<PAGE> 1
As filed with the Securities and Exchange Commission
on December 3, 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. 28
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 29 [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 LLP
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant [ ] on _________ pursuant
to Rule 485(b), or to Rule 485(b)
[ ] 60 days after filing pursuant [ ] on _________ pursuant
to Rule 485(a)(1), or to Rule 485(a)(1)
[X] 75 days after filing pursuant [ ] on ___________pursuant
to Rule 485(a)(2), or to Rule 485(a)(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 period ending September 30, 1996, was filed with the
Securities and Exchange Commission on or about November 27, 1996.
<PAGE> 2
EXPLANATORY NOTE
This Post-Effective Amendment to the Registration Statement (the
"Amendment") of Stagecoach Funds, Inc. (the "Company") is being filed to
register a new series of the Company offering a single class of shares - the
California Tax-Free Money Market Trust.
This Amendment does not affect the Registration Statement for the
Company's Aggressive Growth, Arizona Tax- Free, Asset Allocation, Balanced,
California Tax-Free Bond, California Tax-Free Income, California Tax-Free Money
Market Mutual, Corporate Stock, Diversified Income, Equity Value, Ginnie Mae,
Government Money Market Mutual, Growth and Income, Intermediate Bond, Money
Market Mutual, Money Market Trust, National Tax-Free, National Tax-Free Money
Market Mutual, Oregon Tax-Free, Prime Money Market Mutual, Short-Intermediate
U.S. Government Income, Small Cap, Treasury Money Market Mutual and U.S.
Government Allocation Funds.
<PAGE> 3
Cross Reference Sheet
CALIFORNIA TAX-FREE MONEY MARKET TRUST
Form N-1A Item Number
Part A Prospectus Captions
- ------ -------------------
[S] [C]
1 Cover Page
2 Prospectus Summary; Summary of Fund Expenses
3 Not Applicable
4 The Fund and Management; Prospectus Appendix-Additional
Investment Policies
5 How the Fund Works; The Fund and Management; Management and
Servicing Fees
6 The Fund and Management; Investing in the Fund
7 Investing in the Fund; Dividends; Taxes
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; Special Considerations Affecting
California Municipal Obligations; Additional Permitted
Investment Activities; SAI Appendix
14 Management
15 Management
16 Management; Servicing Plan
Independent Auditors; Fund Expenses
17 Portfolio Transactions
18 Capital Stock; Other
19 Determination of Net Asset Value
20 Federal Income Taxes
21 Distribution Plan
22 Performance Calculations
23 Financial Information
Part C Other Information
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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> 4
[LOGO]
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PROSPECTUS
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CALIFORNIA TAX-FREE MONEY MARKET TRUST
FEBRUARY 17, 1997
<PAGE> 5
STAGECOACH FUNDS(R)
CALIFORNIA TAX-FREE MONEY MARKET TRUST
Stagecoach Funds, Inc. (the "Company") is an open-end management investment
company. This Prospectus contains information about one fund of the Stagecoach
Family of Funds -- the CALIFORNIA TAX-FREE MONEY MARKET TRUST (the "Fund").
The CALIFORNIA TAX-FREE MONEY MARKET TRUST 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.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
CONSTANT $1.00 NET ASSET VALUE PER SHARE.
Please read this Prospectus before investing and retain it for future
reference. It is designed to provide you with important information and to help
you decide if the Fund's goals match your own. A Statement of Additional
Information ("SAI"), dated February 17, 1997, containing additional information
about the Fund has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. The SAI is
available without charge by writing to Stagecoach Funds, Inc., c/o Stagecoach
Shareholder Services, Wells Fargo Bank, N.A., P.O. Box 7066, San Francisco, CA
94120-7066 or by calling 800-222-8222.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND INVOLVES CERTAIN
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND ADMINISTRATOR AND PROVIDES THE
FUND WITH CERTAIN OTHER SERVICES FOR WHICH IT IS COMPENSATED. STEPHENS INC.
("STEPHENS"), WHICH IS NOT AFFILIATED
PROSPECTUS
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WITH WELLS FARGO BANK, IS THE FUND'S SPONSOR, CO-ADMINISTRATOR AND DISTRIBUTOR.
PROSPECTUS DATED FEBRUARY 17, 1997
PROSPECTUS
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 3
HOW THE FUND WORKS 4
THE FUND AND MANAGEMENT 8
INVESTING IN THE FUND 9
DIVIDENDS 11
HOW TO REDEEM SHARES 11
MANAGEMENT AND SERVICING FEES 12
TAXES 15
PROSPECTUS APPENDIX - ADDITIONAL
INVESTMENT POLICIES A-1
</TABLE>
PROSPECTUS
<PAGE> 8
PROSPECTUS SUMMARY
The Fund provides investors with a convenient way to invest in a portfolio
of securities selected and supervised by professional management. The following
provides summary information about the Fund. For more information, please refer
specifically to the identified Prospectus sections and generally to the Fund's
Prospectus and SAI.
Q. WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A. The 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. 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.
See "How the Fund Works -- Investment Objective and Policies" and "Prospectus
Appendix -- Additional Investment Policies" for further information on
investments.
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF
INVESTMENT?
A. Investments in the Fund are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed
against loss of principal. Therefore, investors should be willing to accept
some risk with money invested in the Fund. Although the Fund seeks to
maintain a stable net asset value of $1.00 per share, there is no assurance
that it will be able to do so. Since the 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
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. The Fund may
not achieve as high a level of current income as other mutual funds that do
not limit their investment to the high credit quality instruments in which
the Fund invests. As with all mutual funds, there can be no assurance that
the Fund will achieve its investment objective. See "How the Funds
Work--Risk Factors" and "Additional Permitted Investment Activities" in the
SAI for further information about the Funds' investments and related risks.
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the Fund's investment adviser, manages the Fund's
investments. Wells Fargo Bank also provides the Fund with transfer agency,
dividend disbursing agency, and custodial services. In addition, Wells
Fargo Bank is a shareholder servicing agent and a
1 PROSPECTUS
<PAGE> 9
selling agent for the Fund. See "The Fund and Management" and "Management
and Servicing Fees" for further information.
Q. HOW DO I INVEST?
A. Qualified investors may invest by purchasing Fund shares at the net asset
value per share without a sales charge ("NAV"). Qualified investors include
customers ("Customers") who maintain qualified accounts with the trust
division of Wells Fargo Bank or an affiliate of Wells Fargo Bank (a
"Bank"). Customers may include individuals, trusts, partnerships and
corporations. Purchases are effected through the Customer's account with a
Bank under the terms of the Customer's account agreement with the Bank.
Investors wishing to purchase Fund shares should contact their account
representatives. See "Investing in the Fund" for additional information.
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares at NAV, without charge by the Company. Fund
shares held by a Bank on behalf of its Customers must be redeemed under the
terms of the Customer's account agreement with the Bank. Banks are
responsible for transmitting redemption requests to the Company and
crediting their Customers' accounts. The Company reserves the right to
impose charges for wiring redemption proceeds. See "Investing in the Fund
-- Redemption of Shares."
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of the Fund are declared daily, paid
monthly and automatically reinvested in additional shares of the Fund at
NAV. Shareholders also may elect to receive dividends in cash. Any capital
gains are distributed at least annually in the same manner as dividends.
See "Dividends" for additional information.
2 PROSPECTUS
<PAGE> 10
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Sales Charge Imposed on Reinvested Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . None
Sales Charge Imposed on Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (after waivers or reimbursements)(1). . . . . . . . . . . . . . . . . . . . . . . 0.00%
Other Expenses (after waivers or reimbursements)(2). . . . . . . . . . . . . . . . . . . . . . . 0.20%
TOTAL FUND OPERATING EXPENSES (after waivers or
reimbursements)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.20%
- ------------
</TABLE>
(1) Management Fees (before waivers or reimbursements) would be payable at a
maximum annual rate of 0.50%.
(2) Other Expenses (before waivers or reimbursements) and Total Fund Operating
Expenses (before waivers or reimbursements) would be 0.49% and 0.99%,
respectively. The Fund has adopted a defensive distribution plan under
Rule 12b-1 of the Investment Adviser's Act of 1940 ("the 1940 Act"), which
does not result in any added expenses to the Fund.
Note: The table does not reflect any charges that may be imposed by Wells
Fargo Bank or another Bank directly on certain customer accounts in connection
with an investment in the Fund.
EXAMPLE OF EXPENSES
You 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:
<TABLE>
<S> <C> <C>
1 YEAR 3 YEARS
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California Tax-Free Money Market Trust $2 $6
</TABLE>
EXPLANATION OF TABLES
The purpose of the above tables is to help a shareholder understand the
various costs and expenses that an investor in the Fund will bear directly or
indirectly.
3 PROSPECTUS
<PAGE> 11
SHAREHOLDER TRANSACTION EXPENSES are charges incurred when an investor buys
or sells Fund shares. Fund shares are sold with no shareholder transaction
expenses imposed by the Company. However, the Company reserves the right to
impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES for Fund shares are based on applicable
contract amounts restated to reflect voluntary fee waivers and expense
reimbursements that are expected to continue to reduce expenses during the
Company's current fiscal year, except that "Other Expenses" is based on
estimated amounts for the current fiscal year. Any waivers or reimbursements
would reduce the Fund's total expenses. There can be no assurance that waivers
or reimbursements will continue after that time. For more complete descriptions
of the various costs and expenses you can expect to incur as an investor in the
Fund, please see "Management and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical illustration of the expenses
associated with a $1,000 investment over stated periods, based on the expenses
in the above tables and an assumed annual rate of return of 5%. The rate of
return should not be considered an indication of actual or expected performance
of the Fund nor a representation of past or future expenses; actual expenses
and returns may be greater or lesser than those shown.
HOW THE FUND WORKS
INVESTMENT OBJECTIVE AND POLICIES
Set forth below is a description of the investment objectives and
related policies of the Fund.
The 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 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. 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 also may 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.
4 PROSPECTUS
<PAGE> 12
The Fund seeks to maintain a net asset value of $1.00 per share. Its
assets consist only of obligations with remaining maturities (as defined by the
SEC) of 397 days (13 months) or less at the date of acquisition as determined
in accordance with Rule 2a-7 under the 1940 Act and the dollar-weighted average
maturity of the Fund's investments is 90 days or less.
The 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, 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" section below and in the SAI.
As a matter of fundamental policy, at least 80% of the 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 Fund may
own different municipal obligations which pay interest based on the revenues of
similar types of projects. For additional descriptions of the types of
securities and investment practices used by the Fund, see "Risk Factors" and
"Prospectus Appendix -- Additional Investment Policies" in this Prospectus and
"Investment Restrictions" and "Additional Permitted Investment Activities" in
the SAI.
RISK FACTORS
Investments in the Fund are not bank deposits or obligations of Wells Fargo
Bank and are not insured by the FDIC, nor are they insured or guaranteed
against loss of principal. Therefore, investors should be willing to accept
some risk with money invested in the Fund. Although the Fund seeks to maintain
a stable net asset value of $1.00 per share, there is no assurance that it will
be able to do so. The Fund may not achieve as high a level of current income as
other mutual
5 PROSPECTUS
<PAGE> 13
funds that do not limit their investment to the high credit quality instruments
in which the Fund invests. The Fund may invest in illiquid securities
(including certain restricted securities) which may be difficult to sell
promptly at an acceptable price. Certain restricted securities may be subject
to legal restrictions on resale. Delay or difficulty in selling securities may
result in a loss or be costly to a Fund. As with all mutual funds, there can be
no assurance that the Fund will achieve its investment objective.
The Fund, under the 1940 Act, must comply with certain investment criteria
designed to provide liquidity, reduce risk, and allow the Fund to maintain a
stable net asset value of $1.00 per share. Of course, the Fund cannot guarantee
a $1.00 share price. The Fund's dollar-weighted average portfolio maturity must
not exceed 90 days. Any security that the Fund purchases must have a remaining
maturity of not more than 397 days. In addition, any security that the Fund
purchases must present minimal credit risks and be of high quality (i.e., be
rated in the top two rating categories by the requisite NRSROs or, if unrated,
determined to be of comparable quality to such rated securities). These
determinations are made by Wells Fargo Bank, as the Fund's investment adviser,
under guidelines adopted by the Company's Board of Directors.
The Fund seeks to reduce risk by investing its assets in securities of
various issuers. In addition, the Fund emphasizes safety of principal and high
credit quality. In particular, the internal investment policies of the Fund's
investment adviser, Wells Fargo Bank, prohibit the purchase for the Fund of
many types of floating-rate derivative securities that are considered
potentially volatile. The following types of derivative securities ARE NOT
permitted investments for the Fund:
- capped floaters (on which interest is not paid when market rates move
above a certain level);
- leveraged floaters (whose interest rate reset provisions are based on a
formula that magnifies changes in interest rates);
- range floaters (which do not pay any interest if market interest rates
move outside of a specified range);
- dual index floaters (whose interest rate reset provisions are tied to more
than one index so that a change in the relationship between these indices
may result in the value of the instrument falling below face value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, the Fund may not invest in securities whose interest
rate reset provisions are tied to an index that materially lags short-term
interest rates, such as "COFI floaters." The Fund may only invest in
floating-rate securities that bear interest at a rate that resets quarterly or
more frequently and that resets based on changes in standard money market rate
indices such as U.S. Treasury bills, London Interbank Offered Rate or LIBOR,
the prime rate, published commercial paper rates, federal funds rates, Public
Securities Associates ("PSA") floaters or JJ Kenney index floaters.
6 PROSPECTUS
<PAGE> 14
Since the 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 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 Fund will
comply with the Internal Revenue Code of 1986, as amended from time to time
(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 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." On
July 15, 1996, Standard & Poors upgraded its rating back to "A+." Since the
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 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.
PERFORMANCE
The performance of the Fund may be advertised from time to time in terms of
current yield, effective yield, and average annual total return. In addition,
the Fund's performance may be advertised in terms of tax-equivalent yield or
effective tax-equivalent yield. Performance figures are based on historical
results and are not intended to indicate future performance.
Yield refers to the income generated by an investment in the Fund over
a specified period (usually 7 days), expressed as an annual percentage rate.
Effective yield is calculated similarly but assumes reinvestment of the income
earned from the Fund. Because of the effects of compounding, effective yields
are slightly higher than yields. The tax-equivalent and effective
tax-equivalent yields assume that a stated income tax rate has been applied to
determine the tax-equivalent figures. Application of a stated income-tax rate
results in higher yield and effective yield figures.
Average annual return is based on the overall dollar or percentage
change of an investment in the Fund and assumes the investment is at NAV and
all dividends and distributions are also reinvested at NAV in shares of the
Fund.
7 PROSPECTUS
<PAGE> 15
In addition to presenting these standardized performance calculations,
at times, the Fund may also present non- standard performance figures, such as
yields and effective yields for a 30-day period or, in sales literature,
distribution rates.
Additional performance information is contained in the SAI under
"Performance Calculations" and in the Annual Report, which are available upon
request without charge by calling the Company at 1-800-222-8222 or by writing
the Company at the address shown on the front cover of the Prospectus.
THE FUND AND MANAGEMENT
The Fund is one fund in the Stagecoach Family of Funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of twenty-four other series. For information on another fund, please
call Stagecoach Shareholder Services at 1-800-222-8222 or write the Company at
the address shown on the front cover of the Prospectus.
The Company's Board of Directors supervises the 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 changing a Fund's investment
objective or fundamental investment policies. All shares of the Company have
equal voting rights and are voted in the aggregate, rather than by series or
class, unless otherwise required by law (such as when the voting matter affects
only one series or class). A shareholder of record of the Fund is entitled to
one vote for each share owned 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.
MANAGEMENT
Wells Fargo Bank serves as the Fund's investment adviser, administrator,
transfer and dividend disbursing agent and custodian. In addition, Wells Fargo
Bank serves as a shareholder servicing agent and as a selling agent for the
Fund. Wells Fargo Bank, one of the largest banks in the United States, was
founded in 1852 and is the oldest bank in the western United States. As of
December 31, 1996, Wells Fargo Bank provided investment advisory services for
approximately $___ billion of assets of individuals, trusts, estates and
institutions. Wells Fargo Bank also serves as the investment adviser or
sub-adviser to other separately managed series of the Company, and to five
other registered, open-end, management investment companies which consist 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.
