moody's Investors
Service lowered its rating from "Aa" to "A1," Standard & Poor's Ratings Group
lowered its rating from "A+" to "A" and termed its outlook as "stable," and
Fitch Investors Service lowered its rating from "AA" to "A." Since the
California Tax-Free Money Market Mutual Fund may invest only in securities rated
in the top two rating categories, any further rating downgrade of the state's
debt obligations may impact the availability of securities that meet the Fund's
investment policies and restrictions. The Fund's investment adviser continues to
monitor and evaluate the Fund's investments in light of the events in California
and the California Tax-Free Money Market Mutual Fund's investment objective and
investment policies. The rating agencies also continue to monitor events in the
state and the state and local governments' responses to budget shortfalls. See
"Special Considerations Affecting California Municipal Obligations" in the SAI
for the California Tax-Free Money Market Mutual Fund.
PERFORMANCE
The performance of the Class A Shares of the Money Market Mutual Fund and the
shares of the California Tax-Free Money Market Mutual and National Tax-Free
Money Market Mutual Funds may be advertised in terms of current yield or
effective yield. In addition, the performance of the Tax-Free Funds may be
advertised in terms of tax-equivalent yield or effective tax-equivalent yield.
These performance figures are based on historical results and are not intended
to indicate future performance. The investment performance of the National
Tax-Free Money Market Mutual Fund will correspond to the investment performance
of the Master Portfolio.
Yield refers to the income generated by an investment in shares of a Tax-Free
Fund, or Class of shares of the Money Market Mutual Fund, over a seven- or
thirty-day period (which period will be specified in any advertisement),
expressed as an annual percentage rate. Effective yields are calculated
similarly but assume that the income earned from a Fund is reinvested in the
Fund or in shares of the same Class of such Fund. Because of the effects of
compounding, effective yields are slightly higher than yields. The
tax-equivalent yield and the effective tax-equivalent yield of the Tax-Free
Funds assume that a stated income tax rate has been applied to determine the
tax-equivalent figures. The application of the stated income tax rate results in
higher yield and effective yield figures. The Tax-Free Funds may also present
nonstandard performance
PROSPECTUS 16
<PAGE> 25
information, such as distribution rate, for purposes of sales literature.
Performance quotations are computed separately for Class A Shares and Class S
Shares of the Money Market Mutual Fund.
Additional performance information is contained in the Company's annual report
which is available upon request without charge by calling the Company at
1-800-222-8222.
THE FUNDS, THE MASTER PORTFOLIO
AND MANAGEMENT
The Funds are three of the Funds in the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991, and is
currently authorized to offer shares of ten other funds: the Aggressive Growth
Fund, Asset Allocation Fund, California Tax-Free Bond Fund, California Tax-Free
Income Fund, Corporate Stock Fund, Diversified Income Fund, Ginnie Mae Fund,
Growth and Income Fund, Short-Intermediate U.S. Government Income Fund and U.S.
Government Allocation Fund. The Money Market Mutual Fund also offers a second
class of shares -- Class S Shares. Class S Shares are subject to different
levels of fees and expenses than Class A Shares, and the performance of such
shares may vary accordingly. Class S Shares are currently available only to
qualified business investors who purchase such shares through certain
non-interest bearing transaction accounts offered by Wells Fargo Bank. Please
contact Stagecoach Shareholder Services at 1-800-222-8222 if you would like
additional information about Class S Shares.
The Company's Board of Directors supervises these funds' activities and
monitors their contractual arrangements with various service providers. Although
the Company is not required to hold annual shareholder meetings, special
meetings may be required for purposes such as electing or removing Directors,
approving advisory contracts and distribution plans, and changing the funds'
investment objectives or fundamental investment policies. All shares of the
funds have equal voting rights and will be voted in the aggregate, rather than
by fund or class, unless otherwise required by law (such as when the voting
matter affects only one fund or class). As a shareholder of the Funds, you are
entitled to one vote for each share you own and fractional votes for fractional
shares owned. A more detailed description of the voting rights and attributes of
the shares is contained in the "Capital Stock" section of the SAI for each Fund.
The Master Trust was established on August 15, 1991, as a Delaware business
trust. The Master Trust's Declaration of Trust permits the Board of Trustees to
issue beneficial interests in a Master Portfolio of the Master Trust to
investors based on their proportionate investments in the Master Portfolio. The
Master Trust is divided into separate portfolios. The Master Trust has retained
the services of Wells Fargo Bank as
17 PROSPECTUS
<PAGE> 26
investment adviser and Stephens as administrator and placement agent. The Board
of Trustees of the Master Trust is responsible for the general management of the
Master Trust and its Master Portfolios and supervising the actions of Wells
Fargo Bank and Stephens in these capacities.
INVESTMENT ADVISER
Wells Fargo Bank is the investment adviser to the Master Portfolio, the Money
Market Mutual Fund and the California Tax-Free Money Market Mutual Fund. Wells
Fargo Bank, one of the largest banks in the United States, was founded in 1852
and is the oldest bank in the western United States. As of January 1, 1996,
Wells Fargo Bank provided investment advisory services for over $33 billion of
assets for individuals, trusts, estates and institutions. Wells Fargo Bank also
serves as the investment adviser or sub-adviser to the other separately managed
portfolios of the Master Trust, to the other funds of the Company and to five
other registered, open-end management investment companies each of which
consists of several separately managed investment portfolios. Wells Fargo Bank,
a wholly owned subsidiary of Wells Fargo & Company, is located at 420 Montgomery
Street, San Francisco, California 94104.
Morrison & Foerster LLP, counsel to the Company and the Master Trust and
special counsel to Wells Fargo Bank, has advised the Company, the Master Trust
and Wells Fargo Bank that Wells Fargo Bank and its affiliates may perform the
services contemplated by the Investment Advisory Agreement and this Prospectus
without violation of the Glass-Steagall Act. Such counsel has pointed out,
however, that there are no controlling judicial or administrative
interpretations or decisions and that future judicial or administrative
interpretations of, or decisions relating to, present federal or state statutes,
including the Glass-Steagall Act, and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in such statutes, regulations and judicial or administrative decisions
or interpretations, could prevent such entities from continuing to perform, in
whole or in part, such services. If any such entity were prohibited from
performing any such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as the Funds' and the Master Portfolio's custodian and
transfer and dividend disbursing agent (the "Transfer Agent"). In addition,
Wells Fargo Bank is a Shareholder Servicing Agent and Selling Agent of the
Funds.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Stephens is the Company's and the Master Trust's sponsor and administrator,
and distributes the Funds' shares. Stephens is a full service broker/dealer and
investment advisory firm located at 111 Center Street, Little Rock, Arkansas
72201. Stephens and its
PROSPECTUS 18
<PAGE> 27
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit-sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUNDS
You may purchase Fund shares directly by opening a Fund account or indirectly
by opening a sweep account with Wells Fargo Bank.
OPENING A FUND ACCOUNT
You can buy Fund shares in one of the several ways described below. You must
complete and sign an Account Application to open an account. Additional
documentation may be required from corporations, associations, and certain
fiduciaries. Do not mail cash. If you have any questions or need extra forms,
you may call 1-800-222-8222.
After an application has been processed and an account has been established,
subsequent purchases of different funds of the Company under the same umbrella
account do not require the completion of additional Account Applications. A
separate Account Application must be processed for each different umbrella
account number (even if the registration is the same). Call the number on your
confirmation statement to obtain information about what is required to change
registration.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon receipt of a request from you or your representative, the Company
or Stephens will transmit or cause to be transmitted promptly, without charge, a
paper copy of the electronic Prospectus.
OPENING A WELLS FARGO BANK SWEEP ACCOUNT
Customers of Wells Fargo Bank may invest in the Class A Shares of the Money
Market Mutual Fund, California Tax-Free Money Market Mutual Fund or the National
Tax-Free Money Market Mutual Fund through a Money Market Access Account or a
Money Market Checking Account established with the Bank. Customers of Wells
Fargo Bank who currently hold shares of the California Tax-Free Money Market
Mutual Fund through a Managed Sweep Account may also open additional Managed
Sweep Accounts that sweep into the California Tax-Free Money Market Mutual Fund.
Investments through an account are governed by the terms and conditions of the
Account, which are set forth in a separate Disclosure Statement provided by
Wells Fargo Bank to each Accountholder. In light of the automated sweep and
custodial account structure of investments through an Account, certain of the
features described in this Prospectus are not available to
19 PROSPECTUS
<PAGE> 28
investors purchasing shares through an Account. Specifically, shares of a Fund
purchased through an Account may be redeemed only through the Account, and the
dividend and distribution options and exchange privileges described in this
Prospectus are not available with respect to shares purchased through an
Account. Potential Accountholders should refer to the Disclosure Statement for
more information regarding the Account, including information about fees and
expenses.
SHARE VALUE
The value of a share of each Fund is its NAV (as defined below). The NAV of
each Fund's shares is calculated as of 9:00 a.m. and 1:00 p.m. (Pacific time) on
each Business Day. The NAV of each share of the California Tax-Free Money Market
Mutual Fund and the National Tax-Free Money Market Mutual Fund is computed by
adding the value of the respective Fund's portfolio investments plus cash and
other assets, deducting liabilities and then dividing the result by the number
of outstanding shares of such Fund. The National Tax-Free Money Market Mutual
Fund's investments in the Master Portfolio are valued at the NAV of the Master
Portfolio's shares. The Master Portfolio calculates the NAV of its shares on the
same day and at the same time as the National Tax-Free Money Market Mutual Fund.
The NAV of a share of each Class of the Money Market Mutual Fund is the value of
total net assets attributable to each Class divided by the number of outstanding
shares of that Class. The value of the net assets per Class is determined daily
by adjusting the net assets per Class at the beginning of the day by the value
of each Class's shareholder activity, net investment income and net realized and
unrealized gains or losses for that day. Net investment income is calculated
each day for each Class by attributing to each Class a pro rata share of daily
income and common expenses, and by assigning class-specific expenses to each
Class as appropriate. As noted above, the Funds and the Master Portfolio seek to
maintain a constant $1.00 per share NAV, although there is no assurance that
they will be able to do so.
Shares of a Fund may be purchased on any day such Fund is open (a "Business
Day"). Currently, the Money Market Mutual Fund and California Tax-Free Money
Market Mutual Fund observe the following holidays: New Year's Day, Presidents'
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day (each, with respect to such Funds, a "Holiday"), the National Tax-Free Money
Market Mutual Fund observes the aforementioned Holidays and also observes Martin
Luther King, Jr. Day, Columbus Day and Veterans Day (with respect to such Fund,
these days are also "Holidays"). Purchase orders received before 9:00 a.m.
(Pacific time) are processed at 9:00 a.m. on that Business Day. Purchase orders
received after 9:00 a.m. are processed at 9:00 a.m. the next Business Day,
except that transaction orders that are received prior to 1:00 p.m. through
Shareholder Servicing Agents in connection with automated investment programs
are processed at 1:00 p.m. All transaction orders are processed at the NAV next
determined after the order is received.
PROSPECTUS 20
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The Funds' and the Master Portfolio's NAV are each calculated on the basis of
the amortized cost method. This valuation method is based on the receipt of a
steady rate of payment on portfolio instruments from the date of purchase until
maturity rather than actual changes in market value. The Company's Board of
Directors and the Master Trust's Board of Trustees believe that this valuation
method accurately reflects fair value.
HOW TO BUY SHARES
You may buy shares of the Funds on any Business Day by any of the methods
described below or by opening a Wells Fargo Bank Sweep Account. After a properly
completed Account Application is received and your wire order or check is
received, or an account with a bank that is designated in the Account
Application and that is approved by the Transfer Agent (an "Approved Bank
Account") is debited, your purchase order is effected and full and fractional
shares are purchased at the next determined NAV, which is expected to remain a
constant $1.00 per share. If shares are purchased by a check that does not
clear, the Company reserves the right to cancel the purchase and hold the
investor responsible for any losses or fees incurred. In addition, the Funds may
hold payment on any redemption until reasonably satisfied that investments made
by check have been collected (which may take up to 10 days).
Generally, the minimum initial investment amount is $2,500. However, the
minimum initial investment amount is $100 for investments made through the
AutoSaver Plan purchase method (described below) and $250 for investments in
Class A Shares of the Money Market Mutual Fund made through any tax-deferred
retirement account for which Wells Fargo Bank serves as custodian or trustee
under a prototype trust approved by the IRS (a "Plan Account"). Plan Accounts
that invest in Class A Shares of the Money Market Mutual Fund through Wells
Fargo ExpressInvest(TM) (available to certain Wells Fargo tax-deferred
retirement plans) are not subject to the minimum initial investment amount
requirement. Where Fund shares are acquired in exchange for shares of another
fund in the Stagecoach Family of Funds, the minimum initial investment amount
applicable to the shares being exchanged generally carries over. This means, for
example, that you can invest $1,000 in shares of the California Tax-Free Money
Market Mutual Fund even though such Fund ordinarily requires a $2,500 minimum
balance, in an exchange from a fund that has a $1,000 minimum balance
requirement, except that if the value of your investment in the shares of the
Fund from which you are exchanging has been reduced below the minimum initial
investment amount by changes in market conditions or sales charges (and not by
redemptions), you may carry over the lesser amount into one of the Money Market
Mutual Funds. In addition, the minimum initial or subsequent purchase amount
requirements may be waived or lowered for investments effected on a group basis
by certain entities and their employees, such as pursuant to a payroll deduction
or other accumulation plan. In addition, the minimum initial purchase amount
does not apply to investors who purchase shares of the Funds as customers of a
financial institution that has established a cash sweep arrangement with respect
to one of the Funds. Generally, subsequent investments must be of at least $100.
However, Plan
21 PROSPECTUS
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Accounts that invest in Class A Shares of the Money Market Mutual Fund through
Wells Fargo ExpressInvest are not subject to the minimum subsequent investment
amount requirements. If you have questions regarding purchases of shares or
ExpressInvest, please contact the Company at 1-800-222-8222 or contact a
Shareholder Servicing Agent or Selling Agent (defined below). For additional
information on tax-deferred accounts, please refer to "Investing in the
Funds -- Tax-Deferred Retirement Plans" or contact a Shareholder Servicing Agent
or Selling Agent.
Shares of the National Tax-Free Money Market Mutual Fund and the California
Tax-Free Money Market Mutual Fund may not be suitable investments for tax-exempt
institutions or tax-deferred retirement plans, since such investors would not
benefit from the exempt status of the Funds' dividends. See "Federal Income
Taxes - Special Tax Considerations" in the SAI for each Fund. In addition,
California Tax-Free Money Market Mutual Fund shares are not available in all
states.
The Company reserves the right to reject any purchase order or suspend sales
at any time. Payment for orders that are not received is returned after prompt
inquiry. The issuance of shares is recorded on the Company's books, and share
certificates are not issued.
INITIAL PURCHASES BY WIRE
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
($2,500 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund) (designate a Class, if applicable)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after the funds are wired and must be received and accepted by the Transfer
Agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
PROSPECTUS 22
<PAGE> 31
4. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
INITIAL PURCHASES BY MAIL
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $2,500 or more, payable to
"Stagecoach Funds (Name of Fund) (designate a Class, if applicable)," to the
address set forth in "Initial Purchases by Wire."
3. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
AUTOSAVER PLAN PURCHASES
The AutoSaver Plan provides you with a convenient way to establish and
automatically add to your Fund account on a monthly basis. To participate in the
AutoSaver Plan, you must specify an amount ($100 or more) to be withdrawn
automatically by the Transfer Agent on a monthly basis from your Approved Bank
Account. An Approved Bank Account may be established at Wells Fargo Bank. The
Transfer Agent withdraws and uses this amount to purchase specified shares of
the designated Fund on your behalf each month on or about the day that you have
selected, or, if you have not selected a day, on or about the 20th day of each
month. The Transfer Agent requires a minimum of ten (10) Business Days to
implement your AutoSaver Plan purchases. There are no separate fees charged to
you by the Funds for participating in the AutoSaver Plan.
You may change your investment amount, the date on which your AutoSaver
purchase is effected, suspend purchases or terminate your election at any time
by notifying the Transfer Agent at least five (5) Business Days prior to any
scheduled transaction.
TAX-DEFERRED RETIREMENT PLANS
You may be entitled to invest in the Money Market Mutual Fund through a Plan
Account or other tax-deferred retirement plan. Contact a Shareholder Servicing
Agent (such as Wells Fargo Bank) or a Selling Agent for materials describing
Plan Accounts available through it, and the benefits, provisions, and fees of
such Plan Accounts. The minimum initial investment amount for Class A Shares of
the Money Market Mutual Fund acquired through a Plan Account is $250 (the
minimum initial investment amount is not applicable if you participate in
ExpressInvest through a Plan Account).
Pursuant to the Code, individuals who are not active participants (and who do
not have a spouse who is an active participant) in certain types of retirement
plans ("qualified retirement plans") may deduct contributions to an Individual
Retirement Account ("IRA"), up to specified limits. Investment earnings in the
IRA will be tax-deferred until withdrawn, at which time the individual may be in
a lower tax bracket.
23 PROSPECTUS
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The maximum annual deductible contribution to an IRA for individuals under age
70 1/2 is 100% of includible compensation up to a maximum of (i) $2,000 for
single individuals; (ii) $4,000 for a married couple when both spouses earn
income; and (iii) $2,250 when one spouse earns, or elects for IRA purposes to be
treated as earning, no income (together the "IRA contribution limits").
