<PAGE>
- ---------------------
ANNUAL
- ---------------------
REPORT
- ---------------------
Money Market
Mutual Fund
Class S
DECEMBER 31, 1995
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS ii
MANAGER COMMENTS AND PORTFOLIOS OF INVESTMENTS
Money Market Mutual Fund 1
STATEMENT OF ASSETS AND LIABILITIES 6
STATEMENT OF OPERATIONS 7
STATEMENTS OF CHANGES IN NET ASSETS 8
FINANCIAL HIGHLIGHTS 9
NOTES TO THE FINANCIAL STATEMENTS 10
INDEPENDENT AUDITORS' REPORT 15
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- ARE NOT FDIC INSURED MONEY MARKET MUTUAL FUNDS SEEK
- ARE NOT GUARANTEED BY WELLS FARGO TO MAINTAIN A STABLE NET ASSET [LOGO]
BANK VALUE OF $1.00 PER SHARE,
- ARE NOT DEPOSITS OR OBLIGATIONS OF HOWEVER, THERE CAN BE NO
THE BANK ASSURANCE THAT THE FUNDS WILL
- INVOLVE INVESTMENT RISK, INCLUDING MEET THIS OBJECTIVE. YIELDS
POSSIBLE LOSS OF PRINCIPAL WILL VARY WITH MARKET
CONDITIONS.
---------------------
i
<PAGE>
LETTER TO SHAREHOLDERS
- -----------------
TO OUR SHAREHOLDERS
A BANNER YEAR FOR BONDS AND STOCKS
The investment markets had a banner year in 1995. The stock market had its
biggest one-year gain since 1958, as measured by the Standard & Poor's 500
Index. Long-term bond returns were the third highest since 1950, according to
various bond indexes. The effect of this remarkable rally was reflected in
equity and fixed-income mutual funds, where double-digit returns were common.
Stagecoach long-term Funds shared in 1995's impressive returns.
One lesson for the long-term investor after the disappointing returns in 1994
was clear: patience and a long-term commitment are keys to successful investing.
And while it is unlikely that 1996 will repeat 1995's impressive performance,
the climate remains favorable for the long-term investor.
THE BOND MARKET
The Federal Reserve lowered the federal funds target rate by 0.25% in July,
1995, and again by 0.25% in December. These cuts signaled a reversal of Fed
policy after a series of rate increases in 1994 and early 1995. Longer-term
rates followed suit, with two-year Treasury yields falling 2.50% and thirty-year
Treasury rates down almost 2%. While rate decreases lower the returns on new
bonds, the resale value of higher paying, existing bonds increases. The Fed's
actions sparked a strong rally in the bond market and the resulting price
appreciation helped to erase the erosion bond-holders endured in 1994.
The Orange County bankruptcy, which caused concern among municipal securities
investors early in the year, moved toward a resolution when the County filed a
reorganization plan which should see the County emerge from bankruptcy by June,
1996. Meanwhile, Orange County has been forced to raise interest rates by as
much as 0.20% in order to attract investors. The Stagecoach Funds do not
currently hold any Orange County obligations which are not credit enhanced (for
example, backed by a line of credit) or revenue-backed (backed by the income
from a particular project) so that the resolution of the bankruptcy should have
little effect on the Funds.
The outlook remains positive for fixed-income markets in 1996. Several broad
trends continue to support a declining interest rate environment. Sluggish
economic growth and low inflation should lead to further easing of monetary
policy early in the year, and both short-term and long-term rates should
decline, continuing the bond market rally. Money market instruments, however,
closely follow the federal funds target rate and should see decreased yields in
1996. The Stagecoach Money Market Mutual Funds have responded to this
environment by purchasing longer-term securities in order to lock in the higher
rates. For the Money Market Mutual Fund, this has
- ---------------------
ii
<PAGE>
LETTER TO SHAREHOLDERS
resulted in an increase in average maturity from 42 days at the end of 1994, to
72 days at the end of 1995.