Stephens is the Company's sponsor and co-administrator and distributes the
Fund's shares. Stephens is a full service broker/dealer and investment advisory
firm located at 111 Center
8 PROSPECTUS
<PAGE> 16
Street, Little Rock, Arkansas 72201. Stephens and its predecessor have been
providing securities and investment services for more than 60 years.
Additionally, they have been providing discretionary portfolio management
services since 1983. Stephens currently manages investment portfolios for
pension and profit-sharing plans, individual investors, foundations, insurance
companies and university endowments.
Morrison & Foerster LLP, counsel to the Company and special counsel to Wells
Fargo Bank has advised the Company and Wells Fargo Bank that Wells Fargo Bank
and its affiliates may perform the services contemplated by the Advisory
Contract and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
INVESTING IN THE FUND
SHARE PRICE
The price of a Fund share is its "net asset value" or NAV. The NAV of shares
of the Fund is computed by adding the value of its portfolio investments plus
cash and other assets, deducting liabilities and then dividing the result by
the number of Fund shares outstanding. All expenses, including fees paid to
the investment adviser and co-administrators, are accrued daily and taken into
account for the purposes of computing NAV, which is expected to fluctuate
daily. As noted above, the Fund seeks to maintain a constant $1.00 NAV share
price, although there is no assurance that it will be able to do so.
Fund shares may be purchased on any day the Fund is open (a "Business Day").
The Fund is open on any day that either the New York Stock Exchange or Wells
Fargo Bank is open. Currently the holidays observed by the Fund are New Year's
Day, Presidents' Day, Martin Luther King's Birthday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day
(each, a "Holiday"). When any Holiday falls on a weekend, the Fund typically is
closed on the weekday immediately before or after such Holiday.
Wells Fargo Bank calculates the Fund's NAV as of 12:00 Noon (Pacific time)
each Business Day. All transaction orders are processed at the NAV next
determined after the order is received.
9 PROSPECTUS
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The Fund's portfolio investments are valued on the basis of amortized cost.
This valuation method is based on the receipt of a steady rate of payment from
the date of purchase until maturity rather than actual changes in market value.
The Company's Board of Directors believes that this valuation method accurately
reflects fair value.
HOW TO BUY SHARES
Shares of the Fund are sold without a sales load on a continuous basis to
Customers who maintain qualified accounts with the trust division of a Bank.
Customers may include individuals, trusts, partnerships and corporations. All
share purchases are effected through a Customer's account at a Bank through
procedures established in connection with the requirements of the account, and
confirmations of share purchases and redemptions are sent to the Bank involved.
A Bank (or its nominee) is normally the holder of record of Fund shares acting
on behalf of its Customers and reflects its Customers beneficial ownership of
shares in the account statements provided to its Customers. The exercise of
voting rights and the delivery to Customers of shareholder communications from
the Fund is governed by a Customer's account agreement with a Bank. Investors
wishing to purchase shares of the Fund should contact their account
representatives or call 1-800-222-8222.
Purchase orders for shares in the Fund must be received by the Fund by 12:00
Noon (Pacific time) on a Business Day. Payment for such shares must also be
made in federal funds or other funds immediately available to the Custodian no
later than 12:00 Noon (Pacific time) on the same Business Day that the purchase
order is received. Orders for the purchase of shares are executed at the NAV
per share (the "public offering price") next determined after receipt of both
an order and payment in proper order. The Fund has no minimum initial or
subsequent investment requirement, although a Bank may impose certain minimum
Customer account requirements.
The Bank is responsible for transmitting orders for purchases by Customers
and delivering required funds on a timely basis. If funds are not received
within the period described above, the order will be canceled, notice thereof
will be given, and the Bank will be responsible for any loss to the Fund or its
shareholders. A Bank may charge certain account fees depending on the type of
account the investor has established. Payment for shares of the Fund may, in
the discretion of the investment adviser, be made in the form of securities
that are permissible investments for the Fund. For further information see
"Additional Purchase and Redemption Information" in the SAI.
The Company reserves the right to reject any purchase order. Payment for
orders which are not received will be returned after prompt inquiry. The
issuance of shares is recorded on the books of the Fund, and share certificates
are not issued.
For additional information on tax-deferred accounts, please contact a
shareholder servicing agent or selling agent or call 1-800-222-8222.
10 PROSPECTUS
<PAGE> 18
Shares of a tax-free fund such as the 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. In
addition, Fund shares are not available in all states.
STATEMENTS AND REPORTS
If a Bank is the recordholder for an investor's account, the Bank sends the
investor a monthly account statement after the end of each month in which there
has been a transaction that affects the share balance or Fund account
registration. A statement with tax information for each year is mailed to
investors during January of the following year and also is filed with the
Internal Revenue Service ("IRS"). At least twice a year, investors receive
financial statements from the Fund.
DIVIDENDS
Dividends from net investment income are declared daily payable to
shareholders of record as of 12:00 Noon (Pacific time). If your purchase order
is received before 12:00 Noon on any Business Day, you begin earning dividends
on the day your purchase order is effective and continue to earn dividends
through the day prior to the date you redeem such shares. Dividends for a
Saturday, Sunday or Holiday are credited on 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 receive your accrued dividends
together with your redemption proceeds. The Fund distributes any capital gains
at least annually. The Fund does not make distributions from net realized
securities gains unless capital loss carryovers, if any, have been utilized or
have expired.
Dividends declared in a month generally are paid on the last Business Day of
that month. All dividends are reinvested automatically in additional shares of
the Fund at NAV or, at the option of the investor, paid in cash. Distributions
from net realized securities gains are declared and paid once a year, but the
Fund may make distributions on a more frequent basis. In all cases,
distributions will be made in a manner that is consistent with the provisions
of the 1940 Act.
HOW TO REDEEM SHARES
Redemption requests are effected at the NAV per share next determined after
receipt of a redemption request in good order by the Company. Shares held by a
Bank on behalf of its Customers must be redeemed in accordance with
instructions and limitations pertaining to the Customer's accounts at the Bank.
The Bank is responsible for transmitting redemption requests to the Company and
crediting its Customers' accounts with the redemption proceeds on a timely
basis. The redemption proceeds for Fund shares normally are wired to the
redeeming Bank the following Business Day after receipt of the request by the
Company. The Company reserves the
11 PROSPECTUS
<PAGE> 19
right to delay the wiring of redemption proceeds for up to seven days after it
receives a redemption order if, in the judgment of the investment adviser, an
earlier payment could adversely affect the Fund or unless the SEC permits a
longer period under extraordinary circumstances. Such extraordinary
circumstances could include a period during which an emergency exists as a
result of which (a) disposal by the Fund of securities owned by it is not
reasonably practicable or (b) it is not reasonably practicable for the Fund to
fairly determine the value of its net assets, or a period during which the SEC
by order permits deferral of redemptions for the protection of security holders
of a Fund.
To be accepted by the Company, a letter requesting redemption must include:
(i) the Fund's name and account registration from which the shares are being
redeemed; (ii) the account number; (iii) the amount to be redeemed; (iv) the
signatures of all registered owners; and (v) a signature guarantee by any
eligible guarantor institution. An "eligible guarantor institution" includes a
commercial bank that is an FDIC member, a trust company, a member firm of a
domestic stock exchange, a savings association, or a credit union that is
authorized by its charter to provide a signature guarantee. Signature
guarantees by notaries public are not acceptable. Further documentation may be
requested from corporations, administrators, executors, personal
representatives, trustees or custodians.
All redemptions of Fund shares are made in cash, except that the commitment
to redeem shares in cash extends only to redemption requests made by an
investor during any 90-day period of up to the lesser of $250,000 or 1% of the
NAV of the Fund at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC. In the case of redemption requests by
investors in excess of such amounts, the Board of Directors reserves the right
to have the Fund make payment, in whole or in part, in securities or other
assets, in case of an emergency or any time a cash distribution would impair
the liquidity of the Fund to the detriment of the existing shareholders. In
this event, the securities would be valued in the same manner as the Fund's
securities are valued. If the recipient were to sell such securities, the
investor might incur brokerage charges.
A redemption may result in a recognized gain or loss for federal income tax
purposes, irrespective of whether the redemption is paid in cash or in kind.
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of the Company's Board of Directors,
Wells Fargo Bank, as the Fund's investment adviser, provides investment
guidance and policy direction in connection with the management of the Fund's
assets. Wells Fargo Bank also furnishes the Board of Directors with periodic
reports on the Fund's investment strategies and performance. For these
services, Wells Fargo Bank is entitled to a monthly investment advisory fee at
the annual rate of 0.50% of the Fund's average daily net assets, and may waive
such fee in whole or in part. Any
12 PROSPECTUS
<PAGE> 20
such waiver will reduce the Fund's expenses and, accordingly, have a favorable
impact on the Fund's yield. From time to time, the Fund, consistent with its
investment objective, policies and restrictions, may invest in securities of
companies with which Wells Fargo Bank has a lending relationship.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank also serves as the Fund's custodian and transfer and
dividend disbursing agent. Under the Custody Agreement, the Fund may, at times,
borrow money from Wells Fargo Bank as needed to satisfy temporary liquidity
needs. Wells Fargo Bank charges interest on such overdrafts at a rate
determined pursuant to the Fund's Custody Agreement. Wells Fargo Bank performs
its custodial and transfer and dividend disbursing agency services at 525
Market Street, San Francisco, California 94105. For its services as custodian,
Wells Fargo Bank is entitled to receive fees as follows: a net asset charge at
the annual rate of 0.0167%, payable monthly, plus specified transaction
charges. Wells Fargo Bank also will provide portfolio accounting services
under the Custody Agreement for a fee calculated as follows: a monthly base fee
of $2,000 plus a net asset fee at the annual rate of 0.070% of the first
$50,000,000 of the Fund's average daily net assets, 0.045% of the next
$50,000,000, and 0.020% of the average daily net assets in excess of
$100,000,000.
For its transfer and dividend disbursement agency services, Wells Fargo Bank
is entitled to receive a fee at the annual rate of 0.04% of the Fund's average
daily net assets.
SHAREHOLDER SERVICING AGENTS
The Fund has entered into a servicing plan and related shareholder servicing
agreement with Wells Fargo Bank and may enter into similar agreements with
other Banks ("Shareholder Servicing Agents"). Under such agreements,
Shareholder Servicing Agents (including Wells Fargo Bank) agree, as agents for
their customers, to provide shareholder administrative and liaison servicing
with respect to Fund shares, which include, without limitation, aggregating and
transmitting shareholder orders for purchases, exchanges and redemptions;
maintaining shareholder accounts and records; and providing such other related
services as the Company or a shareholder may reasonably request. For these
services, a Shareholder Servicing Agent is entitled to receive a fee at the
annual rate of up to 0.20% of the average daily net assets attributable to the
shares owned of record or beneficially by investors with whom the Shareholder
Servicing Agent maintains a servicing relationship. In no case shall payments
exceed any maximum amount that may be deemed applicable under applicable laws,
regulations or rules, including the Conduct Rules of the National Association
of Securities Dealers ("NASD Rules").
A Shareholder Servicing Agent also may impose certain conditions and/or fees
on its customers, subject to the terms of this Prospectus, in addition to or
different from those imposed by the Fund, such as requiring a higher minimum
initial investment or payment of a separate fee for additional services. Each
Shareholder Servicing Agent has agreed to disclose any fees it may directly
charge its customers who are shareholders of the Fund and to notify them in
writing at least 30 days before it imposes any transaction fees.
13 PROSPECTUS
<PAGE> 21
ADMINISTRATOR AND CO-ADMINISTRATOR
Subject to the overall supervision of the Company's Board of Directors,
Wells Fargo Bank as Administrator and Stephens as Co-administrator, provide the
Fund with administrative services, including general supervision of the Fund's
operation, coordination of the other services provided to the Fund, compilation
of information for reports to the SEC and the state securities commissions,
preparation of proxy statements and shareholder reports, and general
supervision of data compilation in connection with preparing periodic reports
to the Company's Directors and officers. Wells Fargo Bank and Stephens also
furnish office space and certain facilities to conduct the Fund's business, and
Stephens compensates the Company's Directors and officers who are affiliated
with Stephens. For these administrative services, Wells Fargo Bank and Stephens
are entitled to receive a monthly fee at the annual rate of ____% and ____%,
respectively, of the Fund's average daily net assets. Wells Fargo Bank and
Stephens may delegate certain of their respective administrative duties to
sub-administrators.
SPONSOR AND DISTRIBUTOR
Stephens, as the principal underwriter of the Fund within the meaning of
the 1940 Act, has entered into a Distribution Agreement with the Company
pursuant to which Stephens is responsible for distributing Fund shares.
DEFENSIVE 12B-1 PLAN
The Fund has entered into a "defensive" Distribution Plan under Rule 12b-1
of the 1940 Act (the "Plan"). The Plan reflects that, to the extent any fees
paid pursuant to the servicing plan are deemed to be "primarily intended to
result in the sale of shares" of the Fund, such fees are approved pursuant to
the Plan. The Plan will not result in any separate payment of fees by the Fund.
FUND 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 the Fund's expenses and, accordingly,
have a favorable impact on the Fund's performance. Except for the expenses
borne by Wells Fargo Bank and Stephens, each fund of the Company bears all
costs of its operations, including its pro rata portion of Company expenses
such as fees and expenses of its independent auditors, legal counsel, and
compensation of the Company's directors who are not affiliated with the
adviser, administrator, or any of their affiliates; advisory, transfer agency,
custody and administration fees; and any extraordinary expenses. Expenses
attributable to each fund or class are charged against the assets of the fund
or class. General expenses of the Company are allocated among all of the funds
of the Company, including the
14 PROSPECTUS
<PAGE> 22
Fund, in a manner proportionate to the net assets of each fund, on a
transactional basis, or on such other basis as the Company's Board of Directors
deems equitable.
TAXES
The Company intends to qualify the Fund each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), as long as such qualification is in the best interest of the
Fund's shareholders. The Fund is treated as a separate entity for federal
income tax purposes and, thus, the provisions of the Code applicable to
regulated investment companies are applied to the Fund separately, rather than
to the Company as a whole. In addition, net capital gains, net investment
income, and operating expenses are determined separately for the Fund. By
complying with the applicable provisions of the Code, the Fund will not be
subject to federal income taxes with respect to net investment income and any
net realized capital gains distributed to its shareholders. The Fund intends to
pay out substantially all of its net investment income and any net realized
capital gains each year.
Dividends from net investment income and net realized short-term capital
gains (the excess of net short-term capital gains over net long-term capital
losses) declared and paid by the Fund will be taxable as ordinary income to its
shareholders. Any capital gain distributions, attributable to the Fund's net
realized long-term capital gains (the excess of net long-term capital gains
over net short-term capital losses), will generally be taxable to shareholders
as long-term capital gain, regardless of the length of time that the Fund's
shares have been held. Such dividends and distributions will be taxable to
shareholders irrespective of whether the shareholder takes them in cash or has
them automatically reinvested in additional Fund shares. You may be eligible to
defer the taxation of dividend and capital gains distributions on Fund shares
which are held under a qualified tax-deferred retirement plan. The Fund does
not expect its dividends to qualify for the dividends-received deduction
allowed to corporate shareholders.
The 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 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,
15 PROSPECTUS
<PAGE> 23
1986. To the extent that the 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 Fund. Persons who may be "substantial users" (or
"related persons" of substantial users) of facilities financed by private
activity bonds should consult their tax advisors before purchasing Fund shares.
With respect to corporate shareholders, exempt- interest dividends paid by the
Fund are included in the corporate shareholder's "adjusted current earnings" as
part of its AMT calculation, and may also affect its federal "environmental
tax" liability. As of the date 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.
An investor must provide a valid taxpayer identification number ("TIN"),
generally the investor's social security or employer identification number,
upon opening or reopening an account. Failure to furnish a valid TIN to the
Company could subject the investor to penalties imposed by the IRS. In
addition, the Company may be required to withhold, subject to certain
exemptions, at a rate of 31% ("backup withholding") on dividends, capital gain
distributions, and redemption proceeds (including proceeds from exchanges) paid
or credited to an individual Fund shareholder, unless a shareholder certifies
that the TIN provided is correct and that the shareholder is not subject to
backup withholding, or the IRS notifies the Company that the shareholder's TIN
is incorrect or that the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the
Fund's SAI.
The foregoing discussion is based on tax laws in effect as of the date of
this Prospectus and summarizes only some of the important federal income tax
considerations generally affecting the Fund and its shareholders. It is not
intended as a substitute for careful tax planning; investors should consult
their tax advisor with respect to their specific tax situation and state and
local taxes. Further federal income tax considerations are discussed in the
SAI.