The IRA deduction is also available for single individual taxpayers and
married couples who are active participants in qualified retirement plans but
who have adjusted gross incomes which do not exceed certain specified limits. If
their adjusted gross income exceeds these limits, the amount of the deductible
contribution is phased down and eventually eliminated.
Any individual who works may make nondeductible contributions to an IRA in
addition to any deductible contributions. Total aggregate deductible and
nondeductible contributions are limited to the IRA contribution limits discussed
above. Nondeductible contributions in excess of the applicable IRA contribution
limit are "nondeductible excess contributions." In addition, contributions made
to an IRA for the year in which an individual attains the age of 70 1/2, or any
year thereafter, are also nondeductible excess contributions. Nondeductible
excess contributions are subject to a 6% excise tax penalty which is charged
each year that the nondeductible excess contribution remains in the IRA.
An employer also may contribute to an individual's IRA by establishing a
Simplified Employee Pension Plan, known as a SEP-IRA, through a Shareholder
Servicing Agent or a Selling Agent. Participating employers may make an annual
contribution in an amount up to the lesser of 15% of earned income or $30,000,
subject to certain provisions of the Code. Investment earnings will be
tax-deferred until withdrawn.
The foregoing discussion regarding IRAs is based on the Code and federal
regulations in effect as of the date of this Prospectus and summarizes only some
of the important federal tax considerations generally affecting IRA
contributions made by individuals or their employers. It is not intended as a
substitute for careful tax planning. You should consult your tax advisor with
respect to your specific federal tax situation as well as with respect to state
and local taxes. Further federal tax information is contained under the heading
"Taxes" in this Prospectus and in the SAI for each Fund.
A Shareholder Servicing Agent or Selling Agent also may offer other types of
tax-deferred or tax-advantaged plans, including a Keogh retirement plan for
self-employed professional persons, sole proprietors and partnerships.
Application materials for opening a tax-deferred retirement plan can be
obtained from a Shareholder Servicing Agent or a Selling Agent. Return your
completed tax-deferred retirement plan application to your Shareholder Servicing
Agent or a Selling Agent for approval and processing. If your tax-deferred
retirement plan application is incomplete or improperly filled out, there may be
a delay before a Fund account is opened. You should ask your Shareholder
Servicing Agent or Selling Agent about the investment
PROSPECTUS 24
<PAGE> 33
options available to your tax-deferred retirement plan, since some of the funds
in the Stagecoach Family of Funds may be unavailable as options. Moreover,
certain features described herein, such as the AutoSaver Plan and the Systematic
Withdrawal Plan, may not be available to individuals or entities who invest
through a tax-deferred retirement plan.
ADDITIONAL PURCHASES
You may make additional purchases of $100 or more by instructing the Funds'
Transfer Agent to debit a designated Approved Bank account, by wire by
instructing the wiring bank to transmit the specified amount as directed above
for initial purchases, or by mail with a check payable to "Stagecoach Funds
(name of Fund) (designate Class A, if applicable)" to the address set forth in
"Initial Purchases by Wire." Write your Fund account number on the check and
include the detachable stub from your Statement of Account or a letter providing
your Fund account number.
PURCHASES THROUGH SELLING AGENTS
You may place a purchase order for shares of the Funds through a broker/dealer
or financial institution that has entered into a Selling Agreement with
Stephens, as the Funds' Distributor ("Selling Agent"), by 9:00 a.m. (Pacific
time) on any Business Day, including orders for which payment is to be made from
your free cash credit balance in a securities account maintained with a Selling
Agent. These purchase orders are executed on the same day the order is placed if
notice is provided to the Transfer Agent by 9:00 a.m. and if federal funds are
received by the Transfer Agent before the close of business. If your purchase
order is received by a Selling Agent after 9:00 a.m. on any Business Day or if
federal funds are not received by the Transfer Agent before the close of
business, then your purchase order generally is executed on the next Business
Day following the day your order is placed. The Selling Agent is responsible for
the prompt transmission of your purchase order to the Funds.
PURCHASES THROUGH SHAREHOLDER SERVICING AGENTS
Purchase orders for shares of the Funds may be transmitted to the Transfer
Agent through any entity that has entered into a Shareholder Servicing Agreement
with the Funds ("Shareholder Servicing Agent"), such as Wells Fargo Bank. See
"Management and Servicing Fees - Shareholder Servicing Agent."
The Shareholder Servicing Agent may transmit a purchase order to the Transfer
Agent, on your behalf, including a purchase order for which payment is to be
transferred from your Approved Bank Account or wired from a financial
institution. If the Shareholder Servicing Agent transmits your purchase order to
the Transfer Agent before 9:00 a.m. (Pacific time) and if federal funds are
received by the Transfer Agent before the close of business, the purchase order
is executed on the same day. If your Shareholder Servicing Agent transmits your
purchase order to the Transfer Agent after 9:00 a.m. or if federal
25 PROSPECTUS
<PAGE> 34
funds are not received by the Transfer Agent before the close of business, then
your order generally is executed on the next Business Day, except that automated
investment program purchase orders transmitted through Shareholder Servicing
Agents are executed as of 1:00 p.m. on each Business Day. The Shareholder
Servicing Agent is responsible for the prompt transmission of your purchase
order to the Transfer Agent.
STATEMENTS AND REPORTS
The Funds, or a Shareholder Servicing Agent on their behalf, will typically
send you a monthly statement of your account after every month in which there
has been a transaction that affects your share balance or your Fund account
registration. A statement with tax information will be mailed to you by January
31 of each year, and also will be filed with the IRS. At least twice a year, the
Company's financial statements will be mailed to investors.
DIVIDENDS
The Funds intend to declare dividends on a daily basis payable to shareholders
of record as of 9:00 a.m. (Pacific time). If your purchase order is received
before 9:00 a.m. on any Business Day, you begin earning dividends on that
Business Day and continue to earn dividends through the day prior to the date
you redeem such shares. If your purchase order is processed at or after 9:00
a.m. on any Business Day, you begin earning dividends on the next Business Day
and continue to earn dividends through the day on which you redeem your shares.
Dividends for a Saturday, Sunday or Holiday are declared payable to shareholders
of record as of the preceding Business Day. If you redeem shares before a
dividend payment date, any dividends credited to you are paid on the following
dividend payment date unless you have redeemed all of the shares in your
account, in which case you will receive any accrued dividends together with your
redemption proceeds. The Funds declare and distribute any capital gains at least
annually.
Dividends declared in, and attributable to, a month generally are paid on the
last Business Day of such month. You have three options for receiving dividends
and any capital gain distributions. They are discussed under "Additional
Shareholder Services - Dividend and Distribution Options."
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares in a Fund on any Business Day
without any charge by the Funds. Your shares are redeemed at the NAV next
calculated after the Funds have received your redemption request in proper form.
Redemption proceeds may be more or less than the amount invested and, therefore,
a redemption of shares in a Fund may result in a gain or loss for federal and
state income tax purposes. The Funds
PROSPECTUS 26
<PAGE> 35
ordinarily remit your redemption proceeds within seven days after your
redemption order is received in proper form, unless the SEC permits a longer
period under extraordinary circumstances. Such extraordinary circumstances could
include a period during which an emergency exists as a result of which (a)
disposal by the Funds and/or Master Portfolio of securities owned by them is not
reasonably practicable or (b) it is not reasonably practicable for the Funds
and/or Master Portfolio fairly to determine the value of their net assets, or
(c) a period during which the SEC by order permits deferral of redemptions for
the protection of security holders of the Funds and/or Master Portfolio. In
addition, the Funds may hold payment on your redemption until reasonably
satisfied that your investments made by check have been collected (which can
take up to 10 days from the purchase date). To ensure acceptance of your
redemption request, please follow the procedures described below. Payment of
redemption proceeds may be made in securities, subject to regulation by some
state securities commissions.
Due to the high cost of maintaining Fund accounts with small balances, the
Funds reserve the right to close your account and send you the proceeds if the
balance falls below the applicable minimum balance because of a redemption
(including a redemption of Fund shares after you have made only the applicable
minimum initial investment). You will be given 30 days' notice to make an
additional investment to increase your account balance to an amount equal to or
greater than the applicable minimum balance. For a discussion of applicable
minimum balance requirements, see "Investing in the Funds - How to Buy Shares."
Redemption orders that are received by the Transfer Agent before 9:00 a.m.
(Pacific Time) on any Business Day are executed on that Business Day. Redemption
orders that are received after 9:00 a.m. on any Business Day are executed on the
next Business Day.
REDEMPTIONS BY TELEPHONE
Telephone redemption or exchange privileges are made available to you
automatically upon opening an account, unless you specifically decline such
privileges. Telephone redemption privileges authorize the Transfer Agent to act
on telephone instructions from any person representing himself or herself to be
the investor and reasonably believed by the Transfer Agent to be genuine. The
Company requires the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Company nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
REDEMPTIONS BY LETTER
1. Write a letter of instruction. Indicate the dollar amount or number of Fund
shares you want to redeem. Refer to your Fund account number and give your
social security number or TIN (where applicable).
27 PROSPECTUS
<PAGE> 36
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. Signature guarantees are not required for redemption requests unless
redemption proceeds of $5,000 or more are to be paid to someone other than
you at your address of record or your Approved Bank Account, or other unusual
circumstances exist which cause the Transfer Agent to determine that a
signature guarantee is necessary or prudent to protect against unauthorized
redemption requests. If required, a signature must be guaranteed by an
"eligible guarantor institution," which includes a commercial bank that is an
FDIC member, a trust company, a member firm of a domestic stock exchange, a
savings association, or a credit union that is authorized by its charter to
provide a signature guarantee. Signature guarantees by notaries public are
not acceptable. Further documentation may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians.
4. Mail your letter to the Transfer Agent at the mailing address set forth under
"Investing in the Funds - Initial Purchases by Wire."
Unless other instructions are given in proper form, a check for your
redemption proceeds is sent to your address of record.
EXPEDITED REDEMPTIONS BY LETTER OR TELEPHONE
You may request an expedited redemption of Fund shares by letter, in which
case your receipt of redemption proceeds (but not the Fund's receipt of your
redemption request) would be expedited. Telephone redemption or exchange
privileges are made available to you automatically upon the opening of an
account unless you specifically decline such privileges. You also may request an
expedited redemption of Fund shares by telephone on any Business Day, in which
case both your receipt of redemption proceeds and the Fund's receipt of your
redemption request would be expedited. You may request expedited redemption by
telephone only if the total value of the shares redeemed is equal to $100 or
more.
You may request expedited redemption by telephone by calling the Transfer
Agent at the telephone number listed on your transaction confirmation or by
calling 1-800-222-8222.
You may mail your expedited redemption request to the Transfer Agent at the
mailing address set forth under "Investing in the Funds - Initial Purchases by
Wire."
Upon request, proceeds of expedited redemptions of $5,000 or more will be
wired or credited to your Approved Bank Account or wired to the Selling Agent
designated in your Account Application. The Company reserves the right to impose
a charge for wiring redemption proceeds. When proceeds of your expedited
redemption are to be paid to someone else, to an address other than that of
record, or to an account with an Approved Bank or Selling Agent that you have
not predesignated in your Account Application,
PROSPECTUS 28
<PAGE> 37
your expedited redemption request must be made by letter and the signature(s) on
the letter may be required to be guaranteed, regardless of the amount of the
redemption. If your expedited redemption request is received by the Transfer
Agent before 9:00 a.m. (Pacific time) on a Business Day, your redemption
proceeds are transmitted to your Approved Bank Account or Selling Agent on the
same Business Day (assuming your investment check has cleared as described
above), absent extraordinary circumstances. Such extraordinary circumstances
could include those described above as potentially delaying redemptions and also
could include situations involving an unusually heavy volume of wire transfer
orders on a national or regional basis or communication or transmittal delays
that could cause a brief delay in the wiring or crediting of funds. A check for
proceeds of less than $5,000 is mailed to your address of record, or, at your
election, credited to your Approved Bank Account.
During periods of drastic economic or market activity or changes, you may
experience problems implementing an expedited redemption by telephone. In the
event you are unable to reach the Transfer Agent by telephone, you should
consider using overnight mail to implement an expedited redemption. The Funds
reserve the right to modify or terminate the expedited telephone redemption
privilege at any time.
SYSTEMATIC WITHDRAWAL PLAN
The Company's Systematic Withdrawal Plan provides you with a convenient way to
have Fund shares redeemed from your account and the proceeds distributed to you
on a monthly basis. You may participate in this plan only if you have a Fund
account valued at $10,000 or more as of the date of your election to
participate, your dividend and capital gain distributions are being reinvested
automatically and you are not a participant in the AutoSaver Plan at any time
while participating in the Systematic Withdrawal Plan. You specify an amount
($100 or more) to be distributed by check to your address of record or deposited
in your Approved Bank Account. The Transfer Agent redeems sufficient shares and
mails or deposits your redemption proceeds as instructed on or about the fifth
Business Day prior to the end of each month. There are no separate fees charged
to you by the Funds for participating in the Systematic Withdrawal Plan.
It may take up to ten (10) days after receipt of your request to establish
your participation in the Systematic Withdrawal Plan. You may change your
withdrawal amount, suspend withdrawals or terminate your participation in the
Systematic Withdrawal Plan at any time by notifying the Transfer Agent at least
five (5) Business Days prior to any scheduled transaction. Your participation in
the Systematic Withdrawal Plan is terminated automatically if your Fund account
is closed or, in some cases, if your Approved Bank Account is closed.
REDEMPTIONS THROUGH SELLING AGENTS
You may request a redemption of Fund shares through your Selling Agent.
Redemption orders transmitted by a Selling Agent to the Transfer Agent before
9:00 a.m. (Pacific
29 PROSPECTUS
<PAGE> 38
time) on any Business Day generally are executed on that day. Redemption orders
transmitted by a Selling Agent to the Transfer Agent after 9:00 a.m. on any
Business Day generally are executed on the next Business Day. The Selling Agent
is responsible for the prompt transmission of your redemption order to the
Funds.
Unless you have made other arrangements with a Selling Agent and the Transfer
Agent has been informed of such arrangements, proceeds of a redemption order
made by you through a Selling Agent are credited to your Approved Bank Account.
If no such account is designated, a check for the proceeds is mailed to your
address of record or, if such address is no longer valid, the proceeds are
credited to your account with the Selling Agent. You may request a check from
the Selling Agent or you may elect to retain the redemption proceeds in such
account. The Selling Agent may charge you a service fee. In addition, the
Selling Agent may benefit from the use of your redemption proceeds until the
check it issues to you has cleared or until such proceeds have been disbursed or
reinvested on your behalf.
REDEMPTIONS THROUGH SHAREHOLDER SERVICING AGENTS
You may request a redemption of shares of a Fund through your Shareholder
Servicing Agent. Any redemption request made by telephone through your
Shareholder Servicing Agent must redeem shares with a total value equal to $100
or more. Redemption orders transmitted by a Shareholder Servicing Agent to the
Transfer Agent before 9:00 a.m. (Pacific time) generally are executed on that
day. Redemption orders transmitted by a Shareholder Servicing Agent to the
Transfer Agent after 9:00 a.m. generally are executed on the next Business Day,
except that automated investment program redemption orders transmitted through
Shareholder Servicing Agents are executed at 1:00 p.m. on each Business Day. The
Shareholder Servicing Agent is responsible for the prompt transmission of your
redemption order to the Funds.
Unless you have made other arrangements with your Shareholder Servicing Agent,
and the Transfer Agent has been informed of such arrangements, proceeds of a
redemption order made by you through your Shareholder Servicing Agent are
credited to your Approved Bank Account. If no such account is designated, a
check for the proceeds is mailed to your address of record or, if such address
is no longer valid, the proceeds are credited to your account with your
Shareholder Servicing Agent or to another account designated in your agreement
with your Shareholder Servicing Agent. The Shareholder Servicing Agent may
charge you a fee. In addition, the Shareholder Servicing Agent may benefit from
the use of proceeds credited to your account until any check it issues to you
has cleared or until such proceeds have been disbursed or reinvested on your
behalf.
PROSPECTUS 30
<PAGE> 39
ADDITIONAL SHAREHOLDER SERVICES
The Company offers you a number of optional services. As noted above, you can
take advantage of the AutoSaver Plan, the Systematic Withdrawal Plan, and
Expedited Redemptions by Letter and Telephone. In addition, the Funds offer you
three dividend and distribution payment options and an exchange privilege, which
are described below.
DIVIDEND AND DISTRIBUTION OPTIONS
When you fill out your Account Application, you can choose from three dividend
and distribution options:
A. The AUTOMATIC REINVESTMENT OPTION provides for the reinvestment of your
dividends and capital gain distributions in additional shares of the same
class of the Fund that paid such dividends or capital gain distributions.
Dividends and distributions declared in a month generally are reinvested at
NAV on the last Business Day of such month. You are assigned this option
automatically if you make no choice on your Account Application.
B. The AUTOMATIC CLEARING HOUSE OPTION permits you to have dividends and
capital gain distributions deposited in your Approved Bank Account. In the
event your Approved Bank Account is closed, and your distribution is
returned to the Funds' dividend disbursing agent, your distribution will be
reinvested in your Fund account at the NAV next determined after the
distribution has been returned. Your Automatic Clearing House Option will
be converted to the Automatic Reinvestment Option.
C. The CHECK PAYMENT OPTION lets you receive a check for all dividends and
capital gain distributions, which generally is mailed either to your
designated address or your Approved Bank Account shortly following
declaration. If the U.S. Postal Service cannot deliver your checks, or if
your checks remain uncashed for six months, your distribution will be
reinvested in your Fund account at the NAV next determined after the
earlier of the date the checks have been returned to the dividend
disbursing agent or the date six months after the payment of such dividend
or distribution. Your Check Payment Option will be converted to the
Automatic Reinvestment Option.