Although the decline in interest rates in the months ahead will likely not be as
steep as last year's, 1996 should reward bond investors. The Federal Reserve
will likely lower the federal funds target rate by 0.25 to 1.00% from the 1995
year-end level of 5.50%.
THE STOCK MARKET
In 1995, the ingredients were in place for a spectacular year: declining
interest rates, low inflation, increasing profit margins and a strong flow of
funds into the market. U.S. equities responded with near-record returns.
Technology stocks were winners as strong earnings growth drove prices higher for
the year. Financial stocks, which traditionally benefit from falling interest
rates, were also market leaders due to industry consolidation and record
profits, as well as the Fed's actions. Strength was also seen in the traditional
consumer goods companies, particularly among large U.S.-based multinationals
where global name recognition and a history of consistent positive earnings
resulted in strong stock prices.
Although 1996 is not expected to repeat 1995's impressive performance, many of
the ingredients for attractive market returns, however, are still in place: a
favorable interest rate environment, corporate restructurings, mergers and
acquisitions, corporate share repurchase
programs, and the continual stream of contributions into mutual funds,
retirement plans and household savings ear-marked for long-term equity
investment. We feel that the stocks of those companies which focus most on
enhancing shareholder value should be the least volatile and provide the best
long-term results.
THE ENVIRONMENT REMAINS "FRIENDLY" FOR INVESTORS
Under current economic conditions, we expect the stock and bond markets to
continue to benefit from lower interest rates during 1996. We also expect that
modest growth and historically low inflation should set the stage for further
interest rate reductions over the next several months. Corporate earnings should
help support the stock market as well. While the federal budget debate is making
some investors more cautious about investing in long-term government and
municipal bonds, the plan to reduce the federal deficit is encouraging news and
should have a positive effect on investors.
Of course, the financial markets are not without their risks and uncertainties.
Investors should not take continued market increases for granted, especially in
the short-term. Diversification and a long-term strategy are important elements
of successful investing. We do believe, however, that we can look forward to a
sustained period of slow growth and continued long-term bond rate declines with
little risk of inflation throughout 1996.
---------------------
iii
<PAGE>
LETTER TO SHAREHOLDERS
A COMMITMENT TO INVESTMENT QUALITY
We believe a conservative, straight-forward approach to portfolio management to
be the most effective long-term investment strategy. On the following pages you
will find commentary on each of the Funds, offering insight into individual Fund
performance, strategies, portfolio holdings and other helpful information.
The portfolio managers pictured with each Fund are only a part of the extensive
team assembled to help you meet your financial goals. Over fifty investment
professionals concentrate on specific disciplines within the equity and debt
markets to develop strategies and focus on individual investments. Our
investment professionals have access to state-of-the-art technology, numerous
research databases and services, and a scale of assets which assures
cost-efficient trade execution and thorough investment research coverage.
Thank you for your continued investment in Stagecoach Funds. We will work
diligently to help you realize your financial goals in 1996 and in the years to
come.
STAGECOACH FUNDS, FEBRUARY 1996
PS During 1996, Stagecoach Funds will be introducing a new choice for
investors: the STAGECOACH AGGRESSIVE GROWTH FUND. This Fund is for the
experienced investor who is willing to accept an above-average degree of risk in
exchange for the potential of high performance. The Aggressive Growth Fund is
not for everybody, but it reflects our commitment to offering a variety of
Stagecoach Funds to meet a broad range of investment goals. -- FEBRUARY 15, 1996
"STANDARD & POOR'S-REGISTERED TRADEMARK-," "S&P-REGISTERED TRADEMARK-," AND "S&P
500-REGISTERED TRADEMARK-" ARE REGISTERED TRADEMARKS OF MCGRAW-HILL, INC. THE
S&P 500 INDEX IS AN UNMANAGED INDEX THAT TRACKS THE PERFORMANCE OF 500 LARGE
COMPANIES, INCLUDING INDUSTRIAL, TRANSPORTATION, UTILITY AND FINANCIAL
COMPANIES.
- ---------------------
iv
<PAGE>
MONEY MARKET MUTUAL FUND CLASS S
- ---------
INVESTMENT
ADVISORS
FUND OBJECTIVE
To seek a high level of income while preserving capital and liquidity by
investing in high-quality, short-term securities.