16 PROSPECTUS
<PAGE> 24
PROSPECTUS APPENDIX --
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
The California Tax-Free Money Market Trust 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;
(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 "A1+" 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
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;
(vi) high-quality municipal obligations, the income from which may
or may not be exempt from federal income taxes; and
(vii) certain securities issued by other investment companies.
Moreover, the 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
A-1 PROSPECTUS
<PAGE> 25
from federal income taxes to maintain a temporary defensive posture or in an
effort to improve after-tax yield to the 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.
Municipal Obligations
Subject to the maturity and other restrictions of Rule 2a-7, the Fund
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 Fund may
invest 25% or more of the current value of its total assets in certain "private
activity bonds," such as pollution control bonds; provided, however, that such
investments will be made only to the extent they are consistent with the Fund'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 Fund 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.
For a further discussion of factors affecting purchases of municipal
obligations by the Fund, see "Special Considerations Affecting California
Municipal Obligations" in the SAI.
U.S. Government Obligations
U.S. Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government and supported by the full faith
and credit of the U.S. Treasury. U.S. Treasury obligations differ mainly in the
length of their 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.
A-2 PROSPECTUS
<PAGE> 26
Some obligations of agencies or instrumentalities of the U.S. Government are
supported by the full faith and credit of the United States or U.S. Treasury
guarantees; others, by the right of the issuer or guarantor to borrow from the
U.S. Treasury; still others, by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality;
and others, only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
which agency or instrumentality may be privately owned. There can be no
assurance that the U.S. Government will provide financial support to its
agencies or instrumentalities where it is not obligated to do so. In addition,
U.S. Government obligations are subject to fluctuations in market value due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market rates
increase and rises when market interest rates decrease. Certain types of U.S.
Government obligations are subject to fluctuations in yield or value due to
their structure or contract terms.
The Fund may also purchase "stripped securities," which include
participations in trusts that hold U.S. Treasury obligations (such as TIGRs and
CATS) and interests in U.S. Treasury obligations reflected in the Federal
Reserve-Book Entry System which represent ownership in either the future
interest payments or the future principal payments on the U.S. Treasury
obligations. Stripped securities are issued at a discount to their "face value"
and may exhibit greater price volatility than ordinary debt securities because
of the manner in which their principal and interest are paid to investors.
Other Investment Companies
For temporary investments, the Fund 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 any such company has a 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 the Fund; however, Wells Fargo Bank has undertaken to waive its
advisory fees with respect to that portion of the Fund's assets so invested,
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition. Under Section 12(d)(l), a Fund, together with
any company or companies controlled by it, is generally prohibited from owning
more than 3% of the total outstanding voting stock of any such investment
company, nor may a Fund, 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.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Fund may purchase bear interest at
rates that are not fixed, but vary for example, with changes in specified
market rates or indices or at specified intervals. Certain of these instruments
may carry a demand feature that would permit the holder to
A-3 PROSPECTUS
<PAGE> 27
tender them back to the issuer at par value prior to maturity. The Fund may, in
accordance with SEC rules, account for these instruments as maturing at the
next interest rate readjustment date or the date at which the Fund may tender
the instrument back to the issuer, whichever is later. The floating- and
variable-rate instruments that the Fund may purchase include certificates of
participation in such obligations. The Fund may invest in floating- and
variable-rate obligations even if they carry stated maturities in excess of 397
days, upon compliance with certain conditions of the SEC, in which case such
obligations will be treated in accordance with these conditions as having
maturities not exceeding 397 days.
Wells Fargo Bank, as investment adviser to the Fund, will monitor on an
ongoing basis the ability of an issuer of a demand instrument to pay principal
and interest on demand. Events affecting the ability of the issuer of a demand
instrument to make payment when due may occur between the time the Fund elects
to demand payment and the time payment is due, thereby affecting the Fund's
ability to obtain payment at par. Demand instruments whose demand feature is
not exercisable within seven days may be treated as liquid, provided that an
active secondary market exists.
Repurchase Agreements
The Fund may enter into repurchase agreements wherein the seller of a
security to the Fund agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Fund may enter into repurchase agreements only with respect to U.S.
Government obligations and other obligations that could otherwise be purchased
by the Fund. All repurchase agreements must be collateralized at 102% 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 397 days,
the term of any repurchase agreement on behalf of the Fund will always be less
than one year. If the seller defaults and the value of the underlying
securities has declined, the Fund may incur a loss. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security, the
Fund's disposition of the security may be delayed or limited. The Fund will
enter into repurchase agreements only with primary reporting dealers and
commercial banks that meet guidelines established by the Board of Directors and
that are not affiliated with Wells Fargo Bank. The Fund may participate in
pooled repurchase agreement transactions with other funds advised by Wells
Fargo Bank.
Letters of Credit
Certain of the debt obligations, certificates of participation, commercial
paper and other short-term obligations which the Fund is permitted to purchase
may be backed by an unconditional and irrevocable letter of credit of a bank,
savings and loan association or insurance company which assumes the obligation
for payment of principal and interest in the event of default by the issuer.
Letter of credit-backed investments must, in the opinion of Wells Fargo Bank,
be of investment quality comparable to other permitted investments of the Fund.
A-4 PROSPECTUS
<PAGE> 28
Foreign Obligations
The Fund may invest up to 25% of its assets in high-quality, short-term debt
obligations of foreign branches of U.S. banks or U.S. branches of foreign
banks that are denominated in and pay interest in U.S. dollars. Investments in
foreign obligations involve certain considerations that are not typically
associated with investing in domestic obligations. There may be less publicly
available information about a foreign issuer than about a domestic issuer.
Foreign issuers also are not subject to the same uniform accounting, auditing
and financial reporting standards or governmental supervision as domestic
issuers. In addition, with respect to certain foreign countries, interest may
be withheld at the source under foreign income tax laws, and there is a
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
Taxable Investments
Pending the investment of proceeds from the sale of shares of the Fund
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 Fund 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 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
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.
Illiquid Securities
Certain securities may be sold only pursuant to certain legal restrictions,
and may be difficult to sell. The Fund will not knowingly invest more than 10%
of the value of its net assets in securities that are illiquid or such lower
percentage as may be required by the states in which the Fund sells its shares.
Repurchase agreements and time deposits that do not provide for payment to the
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
A-5 PROSPECTUS
<PAGE> 29
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,
the Fund 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.
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objective, as set forth in the "How the Funds
Work--Investment Objective and Policies" section, is fundamental. Accordingly,
such investment objective and policies may not be changed without approval by
the vote of the holders of a majority of the Fund's outstanding voting
securities, as described under "Capital Stock" in the SAI. In addition, any
fundamental investment policy may not be changed without such shareholder
approval. If the Company's Board of Directors determines, however, that the
Fund's investment objective can best be achieved by a substantive change in a
nonfundamental investment policy or strategy, the Company's Board may make such
a change without shareholder approval and will disclose any such material
changes in the then-current prospectus.
As matters of fundamental policy, the Fund may: (i) borrow from banks
up to 10% of the current value of its net assets only for temporary purposes in
order to meet redemptions, and these borrowings may be secured by the pledge of
up to 10% of the current value of its net assets (but investments may not be
purchased by the Fund while any such outstanding borrowing in excess of 5% of
the net assets exists); (ii) not make loans of portfolio securities or other
assets, except that loans for purposes of this restriction will not include the
purchase of fixed time deposits, repurchase agreements, commercial paper and
other short-term obligations, and other types of debt instruments commonly sold
in a public or private offering; and (iii) not invest more than 25% of its
assets (i.e., concentrate) in any particular industry, excluding, (a)
investments in municipal securities by the 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: The Fund may not invest more than
10% of the current value of its net assets in repurchase agreements having
maturities of more than seven days, illiquid securities and fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days. It may be possible that the Company would own more than 10% of the
outstanding voting securities of an issuer.
A-6 PROSPECTUS
<PAGE> 30
For purposes of complying with the Code, the 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 Fund's assets is represented by cash, U.S.
Government obligations and other securities limited in respect of any one
issuer to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government obligations and the securities of other regulated investment
companies), or of two or more issuers which the taxpayer controls and which are
determined to be engaged in the same or similar trades or businesses or related
trades or businesses.
In addition, at least 65% of the Fund's total assets are invested
(under normal market conditions) in municipal obligations that pay interest
that 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.
A-7 PROSPECTUS
<PAGE> 31
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 32
[LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH MONEY MARKET FUNDS:
- are NOT FDIC insured
- are NOT deposits or obligations of Wells Fargo Bank
- are NOT guaranteed by Wells Fargo Bank
- involve investment risk, including possible loss of
principal
- seek to maintain a stable net asset value of $1.00 per [LOGO]
share, however, there can be no assurance that a fund
will meet this goal. Yields will vary with market
conditions.
[LOGO]
Printed on Recycled Paper [SC0232 (2/97)]
<PAGE> 33
SAGECOACH FUND, INC.
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
Dated February 17, 1997
CALIFORNIA TAX-FREE MONEY MARKET TRUST
__________________________________
Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about one fund in the Stagecoach Family of funds -- the CALIFORNIA
TAX-FREE MONEY MARKET TRUST (the "Fund"). The Fund offers a single class of
shares. The investment objective of the Fund is described in its prospectus
under "How the Fund Works -- Investment Objective and Policies."
This SAI is not a prospectus and should be read in conjunction
with the Fund's Prospectus dated February 17, 1997. All terms used in this SAI
that are defined in the Prospectus will have the meanings assigned in the
Prospectus. A copy of the Prospectus may be obtained without charge by writing
Stephens Inc., the Company's sponsor, co-administrator and distributor, at 111
Center Street, Little Rock, Arkansas 72201 or calling the Transfer Agent at
the telephone number indicated above.
__________________________________
<PAGE> 34
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Permitted Investment Activities . . . . . . . . . . . . . . . . . 5
Special Considerations Affecting
California Municipal Obligations . . . . . . . . . . . . . . . . . . . . . 7
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Servicing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . 17
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
2
<PAGE> 35
INVESTMENT RESTRICTIONS
The Fund is subject to the following investment restrictions, all
of which are fundamental policies.
The Fund may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Fund's investments in that industry would
be 25% or more of the current value of the Fund's total assets, provided that
there is no limitation with respect to investments in (i) municipal securities
(for the purpose of this restriction, private activity bonds and notes shall
not be deemed municipal securities if the payments of principal and interest on
such bonds or notes is the ultimate responsibility of non-governmental
issuers), (ii) obligations of the United States Government, its agencies or
instrumentalities, and (iii) 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 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 and except for margin payments in
connection with options, futures and options on futures) or make short sales of
securities;
(4) underwrite securities of other issuers, except to the extent
that the purchase of municipal securities or other permitted investments
directly from the issuer thereof or from an underwriter for an issuer and the
later disposition of such securities in accordance with the Fund's investment
program may be deemed to be an underwriting;
(5) make investments for the purpose of exercising control or
management;
(6) issue senior securities, except that the Fund may borrow from
banks up to 10% of the current value of its net assets for temporary purposes
only in order to meet redemptions, and these borrowings may be secured by the
pledge of up to 10% of the current value of its net assets (but investments may
not be purchased while any such outstanding borrowings exceed 5% of its net
assets); or
(7) write, purchase or sell puts, calls, options, warrants or any
combination thereof, except that the Fund may purchase securities with put
rights in order to maintain liquidity.
In addition, the Fund may 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
3
<PAGE> 36
deposits, repurchase agreements, commercial paper and other short-term
obligations, and other types of debt instruments commonly sold in public or
private offerings.
The Fund is subject to the following non-fundamental policies.
The Fund may not:
(1) purchase or retain securities of any issuer if the officers
or Directors of the Company or the investment adviser owning beneficially more
than one-half of one percent (0.5%) of the securities of the issuer together
owned beneficially more than 5% of such securities.
(2) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs.
(3) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth, possession,
territory, the District of Columbia or by an entity in existence at least three
years, or the securities are backed by the assets and revenues of any of the
foregoing if, by reason thereof, the value of its aggregate investments in such
securities will exceed 5% of its total assets.
(4) purchase equity securities of issuers which are not readily
marketable if by reason thereof the value of the Fund's aggregate investment
in such classes of securities will exceed 5% of its total assets.
(5) invest more than 10% of the current value of its net assets
in repurchase agreements maturing in more than seven days or other illiquid
securities (including restricted securities).
In addition, the Fund may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies. However, the
Fund's investment adviser will waive its advisory fees for that portion of the
Fund's assets so invested, except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition. These unaffiliated
investment companies must have a fundamental investment policy of investing at
least 80% of their net assets in obligations that are exempt from federal
income taxes and are not subject to the federal alternative minimum tax.
In addition, as provided in Rule 2a-7 under the 1940 Act, the Fund
may only purchase "Eligible Securities" (as defined in Rule 2a-7) and only if,
immediately after such purchase: the 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 Fund
would own no more than 10% of the voting securities of any one issuer; the Fund
would have no more than 5% of its total assets in "Second Tier Securities" (as
defined in Rule 2a-7); and the Fund would have
4
<PAGE> 37
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 Fund 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 the Fund. The Fund may purchase unrated instruments only if they
are purchased in accordance with the procedures of the Fund adopted by the
Company's Board of Directors in accordance with Rule 2a-7 under the 1940 Act.
After purchase by the Fund, a security may cease to be rated or its rating may
be reduced below the minimum required for purchase by the Fund. Neither event
will require a sale of such security by the Fund, provided that 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 the Fund's 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, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in the Fund's Prospectus and in this SAI. The ratings of Moody's and S&P are
more fully described in the SAI Appendix.
Letters of Credit. Certain of the debt obligations (including
municipal securities, certificates of participation, commercial paper and other
short-term obligations) which the Fund may purchase may be backed by an
unconditional and irrevocable letter of credit of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Wells Fargo Bank, are of comparable quality to issuers of other permitted
investments of the Fund may be used for letter of credit-backed investments,
provided that the Company's Board approves or ratifies such investments.
When-Issued Securities. Certain of the securities in which the
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 Fund has no present intention to invest
in when-issued securities during the coming year. The Fund 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.
5
<PAGE> 38
The 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 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 Fund may invest in municipal bonds. As
discussed in the Fund's Prospectus, the two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds. Municipal bonds
are debt obligations issued to obtain Fund 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 Fund 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 Fund 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. 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
6
<PAGE> 39
to meet other obligations could affect the ability of the issuer to pay the
principal of, and interest on, RANs.
The values of outstanding municipal securities will vary as a
result of changing market evaluations of the ability of their issuers to meet
the interest and principal payments (i.e., credit risk). Such values also will
change in response to changes in the interest rates payable on new issues of
municipal securities (i.e., market risk). Should such interest rates rise, the
values of outstanding securities, including those held in the 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.
SPECIAL CONSIDERATIONS AFFECTING
CALIFORNIA MUNICIPAL OBLIGATIONS
Certain debt obligations held by the 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 Fund 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 this Fund may be impaired.
Certain of the municipal obligations in which the 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 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.
7
<PAGE> 40
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 section in the prospectus entitled "The Fund and
Management." The principal occupations during the past five years of the
Directors and principal executive Officer of the Company are listed below. The
address of each, unless otherwise indicated, is 111 Center Street, Little Rock,
Arkansas 72201. Directors deemed to be "interested persons" of the Company
for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position During Past 5 Years
- --------------------- -------- ---------------------
<S> <C> <C>
Jack S. Euphrat, 74 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.
*R. Greg Feltus, 45 Director, Senior Vice President
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of Stephens
Sports Management
Inc.; and President of
Investor Brokerage
Insurance Inc.
Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
</TABLE>
8
<PAGE> 41
<TABLE>
<S> <C> <C>
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.
Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
Junior College from 1967 to
1971; Adjunct Professor of
Columbia University
Teachers College since
1976.
*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 52 Director Private Investor; Real Estate
10 Legrae Street Developer; Chairman
Charleston, SC 29401 of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.
</TABLE>
9
<PAGE> 42
<TABLE>
<S> <C> <C>
Richard H. Blank, Jr., 40 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary and Director of Stephens
Treasurer Sports Management
Inc.; and Director of
Capo Inc.