The Company takes reasonable efforts to locate investors whose checks are
returned or uncashed after six months. The Company forwards moneys to the
dividend disbursing agent so that it may issue you dividend checks under the
Check Payment Option. The dividend disbursing agent may benefit from the
temporary use of such moneys until these checks clear.
31 PROSPECTUS
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EXCHANGE PRIVILEGE
Wells Fargo Bank advises a variety of other funds, each with its own
investment objective and policies. The exchange privilege is a convenient way
for you to buy shares in the other funds of the Stagecoach Family of Funds that
are registered in your state of residence in order to respond to changes in your
investment and savings goals or in market conditions. Before you make an
exchange from a Fund into another fund of the Stagecoach Family of Funds, please
observe the following:
- Obtain and carefully read the prospectus of the fund into which you want to
exchange. Prospectuses may be obtained by calling 1-800-222-8222.
- Shares are exchanged at the next determined NAV.
- You may exchange shares of the Tax-Free Funds and Class A Shares of the
Money Market Mutual Fund for shares of one of the Company's single-class
funds, for Class A or Class B Shares of one of the Company's multi-class
funds or for Retail Class Shares of another fund. You may also exchange
shares of the Tax-Free Funds for Class A Shares of the Money Market Mutual
Fund and vice versa.
- If you exchange into a fund with a front-end sales charge, you must pay the
difference between that fund's sales charge and any sales charge you already
have paid in connection with the shares you are exchanging.
- Each exchange, in effect, represents the redemption of shares of one fund
and the purchase of shares of another, which may produce a gain or loss for
tax purposes. A confirmation of each exchange transaction is sent to you.
- The dollar amount of shares you exchange generally must meet the minimum
initial and/or subsequent investment amounts of the fund from which you are
exchanging. Where Fund shares are acquired in exchange for shares of another
fund in the Stagecoach Family of Funds, however, the minimum initial
investment amount applicable to the shares being exchanged carries over,
except that if the value of your investment in the shares of the fund from
which you are exchanging has been reduced below the minimum initial
investment amount by changes in market conditions or sales charges (and not
by redemptions), you may carry over the lesser amount into one of the Money
Market Funds.
- The Company reserves the right to limit the number of times shares may be
exchanged between funds, to reject any telephone exchange order, to charge a
nominal exchange fee (although it currently does not do so) or otherwise to
modify or discontinue exchange privileges at any time. Under SEC rules,
subject to limited exceptions, the Company must notify you 60 days before it
modifies or discontinues the exchange privilege.
The procedures applicable to Fund redemptions generally apply to Fund
exchanges. In particular, transaction orders that are received before 1:00 p.m.
(Pacific time) on
PROSPECTUS 32
<PAGE> 41
each Business Day through Shareholder Servicing Agents in connection with
automated investment programs are processed on that Business Day (provided it is
a Business Day for each fund involved in the transaction). Also, where an
exchange order is from a Stagecoach money market mutual fund to a Stagecoach
non-money market mutual fund (a "long-term fund") and the instructions are
received before 1:00 p.m. (Pacific time) through a Shareholder Servicing Agent
by telephone or in person (excluding automated telephone instructions or Wells
Fargo Express ATM instructions), the purchase order for the long-term fund is
processed as of 1:00 p.m. (Pacific time) at the share price determined as of
that Business Day's close of market. A sufficient number of money market mutual
fund shares are sold the following Business Day as of 9:00 a.m. (Pacific time)
in order to settle the long-term fund purchase. In all other instances, exchange
orders received after 9:00 a.m. (Pacific time) are processed on the next day
that is a Business Day for each fund involved in the exchange. In addition, a
signature guarantee may be required for exchanges between shareholder accounts
registered in identical names if the amount being exchanged is more than
$25,000.
To exchange shares, write the Transfer Agent at the mailing address under
"Investing in the Funds - Initial Purchases by Wire" or call the Transfer Agent
at the telephone number listed on your transaction confirmation, or contact your
Shareholder Servicing Agent or Selling Agent. The procedures applicable to
telephone redemptions, including the discussion regarding the responsibility for
the authenticity of telephone instructions, are also applicable to telephone
exchange requests. See "How to Redeem Shares - Expedited Redemptions by Letter
and Telephone."
MANAGEMENT, DISTRIBUTION AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors and the
Board of Trustees of the Master Trust, Wells Fargo Bank, as the Funds' and the
Master Portfolio's investment adviser, provides investment guidance and policy
direction in connection with the management of the Funds' assets. Wells Fargo
Bank also furnishes the Board of Directors with periodic reports on the Funds'
investment strategies and performance. For these services, Wells Fargo Bank is
entitled to a monthly investment advisory fee at the annual rate of 0.40% of the
average daily net assets of the Money Market Mutual Fund, 0.50% of the average
daily net assets of the California Tax-Free Money Market Mutual Fund and 0.30%
of the average daily net assets of the Master Portfolio, of which the National
Tax-Free Money Market Mutual Fund bears a pro rata portion. From time to time,
Wells Fargo Bank may waive such fees in whole or in part. Any such waiver will
reduce expenses of the Funds and the Master Portfolio and,
33 PROSPECTUS
<PAGE> 42
accordingly, have a favorable impact on the Funds' yields. From time to time,
each of the Funds, consistent with its investment objective, policies and
restrictions, may invest in securities of companies with which Wells Fargo Bank
has a lending relationship. For the year ended December 31, 1995, Wells Fargo
Bank was paid at an annual rate equal to 0.40% of the average daily net assets
of the Money Market Mutual Fund and 0.50% of the average daily net assets of the
California Tax-Free Money Market Mutual Fund, respectively, for its services as
investment adviser. As of December 31, 1995, the National Tax-Free Money Market
Mutual Fund had not commenced operations.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as the Funds' and the Master Portfolio's
custodian and transfer and dividend disbursing agent. Wells Fargo Bank performs
the custodial services at 525 Market Street, San Francisco, California 94105.
Under its respective Custody Agreement with Wells Fargo Bank, each Fund and the
Master Portfolio may, at times, borrow money from Wells Fargo Bank as needed to
satisfy temporary liquidity needs. Wells Fargo Bank charges interest on such
overdrafts at a rate determined pursuant to each Fund's and/or Master
Portfolio's Custody Agreement. The transfer and dividend disbursing agency
activities are performed at 525 Market Street, San Francisco, California 94105.
SHAREHOLDER SERVICING AGENT
The Funds have entered into Shareholder Servicing Agreements with Wells Fargo
Bank, and may enter into similar agreements with other entities. Under such
agreements, Shareholder Servicing Agents (including Wells Fargo Bank) agree, as
agent for their customers, to provide various administrative services with
respect to Fund shares, such as maintaining shareholder accounts and records,
assisting shareholders with purchases, exchanges and redemptions, and providing
such other related services as the Company or a shareholder may reasonably
request. For these services, a Shareholder Servicing Agent is entitled to
receive a fee, as calculated on an annualized basis for each Fund's then-current
fiscal year, up to (1) 0.30% of the average daily net assets of the California
Tax-Free Money Market Mutual Fund, 0.30% of the average daily net assets
attributable to the Class A shares of the Money Market Mutual Fund or 0.25% of
the average daily net assets of the National Tax-Free Money Market Mutual Fund,
as represented by shares owned during the period for which payment is being made
by investors with whom the Shareholder Servicing Agent maintains a servicing
relationship, or (2) an amount which equals the maximum amount payable to the
Shareholder Servicing Agent under applicable laws, regulations or rules,
including the Rules of Fair Practice of the NASD ("NASD Rules"). In no event
will the portion of such fees that constitutes a "service fee," as that term is
used by the NASD, exceed 0.25% of the average net asset value of a Fund or Class
of a Fund, as the case may be.
PROSPECTUS 34
<PAGE> 43
A Shareholder Servicing Agent may impose certain conditions on its customers,
subject to the terms of this Prospectus, in addition to or different from those
imposed by the Funds, such as requiring a minimum initial investment or payment
of a separate fee for additional services. Each Shareholder Servicing Agent
agrees to disclose any fees it may directly charge its customers who are
shareholders of a Fund and to notify them in writing at least 30 days before it
imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Subject to the overall supervision of the governing Board of
Directors/Trustees, Stephens provides each Fund and the Master Portfolio with
administrative services, including general supervision of each Fund's operation,
coordination of the other services provided to each Fund and the Master
Portfolio, compilation of information for reports to the SEC and the state
securities commissions, preparation of proxy statements and shareholder reports
and general supervision of data compilation in connection with preparing
periodic reports. Stephens also furnishes office space and certain facilities to
conduct each Fund's and the Master Portfolio's business, and compensates the
Directors/Trustees, officers and employees who are affiliated with Stephens. For
these services, Stephens is entitled to a monthly fee at the annual rate of
0.03% of the Money Market Mutual Fund's and California Tax-Free Money Market
Mutual Fund's average daily net assets and 0.05% of the National Tax-Free Money
Market Mutual Fund's average daily net assets. From time to time, Stephens may
waive its fees charged to a Fund in whole or in part. Any such waivers will
reduce a Fund's expenses and, accordingly, have a favorable impact on such
Fund's performance.
The Company has adopted Distribution Plans on behalf of the Class A Shares of
the Money Market Mutual Fund and shares of the Tax-Free Funds under the SEC's
Rule 12b-1 ("Plans"). The Money Market Mutual Fund, pursuant to the Plan adopted
on behalf of the Class A Shares, may defray all or part of the actual cost of
preparing and printing prospectuses and other promotional materials and of
delivering prospectuses and those materials to prospective Class A shareholders
by paying on an annual basis up to 0.05% of the average daily net assets
attributable to the Class A Shares. Pursuant to the Plan for the California
Tax-Free Money Market Mutual Fund, the Fund may defray all or a part of the cost
of preparing and printing prospectuses and of delivering prospectuses and those
materials to prospective shareholders of the Fund by paying on an annual basis
up to 0.05% of the Fund's average daily net assets. Pursuant to the Plan for the
National Tax-Free Money Market Mutual Fund, Stephens is entitled to receive as
compensation for distribution-related services, a monthly fee at an annual rate
of up to 0.05% of the average daily net assets of the Fund.
Stephens has entered into Distribution Agreements with the Funds and acts as
agent for the Funds for the sale of their shares and may enter into selling
agreements with other agents ("Selling Agents") that wish to make available
shares of the Funds to their respective customers. The Funds may participate in
joint distribution activities with any
35 PROSPECTUS
<PAGE> 44
of the Company's other funds, in which event, expenses reimbursed out of the
assets of a Fund may be attributable, in part, to the distribution-related
activities of another of the Company's funds. Generally, the expenses
attributable to joint distribution activities will be allocated among each Fund
and the other funds of the Company in proportion to their relative net asset
sizes, although the Company's Board of Directors may allocate such expenses in
any other manner that it deems fair and equitable. In addition, Stephens has
established a non-cash compensation program, pursuant to which broker/dealers or
financial institutions that sell shares of the Funds may earn additional
compensation in the form of trips to sales seminars or vacation destinations,
tickets to sporting events, theater or other entertainment, opportunities to
participate in golf or other outings and gift certificates for meals or
merchandise.
In addition, the Plans contemplate that, to the extent any fees payable
pursuant to a Shareholder Servicing Agreement (discussed above) are deemed to be
for distribution-related services, such payments are approved and payable
pursuant to the Plans.
Financial institutions acting as Shareholder Servicing Agents or Selling
Agents, or in certain other capacities, may be required to register as dealers
pursuant to applicable state securities laws which may differ from federal law
and any interpretations expressed herein.
EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a Fund's expenses and, accordingly, have a
favorable impact on such Fund's yield. Except for the expenses borne by Wells
Fargo Bank and Stephens, the Company bears all costs of its operations,
including advisory, shareholder servicing, transfer agency, custody and
administration fees, payments pursuant to any Plans, interest, fees and expenses
of independent auditors and legal counsel, and any extraordinary expenses.
Expenses attributable to each Fund or Class are charged against the assets of
the Fund or Class. General expenses of each Company are allocated among all of
the funds of such Company, including the Funds, in a manner proportionate to the
net assets of each fund, on a transactional basis, or on such other basis as the
Company's Board of Directors deems equitable. The National Tax-Free Money Market
Fund bears a pro rata portion of the Tax-Free Money Market Master Portfolio's
expenses.
PROSPECTUS 36
<PAGE> 45
TAXES
The Company intends to qualify each Fund as a regulated investment company
under Subchapter M of the Code, as long as such qualification is the best
interest of each Fund's shareholders. Each Fund will be treated as a separate
entity for tax purposes and thus the provisions of the Code applicable to
regulated investment companies generally will be applied to each Fund, rather
than to the Company as a whole. In addition, net capital gains, net investment
income, and operating expenses will be determined separately for each Fund.
By complying with the applicable provisions of the Code, each Fund will not be
subject to federal income taxes with respect to net investment income and net
realized capital gains distributed to its shareholders. Each Fund intends to pay
out substantially all of its net investment income and net realized capital
gains (if any) for each year.
Dividends from net investment income (including net short-term capital gains,
if any) declared and paid by the Money Market Mutual Fund will be taxable as
ordinary income to Fund shareholders. Whether you take dividend payments in cash
or have them automatically reinvested in additional shares in the Money Market
Mutual Fund, they will be taxable as ordinary income. The Money Market Mutual
Fund does not expect its dividends to qualify for the dividends-received
deduction allowed to corporate shareholders.
The California Tax-Free Money Market Mutual Fund's shareholders will not be
subject to federal income taxes on any Fund dividends attributable to interest
from tax-exempt securities. However, dividends attributable to interest from
taxable securities and capital gains (if any) will be taxable to shareholders,
regardless of whether such dividends are paid in cash or reinvested in Fund
shares. In addition, by complying with the applicable provisions of the
California Revenue and Taxation Code, Fund dividends also will be exempt from
California personal income tax to the extent such dividends are attributable to
instruments that pay interest which would be exempt from California personal
income taxes were such instruments held directly by an individual.
The National Tax-Free Money Market Mutual Fund's shareholders will not be
subject to federal income tax on any dividends of the Fund attributable to
interest from tax-exempt securities. However, dividends attributable to interest
from taxable securities and capital gains (if any) will be taxable to
shareholders, regardless of whether such dividends are paid in cash or
reinvested in Fund shares. The Fund seeks to qualify as a regulated investment
company by investing all of its assets in the Master Portfolio. The Master
Portfolio will be treated as a non-publicly traded partnership rather than as a
regulated investment company or a corporation under the Code, and as such, shall
not be subject to federal income tax. As a non-publicly traded partnership, any
interest, dividends, gains and losses of the Master Portfolio shall be deemed to
have been
37 PROSPECTUS
<PAGE> 46
"passed through" to the Fund (and other investors) in proportion to the Fund's
ownership interest in the Master Portfolio.
If the Master Portfolio were to accrue but not distribute any interest,
dividends or gains, the Fund would be deemed to have realized and recognized its
proportionate share of such income, regardless of whether or not such income has
been distributed by the Master Portfolio. However, the Master Portfolio will
seek to minimize recognition by the Fund and other investors of interest,
dividends and gains without a corresponding distribution.
The federal alternative minimum tax ("AMT") rules attempt to ensure that at
least a minimum amount of tax is paid by corporate and high-income noncorporate
taxpayers who obtain significant benefit from certain tax deductions and
exemptions. Some of these deductions and exemptions have been designated "tax
preference items" which must be added back to taxable income for the purposes of
calculating the AMT. Among the tax preference items which must be considered
when calculating the AMT is tax-exempt interest from "private activity bonds"
issued after August 7, 1986. To the extent that the California Tax-Free Money
Market Mutual Fund or the National Tax-Free Money Market Mutual Fund invests in
private activity bonds, shareholders of these Funds who pay AMT will be required
to report that portion of Fund dividends attributable to income from the bonds
as a tax preference item in determining their AMT. Shareholders will be notified
of the tax status of distributions made by the Funds. Persons who may be
"substantial users" (or "related persons" of substantial users) of facilities
financed by private activity bonds should consult their tax advisors before
purchasing shares in the California Tax-Free Money Market Mutual Fund or the
National Tax-Free Money Market Mutual Fund. With respect to corporate
shareholders 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 Prospectus, individuals are subject to an AMT at a
maximum rate of 28% and corporations at a maximum rate of 20%. Shareholders with
questions or concerns about AMT should consult their tax advisors.
The Funds, or your Shareholder Servicing Agent on their behalf, will inform
you of the amount and nature of such Fund's dividends and capital gains. You
should keep all statements you receive to assist in your personal record
keeping. The Company is required to withhold, subject to certain exemptions, at
a rate of 31% on dividends paid or credited to individual shareholders of the
Funds, if a shareholder has not complied with IRS regulations or if a correct
Taxpayer Identification Number, certified when required, is not on file with the
Company or the Transfer Agent. In connection with this withholding requirement,
you will be asked to certify on your Account Application that the social
security or taxpayer identification number you provide is correct and that you
are not subject to 31% back-up withholding for previous underreporting to the
IRS.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAIs.
PROSPECTUS 38
<PAGE> 47
The foregoing discussion regarding dividends, distributions and taxes is based
on tax laws and regulations which were in effect as of the date of this
Prospectus and summarizes only some of the important federal tax considerations
generally affecting the Funds and their shareholders. It is not intended as a
substitute for careful tax planning; you should consult your tax advisor with
respect to your specific tax situation as well as with respect to state and
local taxes. In addition, each Fund does not make any representation regarding
the taxation of its corporate shareholders and recommends that such shareholders
consult their tax advisors.