[PHOTO] MARK KRASCHEL has co-managed the Money Market Mutual Fund
since its inception in July of 1992. He has specialized in
short-term bond investments for over a decade. Mark holds a
B.S. in Business Administration from the University of
Oregon and an M.B.A. in Finance from the University of San
Francisco.
[PHOTO] MADELINE GISH has co-managed the Money Market Mutual Fund
since July 1994. She joined Wells Fargo in 1989 as the
portfolio coordinator for the Mutual Funds Division.
Madeline also holds a B.S. in Business Administration from
the University of Kansas.
---------------------
1
<PAGE>
MONEY MARKET MUTUAL FUND CLASS S
- --------------------
INVESTMENT ADVISOR Q&A
WHAT WAS THE SEVEN-DAY YIELD FOR THE MONEY MARKET MUTUAL FUND CLASS S SHARES AT
THE END OF 1995?
The Money Market Fund's 7-day yield for Class S shares for the period ended
December 31, 1995 was 4.30%. (The Fund's manager has voluntarily waived or has
reimbursed expenses, thereby reducing operating expenses. Without this
reduction, yields would have been lower.)
WHAT FACTORS CONTRIBUTED TO THIS FUND'S YIELDS IN 1995?
After peaking in February, money market yields decreased steadily over the
course of the year. The federal funds target rate, the benchmark for short-term
interest rates, declined by .50% from July through the end of 1995. As a result,
the Fund's yield fell by a similar amount. The Fund's yield would be expected to
move in tandem with the federal funds target rate in 1996 and still remain an
attractive alternative for investors seeking liquidity and capital preservation.
WHAT STEPS WILL YOU TAKE DURING 1996 IN ANTICIPATION OF LOWER INTEREST RATES?
In anticipation of the Federal Reserve further easing rates, the AVERAGE
MATURITY, or the dollar-weighted average of the entire portfolio, has been
extended in order to enjoy current rates for a longer period of time. As of
December 31, 1995, the Fund's average maturity was 72 days compared to 42 days
at year-end 1994. In 1996, if current market conditions continue, we intend to
maintain the Fund's average maturity in a longer range in anticipation of
further declines in interest rates.
PLEASE DESCRIBE THE PORTFOLIO'S SECURITIES.
As of year end, the Fund was composed of 52% commercial paper, 21% floating rate
notes, 19% US Treasury Bills, 4% repurchase agreements, 3% Federal agency
discount notes, and 1% bank notes or certificates of deposits. All the
commercial paper purchased by the Fund is rated in the highest category by
national credit rating agencies such as Standard & Poor's and Moody's.
- ---------------------
2
<PAGE>
MONEY MARKET MUTUAL FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
YIELD TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER - 52.40%
$25,000,000 ABN Amro North American Finance Corp Inc 5.69 % 01/26/96 $ 24,901,215
40,000,000 ANZ Delaware Inc 5.67 02/13/96 39,729,100
50,000,000 ANZ Delaware Inc 5.70 01/24/96 49,817,917
50,000,000 ANZ Delaware Inc 5.70 02/02/96 49,746,667
45,000,000 Asset Securitization Cooperative Corp++ 5.65 02/29/96 44,583,313
50,000,000 Associates Corp of North America 5.59 03/21/96 49,378,889
50,000,000 Associates Corp of North America 5.60 04/11/96 49,214,444
50,000,000 Beta Finance Corp++ 5.66 02/13/96 49,661,972
50,000,000 Ciesco LP++ 5.47 03/27/96 49,346,639
50,000,000 Corporate Receivables Corp++ 5.50 03/22/96 49,381,250
30,000,000 Corporate Receivables Corp++ 5.65 02/26/96 29,736,333
47,600,000 Corporate Receivables Corp++ 5.72 01/30/96 47,380,670
50,000,000 Daimler-Benz North America Corp 5.46 03/22/96 49,385,750
15,000,000 Daimler-Benz North America Corp 5.50 03/28/96 14,800,625