</TABLE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
Period Ended Period Ended
------------ -------------
December 31, 1995 September 30, 1996
----------------- ------------------
Total Total
Aggregate Compensation Aggregate Compensation
Compensation from Registrant Compensation from Registrant
from and Fund from and Fund
Registrant Complex Registrant Complex
---------- -------- ---------- --------
Name and Position
- -----------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $______ $______
Director
*R. Greg Feltus 0 0 $______ $______
Director
Thomas S. Goho 10,188 39,750 $______ $______
Director
Joseph N. Hankin N/A N/A $______ $______
Director
*Zoe Ann Hines 0 0 $______ $______
Director
(resigned as of
September 6, 1996)
*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>
10
<PAGE> 43
Directors of the Company are compensated annually by the Company
and by all the registrants in each fund complex they serve as indicated above
and also are reimbursed for all out-of-pocket expenses relating to attendance
at board meetings. The Company, Overland Express Funds, Inc., Stagecoach
Trust, Life & Annuity Trust and Master Investment Trust are considered to be
members of the same fund complex as such term is defined in Form N-1A under the
1940 Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment Trust together form a
separate fund complex (the "BGFA Fund Complex"). Each of the Directors and
Officers of the Company serves in the identical capacity as directors and
officers or as trustees and/or officers of each registered open-end management
investment company in both the Wells Fargo and BGFA Fund Complexes, except for
Joseph N. Hankin, who only serves the aforementioned members of the Wells Fargo
Fund Complex, and Zoe Ann Hines who, after September 6, 1996, only serves the
aforementioned members of the BGFA Fund Complex. The Directors are compensated
by other companies and trusts within a 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 each fund complex.
As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.
INVESTMENT ADVISER. The Fund is advised by Wells Fargo Bank
pursuant to an Advisory Contract. The Advisory Contract 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 Contract, Wells Fargo Bank furnishes to the Company's Board of
Directors periodic reports on the investment strategy and performance of the
Fund. Wells Fargo Bank has agreed to provide to the 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 the Fund's portfolio. Wells Fargo is entitled to receive a
monthly fee at the annual rate of 0.50% of the Fund's average daily net assets
for providing investment advisory services.
The 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 Fund's outstanding voting securities or by the Company's Board
of Directors and (ii) by a majority of the Directors of the Company who are not
parties to the Advisory Contract or "interested persons" (as defined in the
1940 Act) of any such party. The Advisory Contract may be terminated on 60
days' written notice by either party and will terminate automatically if
assigned.
ADMINISTRATOR AND CO-ADMINISTRATOR . The Company has retained
Wells Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of
the Fund. The Administration Agreement between Wells Fargo and the Fund, and
the Co-Administration Agreement among Wells Fargo, Stephens and the Fund, state
that Wells Fargo and Stephens shall provide as administrative services, among
other things: (i) general supervision of the
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<PAGE> 44
operation of the 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. Wells Fargo Bank and Stephens also furnish office space and
certain facilities required for conducting the business of the Fund together
with ordinary clerical and bookkeeping services. Stephens pays the
compensation of the Company's Directors, officers and employees who are
affiliated with Stephens. The Administrator and Co-Administrator are entitled
to receive a monthly fee of ____% and ____%, respectively, of the average daily
net assets of the Fund.
The Advisory Contract, Administration and Co-Administration
Agreements for the 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, Administration
and Co-Administration Agreements) 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, Administration and Co-Administration Agreements, respectively, 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, Administration
and Co-Administration Agreements further provide that the 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.
SPONSOR AND DISTRIBUTOR. As discussed in the Fund's prospectus
under the heading "Management and Servicing Fees," Stephens serves as the
Fund's sponsor and distributor.
SHAREHOLDER SERVICING AGENT. As discussed in the Fund's
prospectus under the heading "Shareholder Servicing Agent," the Fund has
entered into shareholder servicing agreements with Wells Fargo Bank. See
"Servicing Plan" in this SAI.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells
Fargo Bank has been retained to act as custodian and transfer and dividend
disbursing agent for the Fund, pursuant to a Custody Agreement and an Agency
Agreement with the Company on behalf of the Fund. The custodian, among other
things, maintains a custody account or accounts in the name of the Fund,
receives and delivers all assets for the Fund upon purchase and upon sale or
maturity, collects and receives all income and other payments and distributions
on account of the assets of the Fund and
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<PAGE> 45
pays all expenses of the Fund. For its services as custodian, Wells Fargo
Bank is entitled to receive fees as follows: a net asset charge at the annual
rate of 0.0167%, payable monthly, plus specified transaction charges. Wells
Fargo Bank also will provide portfolio accounting services under the Custody
Agreement for a fee calculated as follows: a monthly base fee of $2,000 plus a
net asset fee at the annual rate of 0.070% of the first $50,000,000 of a Fund's
average daily net assets, 0.045% of the next $50,000,000, and 0.020% of the
average daily net assets in excess of $100,000,000.
For its services as transfer and dividend disbursing agent for the
Fund, Wells Fargo Bank is entitled to receive monthly payments at the annual
rate of 0.04% of the Fund's average daily net assets.
UNDERWRITING COMMISSIONS. The Fund does not charge any front-end
sales loads or contingent deferred sales charges in connection with the
purchase and redemption of its shares, and therefore pays no underwriting
commissions to the Distributor.
DEFENSIVE 12B-1 PLAN. The Fund has entered into a "defensive"
Distribution Plan under Rule 12b-1 of the 1940 Act (the "Plan"). The Plan
reflects that, to the extent any fees paid pursuant to the servicing plan are
deemed to be "primarily intended to result in the sale of shares" of the Fund,
such fees are approved pursuant to the Plan. The Plan will not result in any
separate payment of fees by the Fund.
SERVICING PLAN
As indicated in the prospectus, the Company's Board of Directors,
adopted a Servicing Plan ("Servicing Plan") and related form of Shareholder
Servicing Agreement on October 24, 1996, with respect to the Fund. The Board
of Directors included a majority of the Directors who were not "interested
persons" (as defined in the Act) of the Fund and who had no direct or indirect
financial interest in the operation of the Servicing Plan or in any agreement
related to the Servicing Plan (the "Servicing Plan Non-Interested Directors").
Under the Servicing Plan and pursuant to the shareholder servicing
agreements, the Fund may pay one or more servicing agents, as compensation for
performing certain services, a fee at an annual rate of up to 0.20% of the
average daily net assets of the Fund's shares attributable to the servicing
agent's customers. The actual fee payable to servicing agents is determined,
within such limits, from time to time by mutual agreement between the Company
and each servicing agent and will not exceed the maximum service fees payable
by mutual funds sold by members of the NASD under the NASD Rules.
The Servicing Plan continues in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Servicing Plan Non-Interested Directors. Any form of servicing
agreement related to the Servicing Plan also must be approved by such vote of
the Directors and the Servicing Plan Non-Interested Directors. Servicing
agreements may be terminated at any time, without payment of any penalty, by
vote of a majority of the Servicing Plan Non-Interested Directors. No material
amendment to the Servicing Plans may be
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<PAGE> 46
made except by a majority of both the Directors of the Company and the
Servicing Plan Non-Interested Directors.
The Servicing Plan requires that the administrator shall provide
to the Directors, and the Directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Servicing
Plan.
PERFORMANCE CALCULATIONS
Yield for the 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 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.
Effective yield and effective tax-equivalent yield for the 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 yield for the 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 the Fund may be useful in reviewing the
performance of Fund shares and for providing a basis for comparison with
investment alternatives. The Fund's yield, 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.
From time to time and only to the extent the comparison is
appropriate, the Company may quote the performance or price-earning ratio of
the Fund 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
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<PAGE> 47
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 Fund on overall performance or other criteria.
The S&P Index and the Dow Jones Industrial Average are unmanaged indices of
selected common stock prices. The performance of the Fund also may be compared
to that of other mutual Fund 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 Fund. The Fund's 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 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 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 use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for the Fund: (i) the Consumer Price Index may be
used to assess the real rate of return from an investment in the Fund; (ii)
other government statistics, including, but not limited to, The Survey of
Current Business, may be used to illustrate investment attributes of the Fund
or the general economic, business, investment, or financial environment in
which the Fund operates; (iii) the effect of tax-deferred compounding on the
investment returns of the Fund, or on returns in general, may be illustrated by
graphs, charts, etc., where such graphs or charts would compare, at various
points in time, the return from an investment in 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)
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<PAGE> 48
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 Fund 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 Fund, provides
various services to its customers that are also shareholders of the Fund.
These services may include access to Stagecoach Fund's account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Fund through ATMs and the availability of
combined Wells Fargo Bank and Stagecoach Fund account statements." The Company
may also disclose in advertising and other types of sales literature the assets
and categories of assets under management by the Company's investment adviser.
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 ("IMG"). As of December
31, 1996, IMG had $_________ billion in assets under management. The Company
also may disclose in advertising and other types of sales literature the amount
of assets and mutul fund assets managed by Wells Fargo Bank. As of December
31, 1996, Wells Fargo Bank and its affiliates provided investment Advisory
services for approximately $___ billion of assets of individual, trusts, estates
and institutions and $___ billion of mutual fund assets.
The Company may disclose in advertising and other types of
literature that investors can open and maintain Sweep Accounts over the
Internet or through other electronic channels (collectively, "Electronic
Channels"). Such advertising and other literature may discuss the investment
options available to investors, including the types of accounts and any
applicable fees. Such advertising and other literature may disclose that Wells
Fargo Bank is the first major bank to offer an on-line application for a mutual
fund account that can be filled out completely through Electronic Channels.
Advertising and other literature may disclose that Wells Fargo Bank may
maintain Web sites, pages or other information sites accessible through
Electronic Channels (an "Information Site") and may describe the contents and
features of the Information
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<PAGE> 49
Site and instruct investors on how to access the Information Site and open a
Sweep Account. Advertising and other literature may also disclose the
procedures employed by Wells Fargo Bank to secure information provided by
investors, including disclosure and discussion of the tools and services for
accessing Electronic Channels. Such advertising or other literature may
include discussions of the advantages of establishing and maintaining a Sweep
Account through Electronic Channels and testimonials from Wells Fargo Bank
customers or employees and may also include descriptions of locations where
product demonstrations may occur. The Company may also disclose the ranking of
Wells Fargo Bank as one of the largest money managers in the United States.
DETERMINATION OF NET ASSET VALUE
Net asset value per Fund share is determined by the Custodian on
each Business Day, as described in the Prospectus for the Fund.
As indicated under "Investing In The Fund -- Share Price" in the
Prospectus, the Fund uses the amortized cost method to determine the value of
its portfolio securities pursuant to Rule 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 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 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, the 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, the 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
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<PAGE> 50
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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Payment for shares may, in the discretion of the adviser, be made
in the form of securities that are permissible investments for the Fund as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by
the Fund and that the Fund receives satisfactory assurances that (i) it will
have good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.
Under the 1940 Act, the Fund may suspend the right of redemption
or postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.
The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.
In addition, the Company may redeem shares involuntarily to
reimburse the Fund for any losses sustained by reason of the failure of a
shareholders to make full payment for shares purchased or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to shares of the Fund as provided from time to time in the
Prospectus.
PORTFOLIO TRANSACTIONS
The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Company's Board of Directors, Wells Fargo Bank is
responsible for the Fund's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the
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<PAGE> 51
Company to obtain the best results taking into account the dealer's general
execution and operational facilities, the type of transaction involved and
other factors such as the dealer's risk in positioning the securities involved.
While Wells Fargo Bank generally seeks reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest spread or
commission available.
Purchase and sale orders of the securities held by the Fund may be
combined with those of other accounts that Wells Fargo Bank manages, and for
which it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When Wells Fargo Bank determines that a
particular security should be bought or sold for the Fund and other accounts
managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate those
transactions among the participants equitably.
Purchases and sales of securities usually 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
Fund 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 Fund 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 to the Fund, may, in
circumstances in which two or more dealers are in a position to offer
comparable results for the 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 the Fund may be used by
Wells Fargo Bank in servicing its other accounts, and not all of these services
may be used by Wells Fargo Bank in connection with advising the Fund.
SECURITIES OF REGULAR BROKER/DEALERS. As of the date of this SAI,
the Fund owned no securities of its "regular brokers or dealers" or their
parents, as defined in the Act.
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<PAGE> 52
PORTFOLIO TURNOVER. Because the Fund's portfolio consists of
securities with relatively short-term maturities, the Fund can expect to
experience high portfolio turnovers. A high portfolio turnover rate should not
adversely affect the Fund, however, because portfolio transactions ordinarily
will be made directly with principals on a net basis and, consequently, the
Fund usually will not incur brokerage expenses.
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 the Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of the Fund's shares;
pricing services, and any extraordinary expenses. Expenses attributable to the
Fund are charged against Fund assets. General expenses of the Company are
allocated among all of the funds of the Company, including the Fund, in a
manner proportionate to the net assets of the 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 Fund. 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 the Fund's annual gross income be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of securities or options thereon; (b) the Fund
derives less than 30% of its gross income from gains from the sale or other
disposition of securities or options thereon held for less than three months;
and (c) the 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
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<PAGE> 53
Fund controls and which are determined to be engaged in the same or similar
trades or businesses or related trades or businesses. As a regulated
investment company, the Fund will not be subject to federal income tax on its
net investment income and net capital gains distributed to its shareholders,
provided that it distributes to its 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 Fund intends that at least 50% of the value of
its 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 the 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 the Fund (other than to the extent of the Fund's tax-exempt income) to the
extent it does not meet certain minimum distribution requirements by the end of
each calendar year. The Fund will either 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, the Fund will not be eligible to elect to "pass through" foreign tax
credits to shareholders. Gains or losses on sales of portfolio securities by
the 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 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 the Fund recognizes
long-term capital gains, such gains will be distributed at least annually.
Such distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares. Such distributions
will be designated as 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.
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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 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 date 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.
Foreign Shareholders. Under the Code, distributions of net
investment income by the Fund to a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. 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,
22
<PAGE> 55
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.
It is expected that the net income of the Fund will be a positive
amount at the time of each determination thereof. If, however, the net income
of a Fund determined at any time is a negative amount (which could occur, for
instance, upon nonpayment of interest and/or principal by an issuer of a
security held by a Fund), the 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, the Fund will reduce the number of its outstanding shares by
treating each shareholder as having contributed to the capital of the Fund that
number of full and fractional shares in the account of such shareholder which
represents the shareholder's proportion of the amount of such excess. Each
shareholder will be deemed to have agreed to such contribution in these
circumstances by investing in a Fund.
Although dividends will be declared daily with respect to the Fund
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 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 Fund.
Federal -- The Fund does not expect to earn any significant
investment company taxable income. If the Fund does 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, the 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 the 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 Fund should
consult their tax advisers to determine whether exempt-interest dividends and
California exempt-interest dividends (as defined below) paid by the Fund with
respect to such obligations retain their federal and California tax exclusions.
In this connection, the rules regarding the possible unavailability of
23
<PAGE> 56
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 Fund will not be deductible to the extent that the Fund's
distributions are exempt from federal and California income tax.
California Tax Issues -- The Fund expects to be exempt from tax in
California on the same basis as under Subchapter M of the Code as described
above. Moreover, if at the close of each quarter of the 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 Fund will invest primarily in municipal
securities of the State of California, its cities, municipalities and other
political authorities. The Fund intends to qualify under the above
requirements so that it can pay California exempt-interest dividends.
Not later than 60 days after the close of its taxable year, the
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 the
Fund to all of its shareholders with respect to any taxable year cannot exceed
the amount of interest received by the Fund during such year on California
municipal securities and other obligations the interest on which is tax exempt,
less any expenses or expenditures (including any expenditures attributable to
the acquisition of securities of other investment companies). Dividends paid
by the 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 the 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 Fund would not be suitable for
tax-exempt institutions and may not be suitable for retirement plans qualified
under Section 401 of the Code, H.R. 10 plans and IRAs since such plans and
accounts are generally tax-exempt and, therefore, would not benefit from the
exempt status of dividends from such Fund. Such dividends would be ultimately
taxable to the beneficiaries when distributed to them.
24
<PAGE> 57
CAPITAL STOCK
The Fund is one of the Stagecoach Family of funds. The Company
was organized as a Maryland corporation on September 9, 1991 and currently
offers shares of 24 other funds.
The Fund offers one class of shares. Most of the Company's funds
are authorized to issue multiple classes of shares, one class generally subject
to a front-end sales charge and, in some cases, a class subject to a
contingent- deferred sales charge, that are offered to retail investors.