Further federal tax considerations are discussed in the SAI for each Fund.
39 PROSPECTUS
<PAGE> 48
PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND AND MASTER PORTFOLIO INVESTMENTS
Money Market Mutual Fund
The Money Market Mutual Fund may invest in the following:
(i) obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including government-sponsored enterprises ("U.S.
Government obligations") (discussed below);
(ii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other short-term obligations of U.S. banks (including
foreign branches) that have more than $1 billion in total assets at the
time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are insured
by the FDIC ("bank instruments");
(iii) commercial paper rated at the date of purchase P-1 by Moody's Investors
Service, Inc. ("Moody's") or "A-1+" or "A-1" by Standard & Poor's Rating
Group ("S&P") ("rated commercial paper");
(iv) commercial paper unrated at the date of purchase but secured by a letter
of credit from a U.S. bank that meets the above criteria for investment;
(v) certain floating- and variable-rate instruments ("variable-rate
instruments") (discussed below);
(vi) certain repurchase agreements ("repurchase agreements") (discussed
below); and
(vii) short-term, U.S. dollar-denominated obligations of U.S. branches of
foreign banks that at the time of investment have more than $10 billion,
or the equivalent in other currencies, in total assets ("foreign bank
obligations") (discussed below).
California Tax-Free Money Market Mutual Fund
The California Tax-Free Money Market Mutual Fund may invest in the following
municipal obligations with remaining maturities not exceeding thirteen months:
(i) long-term municipal bonds rated at the date of purchase "MIG 1" or "MIG
2" or, if no medium- or short-term rating is available, "Aa" or better by
Moody's or "AA" or better by S&P;
A-1 PROSPECTUS
<PAGE> 49
(ii) medium-term municipal notes rated at the date of purchase "MIG 1" or
"MIG 2" (or "VMIG 1" or "VMIG 2" in the case of an issue having a
variable rate with a demand feature) by Moody's or "SP-1+" or "SP-1" by
S&P; and
(iii) short-term municipal commercial paper rated at the date of purchase
"P-1" by Moody's or "A-1+" or "A-1+" by S&P.
Pending the investment of proceeds from the sale of Fund shares or proceeds
from sales of portfolio securities or in anticipation of redemptions or to
maintain a "defensive" posture when, in the opinion of Wells Fargo Bank, as
investment adviser, it is advisable to do so because of market conditions, the
California Tax-Free Money Market Mutual Fund may elect to invest temporarily up
to 20% of the current value of its total assets in cash reserves or the
following taxable high-quality money market instruments:
(i) U.S. Government obligations;
(ii) bank instruments;
(iii) rated commercial paper;
(iv) repurchase agreements;
(v) foreign bank obligations; and
(vi) high-quality municipal obligations, the income from which may or may not
be exempt from federal income taxes.
Moreover, the California Tax-Free Money Market Mutual Fund may invest
temporarily more than 20% of its total assets in such securities and in
high-quality, short-term municipal obligations the interest on which is not
exempt from federal income taxes to maintain a temporary defensive posture or in
an effort to improve after-tax yield to the California Tax-Free Money Market
Mutual Fund's shareholders when, in the opinion of Wells Fargo Bank, as
investment adviser, it is advisable to do so because of unusual market
conditions.
National Tax-Free Money Market Mutual Fund and
Tax-Free Money Market Master Portfolio
The National Tax-Free Money Market Mutual Fund invests all its assets in
interests of the Master Portfolio. As a result, the performance of the Fund
corresponds to the investment experience of the Master Portfolio. The Master
Portfolio may invest in the following:
(i) certain municipal obligations (discussed below):
(ii) certain U.S. Government obligations (discussed below);
(iii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other obligations of U.S. banks (including foreign
branches) that have more than
PROSPECTUS A-2
<PAGE> 50
$1 billion in total assets at the time of investment and are members of
the Federal Reserve System or are examined by the Comptroller of the
Currency or whose deposits are insured by the FDIC:
(iv) commercial paper rated at the date of purchase P-1 by Moody's or "A-1+"
or "A-1" by S&P;
(v) certain floating- and variable-rate instruments (discussed below);
(vi) certain repurchase agreements (discussed below); and
(vii) short-term U.S. dollar denominated obligations of foreign branches of
U.S. banks or U.S. branches of foreign banks (discussed below).
The following describes certain instruments in which the Funds and the Master
Portfolio may invest.
Municipal Obligations
Subject to the maturity and other restrictions of Rule 2a-7, the Funds and the
Master Portfolio may invest in Municipal Obligations. Municipal bonds generally
have a maturity at the time of issuance of up to 40 years. Medium-term municipal
notes are generally issued in anticipation of the receipt of tax funds, of the
proceeds of bond placements, or of other revenues. The ability of an issuer to
make payments on notes is therefore especially dependent on such tax receipts,
proceeds from bond sales or other revenues, as the case may be. Municipal
commercial paper is a debt obligation with a stated maturity of 270 days or less
that is issued to finance seasonal working capital needs or as short-term
financing in anticipation of longer-term debt. From time to time, the California
Tax-Free Money Market Mutual Fund and the Master Portfolio may each invest 25%
or more of the current value of its total assets in certain "private activity
bonds," such as pollution control bonds; provided, however, that such
investments will be made only to the extent they are consistent with the Master
Portfolio's fundamental policy of investing, under normal circumstances, at
least 80% of its net assets in municipal obligations that are exempt from
federal income tax and not subject to the federal alternative minimum tax.
The Master Portfolio will invest in the following municipal obligations with
remaining maturities not exceeding 13 months:
(i) long-term municipal bonds rated at the date of purchase "Aa" or better by
Moody's or "AA" or better by S&P;
(ii) municipal notes rated at the date of purchase "MIG 1" or "MIG 2" (or
"VMIG 1" or "VMIG 2" in the case of an issue having a variable rate with
a demand feature) by Moody's or "SP-1+" "SP-1" or "SP-2" by S&P; and
(iii) short-term municipal commercial paper rated at the date of purchase
"P-1" by Moody's or "A-1+", or "A-1" or "A-2" by S&P.
A-3 PROSPECTUS
<PAGE> 51
For a further discussion of factors affecting purchases of municipal
obligations by the California Tax-Free Money Market Mutual Fund, see "Special
Considerations Affecting California Municipal Obligations" in the SAI.
U.S. Government Obligations
The Master Portfolio may invest in various types of U.S. Government
obligations with remaining maturities of up to thirteen months. 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 will 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 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.
Other Investment Companies
For temporary investments the Funds and the Master Portfolio may invest in
shares of other open-end investment companies that invest exclusively in
high-quality short-term securities subject to the limits set forth under Section
12 of the 1940 Act, provided however, that with respect to the California
Tax-Free Money Market Fund, the National Tax-Free Money Market Mutual Fund and
the Tax-Free Money Market Master Portfolio, any such company has policy of
investing, under normal market conditions, at least 80% of its net assets in
obligations that are exempt from federal income tax and are not subject to the
federal alternative minimum tax. Such investment companies can be expected to
charge management fees and other operating expenses that would be in addition to
those charged to a Fund or the Master Portfolio; however, Wells Fargo Bank
PROSPECTUS A-4
<PAGE> 52
has undertaken to waive its advisory fees with respect to that portion of the
Funds' or the Master Portfolio's assets so invested, except when such purchase
is part of a plan of merger, consolidation, reorganization or acquisition. Under
Section 12(d)(l), a Fund or the Master Portfolio, together with any company or
companies controlled by the Fund or the Master Portfolio, is generally
prohibited from owning more than 3% of the total outstanding voting stock of any
such investment company, nor may a Fund or the Master Portfolio, together with
any such company or companies, invest more than 5% of its assets in any one such
investment company or invest more than 10% of its assets in securities of all
such investment companies combined. Under Section 12, however, a Fund may invest
substantially all of its assets in the Master Portfolio.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Funds may purchase bear interest at
rates that are not fixed, but vary for example, with changes in specified market
rates or indices or at specified intervals. These instruments may carry a demand
feature that would permit the holder to tender them back to the issuer at par
value prior to maturity. The floating-and variable-rate instruments that the
Funds and the Master Portfolio may purchase include certificates of
participation in such obligations. With regard to the California Tax-Free Money
Market Mutual Fund and the Master Portfolio, Wells Fargo Bank, as investment
adviser to the Master Portfolio, may rely upon either an opinion of counsel to
the issuer or bond counsel regarding the tax-exempt status of these
certificates. The Funds and the Master Portfolio may invest in floating- and
variable-rate obligations even if they carry stated maturities in excess of
thirteen months, upon compliance with certain conditions of the SEC, in which
case such obligations will be treated in accordance with these conditions as
having maturities not exceeding thirteen months.
Wells Fargo Bank, as investment adviser to the Funds and the Master Portfolio,
monitors on an ongoing basis the ability of an issuer of a demand instrument to
pay principal and interest on demand. Events affecting the ability of the issuer
of a demand instrument to make payment when due may occur between the time a
Fund or the Master Portfolio elects to demand payment and the time payment is
due, thereby affecting such Fund's ability to obtain payment at par. The
investment adviser, in accordance with the guidelines approved by the Boards of
Directors or Trustees of the Company or the Master Trust, may treat those
instruments that have a demand feature that is not exercisable within seven days
as liquid, provided that an active secondary market exists.
Repurchase Agreements
The Funds and the Master Portfolio may enter into repurchase agreements
wherein the seller of a security to a Fund or the Master Portfolio agrees to
repurchase that security from such Fund or the Master Portfolio at a mutually
agreed-upon time and price. The period of maturity is usually quite short, often
overnight or a few days, although it may extend over a number of months. The
Funds and the Master Portfolio may enter into
A-5 PROSPECTUS
<PAGE> 53
repurchase agreements only with respect to U.S. Government obligations and other
obligations that could otherwise be purchased by the participating Fund or the
Master Portfolio. All repurchase agreements will be fully collateralized based
on values that are marked to market daily. While the maturities of the
underlying securities in a repurchase agreement transaction may be greater than
twelve months, the term of any repurchase agreement on behalf of a Fund or the
Master Portfolio will always be less than twelve months. If the seller defaults
and the value of the underlying securities has declined, the participating Fund
or the Master Portfolio, as the case may be, may incur a loss. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
disposition of the security by the participating Fund or the Master Portfolio
may be delayed or limited. The Funds and the Master Portfolio enters into
repurchase agreements only with registered broker/dealers, commercial banks and
other financial institutions that meet guidelines established by the Boards of
Directors of the Funds or Board of Trustees of the Master Trust and that are not
affiliated with Wells Fargo Bank. Subject to exemptive relief granted by the
SEC, the Funds and the Master Portfolio may participate in pooled repurchase
agreement transactions with other funds advised by Wells Fargo Bank.
Letters of Credit
Certain of the debt obligations, certificates of participation, commercial
paper and other short-term obligations which the Money Market Mutual Fund and
California Tax-Free Money Market Mutual Fund are permitted to purchase may be
backed by an unconditional and irrevocable letter of credit of a bank, savings
and loan association or insurance company which assumes the obligation for
payment of principal and interest in the event of default by the issuer. Letter
of credit-backed investments must, in the opinion of Wells Fargo Bank, be of
investment quality comparable to other permitted investments of such Funds.
Foreign Obligations
Each Fund and the Master Portfolio may invest up to 25% of its assets in
high-quality, short-term (thirteen months or less) debt obligations of foreign
branches of U.S. banks or U.S. branches of foreign banks that are denominated in
and pay interest in U.S. dollars. Investments in foreign obligations involve
certain considerations that are not typically associated with investing in
domestic obligations. There may be less publicly available information about a
foreign issuer than about a domestic issuer. Foreign issuers also are not
subject to the same uniform accounting, auditing and financial reporting
standards or governmental supervision as domestic issuers. In addition, with
respect to certain foreign countries, taxes may be withheld at the source under
foreign income tax laws and there is a possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments that could affect adversely investments in, the liquidity of, and
the ability to enforce contractual obligations with respect to, securities of
issuers located in those countries.
PROSPECTUS A-6
<PAGE> 54
Taxable Investments
Pending the investment of proceeds from the sale of interests of the Master
Portfolio or proceeds from sales of portfolio securities or in anticipation of
redemptions or to maintain a "defensive" posture when, in the opinion of Wells
Fargo Bank, as investment adviser, it is advisable to do so because of market
conditions, the Master Portfolio may elect to invest temporarily up to 20% of
the current value of its net assets in cash reserves including the following
taxable high-quality money market instruments: (i) U.S. Government obligations;
(ii) negotiable certificates of deposit, bankers' acceptances and fixed time
deposits and other obligations of domestic banks (including foreign branches)
that have more than $1 billion in total assets at the time of investment and are
members of the Federal Reserve System or are examined by the Comptroller of the
Currency or whose deposits are insured by the FDIC; (iii) commercial paper rated
at the date of purchase "P-1" by Moody's or "A-1+" or "A-1" by S&P; (iv) certain
repurchase agreements; and (v) high-quality municipal obligations, the income
from which may or may not be exempt from federal income taxes.
Moreover, the Master Portfolio may invest temporarily more than 20% of its
total assets in such securities and in high-quality, short-term municipal
obligations the interest on which is not exempt from federal income taxes to
maintain a temporary defensive posture or in an effort to improve after-tax
yield to the Master Portfolio's interestholders when, in the opinion of Wells
Fargo Bank, as investment adviser, it is advisable to do so because of unusual
market conditions.
Illiquid Securities
Certain securities may be sold only pursuant to certain legal restrictions,
and may be difficult to sell. The National Tax-Free Money Market Mutual Fund,
the California Tax-Free Bond Fund and the California Tax-Free Money Market
Mutual Fund will not knowingly invest more than 10%, 15% and 15%, respectively,
of the value of their respective net assets in securities that are illiquid or
such lower percentage as may be required by the states in which the Fund sells
their shares. Repurchase agreements and time deposits that do not provide for
payment to a Fund within seven days after notice, guaranteed investment
contracts and some commercial paper issued in reliance upon the exemption in
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act") (other
than variable amount master demand notes with maturities of nine months or
less), are subject to the limitation on illiquid securities. In addition,
interests in privately arranged loans may be subject to this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by the Company's Board of Directors, acting under
guidelines approved and monitored by the Company's Board, that an adequate
trading market exists for that security.
A-7 PROSPECTUS
<PAGE> 55
INVESTMENT POLICIES
Each Fund's investment objective, as set forth in the "How the Funds Work --
Investment Objectives and Policies" section, is fundamental. Accordingly, such
investment objectives and policies may not be changed without approval by the
vote of the holders of a majority of such Fund's outstanding voting securities,
as described under "Capital Stock" in the SAI. In addition, any fundamental
investment policy may not be changed without such shareholder approval. If the
Company's Board of Directors determines, however, that a Fund's investment
objective can best be achieved by a substantive change in a nonfundamental
investment policy or strategy, the Company's Board may make such a change
without shareholder approval and will disclose any such material changes in the
then-current prospectus.
As matters of fundamental policy, the Money Market Mutual Fund and California
Tax-Free Money Market Mutual Fund may: (i) borrow from banks up to 10% of the
current value of each of their net assets only for temporary purposes in order
to meet redemptions, and these borrowings may be secured by the pledge of up to
10% of the current value of each of their net assets (but investments may not be
purchased by a Fund while any such outstanding borrowing in excess of 5% of its
net assets exists); (ii) not make loans of portfolio securities or other assets,
except that loans for purposes of this restriction will not include the purchase
of fixed time deposits, repurchase agreements, commercial paper and other
short-term obligations, and other types of debt instruments commonly sold in a
public or private offering; and (iii) not invest more than 25% of their assets
(i.e. , concentrate) in any particular industry, excluding, (a) investments in
municipal securities by the California Tax-Free Money Market Mutual Fund (for
the purpose of this restriction, private activity bonds shall not be deemed
municipal securities if the payments of principal and interest on such bonds is
the ultimate responsibility of nongovernmental users), (b) U.S. Government
obligations, and (c) obligations of domestic banks (for purposes of this
restriction, domestic bank obligations do not include obligations of foreign
branches of U.S. banks and obligations of U.S. branches of foreign banks).
As matters of nonfundamental policy: (i) the Money Market Mutual Fund may not
purchase securities of any issuer (except for U.S. Government obligations, for
certain temporary purposes and for certain guarantees and unconditional puts) if
as a result more than 5% of the value of the Money Market Mutual Fund's total
assets would be invested in the securities of such issuer or the Money Market
Mutual Fund would own more than 10% of the outstanding voting securities of such
issuer; (ii) the Money Market Mutual Fund may not invest more than 10% of the
current value of its net assets in securities that are illiquid by virtue of the
absence of a readily available market or legal or contractual restrictions on
resale and fixed time deposits that are subject to withdrawal penalties and that
have maturities of more than seven days; and (iii) the California Tax-Free Money
Market Mutual Fund may not invest more than 10% of the current value of its net
assets in repurchase agreements having maturities of more than
PROSPECTUS A-8
<PAGE> 56
seven days, illiquid securities and fixed time deposits that are subject to
withdrawal penalties and that have maturities of more than seven days. With
respect to item (i), it may be possible that the Company would own more than 10%
of the outstanding voting securities of an issuer.
For purposes of complying with the Code, the California Tax-Free Money Market
Mutual Fund will diversify its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of the California
Tax-Free Money Market Mutual Fund's assets is represented by cash, U.S.