50,000,000 Daimler-Benz North America Corp 5.70 01/25/96 49,810,000
60,000,000 Daimler-Benz North America Corp 5.72 01/31/96 59,714,000
110,000,000 Den Danske Corp Inc 5.67 02/09/96 109,324,325
50,000,000 Glaxo Wellcome Plc++ 5.70 01/12/96 49,912,917
77,770,000 Greenwich Funding Corp++ 5.62 03/21/96 76,798,739
50,739,000 Greenwich Funding Corp++ 5.75 01/04/96 50,714,688
55,000,000 Hanson Finance Plc++ 5.65 02/27/96 54,507,979
43,000,000 Hanson Finance Plc++ 5.65 03/06/96 42,561,340
20,000,000 Hanson Finance Plc++ 5.66 02/15/96 19,858,500
25,000,000 Heinz (H J) Co++ 5.58 03/15/96 24,717,361
50,000,000 Household Finance Corp 5.69 01/24/96 49,818,236
50,000,000 Household Finance Corp 5.72 01/25/96 49,809,333
40,000,000 Morgan (J P) & Co Inc 5.58 03/13/96 39,553,600
100,000,000 National Australia Funding Inc 5.57 03/15/96 98,855,056
50,000,000 New Center Asset Funding++ 5.60 03/15/96 49,424,444
48,000,000 Penney (J C) Co Inc 5.66 02/14/96 47,667,947
18,625,000 Preferred Receivables Funding Corp 5.67 02/14/96 18,495,929
26,715,000 Sheffield Receivables Corp++ 5.53 03/01/96 26,468,777
50,000,000 Sheffield Receivables Corp++ 5.67 02/15/96 49,645,625
21,040,000 Sony Capital Corp++ 5.47 03/20/96 20,781,893
</TABLE>
---------------------
3
<PAGE>
MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
YIELD TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
$38,000,000 Sony Capital Corp++ 5.68 % 02/12/96 $ 37,748,187
25,000,000 Sony Capital Corp++ 5.71 01/30/96 24,885,007
37,000,000 Student Loan Corp 5.69 01/18/96 36,900,583
30,750,000 Sweden (Kingdom of) 5.70 01/11/96 30,701,227
50,000,000 Swedish Export Credit Corp 5.46 03/20/96 49,400,917
25,000,000 Swedish Export Credit Corp 5.70 01/18/96 24,932,708
50,000,000 WCP Funding Corp++ 5.95 01/02/96 49,991,736
--------------
TOTAL COMMERCIAL PAPER $1,840,065,838
SHORT-TERM FEDERAL AGENCIES - 2.84%
$50,000,000 Federal Home Loan Bank 5.50 % 01/31/96 $ 49,770,833
50,000,000 Federal Home Loan Mortgage Corp 5.50 01/31/96 49,770,833
--------------
TOTAL SHORT TERM FEDERAL AGENCIES $ 99,541,666
U.S. TREASURY BILLS - 18.81%
$680,000,000 U.S. Treasury Bills 5.19 % 07/25/96 $ 660,516,978
</TABLE>
- ------------------------
4
<PAGE>
MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSITS - 0.71%
$25,000,000 Banque Nationale de Paris 5.81 % 01/30/96 $ 25,000,000
CORPORATE MEDIUM TERM NOTES - 0.71%
$25,000,000 FCC National Bank 5.74 % 03/27/96 $ 25,000,000
VARIABLE AND FLOATING RATE BONDS - 21.35%
$60,000,000 Boatmen's Bancshares Inc 6.91 % 06/19/96 $ 59,994,533
30,000,000 Chemical Banking Corp 6.08 08/19/96 30,039,625
50,000,000 Colorado National Bank of Denver 5.91 04/17/96 50,000,000
100,000,000 Comerica Inc 5.78 11/08/96 99,941,840
50,000,000 Comerica Inc 5.84 10/30/96 49,970,920
135,000,000 FCC National Bank 5.59 10/31/96 134,934,903
25,000,000 Household Finance Corp 5.88 09/16/96 25,016,052
100,000,000 International Business Machines Credit Corp 5.79 11/06/96 99,913,570
100,000,000 PNC Bank Corp 5.64 07/29/96 99,970,810
50,000,000 PNC Bank Corp 5.97 09/03/96 49,979,850
50,000,000 Student Loan Marketing Assoc 5.68 04/11/96 50,000,000
--------------
TOTAL VARIABLE AND FLOATING RATE BONDS $ 749,762,103
REPURCHASE AGREEMENTS - 3.59%
$125,955,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 125,955,000
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $3,525,841,585)* (Note 1) 100.41% $3,525,841,585
Other Assets and Liabilities, Net (0.41) (14,322,049)
------ -------------
TOTAL NET ASSETS 100.00% $3,511,519,536
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
++ THESE SECURITIES ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933.