Certain of the Company's funds also are authorized to issue other classes of
shares, which are sold primarily to institutional investors. Each class of
shares in a fund represents an equal, proportionate interest in a fund with
other shares of the same class. Shareholders of each class bear their pro rata
portion of the fund's operating expenses, except for certain class-specific
expenses (e.g., any state securities registration fees, shareholder servicing
fees or distribution fees that may be paid under Rule 12b-1) that are allocated
to a particular class. Please contact Stagecoach Shareholder Services at
1-800-222-8222 if you would like additional information about other funds or
classes of shares offered.
In situations where voting by series is required by law or where
the matter involved only affects one series, shares of the 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
investment portfolios to approve the proposal as to those investment
portfolios. As used in the Prospectus and this SAI, the term "majority," when
referring to approvals to be obtained from shareholders of the Fund, means the
vote of the lesser of (i) 67% of the shares of the 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 the Fund. The term "majority," when referring to the approvals to be
obtained from shareholders of the Company as a whole, means the vote of the
lesser of (i) 67% of the Company's shares represented at a meeting if the
holders of more than 50% of the Company's outstanding shares are present in
person or by proxy, or (ii) more than 50% of the Company's outstanding shares.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held.
The Company may dispense with an annual meeting of shareholders in
any year in which it is not required to elect Directors under the 1940 Act.
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 Fund share represents an equal proportional interest in the
Fund with each other share and is entitled to such dividends and distributions
out of the income earned on the assets belonging to the Fund as are declared in
the discretion of the Directors. In the event of the liquidation or
dissolution of the Company, shareholders of a fund are entitled to receive the
25
<PAGE> 58
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 17, 1997, Stephens was the beneficial owner of 100% of the
outstanding voting securities of the Fund and, as such, could be considered a
"controlling person" of the Fund for purposes of the 1940 Act. Upon
commencement of the public offering of the Fund's shares it is expected that
Stephens will own a significantly smaller percentage of the Fund's shares and
will no longer be considered a controlling person.
OTHER
The Registration Statement, including the Prospectus of the 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
the Fund as to the contents of any contract or other document are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
INDEPENDENT AUDITORS
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' reports for the Company's fiscal period ended September
30, 1996 are hereby incorporated by reference to the Company's Annual Report as
filed with the SEC on or about November __, 1996. The Company's annual report
may be obtained by calling 1-800-222- 8222.
26
<PAGE> 59
SAI APPENDIX
The following is a description of the ratings given by Moody's and
S&P to corporate and municipal bonds, municipal notes, and corporate and
municipal commercial paper.
Corporate and Municipal Bonds
Moody's: The four highest ratings for corporate and municipal
bonds are "Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of
the "best quality" and carry the smallest amount of investment risk. Bonds
rated "Aa" are of "high quality by all standards," but margins of protection or
other elements make long-term risks appear somewhat greater than "Aaa" rated
bonds. Bonds rated "A" possess many favorable investment attributes and are
considered to be upper medium grade obligations. Bonds rated "Baa" are
considered to be medium grade obligations; interest payments and principal
security appear adequate for the present, but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds have speculative characteristics as well. Moody's applies
numerical modifiers: 1, 2 and 3 in each rating category from "Aa" through
"Baa" in its rating system. The modifier 1 indicates that the security ranks
in the higher end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds
are "AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings
assigned by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded as having an "adequate capacity" to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of
a plus or minus sign to show relative standing within the category.
Municipal Notes
Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality." Notes rated "MIG
2" or "VMIG 2" are of "high quality," with margins of protections "ample
although not as large as in the preceding group." Notes rated "MIG 3" or "VMIG
3" are of "favorable quality," with all security elements accounted for, but
lacking the strength of the preceding grades.
A-1
<PAGE> 60
S&P: The "SP-1" rating reflects a "very strong or strong capacity
to pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
Corporate and Municipal Commercial Paper
Moody's: The highest rating for corporate and municipal
commercial paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior
capacity for repayment of short-term promissory obligations." Issuers rated
"P-2" (Prime- 2) "have a strong capacity for repayment of short-term promissory
obligations," but earnings trends, while sound, will be subject to more
variation.
S&P: The "A-1" rating for corporate and municipal commercial
paper indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."
Corporate Notes
S&P: The two highest ratings for corporate notes are "SP-1" and
"SP-2." The "SP-1" rating reflects a "very strong or strong capacity to pay
principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
A-2
<PAGE> 61
STAGECOACH FUNDS, INC.
SEC REGISTRATION NOS. 33-42927; 811-6419
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Not Applicable.
(b) Exhibits:
Exhibit
Number Description
------ -----------
1 - Amended and Restated Articles of Incorporation
dated November 22, 1995, incorporated by
reference to Post-Effective Amendment No. 17 to
the Registration Statement, filed November 29,
1995.
2 - By-Laws, incorporated by reference to the
Initial Registration Statement, filed September
30, 1991.
3 - Not Applicable
4 - Not Applicable
5(a)(i) - 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.
5(a)(ii) - 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.
5(b)(i) - 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.
5(b)(ii) - 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.
5(c) - 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.
C-1
<PAGE> 62
5(d) - 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.
5(e) - 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.
5(f) - 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.
5(g)(i) - 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.
5(g)(ii) - 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.
5(h) - 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.
5(i) - 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.
5(j) - 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(k) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Arizona Tax-Free
Fund, incorporated by reference to
Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
5(l) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Balanced Fund,
incorporated by reference to Post-Effective
Amendment No. 25 to the Registration Statement,
filed June 17, 1996.
5(m) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Equity Value Fund,
incorporated by reference to Post-Effective
Amendment No. 25 to the Registration Statement,
filed June 17, 1996.
5(n) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Government Money
Market Mutual Fund, incorporated by reference
to Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
5(o) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Intermediate Bond
Fund, incorporated by reference to
Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
C-2
<PAGE> 63
5(p) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Money Market Trust
Fund, incorporated by reference to
Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
5(q) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the National Tax-Free
Fund, incorporated by reference to
Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
5(r) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Oregon Tax-Free
Fund, incorporated by reference to
Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
5(s) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Prime Money Market
Mutual Fund, incorporated by reference to
Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
5(t) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the Treasury Money
Market Mutual Fund, incorporated by reference
to Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
5(u) - Form of Advisory Contract with Wells Fargo
Bank, N.A. on behalf of the California Tax-
Free Money Market Trust, filed herewith.
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.
6(b) - 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.
8(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.
8(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.
8(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.
8(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.
C-3
<PAGE> 64
8(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.
8(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.
8(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.
8(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.
8(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.
8(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.
8(l) - Custody Agreement with Wells Fargo Bank, N.A.
on behalf of the National Tax-Free Money Market
Mutual Fund, incorporated by reference to
Post-Effective Amendment No. 24 to the
Registration Statement, filed April 29, 1996.
8(m) - Custody Agreement with Wells Fargo Bank, N.A.
on behalf of the Aggressive Growth Fund,
incorporated by reference to Post-Effective
Amendment No. 20 to the Registration Statement,
filed February 28, 1996.
8(n) - Form of Custody Agreement with Wells Fargo Bank
on behalf of the Arizona Tax-Free, Balanced,
Equity Value, Government Money Market Mutual,
Intermediate Bond, Money Market Trust, National
Tax-Free, Oregon Tax-Free, Prime Money Market
Mutual and Treasury Money Market Mutual Funds,
incorporated by reference to Post-Effective
Amendment No. 25 to the Registration Statement,
filed June 17, 1996.
9(a)(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.
9(a)(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.
9(a)(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.
C-4
<PAGE> 65
9(a)(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.
9(a)(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.
9(a)(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.
9(a)(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.
9(a)(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.
9(a)(ix) - 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.
9(a)(x) - 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.
9(a)(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.
9(a)(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.
9(a)(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.
9(a)(xiv) - Form of Administration Agreement with Stephens
Inc. on behalf of the Arizona Tax-Free,
Balanced, Equity Value, Government Money Market
Mutual, Intermediate Bond, Money Market Trust,
National Tax-Free, Oregon Tax-Free, Prime Money
Market Mutual and Treasury Money Market Mutual
Funds, incorporated by reference to
Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
9(b)(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(b)(ii) - 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. 24 to the
Registration Statement, filed April 29, 1996.
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<PAGE> 66
9(b)(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)(iv) - Form of Amended Agency Agreement with Wells
Fargo Bank, NA on behalf of the Arizona Tax-
Free, Balanced, Equity Value, Government Money
Market Mutual, Intermediate Bond, Money Market
Trust, National Tax-Free, Oregon Tax-Free,
Prime Money Market Mutual and Treasury Money
Market Mutual Funds, incorporated by reference
to Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
9(c)(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.
9(c)(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.
9(c)(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.
9(c)(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.
9(c)(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.
9(c)(vi) - 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. 24 to the Registration Statement,
filed April 29, 1996.
9(c)(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.
9(c)(viii) - Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class B
Shares of the California Tax-Free Bond Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
9(c)(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.
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9(c)(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.
9(c)(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.
9(c)(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.
9(c)(xiii) - 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. 20 to the Registration Statement,
filed February 28, 1996.
9(c)(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.
9(c)(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.
9(c)(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.
9(c)(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.
9(c)(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.
9(c)(xix) - Amended Shareholder Servicing Agreement with
Wells Fargo Bank, N.A. on behalf of the Class A
Shares of the U.S. Government Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
9(c)(xx) - 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. 20 to the Registration Statement,
filed February 28, 1996.
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9(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.
9(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.
9(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.
9(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.
9(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.
9(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.
9(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.
9(d)(viii) - 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.
9(d)(ix) - 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.
9(d)(x) - Servicing Plan and Form of Shareholder
Servicing Agreement on behalf of the Class A
Shares of the Arizona Tax-Free, Balanced,
Equity Value, Government Money Market Mutual,
Intermediate Bond, National Tax-Free, Oregon
Tax-Free, Prime Money Market Mutual and
Treasury Money Market Mutual Funds,
incorporated by reference to Post-Effective
Amendment No. 25 to the Registration Statement,
filed June 17, 1996.
9(d)(xi) - Servicing Plan and Form of Shareholder
Servicing Agreement on behalf of the Class B
Shares of the Arizona Tax-Free, Balanced,
Equity Value, Intermediate Bond, National Tax-
Free and Oregon Tax-Free Funds, incorporated by
reference to Post-Effective Amendment No. 25 to
the Registration Statement, filed June 17,
1996.
9(d)(xii) - Servicing Plan and Form of Shareholder
Servicing Agreement on behalf of the
Institutional Class Shares of the Arizona
Tax-Free, Balanced, California Tax-Free Bond,
California Tax-Free Income, Equity Value,
Ginnie Mae, Growth and Income, Intermediate
Bond, Money Market Mutual, National Tax-Free,
Oregon Tax-Free, Prime Money Market Mutual,
Short-Intermediate Government and
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<PAGE> 69
Treasury Money Market Mutual Funds,
incorporated by reference to Post-Effective
Amendment No. 25 to the Registration Statement,
filed June 17, 1996.
9(d)(xiii) - Servicing Plan and Form of Shareholder
Servicing Agreement on behalf of the Service
Class Shares of the Prime Money Market Mutual
and Treasury Money Market Mutual Funds,
incorporated by reference to Post-Effective
Amendment No. 25 to the Registration Statement,
filed June 17, 1996.
9(d)(xiv) - Servicing Plan and Form of Shareholder
Servicing Agreement on behalf of the Money
Market Trust and California Tax-Free Money
Market Trust, filed herewith.
9(e) - Cross Indemnification Agreement, incorporated
by reference to Post-Effective Amendment No. 11
to the Registration Statement of Stagecoach
Inc., filed July 27, 1994.
10 - Opinion and Consent of Counsel, filed herewith.
11 - Not Applicable.
12 - Not Applicable
13 - Investment letter, incorporated by reference to
Item 24(b) of Pre-Effective Amendment No. 1 to
the Registration Statement, filed November 29,
1991.
14 - Not Applicable
15(a)(i) - Distribution Plan on behalf of the California
Tax-Free Money Market Mutual Fund, incorporated
by reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April 17,
1992.
(a)(ii) - Distribution Plan on behalf of the Corporate
Stock Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(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.
(a)(vii) - Distribution Plan on behalf of the California
Tax-Free Money Market Trust, filed herewith.
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<PAGE> 70
(b)(i) - Distribution Plan on behalf of the Class B
Shares of the Asset Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(b)(ii) - Distribution Plan on behalf of the Class B
Shares of the California Tax-Free Bond Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(b)(iii) - Distribution Plan on behalf of the Class B
Shares of the Diversified Income Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(b)(iv) - Distribution Plan on behalf of the Class B
Shares of the Ginnie Mae Fund, incorporated by
reference to Post-Effective Amendment No. 15 to
the Registration Statement, filed May 1, 1995.
(b)(v) - Distribution Plan on behalf of the Class B
Shares of the Growth and Income Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(b)(vi) - Distribution Plan on behalf of the Class B
Shares of the U.S. Government Allocation Fund,
incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
(b)(vii) - Distribution Plan on behalf of the Class B
Shares of the Aggressive Growth Fund,
incorporated by reference to Post-Effective
Amendment No. 19 to the Registration Statement,
filed December 18, 1995.
(b)(viii) - Distribution Plan on behalf of the Class B
Shares of the Arizona Tax-Free, Balanced,
Equity Value, Intermediate Bond, National
Tax-Free and Oregon Tax-Free Funds,
incorporated by reference to Post-Effective
Amendment No. 25 to the Registration Statement,
filed June 17, 1996.
(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.
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<PAGE> 71
(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.
(c)(viii) - Distribution Plan on behalf of the Class A
Shares of the Arizona Tax-Free, Balanced,
Equity Value, Government Money Market Mutual,
Intermediate Bond, National Tax-Free and Oregon
Tax-Free Funds, incorporated by reference to
Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
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.
18(c) - Amended Rule 18f-3 Multi-Class Plan,
incorporated by reference to Post-Effective
Amendment No. 25 to the Registration Statement,
filed June 17, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant
As of October 31, 1996, the Asset Allocation, Corporate Stock and
U.S. Government Allocation Funds each owned approximately 99% of the
outstanding beneficial interests of the Asset Allocation, Corporate Stock and
U.S. Government Allocation Master Portfolios, respectively, of Master
Investment Trust ("MIT"). As of October 31, 1996, the Aggressive Growth,
National Tax-Free Money Market Mutual and Small Cap Funds owned approximately
19%, 7% and 91% of the outstanding beneficial interests of the Capital
Appreciation, Tax-Free Money Market and Small Cap Master Portfolios,
respectively, of MIT. As such, each Fund could be considered a "controlling
person" (as such term is defined in the 1940 Act) of the corresponding Master
Portfolio.
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Item 26. Number of Holders of Securities
As of October 31, 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 Institutional Class
------- ------- -------------------
<S> <C> <C> <C>
Aggressive Growth Fund 1,088 1,300 N/A
Arizona Tax-Free Fund 355 2 8
Asset Allocation Fund 22,717 3,749 N/A
Balanced Fund 2,054 4 289
California Tax-Free Bond Fund 13,446 1,079 67
California Tax-Free Income Fund 4,626 N/A 8
California Tax-Free Money Market Mutual Fund 24,850 N/A N/A
Corporate Stock Fund 1,103 N/A N/A
Diversified Income Fund 11,914 1,238 N/A
Equity Value Fund 1,436 6 291
Ginnie Mae Fund 8,769 698 189
Government Money Market Mutual Fund 240 N/A N/A
Growth and Income Fund 12,840 1,148 38
Intermediate Bond Fund 247 1 12
Money Market Mutual Fund 23,193 21 11
Money Market Trust 12 N/A N/A
National Tax-Free Fund 176 1 8
National Tax-Free Money Market 9 N/A N/A
Mutual Fund
Oregon Tax-Free Fund 979 2 4
</TABLE>
* For purposes of this chart, shares of single class Funds are included under
the designation "Class A"
**Designates the number of Class S recordholders.
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<PAGE> 73
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
Class A* Class B Institutional Class
------- ------- -------------------
<S> <C> <C> <C>
Prime Money Market Mutual 518 7*** 46
Short-Intermediate U.S. Government 6,833 N/A 145
Income Fund
Small Cap Fund 30 20 4
Treasury Money Market Mutual Fund 124 7*** 419
U.S. Government Allocation Fund 9,397 267 N/A
</TABLE>
***Designates the number of Service Class recordholders.
Item 27. Indemnification
The following paragraphs of Article VIII of the Registrant's
Articles of Incorporation provide:
(h) The Corporation shall indemnify (1) its Directors and
Officers, whether serving the Corporation or at its request any other
entity, to the full extent required or permitted by the General Laws of
the State of Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the full extent permitted by law,
and (2) its other employees and agents to such extent as shall be
authorized by the Board of Directors or the Corporation's By-Laws and be
permitted by law. The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary
to carry out these indemnification provisions and is expressly empowered
to adopt, approve and amend from 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
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<PAGE> 74
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
No amendment, modification or repeal of this Article VIII shall adversely
affect any right or protection of a Director or officer that exists at
the time of such amendment, modification or repeal.