Government obligations and other securities limited in respect of any one issuer
to an amount not greater than 5% of the California Tax-Free Money Market Mutual
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government obligations and the securities of
other regulated investment companies), or of two or more issuers which the
taxpayer controls and which are determined to be engaged in the same or similar
trades or businesses or related trades or businesses.
In addition, at least 65% of the California Tax-Free Money Market Mutual
Fund's total assets are invested (under normal market conditions) in municipal
obligations that pay interest which is exempt from California personal income
taxes. However, as a matter of general operating policy, the California Tax-Free
Money Market Mutual Fund seeks to have substantially all of its assets invested
in such municipal obligations.
The investment objective of the Master Portfolio may not be changed without
approval of the investors in the Master Portfolio. The classification of the
National Tax-Free Money Market Mutual Fund and the Master Portfolio as
"diversified" may not be changed, in the case of the Fund, without the approval
of the Fund's shareholders or, in the case of the Master Portfolio, without the
approval of the Fund and any other investors in the Master Portfolio.
As matters of fundamental policy the National Tax-Free Money Market Mutual
Fund and the Master Portfolio may: (i) borrow from banks up to 10% of the
current value of each of their net assets only for temporary purposes in order
to meet redemptions, and these borrowings may be secured by the pledge of up to
10% of the current value of their respective net assets (but investments by the
Master Portfolio may not be purchased while any such outstanding borrowing in
excess of 5% of its net assets exists); (ii) not make loans, except that each of
the Fund and the Master Portfolio may purchase or hold debt instruments, lend
its portfolio securities and enter into repurchase agreement transactions in
accordance with its investment policies; loans for purposes of this restriction
will not include the Fund's purchase of interests in the Master Portfolio; (iii)
not 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 or Master Portfolio's investments in that
industry would be 25% or more of the current value of the Fund's or Master
Portfolio's total assets, provided that there is no limitation with respect to
investments in (a) municipal securities (for the purposes of
A-9 PROSPECTUS
<PAGE> 57
this restriction, private activity bonds and notes shall not be deemed municipal
securities if the payments of principal and interest on such bonds and notes is
the ultimate responsibility of non-governmental entities), (b) U.S. Government
obligations, and (c) certain obligations of domestic banks; and (iv) not
purchase securities of any issuer (except securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities, including
government-sponsored enterprises) if, as a result, with respect to 75% of its
total assets, more than 5% of the value of the Master Portfolio's total assets
would be invested in the securities of any one issuer or, with respect to 100%
of its total assets the Master Portfolio's ownership would be more than 10% of
the outstanding voting securities of such issuer.
As matters of non-fundamental policy the National Tax-Free Money Market Mutual
Fund and the Master Portfolio may each: (i) invest up to 10% of the current
value of its net assets in securities that are illiquid by virtue of the absence
of a readily available market or the existence of legal or contractual
restrictions on resale and fixed time deposits that are subject to withdrawal
penalties and that have maturities of more than seven days; and (ii) invest up
to 10% of the current value of its net assets in repurchase agreements having
maturities of more than seven days, and restricted securities (which include
securities that must be registered under the Securities Act of 1933 before they
may be offered to the public).
PROSPECTUS A-10
<PAGE> 58
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 59
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
LEGAL COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
FOR MORE INFORMATION ABOUT THE FUNDS, SIMPLY CALL 1-800-222-8222, OR WRITE:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH MONEY MARKET MUTUAL FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT INSURED BY THE FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank
nor guaranteed by the Bank
- involve investment risk, including possible loss of
principal [FDIC LOGO]
Money market mutual funds seek to maintain a stable net
asset value of $1.00 per share; however, there can be no
assurance that the Funds will meet this objective.
</TABLE>
[RECYCLED PAPER LOGO] SC-04-96-006
Printed on Recycled Paper
<PAGE> 60
STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 1, 1996
MONEY MARKET MUTUAL FUND
CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
Stagecoach Funds, Inc. (the "Company") is an open-end investment
company. This Statement of Additional Information ("SAI") contains information
about three of the funds in the Stagecoach Family of Funds -- the MONEY MARKET
MUTUAL FUND, the CALIFORNIA TAX-FREE BOND FUND (the "Bond Fund") and the
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND (each a "Fund" and collectively,
the "Funds"; the Money Market Mutual Fund and California Tax-Free Money Market
Mutual Fund are, collectively, the "Money Market Mutual Funds"). The Bond Fund
offers two classes of shares -- Class A and Class B Shares. It formerly
offered only Class A Shares which were not designated as a class. The Money
Market Mutual Fund offers two classes of shares -- Class A and Class S Shares.
It formerly offered only Class A Shares which were not designated as a class.
This SAI relates to both Classes of the Bond Fund and the Money Market Mutual
Fund and to the shares of the California Tax-Free Money Market Mutual Fund.
The investment objective of each Fund is described in its respective 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 current Prospectus. 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> 61
TABLE OF CONTENTS
<TABLE>
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Permitted Investment Activities . . . . . . . . . . . . . 5
Special Considerations Affecting
California Municipal Obligations . . . . . . . . . . . . . . . . . 8
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Calculation of Yield and Total Return . . . . . . . . . . . . . . . . 17
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . 22
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 23
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 25
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . 32
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . 32
SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
2
<PAGE> 62
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 such Fund's investments in that industry
would be 25% or more of the current value of such 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), with respect to the California Tax-Free Bond Fund
and the California Tax-Free Money Market Mutual Fund, (ii) obligations of the
United States Government, its agencies or instrumentalities, and (iii) with
respect to the Money Market Mutual Fund and the California Tax-Free 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) purchase or sell real estate or real estate limited
partnerships (other than municipal obligations with respect to the California
Tax-Free Bond Fund and the California Tax-Free Money Market Mutual Fund, or
other than money market securities with respect to the Money Market Mutual
Fund, 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 all the Funds and
except for margin payments in connection with options, futures and options on
futures with regard to the California Tax-Free Bond Fund and the California
Tax-Free Money Market Mutual Fund) 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 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 its net assets
3
<PAGE> 63
(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, and the California Tax-Free Money Market Mutual Fund and
Money Market Mutual Fund also may not write, purchase or sell warrants, except
that all Funds may purchase securities with put rights in order to maintain
liquidity.
In addition, neither the California Tax-Free Money Market Mutual
Fund nor the Money Market Mutual Fund may make loans of portfolio securities or
other assets, except that loans for purposes of this restriction will not
include the purchase of fixed time deposits, repurchase agreements, commercial
paper and other short-term obligations, and other types of debt instruments
commonly sold in public or private offerings.
The Funds are subject to the following non-fundamental policies:
(1) The Funds 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.
(2) The Funds may not purchase interests, leases, or limited
partnership interests in oil, gas, or other mineral exploration or development
programs.
(3) The Money Market Mutual Fund may not purchase or sell real
estate limited partnership interests.
(4) The Funds 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.
(5) The Funds 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 such Fund's aggregate investment in such classes of
securities will exceed 5% of its total assets.
(6) The California Tax-Free Bond Fund and the California Tax-Free
Money Market Mutual Fund may not invest more than 10% of the current value of
their net assets in repurchase agreements maturing in more than seven days or
other illiquid securities (including restricted securities). The Money Market
Mutual Fund may not invest more than 10% of the current value of its net assets
in securities that are illiquid by virtue of the absence of a readily available
market
4
<PAGE> 64
or legal or contractual restrictions on resale and fixed time deposits that are
subject to withdrawal penalties and that have maturities of more than seven
days.
In addition, 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. 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. In the case of the
California Tax-Free Bond Fund and the California Tax-Free Money Market Mutual
Fund 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.
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.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Unrated Investments. The 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. The Money Market Mutual Funds may purchase unrated
instruments only if they are purchased in accordance with the procedures of
each Fund adopted by the Company's Board of Directors in accordance with 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 a sale of such security by the Fund,
provided that, with respect to the California Tax-Free Money Market Mutual Fund
and 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 rating 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 such
Funds' best interest. 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 Prospectus of the
Fund and in this SAI. The ratings of Moody's and S&P are more fully described
in the SAI Appendix.
5
<PAGE> 65
Letters of Credit. Certain of the debt obligations (including
municipal securities, certificates of participation, commercial paper and other
short-term obligations) which 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 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 each such Fund may be used for letter of credit-backed
investments, provided that, in the case of the California Tax-Free Money Market
Mutual Fund, the Company's Board approves or ratifies such investments.
Pass-Through Obligations. Certain of the debt obligations which
the California Tax-Free Bond Fund 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 Fund. Furthermore, as with any debt obligation,
fluctuations in interest rates will inversely affect the market value of
pass-through obligations. The 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. Certain of the securities in which the
California Tax-Free Bond Fund and the California Tax-Free Money Market Mutual
Fund may invest will be 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. However, the California Tax-Free Money Market Mutual
Fund has no present intention to invest in when-issued securities and 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. The Funds 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 their respective
commitments to purchase when-issued securities. If the value of these
6
<PAGE> 66
assets declines, the 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.
Municipal Bonds. The California Tax-Free Bond Fund and the
California Tax-Free Money Market Mutual Fund may invest in municipal bonds. As
discussed in the Prospectus of each Fund, 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. The California Tax-Free Bond Fund may not 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.
Municipal Notes. Municipal notes 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.
7
<PAGE> 67
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 it has no present intention to
do so, the California Tax-Free Bond Fund may 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 California
Tax-Free Bond Fund may only purchase warrants on securities in which the Fund
may invest directly.
SPECIAL CONSIDERATIONS AFFECTING
CALIFORNIA MUNICIPAL OBLIGATIONS
Certain debt obligations held by the California Tax-Free Bond Fund
and the California Tax-Free Money Market Mutual Fund may be obligations of
issuers which rely in whole or in substantial part on California state revenues
for the continuance of their operations and the payment of their obligations.
The extent to which the California Legislature will continue to appropriate a
portion of the state's general funds to counties, cities and their various
entities, is not entirely certain. To the extent local entities do not receive
money from the state to pay for their operations and services, their ability to
pay debt service on obligations held by these Funds may be impaired.
Certain of the municipal obligations in which the California
Tax-Free Bond Fund and the California Tax-Free Money Market Mutual Fund may
invest may be obligations of California issuers that rely in whole or in part,
directly or indirectly, on ad valorem real property taxes as a source of
revenue. The California Constitution limits the powers of municipalities to
impose and collect ad valorem taxes on real property, which, in turn, restricts
the ability of municipalities to service their debt obligations from such
taxes.
For example, Article XIIIA of the California Constitution, as
amended, limits ad valorem real property taxes to 1% of the full cash value of
the property, defined as the county tax assessor's valuation as of March 1,
1975, plus adjustments not to exceed 2% per year, adjustments upon purchase,
change of ownership or new construction after that date, and certain other
adjustments. Article XIIIB provides that state and local government
appropriations from
8
<PAGE> 68
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 California Tax-Free Bond Fund
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 California Tax-Free Bond Fund would not be paid in a timely manner.
Certain debt obligations held by the California Tax-Free Bond Fund
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.
MANAGEMENT
The following information supplements and should be read in conjunction
with the corresponding sections in the Prospectus. The principal occupations
during the past five years of the Directors and principal executive Officer of
the Company are listed below. The address of
9
<PAGE> 69
each, unless otherwise indicated, is 111 Center Street, Little Rock, Arkansas
72201. Directors deemed to be "interested persons" of the Company for purposes
of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position During Past 5 Years
<S> <C> <C>
Jack S. Euphrat, 73 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.
*R. Greg Feltus, 44 Director, Senior Vice President
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of Stephens
Sports Management
Inc.; and President of
Investor Brokerage
Insurance Inc.
Thomas S. Goho, 53 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School of
Business and
Accountancy; Associate
Professor of Finance
of the School of Business
and Accounting at Wake
Forest University since 1983.
*Zoe Ann Hines, 46 Director Senior Vice President
of Stephens and
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource
Management.
</TABLE>
10
<PAGE> 70
<TABLE>
<S> <C> <C>
*W. Rodney Hughes, 69 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 77 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 51 Director Private Investor; Real Estate
10 Legrae Street Developer; Chairman
Charleston, SC 29401 of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.
Richard H. Blank, Jr., 39 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary and Director of Stephens
Treasurer Sports Management
Inc.; and Director of
Capo Inc.
</TABLE>
COMPENSATION TABLE
For the Fiscal Year Ended December 31, 1995
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
<S> <C> <C>
Jack S. Euphrat $10,188 $39,750
Director
*R. Greg Feltus 0 0
Director
Thomas S. Goho 10,188 39,750
Director
</TABLE>
11
<PAGE> 71
<TABLE>
<S> <C> <C>
*Zoe Ann Hines 0 0
Director
*W. Rodney Hughes 9,438 37,000
Director
Robert M. Joses 9,938 39,000
Director
*J. Tucker Morse 8,313 33,250
Director
</TABLE>
Directors of the Company are compensated annually by the Company
and by all the registrants in the fund complex for their services as indicated
above and also are reimbursed for all out-of-pocket expenses relating to
attendance at board meetings. Each of the Directors and Officers of the
Company serves in the identical capacity as Officers and Directors of Overland
Express Funds, Inc. and Stagecoach Inc., and as Trustees and/or Officers of
Stagecoach Trust, Master Investment Portfolio, Life & Annuity Trust, Master
Investment Trust and Managed Series Investment Trust, each of which is a
registered open-end management investment company and each of which is
considered to be in the same "fund complex," as such term is defined in Form
N-1A under the 1940 Act, as the Company. The Directors are compensated by
other Companies and Trusts within the fund complex for their services as
Directors/Trustees to such Companies 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 approved by the Board of Directors on October
22, 1991, and by the initial shareholder of each Fund on December 2, 1991. The
Advisory Contract for each Fund provides that Wells Fargo Bank shall furnish to
the Fund investment guidance and policy direction in connection with the daily
portfolio management of the Fund. 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 security 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
12
<PAGE> 72
Directors of the Company who are not parties to the Advisory Contract or
"interested persons" (as defined in the 1940 Act) of any such party. The
Advisory Contracts may be terminated on 60 days' written notice by either party
and will terminate automatically if assigned.
For the years ended December 31, 1993, 1994 and 1995, the Funds
paid to Wells Fargo Bank the advisory fees indicated below and Wells Fargo Bank
waived the indicated amounts:
<TABLE>
<CAPTION>
1993 1994 1995
FEES FEES FEES FEES FEES FEES
FUND PAID WAIVED PAID WAIVED PAID WAIVED
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
California Tax-Free Bond $2,157,487 -0- $ 368,134 $1,728,107 $ 1,542,893 -0-
California Tax-Free $3,406,799 $458,784 $ 304,857 $3,809,902 $ 4,867,523 -0-
Money Market
Mutual
Money Market Mutual $1,285,690 -0- $2,073,686 $2,008,946 $12,729,506 -0-
</TABLE>
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 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 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 Fund 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
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 Money Market Mutual Fund $232,585 $247,666 $292,095
Money Market Mutual Fund $ 96,535 $306,209 $954,713
</TABLE>
13
<PAGE> 73
The Advisory Contract and Administration Agreement for each Fund
provide that if, in any fiscal year, the total expenses of the 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 the Plan but including the fees
provided for in the Advisory Contract and the 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 each Fund's
prospectus under the heading "Shareholder Servicing Agent," the Funds have
entered into shareholder servicing agreements with Wells Fargo Bank. 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 Money Market Mutual Fund $ 522,756
Money Market Mutual Fund $8,542,616
</TABLE>
Custodian and Transfer and Dividend 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 did not pay any custody fees or transfer or dividend disbursing
agency fees to Wells Fargo Bank.
14
<PAGE> 74
Underwriting Commissions. For the fiscal years ended December 31,
1993 and 1994, 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.
For the year ended December 31, 1995, 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 PLAN
Each of the Funds has adopted a distribution plan (a "Plan") under
Section 12(b) of the 1940 Act and Rule 12b-1 thereunder as described in each
Fund's Prospectus. The Plans for the shares of the California Tax-Free Money
Market Mutual Fund, the Class A Shares of the Money Market Mutual Fund and the
Class A Shares of the California Tax-Free Bond Fund 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 respective Fund
and who had no direct or indirect financial interest in the operation of the
Plans or in any agreement related to the Plans (the "Qualified Directors") on
October 22, 1991, and were approved by the initial shareholder of the
respective Funds on December 2, 1991. The Plan for the Class B Shares of the
Bond Fund was adopted by the Board of Directors, including a majority of
Qualified Directors, on July 27, 1994.
Under the Plans in effect for the shares of the California
Tax-Free Money Market Mutual Fund, the Class A Shares of the Bond Fund and the
Class A Shares of the Money Market Mutual Fund, each Fund may defray all or
part of the cost of preparing and printing prospectuses and other promotional
materials and of delivering prospectuses and those materials to prospective
Fund shareholders by paying on an annual basis up to 0.05% of the respective
Fund's average daily net assets or average daily net assets attributable to
Class A Shares, as the case may be. The Plans for the California Tax-Free
Money Market Mutual Fund and the Class A Shares of the Bond Fund and Money
Market Mutual Fund provide only for reimbursement of actual expenses. Under
the Plans for the Class B Shares of the Bond Fund and Class S Shares of the
Money Market Mutual Fund the Funds may defray all or part of the cost of
preparing and printing prospectuses and other promotional materials and of
delivering prospectuses and those materials to prospective Fund shareholders by
paying on an annual basis up to 0.70% of the average daily net assets of Class
B Shares and up to 0.75% of the average daily net assets of the Class S Shares,
respectively. The Class B Plan and Class S Plan provide for reimbursement of
actual expenses and payment of compensation to the Distributor and Selling
Agents for sales support services. In addition, each Plan contemplates that to
the extent any fees payable pursuant to a Shareholder Servicing Agreement are
deemed to be for distribution-related services, rather than shareholder
services, such payments are approved and payable pursuant to such Plan.