RULE 144A UNDER THAT ACT PERMITS THESE SECURITIES TO BE RESOLD IN
TRANSACTIONS EXEMPT FROM REGISTRATION TO QUALIFIED INSTITUTIONAL
BUYERS. THESE SECURITIES WERE DEEMED LIQUID BY THE INVESTMENT ADVISER
IN ACCORDANCE WITH PROCEDURES APPROVED BY THE FUND'S BOARD OF
DIRECTORS.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
---------------------
5
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY
MARKET
MUTUAL FUND
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value
(see cost below) $ 3,525,841,585
Cash 40,664
Receivables:
Interest 5,783,710
Organization expenses, net of amortization 42,895
Prepaid expenses 93,897
TOTAL ASSETS 3,531,802,751
LIABILITIES
Payables:
Distribution to shareholders 14,735,673
Due to sponsor and distributor (Note 2) 1,480,969
Due to adviser (Note 2) 4,025,202
Other 41,371
TOTAL LIABILITIES 20,283,215
TOTAL NET ASSETS
$ 3,511,519,536
NET ASSETS CONSIST OF:
Paid-in capital - Class A $ 2,893,688,621
Paid-in capital - Class S $ 619,098,223
Undistributed net realized gain (loss)
on investments (1,267,308)
TOTAL NET ASSETS $ 3,511,519,536
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE
Net assets - Class A $ 2,892,620,765
Shares outstanding - Class A 2,893,688,621
Net asset value per share - Class A $ 1.00
Net assets - Class S $ 618,898,771
Shares outstanding - Class S 619,098,223
Net asset value per share - Class S $ 1.00
INVESTMENTS AT COST (NOTE 3) $ 3,525,841,585
- ----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
6
<PAGE>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY
MARKET
MUTUAL FUND
<S> <C> <C>
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 189,686,272
TOTAL INVESTMENT INCOME 189,686,272
EXPENSES (NOTE 2):
Advisory fees 12,729,506
Administration fees 954,713
Custody 537,886
Shareholder servicing fees 9,399,920
Portfolio accounting fees 698,002
Transfer agency fees 1,100,155
Distribution fees 2,898,662
Amortization of organization expenses 14,420
Legal and audit fees 283,256
Registration fees 257,244
Directors' fees 5,000
Shareholder reports 154,384
Other 58,909
TOTAL EXPENSES 29,092,057
Less:
Waived and reimbursed fees (Note 2) (3,193,347)
Net Expenses 25,898,710
NET INVESTMENT INCOME 163,787,562
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments (1,181,926)
NET LOSS ON INVESTMENTS (1,181,926)
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 162,605,636
- ----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET MUTUAL FUND(1)
--------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 163,787,562 $ 42,335,237
Net realized gain (loss) on sale of
investments (1,181,926) (85,382)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 162,605,636 42,249,855
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (150,704,682) (42,335,237)
CLASS S (13,082,880) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 2,284,498,553 2,694,494,544
Reinvestment of dividends - Class A 146,963,258 32,541,176
Cost of shares redeemed - Class A (1,881,800,747) (700,482,027)
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS - CLASS A 549,661,064 2,026,553,693
Proceeds from shares sold - Class S 1,211,993,101 0
Reinvestment of dividends - Class S 10,735,965 0
Cost of shares redeemed - Class S (603,630,843) 0
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS - CLASS S 619,098,223 0
INCREASE (DECREASE) IN NET ASSETS 1,167,577,361 2,026,468,311
NET ASSETS:
Beginning net assets 2,343,942,175 317,473,864
ENDING NET ASSETS $ 3,511,519,536 $ 2,343,942,175
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 2,284,460,229 2,694,494,544
Shares issued in reinvestment of
dividends - Class A 146,963,258 32,541,176
Shares redeemed - Class A (1,881,762,423) (700,482,027)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A 549,661,064 2,026,553,693
Shares sold - Class S 1,211,984,821 0
Shares issued in reinvestment of
dividends - Class S 10,735,964 0
Shares redeemed - Class S (603,622,562) 0
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS S 619,098,223 0
- ----------------------------------------------------------------------------------------
</TABLE>
(1) THE CLASS S SHARES COMMENCED OPERATIONS ON MAY 25, 1995.