Item 28. Business and Other Connections of Investment Adviser.
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned
subsidiary of Wells Fargo & Company, currently serves as investment adviser to
several of the Registrant's investment portfolios and to certain other
registered open-end management investment companies. Wells Fargo Bank's
business is that of a national banking association with respect to which it
conducts a variety of commercial banking and trust activities.
To the knowledge of Registrant, none of the directors or
executive officers of Wells Fargo Bank, except those set forth below, is or has
been at any time during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial nature, except
that certain executive officers also hold various positions with and engage in
business for Wells Fargo & Company. Set forth below are the names and principal
businesses of the directors and executive officers of Wells Fargo Bank who are
or during the past two fiscal years have been engaged in any other business,
profession, vocation or employment of a substantial nature for their own
account or in the capacity of director, officer, employee, partner or trustee.
All the directors of Wells Fargo Bank also serve as directors of Wells Fargo &
Company.
<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
</TABLE>
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<PAGE> 75
<TABLE>
<S> <C>
William S. Davila President and Director of The Vons Companies, Inc.
Director 618 Michillinda Avenue
Arcadia, CA 91007
Officer of Western Association of Food Chains
825 Colorado Blvd. #203
Los Angeles, CA 90041
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Co.
P.O. Box 1000
Lebec, CA 93243
Director of Turner Casting Corp.
P.O. Box 1099
Cudahy, CA 90201
Director of The Bakersfield Californian
P.O. Box 440
1707 I Street
Bakersfield, CA 93302
Director of Kern County Economic Development Corp.
P.O. Box 1229
2700 M Street, Suite 225
Bakersfield, CA 93301
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
</TABLE>
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<PAGE> 76
<TABLE>
<S> <C>
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
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
</TABLE>
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<PAGE> 77
<TABLE>
<S> <C>
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
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
</TABLE>
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<PAGE> 78
<TABLE>
<S> <C>
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
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>
Prior to May 1, 1996, Barclays Global Fund Advisors ("BGFA"), a
wholly-owned subsidiary of Barclays Global Investors, N.A. ("BGI", formerly,
Wells Fargo Institutional Trust Company), served 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 no longer served as sub-adviser to the Asset Allocation,
Corporate Stock and U.S. Government Allocation Funds. As of this date, BGFA
served 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.
C-18
<PAGE> 79
<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 45 Fremont Street, San Francisco, CA 94105
Donald L. Luskin Chief Executive Officer of WFNIA's Defined Contribution Group
Vice Chairman & Director 45 Fremont Street, San Francisco, CA 94105
Irving Cohen Chief Financial Officer and Chief Operating Officer of Barclays Bank
Director 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)
222 Broadway, New York, NY 10038
Andrea M. Zolberti Chief Financial Officer of WFNIA and WFITC
Chief Financial Officer 45 Fremont Street, San Francisco, CA 94105
Vincent J. Bencivenga Previously Vice President at State Street Bank & Trust Company
Chief Fiduciary Officer One Financial Center, Boston, MA 02111
</TABLE>
Prior to January 1, 1996 Wells Fargo Nikko Investment Advisors
("WFNIA") served as sub-adviser to the Asset Allocation, Corporate Stock and
U.S. Government Allocation Funds of the Company and as adviser or sub-adviser
to various other open-end management investment companies. For additional
information, see "The Funds and Management" in the Prospectus and "Management"
in the Statement of Additional Information of such Funds. For information as to
the business, profession, vocation or employment of a substantial nature of
each of the officers and management committees of WFNIA, reference is made to
WFNIA's Form ADV and Schedules A and D filed under the Investment Advisers Act
of 1940, File No. 801-36479, incorporated herein by reference.
Item 29. Principal Underwriters.
(a) Stephens Inc., distributor for the Registrant, does not
presently act as investment adviser for any other registered investment
companies, but does act as principal underwriter for Overland Express Funds,
Inc., MasterWorks Funds, Inc. (formerly, Stagecoach Inc. and Stagecoach Trust;
Nations Funds, Inc., Nations Fund Portfolio, Inc. and Nations Institutional
Reserves, and is the exclusive placement agent for Master Investment Trust,
Managed Series Investment Trust, Life & Annuity Trust and Master Investment
Portfolio, all of 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 Nations Institutional
Reserves (formerly, The Capitol Mutual Funds), which are open-end management
investment companies.
C-19
<PAGE> 80
(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.
Item 30. Location of Accounts and Records.
(a) The Registrant maintains accounts, books and other
documents required by Section 31(a) of the Investment Company Act of 1940 and
the rules thereunder (collectively, "Records") at the offices of Stephens Inc.,
111 Center Street, Little Rock, Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its
services as investment adviser and custodian and transfer and dividend
disbursing agent at 525 Market Street, San Francisco, California 94105.
(c) WFNIA and Wells Fargo Institutional Trust Company, N.A.
maintain all Records relating to their services as sub-adviser and custodian,
respectively, for the period prior to January 1, 1996, at 45 Fremont Street,
San Francisco, California 94105.
(d) BGFA and BGI maintain all Records relating to their
services as sub-adviser and custodian, respectively, for the period beginning
January 1, 1996 at 45 Fremont Street, San Francisco, California 94105.
(e) Stephens maintains all Records relating to its services as
sponsor, administrator and distributor at 111 Center Street, Little Rock,
Arkansas 72201.
Item 31. Management Services.
Other than as set forth under the captions "The Fund, the Master
Portfolio and Management" in the Prospectuses constituting Part A of this
Registration Statement and "Management" in the Statements of Additional
Information constituting Part B of this Registration Statement, the Registrant
is not a party to any management-related service contract.
Item 32. Undertakings.
(a) Not Applicable.
(b) With respect to the California Tax-Free Money Market Trust,
Registrant undertakes to file a Post-Effective Amendment
using financials, which need not be certified, within four
to six months from the effective date of this
Post-Effective Amendment to its Registration Statement.
(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
C-20
<PAGE> 81
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 opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issue
(d) Not Applicable.
(e) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its most current
annual report to shareholders, upon request and without
charge.
C-21
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Little Rock, State of
Arkansas on the 2nd day of December, 1996.
STAGECOACH FUNDS, INC.
By /s/Richard H. Blank, Jr.
------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the date
indicated:
Signature Title
--------- -----
* Director, Chairman and President
------------------------ (Principal Executive Officer)
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Secretary and Treasurer (Principal
------------------------ Financial Officer)
(Richard H. Blank, Jr.)
* Director
------------------------
(Jack S. Euphrat)
* Director
------------------------
(Thomas S. Goho)
* Director
------------------------
(Zoe Ann Hines)
* Director
------------------------
(W. Rodney Hughes)
* Director
------------------------
(Robert M. Joses)
* Director
------------------------
(J. Tucker Morse)
December 2, 1996
*By /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
<PAGE> 83
STAGECOACH FUNDS, INC.
FILE NOS. 33-42927; 811-6419
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
#EX-99.B5(u) Form of Advisory Contract between Wells Fargo
Bank, N.A. and the California Tax-Free Money
Market Trust
#EX-99.B9(d)(xiv) Servicing Plan and Form of Shareholder
Servicing Agreement on behalf of the California
Tax-Free Money Market Trust
#EX-99.B10 Opinion and Consent of Counsel
#EX-99.B15(a)(vii) Distribution Plan
<PAGE> 1
EX-99.B5(u)
FORM OF
ADVISORY CONTRACT
CALIFORNIA TAX-FREE MONEY MARKET TRUST
a portfolio of
STAGECOACH FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
__________, 1997
Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement between the undersigned (the
"Company"), on behalf of the California Tax-Free Money Market Trust (the
"Fund"), and Wells Fargo Bank, N.A. (the "Adviser") as follows:
1. The Company is a registered open-end management investment company
currently consisting of a number of investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Funds"). The Company proposes to engage in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objective and restrictions specified in the Company's currently
effective prospectus and the currently effective statement of additional
information incorporated by reference therein relating to the Fund and the
Company (such prospectus and such statement of additional information being
collectively referred to as the "Prospectus") included in the Company's
Registration Statement, as amended from time to time (the "Registration
Statement"), filed by the Company under the Investment Company Act of 1940 (the
"Act") and the Securities Act of 1933. Copies of the documents referred to in
the preceding sentence have been furnished to the Adviser. Any amendments to
those documents shall be furnished to the Adviser promptly.
2. The Company is engaging the Adviser to manage the investing and
reinvesting of the assets of the Fund and to provide the advisory services
specified elsewhere in this contract, subject to the overall supervision of the
Board of Directors of the Company. Pursuant to an administration agreement
between the Company and Stephens Inc. (the "Administrator") on behalf of the
Fund, the Company has engaged the Administrator to provide the administrative
services specified therein.
3. (a) The Adviser shall make investments for the account of the Fund
in accordance with the Adviser's best judgment and consistent with the
investment objective and restrictions set forth in the Company's Prospectus,
the Act and the provisions of the Internal Revenue Code relating to
<PAGE> 2
regulated investment companies, subject to policy decisions adopted by the
Company's Board of Directors. The Adviser shall advise the Company's officers
and Board of Directors, at such times as the Company's Board of Directors may
specify, of investments made for the Fund and shall, when requested by the
Company's officers or Board of Directors, supply the reasons for making
particular investments.
(b) The Adviser shall provide to the Company investment guidance
and policy direction in connection with its daily management of the Fund's
portfolio, including oral and written research, analysis, advice, statistical
and economic data and information and judgments, and shall furnish to the
Company's Board of Directors periodic reports on the investment strategy and
performance of the Fund and such additional reports and information as the
Company's Board of Directors and officers shall reasonably request.
(c) The Adviser shall pay the costs of printing and distributing
all materials relating to the Fund prepared by it, or prepared at its request,
other than such costs relating to proxy statements, prospectuses, shareholder
reports and other materials distributed to existing or prospective shareholders
on behalf of the Fund.
(d) The Adviser shall, at its expense, employ or associate with
itself such persons as the Adviser believes appropriate to assist it in
performing its obligations under this contract.
4. The Company understands that the Adviser, in rendering its
services to the Fund hereunder, may engage a sub-adviser to provide certain
sub-advisory services pursuant to a separate sub-advisory contract. The
Adviser will not seek to amend any sub-advisory contract to materially alter
the obligations of the parties unless the Adviser gives the Company at least 60
days' prior written notice thereof.
5. Except as provided in each of the advisory contracts and
administration agreements on behalf of the Company's Funds, each Fund of the
Company shall bear all costs of its operations, except to the extent that such
costs are identified as attributable to a specific class of a Fund ("Class
Expenses"), including the Fund's pro-rata portion of the compensation of the
Company's directors who are not affiliated with the Adviser, the Administrator
or any of their affiliates; advisory and administration fees; governmental
fees; interest charges; taxes; fees and expenses of its independent auditors,
legal counsel, transfer agent and dividend disbursing agent; expenses of
redeeming shares; expenses of preparing and printing any stock certificates,
prospectuses (except the expense of printing and mailing prospectuses used for
promotional purposes, unless otherwise payable pursuant to a Rule 12b-1 Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; travel expenses of directors, officers and employees; office
supplies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio securities transactions; fees and
expenses of any custodian, including those for keeping books and accounts and
calculating the net asset value per share of the Fund; expenses of
shareholders' meetings; expenses relating to the issuance, registration and
qualification of shares of the Fund; expenses relating to any pricing services;
organizational expenses; and any extraordinary expenses; except that Class
Expenses, such as payments related to a servicing plan or distribution-related
expenses pursuant to a Rule 12b-1 Plan, i.e., a plan of distribution of the
Company adopted on behalf of a class of shares of the Fund pursuant to Rule
12b-1 under the
2
<PAGE> 3
Act, or other such expenses as determined in accordance with the Company's Rule
18f-3 Plan, shall be borne by the applicable class of the Fund. Expenses
attributable to one or more, but not all, of the Company's Funds are charged
against the assets of the relevant Funds. General expenses of the Company are
allocated among the Funds in a manner proportionate to the net assets of each
Fund, on a transactional basis, or on such other basis as the Board of
Directors deems equitable.
6. The Adviser shall give the Company the benefit of the Adviser's
best judgment and efforts in rendering services under this contract. As an
inducement to the Adviser's undertaking to render these services, the Company
agrees that the Adviser shall not be liable under this contract for any mistake
in judgment or in any other event whatsoever except for lack of good faith,
provided that nothing in this contract shall be deemed to protect or purport to
protect the Adviser against any liability to the Company or its shareholders to
which the Adviser would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the Adviser's duties under
this contract or by reason of reckless disregard of its obligations and duties
hereunder.
7. In consideration of the services to be rendered by the Adviser
under this contract, the Company shall pay the Adviser a monthly fee on the
first business day of each month, at the annual rate of 0.50% of the average
daily value (as determined on each day that such value is determined for the
Fund at the time set forth in the Prospectus for determining net asset value
per share) of the Fund's net assets during the preceding month. If the fee
payable to the Adviser pursuant to this paragraph 7 begins to accrue before the
end of any month or if this contract terminates before the end of any month,
the fee for the period from the effective date to the end of that month or from
the beginning of that month to the termination date, respectively, shall be
prorated according to the proportion that the period bears to the full month in
which the effectiveness or termination occurs. For purposes of calculating
each such monthly fee, the value of the Fund's net assets shall be computed in
the manner specified in the Prospectus and the Company's Articles of
Incorporation for the computation of the value of the Fund's net assets in
connection with the determination of the net asset value of Fund shares.
8. 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, other expenditures that are capitalized
in accordance with generally accepted accounting principles, extraordinary
expenses and amounts accrued or paid under a Rule 12b-1 Plan of the Fund, but
including the fees provided for in paragraph 7 and those provided for pursuant
to the Fund's Administration Agreement ("includible expenses"), exceed the most
restrictive expense limitation applicable to the Fund imposed by state
securities laws or regulations thereunder, as these limitations may be raised
or lowered from time to time, the Adviser shall waive or reimburse that portion
of the excess derived by multiplying the excess by a fraction, the numerator of
which shall be the percentage at which the excess portion attributable to the
fee payable pursuant to this agreement is calculated under paragraph 7 hereof,
and the denominator of which shall be the sum of such percentage plus the
percentage at which the excess portion attributable to the fee payable pursuant
to the Fund's Administration Agreement is calculated (the "Applicable Ratio"),
but only to the extent of the fee hereunder for the fiscal year. If the fees
payable under this agreement and/or the Fund's Administration Agreement
contributing to such excess portion are calculated at more than one percentage
rate, the Applicable Ratio shall be calculated separately on the basis of,
3
<PAGE> 4
and applied separately to, the portions of the fees calculated at the different
rates. At the end of each month of the Company's fiscal year, the Company
shall review the includible expenses accrued during that fiscal year to the end
of the period and shall estimate the contemplated includible expenses for the
balance of that fiscal year. If as a result of that review and estimation it
appears likely that the includible expenses will exceed the limitations
referred to in this paragraph 8 for a fiscal year with respect to the Fund, the
monthly fee set forth in paragraph 7 payable to the Adviser for such month
shall be reduced, subject to a later adjustment, by an amount equal to the
Applicable Ratio times the pro rata portion (prorated on the basis of the
remaining months of the fiscal year, including the month just ended) of the
amount by which the includible expenses for the fiscal year are expected to
exceed the limitations provided for in this paragraph 8. For purposes of
computing the excess, if any, over the most restrictive applicable expense
limitation, the value of the Fund's net assets shall be computed in the manner
specified in the last sentence of paragraph 7, and any reimbursements required
to be made by the Adviser shall be made once a year promptly after the end of
the Company's fiscal year.