15
<PAGE> 75
Each Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Qualified Directors. Any Agreements related to the Plans also must be
approved by the Majority vote of the Directors and the Qualified Directors.
Such Agreements will terminate automatically if assigned, and may, in the case
of the California Tax-Free Money Market Mutual Fund, be terminated at any time,
without payment of any penalty, by a vote of a majority of the outstanding
voting securities of the respective Fund. In the case of the Bond Fund and
Money Market Mutual Fund, such agreements may be terminated at any time without
penalty by a vote of a majority of the outstanding voting securities of the
respective Class of such Fund affected by the Agreement. The Plans may not be
amended to increase materially the amounts payable thereunder, in the case of
the California Tax-Free Money Market Mutual Fund, without the approval of a
majority of the outstanding voting securities of the respective Fund and in the
case of the Bond Fund and Money Market Mutual Fund, without the approval of a
majority of the outstanding securities of the respective Class of such Fund
affected by the proposed increase. No material amendment to the Plans may be
made except by the approval of a majority of both the Directors of the Company
and the Qualified Directors.
Each Plan requires that the Treasurer of the Company 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 Plan. The
Rule also requires that the selection and nomination of Directors who are not
"interested persons" of the Company be made by such disinterested Directors.
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 TO
MAILING MARKETING UNDERWRITERS
FUND TOTAL PROSPECTUS BROCHURES
- ----------------------------------------------------------------------------------------------------
<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
Money Market Mutual
$ 326,122 $132,394 $193,728 N/A
Money Market Mutual
Class A $ 332,859 $122,263 $210,596 -0-
Class S $2,215,338 N/A N/A $2,215,338
</TABLE>
For the year ended December 31, 1995, WFSI and its registered
representatives received no compensation under each Fund's Plans.
16
<PAGE> 76
CALCULATION OF YIELD AND TOTAL RETURN
As indicated in its Prospectus, the California Tax-Free Bond Fund
may advertise, with respect to Class A and Class B Shares, certain total return
information computed in the manner described in its 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 in a Class of shares ("P") over a
period of years ("n") according to the following formula: P(1+T)n = ERV. In
addition, as indicated in its Prospectus, the California Tax-Free Bond Fund, at
times, also may calculate total return based on net asset value per share of
Class A or Class B Shares (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 average annual total return of the Class A Shares of the 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 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 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 Bond Fund for the
year ended December 31, 1995, assuming no sales charge, was 17.72%.
The California Tax-Free Bond Fund may advertise cumulative total
return on its Class A and Class B Shares. 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 which is 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.
The cumulative total return of the Class A Shares of the 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%.
As indicated in its Prospectus, the California Tax-Free Bond Fund
also may advertise certain yield information with respect to each Class of
shares. As and to the extent required by the SEC, yield is calculated based on
a 30-day (or one month) period, computed by dividing the net investment income
per share of the respective Class of the Fund earned during the period by
17
<PAGE> 77
the maximum offering price per share of such Class on the last day of the
period, according to the following formula: YIELD = 2[((a-b/cd)+1)6-1], where a
= dividends and interest earned during the period; b = expenses accrued for the
period (net of reimbursements); c = the average daily number of shares
outstanding during the period that were 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 yield for the Class A Shares of the 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%.
The tax-equivalent yield for each Class of shares of the
California Tax-Free Bond Fund is also 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 yield of the Class A Shares of the 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%.
Yield for the California Tax-Free Money Market Mutual Fund is
calculated based on the net changes, exclusive of capital changes, over a
seven-day period, 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 multiplying the base period return by
(365/7) with the resulting yield figure carried to at least the nearest
hundredth of one percent. Tax-equivalent yield for the California Tax-Free
Money Market Mutual Fund 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 California Tax-Free Money Market Mutual Fund's yield and
tax-equivalent yield for the seven-day period ended December 31, 1995, were
3.81% and (based on a 42.40% assumed federal and state tax rate) 6.61%,
respectively.
18
<PAGE> 78
Effective yield and effective tax-equivalent yield for the
California Tax-Free Money Market Mutual 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 seven, and subtracting one
from the result. The California Tax-Free Money Market Mutual Fund's effective
yield and effective tax-equivalent yield for the seven-day period ended
December 31, 1995, were 3.88% and (based on a 42.40% assumed federal and state
tax rate) 6.74% respectively.
In addition, as indicated in its Prospectus, the Money Market
Mutual Fund may advertise certain yield information with respect to each Class
of shares. Current yield with respect to each Class of shares of the Money
Market Mutual Fund will be calculated based on the net changes, exclusive of
capital changes, over a seven-day period, 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
multiplying the base period return by (365/7) with the resulting yield figure
carried to at least the nearest hundredth of one percent. The yield for the
Class A Shares of the Money Market Mutual Fund for the seven-day period ended
December 31, 1995 was 4.98%. The yield for the Class S Shares of the Money
Market Mutual Fund for the seven-day period ended December 31, 1995 was 4.30%.
The yield for the California Tax-Free Money Market Mutual Fund and
each Class of the Bond Fund and Money Market Mutual Fund 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 is a function of
portfolio quality, composition, maturity and market conditions as well as the
expenses allocated to the Fund.
Yield 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 yield of a
Fund and the yield of a Class of shares in a Fund, however, may not be
comparable to the yields 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 each Class of the California Tax-Free Bond Fund and
Money Market Mutual Fund will affect the yield of each such Class for any
specified period, and such changes should be considered together with the yield
of each Class in ascertaining the total return to shareholders of each Class of
shares for the period. Yield information for the Funds and each Class may be
useful in reviewing the performance of the Funds and each Class and for
providing a basis for comparison with investment alternatives. The yield of a
Fund and the yield of each Class, however, may not be
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comparable to the yields 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.
From time to time and only to the extent the comparison is
appropriate for a Fund or a Class of shares, the Company may quote the
performance or price-earning ratio of a Fund or Class in advertising and other
types of literature as compared to the performance of the S&P Index, the Dow
Jones Industrial Average, the Lehman Brothers 20+ Treasury Index, the Lehman
Brothers 5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate
Investment Averages (as reported by the National Association of Real Estate
Investment Trusts), Gold Investment Averages (provided by World Gold Council),
Bank Averages (which are calculated from figures supplied by the U.S. League of
Savings Institutions based on effective annual rates of interest on both
passbook and certificate accounts), average annualized certificate of deposit
rates (from the Federal Reserve G-13 Statistical Releases or the Bank Rate
Monitor), the 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 the California Tax-Free Money Market Mutual Fund or of each
Class of the Bond Fund and Money Market Mutual Fund 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. The California Tax-Free Bond Fund's and the Money Market Mutual
Funds' performance will be calculated by relating net asset value per share at
the beginning of a stated period to the net asset value of the investment,
assuming reinvestment of all gains distributions and dividends paid, at the end
of the period. The California Tax-Free Money Market Mutual Fund's and the
Money Market Mutual Fund's comparative performance will be based on a
comparison of yields, as described above, or total return, as reported by
Lipper, Survey Publications, Donoghue or Morningstar, Inc.
Any such comparisons may be useful to investors who wish to
compare past performance of the California Tax-Free Money Market Mutual Fund
or of each Class of the Bond Fund and Money Market Mutual Fund 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, information
and statements the distribution rate on the shares of each class of the
California Tax-Free Bond Fund. 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
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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.
In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank,
and its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. 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 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 Standard & Poor's
Corporation. 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 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 which 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.
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
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advertising and other types of sales literature the assets and categories of
assets under management by the Company's investment adviser. The Company may
also disclose in advertising and other types of sales literature the assets and
categories of assets under management by a fund's investment adviser or
sub-adviser and the total amount of assets under management by Wells Fargo
Investment Management Group. As of December 31, 1995, IMG had $30.1 billion in
assets under management.
The Company also may discuss in advertising and other types of
literature the features, terms and conditions of Wells Fargo Bank accounts
through which investments in the Money Market Mutual Funds may be made via a
"sweep" arrangement, including, without limitation, the Managed Sweep Account,
Money Market Checking Account, California Tax-Free Money Market Checking
Account, Money Market Access Account and California Tax-Free Money Market
Access Account (collectively, the "Sweep Accounts"). Such advertisements and
other literature may include, without limitation, discussions of such terms and
conditions as the minimum deposit required to open a Sweep Account, a
description of the yield earned on shares of the Money Market Mutual Funds
through a Sweep Account, a description of any monthly or other service charge
on a Sweep Account and any minimum required balance to waive such service
charges, any overdraft protection plan offered in connection with a Sweep
Account, a description of any ATM or check privileges offered in connection
with a Sweep Account and any other terms, conditions, features or plans offered
in connection with a Sweep Account. Such advertising or other literature may
also include a discussion of the advantages of establishing and maintaining a
Sweep Account, and may include statements from customers as to the reasons why
such customers have established and maintained a Sweep Account.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for the California Tax-Free Money Market
Mutual Fund and for each Class of the Bond Fund and Money Market Mutual Fund is
determined by the Custodian on each Business Day, as described in the
Prospectus for each Fund.
The assets of the California Tax-Free 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 California Tax-Free 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.
As indicated under "Investing In The Funds -- Share Price" in the
Prospectus of the California Tax-Free Money Market Mutual Fund and the Money
Market Mutual Fund, each Fund uses the amortized cost method to determine the
value of its portfolio securities pursuant to Rule
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2a-7 under the 1940 Act. The amortized cost method involves valuing a security
at its cost and amortizing any discount or premium over the period until
maturity, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it
may result in periods during which the value, as determined by amortized cost,
is higher or lower than the price that the California Tax-Free Money Market
Mutual Fund or the Money Market Mutual Fund would receive if the security were
sold. During these periods the yield to a shareholder may differ somewhat from
that which could be obtained from a similar fund that uses a method of
valuation based upon market prices. Thus, during periods of declining interest
rates, if the use of the amortized cost method resulted in a lower value of the
California Tax-Free Money Market Mutual Fund's or the Money Market Mutual
Fund's portfolio 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 using solely market values, and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, a Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase securities having remaining maturities
(as defined in Rule 2a-7) of thirteen months or less and invest only in those
high-quality securities that are determined by the Board of Directors to
present minimal credit risks. The maturity of an instrument is generally
deemed to be the period remaining until the date when the principal amount
thereof is due or the date on which the instrument is to be redeemed. However,
Rule 2a-7 provides that the maturity of an instrument may be deemed shorter in
the case of certain instruments, including certain variable and floating rate
instruments subject to demand features. Pursuant to the Rule, the Board is
required to establish procedures designed to stabilize, to the extent
reasonably possible, a Fund's price per share as computed for the purpose of
sales and redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether the Fund's net asset value calculated by
using available market quotations deviates from $1.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board of
Directors. If such deviation exceeds 1/2 of 1%, the Board will promptly
consider what action, if any, will be initiated. In the event the Board
determines that a deviation exists that may result in material dilution or
other unfair results to investors or existing shareholders, the Board will take
such corrective action as it regards as necessary and appropriate, including
the sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding dividends or
establishing a net asset value per share by using available market quotations.
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
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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 will not necessarily be paying
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.
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.
Brokerage Commission. The Funds did not pay any brokerage
commissions on portfolio transactions for the year ended December 31, 1995.
Securities of Regular Broker/Dealers. As of December 31, 1995,
neither the California Tax-Free Bond Fund and California Tax-Free Money Market
Mutual Fund owned any
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securities of their respective "regular brokers or dealers" or their parents,
as defined in the Act. As of December 31, 1995, the Money Market Mutual Fund
owned securities of its "regular brokers or dealers", or their parents, as
defined in the Act, as follows: $125,955,000 of Goldman Sachs & Co. debt
securities.
Portfolio Turnover. The portfolio turnover rate for the
California Tax-Free Bond Fund generally is not expected to exceed 300%. The
portfolio turnover rate is not a limiting factor when Wells Fargo Bank deems
portfolio changes appropriate. Because the portfolios of the California
Tax-Free Money Market Mutual Fund and the Money Market Mutual Fund consist of
securities with relatively short-term maturities, such 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.
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.
FEDERAL INCOME TAXES
The Prospectus 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
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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 that it distributes to its stockholders at least 90% of its net
investment income and tax-exempt income earned in each year.
In addition, in order to qualify under the Code to pay
exempt-interest dividends, the California Tax-Free Money Market Mutual Fund and
California Tax-Free Bond 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.
Generally, dividends and distributions of capital gains are
taxable to shareholders when they are received. However, dividends and
distributions of capital gains declared payable as of a record date in October,
November or December of any calendar year are deemed under the Code to have
been received by the shareholders on December 31 of that calendar year if the
dividend is actually paid in the following January. Such dividends 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 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 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. Gains or losses on sales of portfolio securities by
each Fund will generally be long-term capital gains or losses if the securities
sold have been held by it for more than one year, except in certain cases where
the 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 the
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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. 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.
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.
If a shareholder exchanges or otherwise disposes of shares of a
Fund within 90 days of having acquired such shares, and if, as a result of
having acquired those shares, the shareholder subsequently pays a reduced sales
charge for shares of the Fund, or of a different fund, the sales charge
previously incurred acquiring the Fund's shares shall not be taken into account
(to the extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares.
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.
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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 California Tax-Free Bond Fund 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 the Fund without corresponding current cash receipts. Although
the California Tax-Free Bond 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.
It is expected that the net income of each of the Money Market
Mutual Funds will be a positive amount at the time of each determination
thereof. If, however, the net income of a Money Market Mutual 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 a
Money Market Mutual Fund), a Money Market Mutual 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 Money Market Mutual Fund will
reduce the number of its outstanding shares by treating each shareholder as
having contributed to the capital of the Money Market Mutual Fund that number
of full and fractional shares in the account of such shareholder which
represents the 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 Money Market Mutual Fund.
Although dividends will be declared daily with respect to each of
the Funds based on the Fund's daily earnings, for federal income tax purposes,
the Fund's 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 income
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. If during the year, the Fund had reduced the number of shares, as
described above, due to such a shortfall, shareholders who had redeemed shares
prior to such reduction could be deemed to have realized a capital gain to the
extent of the reduction, while
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shareholders redeeming shares after the reduction could be deemed to have
realized a capital loss to the extent of the reduction. It is expected that
the Fund's net income, on an annual basis, will equal the dividends declared
during the year.
Special Tax Considerations for the California Tax-Free Bond Fund and the
California Tax-Free Money Market Mutual Fund.
Federal -- The California Tax-Free Bond Fund and the California
Tax-Free Money Market Mutual Fund 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 advisers to determine whether exempt-interest
dividends and California exempt-interest dividends (as defined below) paid by
the Funds 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 -- The Funds expect 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 respective 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").
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
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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 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 Funds 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 10,000,000,000 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 twelve series of shares, each representing an
interest in one portfolio -- the Asset Allocation Fund, the California Tax-Free
Bond Fund, the California Tax-Free Income Fund, the California Tax-Free Money
Market Mutual Fund, the Corporate Stock Fund, the Diversified Income Fund, the
Ginnie Mae Fund, the Growth and Income Fund, the Money Market Mutual Fund, the
Short-Intermediate U.S. Government Income Fund, the U.S. Government Allocation
Fund and the Variable Rate Government Fund -- and the Board of Directors may,
in the future, authorize the issuance of other series of capital stock
representing shares of additional investment portfolios or funds.
The Bond Fund and the Money Market Mutual Fund are comprised of
two Classes of shares, Class A Shares and Class B Shares, and Class A Shares
and Class S Shares, respectively. With respect to matters affecting one Class,
but not another, shareholders of each of the Bond Fund and Money Market Mutual
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 is required by law or where the matter involved only affects one series,
shares of each Fund will be voted by series. For example, a change in a Fund's
fundamental investment policy would be voted upon only by shareholders of the
Fund involved. Additionally, approval of an advisory contract is a matter to
be determined separately by 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 the other
30
<PAGE> 90
investment portfolios to approve the proposal as to those investment
portfolios. As used in the Prospectus of the Bond Fund and Money Market Mutual
Fund, and in this SAI, the term "majority," when referring to approvals to be
obtained from shareholders of a Class of shares of each of the Funds means the
vote of the lesser of (i) 67% of the shares of the respective 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. As used in
the Prospectus of each Fund and in this SAI, the term "majority," when
referring to approvals to be obtained from shareholders of a Fund, means the
vote of the lesser of (i) 67% of the shares of a Fund represented at a meeting
if the holders of more than 50% of the outstanding shares of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of a 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.
However, the Company has undertaken to hold a special meeting of its
shareholders for the purpose of voting on the question of removal of a Director
or Directors if requested in writing by the holders of at least 10% of the
Company's outstanding voting securities, and to assist in communicating with
other shareholders as required by Section 16(c) of the 1940 Act.
Each share of a Fund 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 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, will be fully paid and non-assessable by the Company.
As of February 29, 1996, no shareholders were known by the Company
to own 5% or more of the outstanding Class A Shares or Class B Shares of the
Funds.