The accompanying notes are an integral part of these financial statements.
- ---------------------
8
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
MONEY MARKET MUTUAL FUND
-----------------------------------------------------
CLASS
CLASS A(3) S(4)
------------------------------------------ ---------
YEAR YEAR YEAR PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05 0.04 0.03 0.02 0.03
Net realized and unrealized gain
(loss) on investments 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.04 0.03 0.02 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.04) (0.03) (0.02) (0.03)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.05) (0.04) (0.03) (0.02) (0.03)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 5.34% 3.74% 2.70% 1.50% 2.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $2,892,621 $2,343,942 $317,474 $236,269 $618,899
Number of shares outstanding, end of
period (000) 2,893,689 2,344,028 317,474 236,270 619,098
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 0.75% 0.69% 0.58% 0.20% 1.43%
Ratio of net investment income to
average net assets(2) 5.13% 4.12% 2.67% 2.98% 4.40%
- ---------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 0.83% 0.89% 1.00% 0.94% 1.53%
(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% 4.30%
- ---------------------------------------------------------------------------------------------
</TABLE>
(3) THE FUND COMMENCED OPERATIONS ON JULY 1, 1992.
(4) THE CLASS S SHARES COMMENCED OPERATIONS ON MAY 25, 1995.
The accompanying notes are an integral part of these financial statements.
---------------------
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Money Market Mutual Fund (the "Fund") is a series of Stagecoach Funds, Inc.
(the "Company"), which is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end series investment company. The
Company commenced operations on January 1, 1992, and consists of eight separate
diversified funds: the Asset Allocation, Corporate Stock, Diversified Income,
Ginnie Mae, Growth and Income, Money Market Mutual, Short-Intermediate U.S.
Government Income and U.S. Government Allocation Funds; and three
non-diversified funds: the California Tax-Free Bond, California Tax-Free Income
and California Tax-Free Money Market Mutual Funds. These financial statements
represent the Class S shares of the Money Market Mutual Fund.
The following significant accounting policies are consistently followed by the
Fund in the preparation of its financial statements, and such policies are in
conformity with Generally Accepted Accounting Principles for investment
companies.
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
The Fund invests in securities with remaining maturities not exceeding 397 days
(thirteen months), including obligations of the U.S. Government, bankers
acceptances, commercial paper and certain floating- and variable-rate
instruments. Certain of these floating- and variable-rate 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 Fund uses the amortized cost method to value its portfolio securities and
seeks to maintain a constant net asset value of $1.00 per share; however, there
can be no assurance that the Fund will be able to do so. The amortized cost
method involves valuing a security at its cost plus accreting any discount or
amortizing any premium over the period until maturity, which approximates market
value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are accounted for on the date the securities are
purchased or sold (trade date). Interest income is accrued daily. Realized gains
or losses are reported on the basis of identified cost of securities delivered.
Bond discounts and premiums are accreted or amortized as required by the
Internal Revenue Code.