9. This contract shall become effective on its execution date and
shall thereafter continue in effect, provided that this contract shall continue
in effect for a period of more than two years from the date hereof only so long
as the continuance is specifically approved at least annually (a) by the vote
of a majority of the Fund's outstanding voting securities (as defined in the
Act) or by the Company's Board of Directors and (b) by the vote, cast in person
at a meeting called for the purpose, of a majority of the Company's directors
who are not parties to this contract or "interested persons" (as defined in the
Act) of any such party. This contract may be terminated at any time by the
Company, without the payment of any penalty, by a vote of a majority of the
Fund's outstanding voting securities (as defined in the Act) or by a vote of a
majority of the Company's entire Board of Directors on 60 days' written notice
to the Adviser or by the Adviser, at any time after the second anniversary of
the effective date of this contract, on 60 days' written notice to the Company.
This contract shall terminate automatically in the event of its assignment (as
defined in the Act).
10. Except to the extent necessary to perform the Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Adviser, or any affiliate of the Adviser, or any
employee of the Adviser, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of
a similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
11. The Adviser and the Company each agree that the words
"Stagecoach," which comprise a component of the Company's name, is a property
right of the parent of the Adviser. The Company agrees and consents that: (i)
it will use the words "Stagecoach" as a component of its corporate name, the
name of any class, or both and for no other purpose; (ii) it will not grant to
any third party the right to use the words "Stagecoach" for any purpose; (iii)
the Adviser or any corporate affiliate of the Adviser may use or grant to
others the right to use the words "Stagecoach," or any combination or
abbreviation thereof, as all or a portion of a corporate or business name or
for any commercial purpose, other than a grant of such right to another
registered investment company not advised by the Adviser or one of its
affiliates; and (iv) in the event that the Adviser or an affiliate thereof is
no longer acting as investment adviser to any class, the Company shall, upon
request by the Adviser, promptly take such action as may be necessary
4
<PAGE> 5
to change its corporate name to one not containing the words "Stagecoach" and
following such change, shall not use the words "Stagecoach," or any combination
thereof, as a part of its corporate name or for any other commercial purpose,
and shall use its best efforts to cause its directors, officers, and
shareholders to take any and all actions that the Adviser may request to effect
the foregoing and to reconvey to the Adviser any and all rights to such words.
12. This contract shall be governed by and construed in accordance
with the laws of the State of California.
If the foregoing correctly sets forth the agreement between the
Company and the Adviser, please so indicate by signing and returning to the
Company the enclosed copy hereof.
Very truly yours,
STAGECOACH FUNDS, INC.,
on behalf of California Tax-Free
Money Market Trust
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
By:
-------------------------
Name:
-----------------------
Title:
----------------------
5
<PAGE> 1
EX-99.B9(d)(xiv)
STAGECOACH FUNDS, INC.
SERVICING PLAN
Section 1. Each of the proper officers of Stagecoach Funds, Inc. (the
"Company") is authorized to execute and deliver, in the name and on behalf of
the Company, written agreements based substantially on the form attached hereto
as Exhibit A or any other form duly approved by the Company's Board of
Directors ("Agreements") with broker/dealers, banks and other financial
institutions that are dealers of record or holders of record or which have a
servicing relationship with the beneficial owners of shares ("Servicing
Agents") of the Company's Funds listed on the attached Appendix (each a
"Fund"). Pursuant to such Agreements, Servicing Agents agree to provide
support services as set forth therein to their customers who beneficially own
shares of the Fund in consideration of a fee, computed monthly in the manner
set forth in the Fund's then current prospectus, at an annual rate of up to
0.20% of the average daily net asset value of the shares beneficially owned by
such customers. The Company's distributor, administrator and adviser and their
respective affiliates are eligible to become Servicing Agents and to receive
fees under this Servicing Plan. All expenses incurred by a Fund in connection
with the Agreements and the implementation of this Servicing Plan shall be
borne entirely by the holders of the shares of the Fund.
Section 2. The Company's administrator shall monitor the arrangements
pertaining to the Company's Agreements with Servicing Agents. The Company's
administrator shall not, however, be obligated by this Servicing Plan to
recommend, and the Company shall not be obligated to execute, any Agreement
with any qualifying Servicing Agents.
Section 3. So long as this Servicing Plan is in effect, the Company's
administrator shall provide to the Company's Board of Directors, and the
Directors shall review, at least quarterly, a written report of the amounts
expended pursuant to this Servicing Plan and the purposes for which such
expenditures were made.
Section 4. The Plan shall be effective on the later of the date (a) a
majority of the Directors of the Company, including a majority of the
Disinterested Directors (defined below), pursuant to a vote cast in person at a
meeting called for the purpose of voting on the approval of the Plan, or (b) on
the date the Fund commences operations..
Section 5. Unless sooner terminated, this Servicing Plan (and each
related agreement) shall continue in effect for a period of one year from its
date of approval and shall continue thereafter for successive annual periods,
provided that such Plan is not specifically terminated by a majority of the
Board of Directors, including a majority of the Directors who are not
"interested persons," as defined in the Investment Company Act of 1940, of the
Company and have no direct or indirect financial interest in the operation of
1
<PAGE> 2
this Servicing Plan or in any Agreement related to this Servicing Plan (the
"Disinterested Directors") cast in person at a meeting called for the purpose
of voting on such approval.
Section 6. This Servicing Plan may be amended at any time with
respect to a Fund by the Company's Board of Directors, provided that any
material amendment of the terms of this Servicing Plan (including a material
increase of the fee payable hereunder) shall become effective only upon the
approvals set forth in Section 5 and the approval of a majority of the
outstanding voting securities of a Fund.
Section 7. This Servicing Plan is terminable at any time with respect
to the Fund by vote of a majority of the Disinterested Directors.
Section 8. While this Servicing Plan is in effect, the selection and
nomination of the Disinterested Directors shall be committed to the discretion
of such Disinterested Directors.
Section 9. Notwithstanding anything herein to the contrary, a Fund
shall not be obligated to make any payments under this Plan that exceed the
maximum amounts payable under Article III, Section 26 of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
Section 10. The Company will preserve copies of this Servicing Plan,
Agreements, and any written reports regarding this Servicing Plan presented to
the Board of Directors for a period of not less than six years.
Approved: April 25, 1996 for the Money Market Trust
Approved as amended: October 24, 1996 for the California Tax-Free Money Market
Trust
2
<PAGE> 3
APPENDIX
California Tax-Free Money Market Trust
Money Market Trust
Approved: April 25, 1996 for the Money Market Trust
As Amended: October 24, 1996 for the California Tax-Free Money Market Trust
3
<PAGE> 4
Form of
SHAREHOLDER SERVICING AGREEMENT
(Money Market Trust and California Tax-Free Money Market Trust shares)
THIS SHAREHOLDER SERVICING AGREEMENT ("Agreement"), dated as of
______, 1996, is made by and between Stagecoach Funds, Inc. ("Company"), a
Maryland corporation having its principal place of business at 111 Center
Street, Little Rock, Arkansas 72201, on behalf of the Funds listed in the
attached Appendix (each, a "Fund"), and [ ] as shareholder servicing
agent hereunder ("Shareholder Servicing Agent");
W I T N E S S E T H:
WHEREAS, shares of common stock (.001 par value) of each Fund
(hereinafter "shares") may be purchased or redeemed through a broker/dealer or
financial institution which has entered into a shareholder servicing agreement
with the Company on behalf of a Fund; and
WHEREAS, the Shareholder Servicing Agent wishes to facilitate
purchases and redemptions of shares by its customers (the "Customers") and
wishes to act as the Customers' agent in performing certain administrative
functions in connection with transactions in shares from time to time for the
account of the Customers and to provide related services to the Customers in
connection with their investments in a Fund; and
WHEREAS, it is in the best interest of each Fund to make the
services of the Shareholder Servicing Agent available to the Customers who,
from time to time, become shareholders of a Fund;
NOW THEREFORE, the Company, on behalf of the Funds, and the
Shareholder Servicing Agent hereby agree as follows:
1. Appointment. The Shareholder Servicing Agent hereby agrees
to perform certain services for Customers as hereinafter set forth. The
Shareholder Servicing Agent's appointment hereunder is not exclusive, and the
Shareholder Servicing Agent shall not be entitled to notice of or a right to
consent to the execution of a shareholder servicing agreement with any other
person.
2. Services to Be Performed.
2.1 Types of Services. The Shareholder Servicing Agent
shall be responsible for performing shareholder administrative and liaison
services, which shall include, without limitation:
(a) answering Customer inquiries regarding
account status and history, the manner in which purchases, exchanges and
redemptions of shares may be effected;
(b) assisting Customers in designating and
changing dividend options, account designations and addresses;
(c) providing necessary personnel and facilities
to establish and maintain Customer accounts and records;
<PAGE> 5
(d) aggregating and transmitting purchase,
redemption and exchange transactions;
(e) arranging for the wiring of money;
(f) transferring money in connection with
Customer orders to purchase or redeem shares;
(g) verify and guarantee Customer signatures in
connection with redemption and exchange orders and transfers and changes in
Customer accounts with a bank which is designated in the Account Application
and which is approved by the Company's Transfer Agent;
(h) furnishing (either separately or on an
integrated basis with other reports sent to a Customer by the Shareholder
Servicing Agent) monthly and year-end statements and confirmations of
purchases, redemptions and exchanges;
(i) furnishing, on behalf of Fund shares, proxy
statements, annual reports, updated prospectuses and other communications to
Customers;
(j) receiving, tabulating and sending to the
Company proxies executed by Customers; and
(k) providing such other related services, and
necessary personnel and facilities to provide all of the shareholder services
contemplated hereby, in each case, as the Company or a Customer may reasonably
request.
2.2 Standard of Services. All services to be rendered
by the Shareholder Servicing Agent hereunder shall be performed in a
professional, competent and timely manner. Any detailed operating standards
and procedures to be followed by the Shareholder Servicing Agent in performing
the services described above shall be determined from time to time by agreement
between the Shareholder Servicing Agent and the Company. The Company
acknowledges that the Shareholder Servicing Agent's ability to perform on a
timely basis certain of its obligations under this Agreement depends upon a
Fund's timely delivery of certain materials and/or information to the
Shareholder Servicing Agent. The Company agrees to use its best efforts to
provide, or cause to be provided, such materials to the Shareholder Servicing
Agent in a timely manner.
2.3 Investments through Distributor. The Company and
the Shareholder Servicing Agent hereby agree that all purchases of shares
effected by the Shareholder Servicing Agent on behalf of its Customers shall be
effected by it through Stephens Inc. ("Distributor") in its capacity as the
Funds' principal underwriter.
3. Fees.
3.1 Fees from the Funds. In consideration of the
services described in Section 2 hereof and the incurring of expenses in
connection therewith, the Shareholder Servicing Agent shall receive a fee to be
paid in arrears periodically or on a periodic basis to be agreed upon by the
Company and the Shareholder Servicing Agent from time to time (but in no event
less frequently than semi-annually) determined by a formula based upon the
number of accounts serviced by the Shareholder Servicing Agent during the
period for which payment is being made, the level of assets or activity in such
accounts during
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<PAGE> 6
such period, and/or the expenses incurred by the Shareholder Servicing Agent.
In no event will such fees exceed 0.20%, on an annualized basis, of the average
daily net assets of a Fund represented by shares owned of record by the
Shareholder Servicing Agent on behalf of the Customers during the period for
which payment is being made. For purposes of determining the fees payable to
the Shareholder Servicing Agent hereunder, the per share value of the shares of
a Fund's net assets shall be computed in the manner specified in the shares'
then-current prospectus. Notwithstanding the foregoing, if applicable laws,
regulations or rules impose a maximum fee amount (a "cap") on a Fund's shares
with respect to shareholder servicing fees and/or fees for distribution-related
services, the amount payable hereunder shall be reduced to an amount which,
when considered in conjunction with fees, if any, payable by a Fund for the
shares' distribution-related activities, is the maximum amount payable to the
Shareholder Servicing Agent under applicable laws, regulations or rules.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to make any payments under this Agreement that exceed the maximum
amounts payable under Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. The above fee constitutes
all fees to be paid to the Shareholder Servicing Agent by the Company under this
plan with respect to the shareholder services contemplated hereby.
3.2 Fees from Customers. It is agreed that the
Shareholder Servicing Agent may impose certain conditions on Customers, subject
to the terms of the shares' then-current prospectus, in addition to or
different from those imposed by the Company, such as requiring a minimum
initial investment or the payment of additional fees directly by the Customer
for additional services offered by the Shareholder Servicing Agent to the
Customer; provided, however, that the Shareholder Servicing Agent may not
charge customers any direct fee which would constitute a "sales load" within
the meaning of Section 2(a)(35) of the Investment Company Act of 1940, as
amended (the "1940 Act"). The Shareholder Servicing Agent shall bill Customers
directly for any such additional fees. In the event the Shareholder Servicing
Agent charges Customers such additional fees, it shall notify the Company in
advance and make appropriate prior written disclosure (such disclosure to be in
accordance with all applicable laws) to Customers of any such additional fees
charged directly to the Customer. To the extent required by applicable rules
and regulations of the Securities and Exchange Commission, the Company shall
make written disclosure of the fees paid or to be paid on behalf of a Fund's
shares to the Shareholder Servicing Agent pursuant to Section 3.1 of this
Agreement. In no event shall the Shareholder Servicing Agent have recourse or
access, as Shareholder Servicing Agent or otherwise, to the assets in the
Customer's account, except to the extent expressly authorized by law or by such
Customer, or to any assets of a Fund or the Company, for payment of any
additional direct fees referred to in this Section 3.2.
4. Information Pertaining to the Shares. The Shareholder
Servicing Agent and its officers, employees and agents are not authorized to
make any representations concerning the Company, a Fund or the shares to
Customers or prospective Customers, excepting only accurate communication of
any information provided by or on behalf of any administrator of the Company or
a Fund or any distributor of the shares or information contained in the shares'
then-current prospectus. In furnishing such information regarding the
Company, a Fund or the shares, the Shareholder Servicing Agent shall act as
agent for the Customer only and shall have no authority to act as agent for the
Company, a Fund or the shares. Advance copies or proofs of all materials which
are proposed to be circulated or disseminated by the Shareholder Servicing
Agent to Customers or prospective Customers and which identify or describe the
Company, a Fund or the shares shall be provided to the Company at least 10 days
prior to such circulation or dissemination (unless the Company consents in
writing to a shorter period), and such materials shall not be circulated or
disseminated or further circulated or disseminated at any time after the
Company shall have given written notice to the Shareholder Servicing Agent of
any objection thereto.
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<PAGE> 7
Nothing in this Section 4 shall be construed to make the Company
liable for the use (as opposed to the accuracy) of any information about the
Company, a Fund or shares which is disseminated by the Shareholder Servicing
Agent.
5. Use of the Shareholder Servicing Agent's Name. The Company
shall not use the name of the Shareholder Servicing Agent, or any of its
affiliates or subsidiaries, in any prospectus, sales literature or other
materials relating to the Company, a Fund or shares in a manner not approved by
the Shareholder Servicing Agent prior thereto in writing; provided, however,
that the approval of the Shareholder Servicing Agent shall not be required for
any use of its name which merely refers in accurate and factual terms to its
appointment hereunder or which is required by the Securities and Exchange
Commission or any state securities authority or any other appropriate
regulatory, governmental or judicial authority; provided, further, that in no
event shall such approval be unreasonably withheld or delayed.
6. Use of the Name of a Fund or the Company. The Shareholder
Servicing Agent shall not use the name of a Fund, the Company or shares on any
checks, bank drafts, bank statements or forms for other than internal use in a
manner not approved by the Company prior thereto in writing; provided, however,
that the approval of the Company shall not be required for the use of the
Company's name or a Fund's name in connection with communications permitted by
Section 4 hereof or (subject to Section 4, to the extent the same may be
applicable) for any use of the Company's name or a Fund's name which merely
identifies the Company or the Fund, as the case may be in connection with the
Shareholder Servicing Agent's role hereunder or which is required by the
Securities and Exchange Commission or any state securities authority or any
other appropriate regulatory, governmental or judicial authority; provided,
further, that in no event shall such approval be unreasonably withheld or
delayed.
7. Security. The Shareholder Servicing Agent represents and
warrants that to the best of its knowledge, the various procedures and systems
which it has implemented (including provision for twenty-four hours a day
restricted access) with regard to safeguarding from loss or damage attributable
to fire, theft or any other cause the Company's records and other data within
its possession or control and the Shareholder Servicing Agent's records, data,
equipment, facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as in its judgment are required for the secure performance of
its obligations hereunder. The parties shall review such systems and
procedures on a periodic basis, and the Company shall from time to time specify
the types of records and other data of the Company to be safeguarded in
accordance with this Section 7.