OTHER
The Registration Statement, including the Prospectus of 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 the Prospectus or the SAI of
each Fund as to the contents of any contract
31
<PAGE> 91
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
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 portfolio of investments, audited financial statements, and
independent auditors' report for the California Tax-Free Money Market Mutual
Fund and Money Market Mutual Fund, contained in the Company's Annual Report for
the year ended December 31, 1995, as filed with the SEC on March 8, 1996, are
hereby incorporated by reference into this SAI. The portfolio of investments,
audited financial statements and independent auditors' report for the year ended
December 31, 1995, for the California Tax-Free Bond Fund are hereby incorporated
by reference to Post-Effective Amendment No. 21 to the Company's Registration
Statement, as filed with the SEC on February 29, 1996. The portfolio of
investments, audited financial statements and independent auditors' report for
the Funds are attached to all SAIs delivered to shareholders or prospective
shareholders.
32
<PAGE> 92
SAI APPENDIX
The following is a description of the ratings given by Moody's and
S&P to corporate and municipal bonds, municipal notes, and corporate and
municipal commercial paper.
Corporate and Municipal Bonds
Moody's: The four highest ratings for corporate and municipal
bonds are "Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of
the "best quality" and carry the smallest amount of investment risk. Bonds
rated "Aa" are of "high quality by all standards," but margins of protection or
other elements make long-term risks appear somewhat greater than "Aaa" rated
bonds. Bonds rated "A" possess many favorable investment attributes and are
considered to be upper medium grade obligations. Bonds rated "Baa" are
considered to be medium grade obligations; interest payments and principal
security appear adequate for the present, but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds have speculative characteristics as well. Moody's applies
numerical modifiers: 1, 2 and 3 in each rating category from "Aa" through
"Baa" in its rating system. The modifier 1 indicates that the security ranks
in the higher end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds
are "AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings
assigned by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded as having an "adequate capacity" to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of
a plus or minus sign to show relative standing within the category.
Municipal Notes
Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality." Notes rated "MIG
2" or "VMIG 2" are of "high quality," with margins of protections "ample
although not as large as in the preceding group." Notes rated "MIG 3" or
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<PAGE> 93
"VMIG 3" are of "favorable quality," with all security elements accounted for,
but lacking the strength of the preceding grades.
S&P: The "SP-1" rating reflects a "very strong or strong capacity
to pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
Corporate and Municipal Commercial Paper
Moody's: The highest rating for corporate and municipal
commercial paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior
capacity for repayment of short-term promissory obligations." Issuers rated
"P-2" (Prime- 2) "have a strong capacity for repayment of short-term promissory
obligations," but earnings trends, while sound, will be subject to more
variation.
S&P: The "A-1" rating for corporate and municipal commercial
paper indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."
Corporate Notes
S&P: The two highest ratings for corporate notes are "SP-1" and
"SP-2." The "SP-1" rating reflects a "very strong or strong capacity to pay
principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
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<PAGE> 94
STAGECOACH FUNDS, INC.
SEC REGISTRATION NOS. 33-42927; 811-6419
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
The portfolio of investments, audited financial statements and,
independent auditors' report for the year ended December 31, 1995 for the Money
Market Mutual Fund and California Tax-Free Money Market Mutual Fund are hereby
incorporated by reference to the Company's Annual Report, as filed with the SEC
on March 8, 1996. The portfolio of investments, audited financial statements and
independent auditors' report for the year ended December 31, 1995, for the
California Tax-Free Bond Fund are hereby incorporated by reference to
Post-Effective Amendment No. 21 to the Company's Registration Statement, as
filed with the SEC on February 29, 1996.
(b) Exhibits:
Exhibit
Number Description
------ -----------
1 - Amended and Restated Articles of Incorporation
dated November 22, 1995, incorporated by reference
to Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
2 - By-Laws, incorporated by reference to the Initial
Registration Statement, filed September 30, 1991.
3 - Not Applicable
4 - Not Applicable
5(a)(i)(A) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Asset Allocation Fund, incorporated
by reference to Post-Effective Amendment No. 2 to
the Registration Statement, filed April 17, 1992.
(i)(B) - Sub-Advisory Contract with BZW Barclays Global
Fund Advisors on behalf of the Asset Allocation
Fund, incorporated by reference to Post-Effective
Amendment No. 21 to the Registration Statement,
filed February 29, 1996.
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<PAGE> 95
(ii)(A) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the U.S. Government Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
(ii)(B) - Sub-Advisory Contract with BZW Barclays Global
Fund Advisors on behalf of the U.S. Government
Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 21 to the
Registration Statement, filed February 29, 1996.
(iii) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Money Market
Mutual Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(iv) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Bond Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
(v) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Ginnie Mae Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(vi) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Growth and Income Fund, incorporated
by reference to Post-Effective Amendment No. 2 to
the Registration Statement, filed April 17, 1992.
(vii)(A) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Corporate Stock Fund, incorporated
by reference to Post-Effective Amendment No. 2 to
the Registration Statement, filed April 17, 1992.
(vii)(B) - Sub-Advisory Contract with BZW Barclays Global
Fund Advisors on behalf of the Corporate Stock
Fund, incorporated by reference to Post-Effective
Amendment No. 21 to the Registration Statement,
filed February 29, 1996.
(viii) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Money Market Mutual Fund,
incorporated by reference to Post-Effective
Amendment No. 3 to the Registration Statement,
filed May 1, 1992.
(ix) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Income Fund,
incorporated by reference to Post-Effective
Amendment No. 4 to the Registration Statement,
filed September 10, 1992.
(x) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Diversified Income Fund,
incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement,
filed November 29, 1995.
5(b)(i) - Administration Agreement with Stephens Inc. on
behalf of the Asset Allocation Fund, incorporated
by reference to Post-Effective Amendment No. 2 to
the Registration Statement, filed April 17, 1992.
(b)(ii) - Administration Agreement with Stephens Inc. on
behalf of the U.S. Government Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
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<PAGE> 96
(b)(iii) - Administration Agreement with Stephens Inc. on
behalf of the California Tax-Free Bond Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
(b)(iv) - Administration Agreement with Stephens Inc. on
behalf of the California Tax-Free Money Market
Mutual Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(v) - Administration Agreement with Stephens Inc. on
behalf of the Ginnie Mae Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(b)(vi) - Administration Agreement with Stephens Inc. on
behalf of the Growth and Income Fund, incorporated
by reference to Post-Effective Amendment No. 2 to
the Registration Statement, filed April 17, 1992.
(b)(vii) - Administration Agreement with Stephens Inc. on
behalf of the Corporate Stock Fund, incorporated
by reference to Post-Effective Amendment No. 2 to
the Registration Statement, filed April 17, 1992.
(b)(viii) - Administration Agreement with Stephens Inc. on
behalf of the Money Market Mutual Fund,
incorporated by reference to Post-Effective
Amendment No. 3 to the Registration Statement,
filed May 1, 1992.
(b)(ix) - Form of Administration Agreement with Stephens
Inc. on behalf of the California Tax-Free Income
Fund, incorporated by reference to Post-Effective
Amendment No. 4 to the Registration Statement,
filed September 10, 1992.
(b)(x) - Form of Administration Agreement with Stephens
Inc. on behalf of the Diversified Income Fund,
incorporated by reference to Post-Effective
Amendment No. 4 to the Registration Statement,
filed September 10, 1992.
(b)(xi) - Administration Agreement with Stephens Inc. on
behalf of the Short-Intermediate U.S. Government
Income Fund, incorporated by reference to
Post-Effective Amendment No. 8 to the Registration
Statement, filed February 10, 1994.
(b)(xii) - Administration Agreement with Stephens Inc. on
behalf of the National Tax-Free Money Market
Mutual Fund, incorporated by reference to
Post-Effective Amendment No. 19 to the
Registration Statement, filed December 18, 1995.
(b)(xiii) - Administration Agreement with Stephens Inc. on
behalf of the Aggressive Growth Fund, incorporated
by reference to Post-Effective Amendment No. 19 to
the Registration Statement, filed December 18,
1995.
6(a) - Amended Distribution Agreement with Stephens Inc.,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(b)(i) - Selling Agreement with Marketing One Securities,
Inc. on behalf of the Funds, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
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<PAGE> 97
(b)(ii) - Selling Agreement with Wells Fargo Bank, N.A. on
behalf of the Funds, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
7 - Not Applicable
8(a) - Custody Agreement with Wells Fargo Institutional
Trust Company, N.A. on behalf of the Asset
Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b) - Custody Agreement with Wells Fargo Institutional
Trust Company, N.A. on behalf of the U.S.
Government Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(c) - Custody Agreement with Wells Fargo Institutional
Trust Company, N.A. on behalf of the Corporate
Stock Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(d) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Money Market
Mutual Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(e) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Bond Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
(f) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Growth and Income Fund, incorporated
by reference to Post-Effective Amendment No. 2 to
the Registration Statement, filed April 17, 1992.
(g) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Ginnie Mae Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(h) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Money Market Fund, incorporated by
reference to Post-Effective Amendment No. 3 to the
Registration Statement, filed May 1, 1992.
(i) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Income Fund,
incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement,
filed November 29, 1995.
(j) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Diversified Income Fund,
incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement,
filed November 29, 1995.
(k) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Short-Intermediate U.S. Government
Income Fund, incorporated by reference to
Post-Effective Amendment No. 8 to the Registration
Statement, filed February 10, 1994.
(l) - Form of Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the National Tax-Free Money
Market Mutual Fund, incorporated by reference to
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<PAGE> 98
Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
(m) - Form of Custody Agreement with Wells Fargo Bank,
N.A. on behalf of the Aggressive Growth Fund,
incorporated by reference to Post-Effective
Amendment No. 19 to the Registration Statement,
filed December 18, 1995.
9(a)(i) - Agency Agreement with Wells Fargo Bank, N.A. on
behalf of the Funds, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
9(a)(ii) - Form of Agency Agreement with Wells Fargo Bank,
N.A. on behalf of the National Tax-Free Money
Market Mutual Fund, incorporated by reference to
Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
9(a)(iii) - Form of Agency Agreement with Wells Fargo Bank,
N.A. on behalf of the Aggressive Growth Fund,
incorporated by reference to Post-Effective
Amendment No. 19 to the Registration Statement,
filed December 18, 1995.
9(b)(i) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the California Tax-Free
Money Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(b)(ii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Corporate Stock Fund,
incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
(b)(iii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Money Market Mutual
Fund, incorporated by reference to Post-Effective
Amendment No. 3 to the Registration Statement,
filed May 1, 1992.
(b)(iv) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the California Tax-Free
Income Fund, incorporated by reference to
Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
(b)(v) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Short-Intermediate
U.S. Government Income Fund, incorporated by
reference to Post-Effective Amendment No. 8 to the
Registration Statement, filed February 10, 1994.
(b)(vi) - Form of Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the National
Tax-Free Money Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 17 to
the Registration Statement, filed November 29,
1995.
(b)(vii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the
Asset Allocation Fund, incorporated by reference
to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(viii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the
California Tax-Free Bond Fund, incorporated by
reference
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<PAGE> 99
to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(ix) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the
Diversified Income Fund, incorporated by reference
to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(x) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the
Ginnie Mae Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(xi) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the
Growth and Income Fund, incorporated by reference
to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(xii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the
U.S. Government Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(b)(xiii) - Form of Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class B Shares
of the Aggressive Growth Fund, incorporated by
reference to Post-Effective Amendment No. 19 to
the Registration Statement, filed December 18,
1995.
(b)(xiv) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares
of the Asset Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(b)(xv) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares
of the California Tax-Free Bond Fund, incorporated
by reference to Post-Effective Amendment No. 15
to the Registration Statement, filed May 1, 1995.
(b)(xvi) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares
of the Diversified Income Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(b)(xvii) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares
of the Ginnie Mae Fund, incorporated by reference
to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(xviii) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares
of the Growth and Income Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(b)(xix) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares
of the U.S. Government Allocation Fund,
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<PAGE> 100
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(b)(xx) - Form of Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares
of the Aggressive Growth Fund, incorporated by
reference to Post-Effective Amendment No. 19 to
the Registration Statement, filed December 18,
1995.
(c) - Cross Indemnification Agreement, incorporated by
reference to Post-Effective Amendment No. 11 to
the Registration Statement of Stagecoach Inc.,
filed July 27, 1994.
(d)(i) - Servicing Plan on behalf of the National Tax-Free
Money Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 17 to
the Registration Statement, filed November 29,
1995.
(d)(ii) - Servicing Plan on behalf of the Class B Shares of
the Asset Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(d)(iii) - Servicing Plan on behalf of the Class B Shares of
the California Tax-Free Bond Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(d)(iv) - Servicing Plan on behalf of the Class B Shares of
the Diversified Income Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(d)(v) - Servicing Plan on behalf of the Class B Shares of
the Ginnie Mae Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(d)(vi) - Servicing Plan on behalf of the Class B Shares of
the Growth and Income Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(d)(vii) - Servicing Plan on behalf of the Class B Shares of
the U.S. Government Allocation Fund, incorporated
by reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(d)(viii) - Servicing Plan on behalf of the Class B Shares of
the Aggressive Growth Fund, incorporated by
reference to Post-Effective Amendment No. 19 to
the Registration Statement, filed December 18,
1995.
(d)(ix) - Servicing Plan on behalf of the Class A Shares of
the Aggressive Growth Fund, incorporated by
reference to Post-Effective Amendment No. 19 to
the Registration Statement, filed December 18,
1995.
10 - Opinion and Consent of Counsel, filed herewith.
11 - Consent of Independent Auditors -- KPMG Peat
Marwick LLP, filed herewith.
12 - Not Applicable
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<PAGE> 101
13 - Investment letter, incorporated by reference to
Item 24(b) of Pre-Effective Amendment No. 1 to the
Registration Statement, filed November 29, 1991.
14 - Not Applicable
15(a)(i) - Distribution Plan on behalf of the California
Tax-Free Money Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(a)(ii) - Distribution Plan on behalf of the Corporate Stock
Fund, incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
(a)(iii) - Distribution Plan on behalf of the Money Market
Mutual Fund, incorporated by reference to
Post-Effective Amendment No. 3 to the Registration
Statement, filed May 1, 1992.
(a)(iv) - Distribution Plan on behalf of the California
Tax-Free Income Fund, incorporated by reference to
Post-Effective Amendment No. 4 to the Registration
Statement, filed September 10, 1992.
(a)(v) - Distribution Plan on behalf of the
Short-Intermediate U.S. Government Income Fund,
incorporated by reference to Post-Effective
Amendment No. 8 to the Registration Statement,
filed February 10, 1994.
(a)(vi) - Distribution Plan on behalf of the National
Tax-Free Money Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 17 to
the Registration Statement, filed November 29,
1995.
(b)(i) - Distribution Plan on behalf of the Class B Shares
of the Asset Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(b)(ii) - Distribution Plan on behalf of the Class B Shares
of the California Tax-Free Bond Fund, incorporated
by reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(b)(iii) - Distribution Plan on behalf of the Class B Shares
of the Diversified Income Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(b)(iv) - Distribution Plan on behalf of the Class B Shares
of the Ginnie Mae Fund, incorporated by reference
to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(v) - Distribution Plan on behalf of the Class B Shares
of the Growth and Income Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(b)(vi) - Distribution Plan on behalf of the Class B Shares
of the U.S. Government Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
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<PAGE> 102
(b)(vii) - Distribution Plan on behalf of the Class B Shares
of the Aggressive Growth Fund, incorporated by
reference to Post-Effective Amendment No. 19 to
the Registration Statement, filed December 18,
1995.
(c)(i) - Amended Distribution Plan on behalf of the Class A
Shares of the Asset Allocation Fund, incorporated
by reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(c)(ii) - Amended Distribution Plan on behalf of the Class A
Shares of the California Tax-Free Bond Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(c)(iii) - Amended Distribution Plan on behalf of the Class A
Shares of the Diversified Income Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(c)(iv) - Amended Distribution Plan on behalf of the Class A
Shares of the Ginnie Mae Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(c)(v) - Amended Distribution Plan on behalf of the Class A
Shares of the Growth and Income Fund, incorporated
by reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(c)(vi) - Amended Distribution Plan on behalf of the Class A
Shares of the U.S. Government Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(c)(vii) - Distribution Plan on behalf of the Class A Shares
of the Aggressive Growth Fund, incorporated by
reference to Post-Effective Amendment No. 19 to
the Registration Statement, filed December 18,
1995.
16(a) - Schedules for Computation of Performance Data,
incorporated by reference to Post-Effective
Amendment No. 2, filed April 17, 1992.
16(b) - Schedules for Computation of Performance Data,
incorporated by reference to Post-Effective
Amendment No. 15, filed May 1, 1995.
17 - Powers of Attorney, incorporated by reference to
Initial Registration Statement, filed September
30, 1991.
18(a) - Rule 18f-3 Multi-Class Plan, incorporated by
reference to Post-Effective Amendment No. 14 to
the Registration Statement, filed April 14, 1995.
18(b) - Amended Rule 18f-3 Multi-Class Plan, incorporated
by reference to Post-Effective Amendment No. 19 to
the Registration Statement, filed December 18,
1995.
27(1) - Financial Data Schedule for the California
Tax-Free Money Market Mutual Fund, incorporated by
reference to the Form N-SAR, filed on February 29,
1996.
27(2) - Financial Data Schedule for the Class A Shares of
the Money Market Mutual Fund, incorporated by
reference to the Form N-SAR, filed on February 29,
1996.
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Item 25. Persons Controlled by or under Common Control with Registrant
No person is controlled by or under common control with
Registrant.