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10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
("repurchase agreements") are treated as collateralized financing transactions
and are recorded at their contracted resale amounts. These repurchase
agreements, if any, are detailed in the Fund's Portfolio of Investments. The
Fund's adviser pools the Fund's cash and invests in repurchase agreements
entered into by the Fund. The repurchase agreements must be fully collateralized
based on values that are marked to market daily. The collateral is held by an
agent bank under a tri-party agreement. It is the adviser's responsibility to
value collateral daily and to obtain additional collateral as necessary to
maintain market value equal to or greater than the resale price. The repurchase
agreements held in the Fund at December 31, 1995, were collateralized by U.S.
Government obligations. The repurchase agreements were entered into on December
29, 1995.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from any net investment income of the Fund are
declared daily and distributed monthly. Any distributions to shareholders from
net realized capital gains are declared and distributed annually.
FEDERAL INCOME TAXES
It is the Company's policy with respect to the Fund to comply with the
requirements of the Internal Revenue Code that are applicable to regulated
investment companies and to distribute substantially all of the Fund's net
investment income and any net realized capital gains to its shareholders.
Therefore, no federal or state income tax provision is required. The Money
Market Mutual Fund has a net capital loss carryforward of $85,382, which will
expire in the year 2002 and $1,181,926 which will expire in 2003. The Board
intends to offset net capital gains with each capital loss carryforward until
each carryforward has been fully utilized or expires. No capital gain
distribution shall be made until the capital loss carryforward has been fully
utilized or has expired.
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Fund's administrator and distributor, has
charged the Fund for expenses incurred in connection with the organization and
initial registration, including Class S of the Money Market Mutual Fund. Such
expenses are being amortized by the Fund on a straightline basis over 60 months
from the date the Fund or class commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into an advisory contract on behalf of the Fund with
Wells Fargo Bank, N.A. ("WFB"). Pursuant to the contract, WFB has agreed to
furnish to the Fund investment guidance and policy direction in connection with
daily portfolio management. Under the contract with the Money Market Mutual
Fund, WFB is entitled to be paid monthly advisory fees at the annual rate of
0.40% of the average daily net assets of the Fund.
The Company has entered into a contract on behalf of the Fund with WFB,
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11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
whereby WFB is responsible for providing custody and fund accounting services
for the Fund. For providing custody services, WFB is entitled to be compensated
at an annual rate of 0.0167% of the average daily net assets of the Fund. For
portfolio accounting services, WFB is entitled to a monthly base fee of $2,000
plus 0.07% for the first $50 million, 0.045% for the next $50 million, and 0.02%
for the net assets over $100 million.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB has agreed to provide transfer agency services for the Fund. Under the
transfer agency agreement, WFB is paid a per account fee plus other related
costs with a minimum monthly fee of $3,000 unless net assets of the Fund are
under $20 million. For as long as the net assets remain under $20 million, the
Fund will not be charged any transfer agency fees by WFB.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB has agreed to provide shareholder services for the Fund. WFB is entitled to
be compensated for these services based on an annual rate not to exceed 0.30% of
the Fund's average daily net assets.
WAIVED FEES
The following fees were waived for the year ended December 31, 1995.
<TABLE>
<CAPTION>
WAIVED FEES
FUND BY WFB
<S> <C>
- ------------------------------------------------------------------------------------------------
Money Market Mutual Fund $ 3,193,347
</TABLE>
Waived fees continue at the discretion of WFB.
The Company has entered into administration and distribution agreements on
behalf of the Fund with Stephens. Under the agreements, Stephens has agreed to
provide supervisory, administrative and distribution services to the Fund. For
providing supervisory and administrative services, the Fund has agreed to pay
Stephens a monthly fee at the annual rate of 0.03% of the Fund's average daily
net assets.
The Company has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the
"Plan"), whereby the Fund may pay Stephens as compensation for
distribution-related services provided, at the annual rate of up to 0.75% of the
average daily net assets attributable to the Class S shares of the Money Market
Mutual Fund. The Fund may participate in joint distribution activities with any
of the other funds, in which event, expenses reimbursed out of the assets of the
Fund may be attributable, in part, to the distribution-related activities of
another fund. Generally, the expenses attributable to joint distribution
activities are allocated among the funds in proportion to their relative net
asset sizes.
For the year ended December 31, 1995 the Money Market Mutual Fund paid
$2,215,338 in distribution fees for Class S.
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12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
All of the officers and certain of the directors of the Company are also
officers of Stephens. At December 31, 1995, Stephens owned 11,135 shares of the
Money Market Mutual Fund.
3. CAPITAL SHARES TRANSACTIONS
As of December 31, 1995, there were 10 billion shares of $.001 par value capital
stock authorized by the Company. At December 31, 1995, the Fund was authorized
to issue 3 billion shares of $.001 par value capital stock. Transactions in
capital shares for the years ended December 31, 1995 and 1994 are disclosed in
detail in the Statements of Changes in Net Assets.
4. ORANGE COUNTY CALIFORNIA DEBT OBLIGATIONS
During the year the Money Market Mutual Fund held obligations issued by Orange
County, California. Orange County filed for protection under Chapter 9 of the
Federal Bankruptcy Code on December 6, 1994 and defaulted on such securities on
July 10, 1995. The bankruptcy court trustee approved an extension of the
obligations' maturity to June 30, 1996 and modification of certain other terms,
including increasing the interest rate and providing for some portion of
interest to accrue until the maturity date rather than being due and payable
monthly. Concurrent with the default by Orange County, the Company entered into
a Credit Enhancement Agreement (the "Agreement") with WFB, pursuant to which the
Fund was named as a beneficiary of an irrevocable letter of credit issued by
Bank of America National Trust and Savings Association ("Bank of America"). The
Agreement provided support for a portion of the Orange County obligations such
that Bank of America would make certain payments to the Fund under defined
circumstances.
During the period from September 19, 1995 through October 17, 1995, the Money
Market Mutual Fund sold all of the Orange County obligations. Under the terms of
the Agreement, the sale of such obligations did not result in any payments from
Bank of America to the Money Market Mutual Fund.
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14
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHARHOLDERS AND BOARD OF DIRECTORS
STAGECOACH FUNDS, INC:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Money Market Mutual Fund (one of the funds
comprising Stagecoach Funds, Inc.) as of December 31, 1995, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and financial
highlights for the periods indicated herein. These financial statements and
financial highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1995, by examination and other appropriate audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Money Market Mutual Fund of Stagecoach Funds, Inc. as of December 31, 1995, the
results of its operations, the changes in its net assets and its financial
highlights for the periods indicated herein in conformity with generally
accepted accounting principles.
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1996
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16
<PAGE>
STAGECOACH FUNDS, INC.
SUPPLEMENT DATED JANUARY 2, 1996
TO THE CURRENT PROSPECTUS, AS PREVIOUSLY SUPPLEMENTED, AND STATEMENT OF
ADDITIONAL INFORMATION OF EACH FUND OF
STAGECOACH FUNDS, INC.
As of January 1, 1996, Wells Fargo Bank, N.A. provides investment advisory
services for approximately $33 billion of assets.
Each Fund's current Prospectus, as supplemented, and Statement of Additional
Information are hereby amended accordingly.
<PAGE>
Wells Fargo provides investment advisory services, shareholder services, and
certain other services for the Stagecoach Funds. The Funds are sponsored and
distributed by STEPHENS INC., Member NYSE/SIPC. Wells Fargo is not affiliated
with Stephens Inc.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Stagecoach Funds. The booklet
also contains a prospectus supplement inside the back cover. If this report is
used for promotional purposes, distribution of the report must be accompanied or
preceded by a current prospectus. For a prospectus containing more complete
information, including charges and expenses, call 1-800-222-8222. Read the
prospectus carefully before you invest or send money.
<TABLE>
<S> <C>
BULK RATE
U.S. POSTAGE
STAGECOACH FUNDS-REGISTERED TRADEMARK- PAID
P.O. Box 7066 PERMIT NO 1933
San Francisco, CA 94120-7066 FULLERTON CA
DATED MATERIAL
PLEASE EXPEDITE
</TABLE>
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-C- 1995 Stagecoach Funds