Item 26. Number of Holders of Securities
As of February 29, 1996, the number of record holders of each
class of Securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
Class A* Class B
------- -------
<S> <C> <C>
Aggressive Growth Fund 1 1
Asset Allocation Fund 69,567 2,005
California Tax-Free Bond Fund 9,384 765
California Tax-Free Income Fund 2,858 N/A
California Tax-Free Money Market Mutual Fund 30,350 N/A
Corporate Stock Fund 28,957 N/A
Diversified Income Fund 10,673 368
Ginnie Mae Fund 13,715 468
Growth and Income Fund 22,506 537
Money Market Mutual Fund 147,972 4,542**
National Tax-Free Money Market 1 N/A
Mutual Fund
Short-Intermediate U.S. Government 5,124 N/A
Income Fund
U.S. Government Allocation Fund 14,705 178
</TABLE>
* For purposes of this chart, shares of single class Funds are included under
the designation "Class A"
** Designates the number of Class S Shares outstanding.
Item 27. Indemnification
The following paragraphs of Article VIII of the Registrant's
Articles of Incorporation provide:
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<PAGE> 104
(h) The Corporation shall indemnify (1) its Directors and
officers, whether serving the Corporation or at its request any other
entity, to the full extent required or permitted by the General Laws of
the State of Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the full extent permitted by law,
and (2) its other employees and agents to such extent as shall be
authorized by the Board of Directors or the Corporation's By-Laws and be
permitted by law. The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary
to carry out these indemnification provisions and is expressly empowered
to adopt, approve and amend from time to time such By-Laws, resolutions
or contracts implementing such provisions or such further indemnification
arrangements as may be permitted by law. No amendment of these Articles
of Incorporation of the Corporation shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal. Nothing contained herein
shall be construed to authorize the Corporation to indemnify any Director
or officer of the Corporation against any liability to the Corporation or
to any holders of securities of the Corporation to which he is subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. Any
indemnification by the Corporation shall be consistent with the
requirements of law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director
or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for money damages; provided, however,
that nothing herein shall be construed to protect any Director or officer
of the Corporation against any liability to which such Director or
officer would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in
the conduct of his office. No amendment, modification or repeal of this
Article VIII shall adversely affect any right or protection of a Director
or officer that exists at the time of such amendment, modification or
repeal.
Item 28. Business and Other Connections of Investment Adviser.
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned
subsidiary of Wells Fargo & Company, currently serves as investment adviser to
several of the Registrant's investment portfolios and to certain other
registered open-end management investment companies. Wells Fargo Bank's
business is that of a national banking association with respect to which it
conducts a variety of commercial banking and trust activities.
To the knowledge of Registrant, none of the directors or
executive officers of Wells Fargo Bank, except those set forth below, is or has
been at any time during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial nature, except
that certain executive officers also hold various positions with and engage in
business for Wells Fargo & Company. Set forth below are the names and principal
businesses of the directors and executive officers of Wells Fargo Bank who are
or during the past two fiscal years have been
C-11
<PAGE> 105
engaged in any other business, profession, vocation or employment of a
substantial nature for their own account or in the capacity of director,
officer, employee, partner or trustee. All the directors of Wells Fargo Bank
also serve as directors of Wells Fargo & Company.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- ------------------------------------------
<S> <C>
H. Jesse Arnelle Senior Partner of Arnelle & Hastie
Director 455 Market Street
San Francisco, CA 94105
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
William R. Breuner General Partner in Breuner Associates, Breuner Properties and
Director Breuner-Pavarnick Real Estate Developers. Retired Chairman of
the Board of Directors of John Breuner Co.
2300 Clayton Road, Suite 1570
Concord, CA 94520
Vice Chairman of the California State Railroad
Museum Foundation.
111 I Street
Old Sacramento, CA 95814
William S. Davila President and Director of The Vons Companies, Inc.
Director 618 Michillinda Avenue
Arcadia, CA 91007
Officer of Western Association of Food Chains
825 Colorado Blvd. #203
Los Angeles, CA 90041
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Co.
P.O. Box 1000
Lebec, CA 93243
Director of Turner Casting Corp.
P.O. Box 1099
Cudahy, CA 90201
Director of The Bakersfield Californian
P.O. Box 440
1707 I Street
Bakersfield, CA 93302
</TABLE>
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<PAGE> 106
<TABLE>
<S> <C>
Director of Kern County Economic Development Corp.
P.O. Box 1229
2700 M Street, Suite 225
Bakersfield, CA 93301
Chairman of the Board of Trustees of Whittier College
13406 East Philadelphia Avenue
P.O. Box 634
Whittier, CA 90608
Paul Hazen Chairman of the Board of Directors of
Chairman of the Wells Fargo & Company
Board of Directors 420 Montgomery Street
San Francisco, CA 94105
Director of Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Director of Phelps Dodge Corp.
2600 North Central Avenue
Phoenix, AZ 85004
Director of Safeway Inc.
Fourth and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Accounting Professor and Dean Emeritus of
Director Graduate School of Business, Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Homestake Mining Co.
650 California Street
San Francisco, CA 94108
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Boise Cascade Corp.
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of Enron Corp.
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
</TABLE>
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<PAGE> 107
<TABLE>
<S> <C>
Paul A. Miller Chairman of Executive Committee and Director of
Director Pacific Enterprises
633 West Fifth Street
Los Angeles, CA 90071
Trustee of Mutual Life Insurance Company of New York
1740 Broadway
New York, NY 10019
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Trustee of University of Southern California
University Park TGF 200
665 Exposition Blvd.
Los Angeles, CA 90089
Ellen M. Newman President of Ellen Newman Associates
Director 323 Geary Street, Suite 507
San Francisco, CA 94102
Chair of Board of Trustees of
University of California at San Francisco Foundation
250 Executive Park Blvd., Suite 2000
San Francisco, CA 94143
Director of American Conservatory Theater
30 Grant Avenue
San Francisco, CA 94108
Director of California Chamber of Commerce
1201 K Street, 12th Floor
Sacramento, CA 95814
Philip J. Quigley Chairman, Chief Executive Officer and
Director Director of Pacific Telesis Group
130 Kearney Street, Rm. 3700
San Francisco, CA 94108
Director of Varian Associates
3050 Hansen Way
P.O. Box 10800
Palo Alto, CA 94303
</TABLE>
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<PAGE> 108
<TABLE>
<S> <C>
Carl E. Reichardt Chairman and Chief Executive Officer of the
Director Board of Directors of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Hospital Corporation of America,
HCA-Hospital Corp. of America
One Park Plaza
Nashville, TN 37203
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Donald B. Rice President, Chief Operating Officer and Director of
Director Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067
Director of Vulcan Materials Company
One Metroplex Drive
Birmingham, AL 35209
Retired Secretary of the Air Force
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
Chang-Lin Tien Chancellor of University of California at Berkeley
Director UC at Berkeley
Berkeley, CA 94720
John A. Young President, Director and Chief Executive Officer of
Director Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
</TABLE>
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<PAGE> 109
<TABLE>
<S> <C>
William F. Zuendt Director of 3Com Corp.
President 5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052
Director of MasterCard International
888 Seventh Avenue
New York, NY 10106
Trustee of Golden Gate University
536 Mission Street
San Francisco, CA 94163
</TABLE>
BZW Barclays Global Fund Advisors ("BGFA"), a wholly-owned
subsidiary of BZW Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo
Institutional Trust Company), serves as the sub-adviser to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds of the Company
and to certain other open-end management investment companies. As of May 1,
1996, BGFA will no longer serve as sub-adviser to the Asset Allocation,
Corporate Stock and U.S. Government Allocation Funds. As of this date, BGFA
will serve as sub-adviser to the corresponding Asset Allocation, U.S.
Government Allocation and Corporate Stock Master Portfolios of Master
Investment Trust in which such funds invest substantially all of their assets.
The directors and officers of BGFA consist primarily of persons
who during the past two years have been active in the investment management
business of the former sub-adviser to the Registrant, Wells Fargo Nikko
Investment Advisors ("WFNIA") and, in some cases, the service business of BGI.
With the exception of Irving Cohen, each of the directors and executive
officers of BGFA will also have substantial responsibilities as directors
and/or officers of BGI. To the knowledge of the Registrant, except as set
forth below, none of the directors or executive officers of BGFA is or has been
at any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- --------------------- --------------------------------
<S> <C>
Frederick L.A. Grauer Chairman and Director of WFNIA and WFITC+
Chairman, Director
Donald L. Luskin Chief Executive Officer of WFNIA's Defined
Vice Chairman & Director Contribution Group+
Irving Cohen Chief Financial Officer and Chief Operating
Director Officer of Barclays Bank PLC, New York Branch
and Chief Operating Officer of Barclays Group,
Inc. (USA)*: previously Chief Financial
Officer of Barclays de Zoete Wedd Securities
Inc. (1994)*
</TABLE>
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<PAGE> 110
<TABLE>
<S> <C>
Andrea M. Zolberti Chief Financial Officer of WFNIA and WFITC+
Chief Financial Officer
Vincent J. Bencivenga Previously Vice President at State Street
Chief Fiduciary Officer Bank & Trust Company++
</TABLE>
* 222 Broadway, New York, New York, 10038.
+ 45 Fremont Street, San Francisco, California 94105.
++ One Financial Center, Boston, Massachusetts 02111.
Prior to January 1, 1996 Wells Fargo Nikko Investment Advisors
("WFNIA") served as the sub-adviser to the Asset Allocation, Corporate Stock
and U.S. Government Allocation Funds of the Company and as adviser or
sub-adviser to various other open-end management investment companies. For
additional information, see "The Funds, the Master Portfolio and Management" in
the Prospectus and "Management of the Company" in the Statement of Additional
Information of such Funds. For information as to the business, profession,
vocation or employment of a substantial nature of each of the officers and
management committees of WFNIA, reference is made to WFNIA's Form ADV and
Schedules A and D filed under the Investment Advisers Act of 1940, File No.
801-36479, incorporated herein by reference.
Item 29. Principal Underwriters.
(a) Stephens Inc., distributor for the Registrant, does not
presently act as investment adviser for any other registered investment
companies, but does act as principal underwriter for Overland Express Funds,
Inc., Stagecoach Inc. and Stagecoach Trust; and is the exclusive placement
agent for Master Investment Trust, Managed Series Investment Trust, Life &
Annuity Trust and Master Investment Portfolio, which are registered open-end
management investment companies, and has acted as principal underwriter for the
Liberty Term Trust, Inc., Nations Government Income Term Trust 2003, Inc., and
Nations Government Income Term Trust 2004, Inc., and Managed Balanced Target
Maturity Fund, Inc., which are closed-end management investment companies and
Nations Fund Trust, Nations Funds, Inc., Nations Fund Portfolios, Inc. and The
Capitol Mutual Funds, which are open-end management investment companies.
(b) Information with respect to each director and officer of
the principal underwriter is incorporated by reference to Form ADV and
Schedules A and D filed by Stephens Inc. with the Securities and Exchange
Commission pursuant to the Investment Advisers Act of 1940 (file No.
501-15510).
(c) Not Applicable.
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<PAGE> 111
Item 30. Location of Accounts and Records.
(a) The Registrant maintains accounts, books and other
documents required by Section 31(a) of the Investment Company Act of 1940 and
the rules thereunder (collectively, "Records") at the offices of Stephens Inc.,
111 Center Street, Little Rock, Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its
services as investment adviser and custodian and transfer and dividend
disbursing agent at 525 Market Street, San Francisco, California 94105.
(c) WFNIA and Wells Fargo Institutional Trust Company, N.A.
maintain all Records relating to their services as sub-adviser and custodian,
respectively, for the period prior to January 1, 1996, at 45 Fremont Street,
San Francisco, California 94105.
(d) BGFA maintains all Records relating to its services as
sub-adviser for the period beginning January 1, 1996 at 45 Fremont Street, San
Francisco, California 94105.
(e) Stephens maintains all Records relating to its services as
sponsor, administrator and distributor at 111 Center Street, Little Rock,
Arkansas 72201.
Item 31. Management Services.
Other than as set forth under the captions "The Funds, the Master
Portfolio and Management" and "Management, Distribution and Servicing Fees" in
the Prospectus constituting Part A of this Registration Statement and
"Management" in the Statement of Additional Information constituting Part B of
this Registration Statement, the Registrant is not a party to any
management-related service contract.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant
to the provisions set forth above in response to Item 27,
or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in
such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the
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<PAGE> 112
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue
(d) Registrant undertakes to hold a special meeting of its
shareholders for the purpose of voting on the question of
removal of a director or directors if requested in writing
by the holders of at least 10W of the Company's outstanding
voting securities, and to assist in communicating with
other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
(e) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its most current
annual report to shareholders, upon request and without
charge.
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<PAGE> 113
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Secruties Act of 1933
and has duly caused this Amendment to its Registration Statement on Form N-1A
to be signed on its behalf by the undersigned, thereto duly authorized in the
City of Little Rock, State of Arkansas on the 28th day of March, 1996.
STAGECOACH FUNDS, INC.
By /s/ Richard H. Blank, Jr.
-----------------------------------
(Richard H. Blank, Jr.)
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:
Signature Title
--------- -----
/s/ R. Greg Feltus Director, Chairman and
---------------------------- President (Principal Executive Officer)
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Chief Operating Officer,
---------------------------- Secretary and Treasurer
(Richard H. Blank, Jr.)
/s/ Jack S. Euphrat Director
----------------------------
(Jack S. Euphrat)
/s/ Thomas S. Goho Director
----------------------------
(Thomas S. Goho)
/s/ Zoe Ann Hines Director
----------------------------
(Zoe Ann Hines)
/s/ W. Rodney Hughes Director
----------------------------
(W. Rodney Hughes)
/s/ Robert M. Joses Director
----------------------------
(Robert M. Joses)
/s/ J. Tucker Morse Director
----------------------------
(J. Tucker Morse)
March 28, 1996
*By: /s/ Richard H. Blank, Jr.
-----------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
<PAGE> 114
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to the Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Little Rock, State of
Arkansas on the 28th day of March, 1996.
MASTER INVESTMENT TRUST
By /s/ Richard H. Blank, Jr.
-----------------------------------
(Richard H. Blank, Jr., Secretary)
Signature Title
--------- -----
/s/ R. Greg Feltus Trustee, Chairman and President
---------------------------- (Principal Executive Officer)
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Secretary and Treasurer (Chief
---------------------------- Operating Officer)
(Richard H. Blank, Jr.)
/s/ Jack S. Euphrat Trustee
----------------------------
(Jack S. Euphrat)
/s/ Thomas S. Goho Trustee
----------------------------
(Thomas S. Goho)
/s/ Zoe Ann Hines Trustee
----------------------------
(Zoe Ann Hines)
/s/ W. Rodney Hughes Trustee
----------------------------
(W. Rodney Hughes)
/s/ Robert M. Joses Trustee
----------------------------
(Robert M. Joses
/s/ J. Tucker Morse Trustee
----------------------------
(J. Tucker Morse
*By: /s/ Richard H. Blank, Jr.
-----------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
<PAGE> 115
STAGECOACH FUNDS, INC.
FILE NOS. 33-42927; 811-6419
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
EX-99.B 10 - Opinion and Consent of Counsel
EX-99.B 11 - Consent of Auditors -- KPMG Peat Marwick LLP
</TABLE>
<PAGE> 1
March 29, 1996 (202) 887-1500
Stagecoach Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Common Stock of
Stagecoach Funds, Inc.
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 22 and Amendment No. 23
to the Registration Statement on Form N-1A (SEC File Nos. 33-42927 and
811-6419) (the "Registration Statement") of Stagecoach Funds, Inc.(the
"Company") relating to the registration of an indefinite number of shares of
common stock of the California Tax-Free Money Market, Money Market Mutual and
National Tax-Free Money Market Mutual Funds of the Company (collectively, the
"Shares").
We have been requested by the Company to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined documents relating to the organization of the
Company and its series and the authorization and issuance of shares of its
series. We have also verified with the Company's transfer agent the maximum
number of shares issued by the Company during fiscal year 1995.
Based upon and subject to the foregoing, we are of the opinion
that:
The issuance of the Shares by the Company has been duly and
validly authorized by all appropriate corporate action and, assuming delivery
by sale or in accord with the Fund's dividend reinvestment plan in accordance
with the description set forth in the Funds' current prospectuses the Shares
will be legally issued, fully paid and nonassessable by the Company.
<PAGE> 2
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to our firm under the caption "Legal Counsel" and the description of
advice rendered by our firm under the heading "The Funds, the Master Portfolio
and Management" in the Prospectus, which is included as part of the
Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Stagecoach Funds, Inc.
We consent to the incorporation by reference in the Stagecoach Funds, Inc.
Post-Effective Amendment No. 22 to the Registration Statement Number 33-42927
on Form N-1A under the Securities Act of 1933 and Amendment No. 23 to the
Registration Statement Number 811-6419 on Form N-1A under the Investment
Company Act of 1940 of our report dated February 14, 1996, on the financial
statements and financial highlights of the California Tax-Free Money Market
Mutual Fund and the Money Market Mutual Fund (two of the funds comprising
Stagecoach Funds, Inc.) for the year ended December 31, 1995. We also consent
to the incorporation by reference of our report dated February 14, 1996, on the
financial statements and financial highlights of the Asset Allocation Fund,
California Tax-Free Bond Fund, California Tax-Free Income Fund, Corporate Stock
Fund, Diversified Income Fund, Ginnie Mae Fund, Growth and Income Fund,
Short-Intermediate U.S. Government Income Fund and U.S. Government Allocation
Fund (nine of the funds comprising Stagecoach Funds, Inc.) for the year ended
December 31, 1995.
We also consent to the reference to our firm under the heading "Financial
Highlights" in the prospectus, and "Independent Auditors" in the Statement of
Additional Information.
/s/ KPMG Peat Marwick
San Francisco, California
March 28, 1996