8. Compliance with Laws. The Shareholder Servicing Agent
shall comply with all applicable federal and state laws and regulations,
including securities laws. The Shareholder Servicing Agent represents and
warrants to the Company that the performance of all its obligations hereunder
will comply with all applicable laws and regulations, the provisions of its
charter documents and by-laws and all material contractual obligations binding
upon the Shareholder Servicing Agent. The Shareholder Servicing Agent
furthermore undertakes that it will promptly, after the Shareholder Servicing
Agent becomes so aware, inform the Company of any change in applicable laws or
regulations (or interpretations thereof) or in its charter or by-laws or
material contracts which would prevent or impair full performance of any of its
obligations hereunder.
9. Reports. To the extent requested by the Company from time
to time, but at least quarterly, the Shareholder Servicing Agent will provide
the Treasurer of the Company with a written report of the amounts expended by
the Shareholder Servicing Agent pursuant to this Agreement and the purposes for
which such expenditures were made. Such written reports shall be in a form
satisfactory to the
4
<PAGE> 8
Company and shall supply all information necessary for the Company to discharge
its responsibilities under applicable laws and regulations. In addition, the
Shareholder Servicing Agent shall have a duty to furnish to the Company's Board
of Directors such information as may reasonably be necessary to an informed
determination of whether this Agreement should be implemented or continued
pursuant to Section 16.
10. Record Keeping.
10.1 Section 31(a). The Shareholder Servicing Agent
shall maintain records in a form acceptable to the Company and in compliance
with applicable laws and the rules and regulations of the Securities and
Exchange Commission, including but not limited to the record-keeping
requirements of Section 31(a) of the 1940 Act and the rules thereunder, with
respect to the services contemplated by this Agreement. Such records shall be
deemed to be the property of the Company and will be made available, at the
Company's request, for inspection and use by the Company, representatives of
the Company and governmental authorities. The Shareholder Servicing Agent
agrees that, for so long as it retains any records hereunder, it will meet all
reporting requirements pursuant to the 1940 Act and applicable to the
Shareholder Servicing Agent with respect to such records.
10.2 Rules 17a-3 and 17a-4. The Shareholder Servicing
Agent shall maintain accurate and complete records with respect to services
performed by the Shareholder Servicing Agent in connection with the purchase
and redemption of shares through the Distributor. Such records shall be
maintained in a form reasonably acceptable to the Company and in compliance
with the requirements of Rules 17a-3 and 17a-4 under the Securities Exchange
Act of 1934, as amended, pursuant to which any dealer of the shares must
maintain certain records. All such records maintained by the Shareholder
Servicing Agent shall be the property of the Distributor and will be made
available for inspection and use by the Company or the Distributor upon the
request of either. The Shareholder Servicing Agent shall file with the
Securities and Exchange Commission and other appropriate governmental
authorities, and furnish to the Company and the Distributor copies of, all
reports and undertakings as may be reasonably requested by the Company or the
Distributor in order to comply with such rules. If so requested by the
Distributor, the Shareholder Servicing Agent shall confirm to the Distributor
its obligations under this Section 10.2 by a writing reasonably satisfactory to
the Distributor.
10.3 Identification, Etc. of Records. The Company shall
from time to time instruct the Shareholder Servicing Agent in writing as to,
and the Company and the Shareholder Servicing Agent shall periodically review,
the records to be maintained and the procedures to be followed by the
Shareholder Servicing Agent in complying with the foregoing Sections 10.1 and
10.2 and Section 8 to the extent it relates to record-keeping required under
federal securities laws and regulations. Notwithstanding the provisions of
Section 8, the Shareholder Servicing Agent shall be entitled to rely on such
instructions.
10.4 Transfer of Customer Data. In the event this
Agreement is terminated or a successor to the Shareholder Servicing Agent is
appointed, the Shareholder Servicing Agent shall, at the expense of the
Company, transfer to such successor as the Company may designate a certified
list of the beneficial owners of shares of the Company serviced by the
Shareholder Servicing Agent (with name, address and tax identification or
Social Security number), a complete record of the account of each such
shareholder and the status thereof, and all other relevant books, records,
correspondence, and other data established or maintained by the Shareholder
Servicing Agent under this Agreement. In the event this Agreement is
terminated, the Shareholder Servicing Agent will use its best efforts to
cooperate in the orderly transfer of such duties and responsibilities to the
successor, including assistance in the establishment of books, records and
other data by the successor.
5
<PAGE> 9
10.5 Survival of Record-Keeping Obligations. The
record-keeping obligations imposed in this Section 10 shall survive the
termination of this Agreement for the shorter of a period of six years or that
minimum period required by applicable rules or regulations of the Securities
and Exchange Commission.
10.6 Obligations Pursuant to Agreement Only. Nothing in
this Section 10 shall be construed to mean that the Shareholder Servicing Agent
would, by virtue of its role hereunder, be required under applicable law to
maintain the records required to be maintained by it under this Section 10, but
it is understood that the Shareholder Servicing Agent has agreed to do so in
order to enable the Company and the Distributor to comply with laws and
regulations applicable to them.
10.7 Shareholder Servicing Agent's Rights to Copy
Records. Anything in this Section 10 to the contrary notwithstanding, except
to the extent otherwise prohibited by law, the Shareholder Servicing Agent
shall have the right to copy, maintain and use any records maintained by the
Shareholder Servicing Agent pursuant to this Section 10, except as otherwise
prohibited by Sections 4 and 6 hereof.
11. Force Majeure. The Shareholder Servicing Agent shall not
be liable or responsible for delays or errors by reason of circumstances beyond
its reasonable control, including, but not limited to, acts of civil or
military authority, national emergencies, labor difficulties, fire, mechanical
breakdown, flood or catastrophe, acts of God, insurrection, war, riots or
failure of communication systems or power supply.
12. Indemnification.
12.1 Indemnification of the Shareholder Servicing Agent.
The Company will indemnify and hold the Shareholder Servicing Agent harmless
from all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) from any claim, demand, action or suit
(collectively, "Claims") (a) arising in connection with misstatements or
omissions in the shares' prospectus, actions or inactions by the Company or any
of its agents or contractors or the performance of the Shareholder Servicing
Agent's obligations hereunder and (b) not resulting from (i) the bad faith or
negligence of the Shareholder Servicing Agent, its officers, employees or
agents, or (ii) any breach of applicable law by the Shareholder Servicing
Agent, its officers, employees or agents, or (iii) any action of the
Shareholder Servicing Agent, its officers, employees or agents which exceeds
the legal authority of the Shareholder Servicing Agent or its authority
hereunder, or (iv) any error or omission of the Shareholder Servicing Agent,
its officers, employees or agents with respect to the purchase, redemption and
transfer of Customers'shares or the Shareholder Servicing Agent's verification
or guarantee of any Customer signature. Notwithstanding anything herein to the
contrary, the Company will indemnify and hold the Shareholder Servicing Agent
harmless from any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any Claim as a
result of its acting in accordance with any written instructions reasonably
believed by the Shareholder Servicing Agent to have been executed by any person
duly authorized by the Company, or as a result of acting in reliance upon any
instrument or stock certificate reasonably believed by the Shareholder
Servicing Agent to have been genuine and signed, countersigned or executed by a
person duly authorized by the Company, excepting only the gross negligence or
bad faith of the Shareholder Servicing Agent.
In any case in which the Company may be asked to indemnify or hold
the Shareholder Servicing Agent harmless, the Company shall be advised of all
pertinent facts concerning the situation in question and the Shareholder
Servicing Agent shall use reasonable care to identify and notify the Company
promptly concerning any situation which presents or appears likely to present a
claim for indemnification
6
<PAGE> 10
against the Company. The Company shall have the option to defend the
Shareholder Servicing Agent against any Claim which may be the subject of
indemnification hereunder. In the event that the Company elects to defend
against such Claim, the defense shall be conducted by counsel chosen by the
Company and reasonably satisfactory to the Shareholder Servicing Agent. The
Shareholder Servicing Agent may retain additional counsel at its expense.
Except with the prior written consent of the Company, the Shareholder Servicing
Agent shall not confess any Claim or make any compromise in any case in which
the Company will be asked to indemnify the Shareholder Servicing Agent.
12.2 Indemnification of the Company. Without limiting
the rights of the Company under applicable law, the Shareholder Servicing Agent
will indemnify and hold the Company harmless from all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses) from
any Claim (a) resulting from (i) the bad faith or negligence of the Shareholder
Servicing Agent, its officers, employees or agents, or (ii) any breach of
applicable law by the Shareholder Servicing Agent, its officers, employees or
agents, or (iii) any action of the Shareholder Servicing Agent, its officers,
employees or agents which exceeds the legal authority of the Shareholder
Servicing Agent or its authority hereunder, or (iv) any error or omission of
the Shareholder Servicing Agent, its officers, employees or agents with respect
to the purchase, redemption and transfer of Customers' shares or the
Shareholder Servicing Agent's verification or guarantee of any Customer
signature, and (b) not resulting from the Shareholder Servicing Agent's actions
in accordance with written instructions reasonably believed by the Shareholder
Servicing Agent to have been executed by any person duly authorized by the
Company, or in reliance upon any instrument or stock certificate reasonably
believed by the Shareholder Servicing Agent to have been genuine and signed,
countersigned or executed by a person duly authorized by the Company.
In any case in which the Shareholder Servicing Agent may be asked
to indemnify or hold the Company harmless, the Shareholder Servicing Agent
shall be advised of all pertinent facts concerning the situation in question
and the Company shall use reasonable care to identify and notify the
Shareholder Servicing Agent promptly concerning any situation which presents or
appears likely to present a claim for indemnification against the Shareholder
Servicing Agent. The Shareholder Servicing Agent shall have the option to
defend the Company against any Claim which may be the subject of
indemnification hereunder. In the event that the Shareholder Servicing Agent
elects to defend against such Claim, the defense shall be conducted by counsel
chosen by the Shareholder Servicing Agent and satisfactory to the Company. The
Company may retain additional counsel at its expense. Except with the prior
written consent of the Shareholder Servicing Agent, the Company shall not
confess any Claim or make any compromise in any case in which the Shareholder
Servicing Agent will be asked to indemnify the Company.
12.3 Survival of Indemnities. The indemnities granted
by the parties in this Section 12 shall survive the termination of this
Agreement.
13. Insurance. The Shareholder Servicing Agent shall maintain
reasonable insurance coverage against any and all liabilities which may arise
in connection with the performance of its duties hereunder.
14. Notices. All notices or other communications hereunder to
either party shall be in writing and shall be deemed sufficient if mailed to
such party at the address of such party set forth in the preamble of this
Agreement or at such other address as such party may have designated by written
notice to the other.
15. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
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<PAGE> 11
16. Implementation and Duration of Agreement. This Agreement
is effective upon the date first written below and shall continue in effect for
a period of more than one year from the date hereof so long as the Servicing
Plan and related form of agreement or this Agreement is not specifically
terminated by a vote of the Company's Board of Directors and of the Directors
who are not "interested persons" of the Company (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of the
Servicing Plan (the "Plan"), this Agreement, or any other agreement related to
such Plan, cast in person at a meeting called for the purpose of voting on this
Agreement.
17. Termination. This Agreement may be terminated by the
Company, without the payment of any penalty, at any time upon not more than 60
days' nor less than 30 days' notice, by a vote of a majority of the Board of
Directors of the Company who are not "interested persons" of the Company (as
defined in the 1940 Act) and have no direct or indirect financial interest in
the operation of the Plan, this Agreement or any other agreement related to
such Plan, including the Amended Distribution Agreement, or by "a vote of a
majority of the outstanding voting securities" (as defined in the 1940 Act) of
a Fund's shares. The Shareholder Servicing Agent may terminate this Agreement
upon not more than 60 days' nor less than 30 days' notice to the Company.
Either party may assign this Agreement provided that such party obtain the
prior written consent of the other party. Upon termination hereof, a Fund
shall pay such compensation as may be due the Shareholder Servicing Agent as of
the date of such termination.
18. Changes; Amendments. This Agreement may be supplemented or
amended only by written instrument signed by both parties, but may not be
amended to increase materially the maximum amount payable without approval of
"a vote of a majority of the outstanding voting securities" (as defined in the
1940 Act) of a Fund's shares, and all material amendments must be approved in
the manner described in Section 16.
19. Limitation of Liability. The Shareholder Servicing Agent
hereby agrees that obligations assumed by the Company pursuant to this
Agreement shall be limited in all cases to a Fund and its assets and that the
Shareholder Servicing Agent shall not seek satisfaction of any such obligations
from the Board of Directors or any individual Director of the Company or from
the assets of any other portfolio or series of the Company.
20. Subcontracting by Shareholder Servicing Agent. The
Shareholder Servicing Agent may, with the written approval of the Company (such
approval not to be unreasonably withheld or delayed), subcontract for the
performance of the Shareholder Servicing Agent's obligations hereunder with any
one or more persons, including but not limited to any one or more persons which
is an affiliate of the Shareholder Servicing Agent; provided, however, that the
Shareholder Servicing Agent shall be as fully responsible to the Company for
the acts and omissions of any subcontractor as it would be for its own acts or
omissions.
21. Authority to Vote. The Company hereby confirms that
nothing contained in the Articles of Incorporation of the Company would
preclude the Shareholder Servicing Agent, at any meeting of shareholders of the
Company or of a Fund, from voting any shares held in accounts serviced by the
Shareholder Servicing Agent and which are otherwise not represented in person
or by proxy at the meeting, proportionately in accordance with the votes cast
by holders of all shares otherwise represented at the meeting in person or by
proxy and held in accounts serviced by the Shareholder Servicing Agent.
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<PAGE> 12
22. Compliance with Laws and Policies; Cooperation. The
Company hereby agrees that it will comply with all laws and regulations
applicable to a Fund's operations and the Shareholder Servicing Agent agrees
that it will comply with all laws and regulations applicable to providing the
services contemplated hereby.
22.1 Miscellaneous. This Agreement shall be construed
and enforced in accordance with and governed by the laws of the State of
California. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
STAGECOACH FUNDS, INC. on behalf of the
Funds listed in the attached Appendix
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
SHAREHOLDER SERVICING AGENT
By:
-------------------------
Name:
-----------------------
Title:
----------------------
By:
-------------------------
Name:
-----------------------
Title:
----------------------
9
<PAGE> 13
APPENDIX
California Tax-Free Money Market Trust
Money Market Trust
Approved: April 25, 1996 for the Money Market Trust
As Amended: October 24, 1996 for the California Tax-Free Money Market Trust
10
<PAGE> 1
EX-99.B10
December 3, 1996
Writer's Direct Dial Number
(202) 887-1500
Stagecoach Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Issuance of Shares of Common Stock of Stagecoach Funds, Inc.
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 28 and Amendment No. 29
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"). The Company has requested our opinion in connection with the
issuance by the Company of the California Tax-Free Money Market Trust, a
separate series of the Company (collectively, the "Shares").
We have been requested by the Company to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined documents relating to the organization of the
Company and its series and classes thereof, and the authorization and issuance
of shares of its series and classes thereof. We have also verified with the
Company's transfer agent the maximum number of shares issued by the Company for
the fiscal period ended September 30, 1996.
Based upon and subject to the foregoing, we are of the opinion
that:
The issuance of the Shares by the Company, upon completion of such
corporate action as is deemed necessary or appropriate, will be duly and
validly authorized by such corporate action and, assuming delivery by sale or
in accord with the Company's dividend reinvestment plan in accordance with the
description set forth in the Fund's current prospectuses under the Securities
Act of 1933, as amended, the Shares will be legally issued, fully paid and
nonassessable by the Company.
<PAGE> 2
Stagecoach Funds, Inc.
December 3, 1996
Page Two
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 Fund and
Management" in the prospectus, which are included as part of the Registration
Statement.
Very truly yours,
/s/ Morrison & Foerster LLP
MORRISON & FOERSTER LLP
<PAGE> 1
EX-99.B15(c)(vii)
STAGECOACH FUNDS, INC.
CALIFORNIA TAX-FREE MONEY MARKET TRUST
DISTRIBUTION PLAN
Section 1. If and to the extent any portion of the fees paid of the
California Tax-Free Money Market Company (the "Fund") of Stagecoach Funds, Inc.
(the "Company") under its Shareholder Servicing Plan and related Shareholder
Servicing Agreement are considered an indirect payment to finance activities or
services that are primarily intended to result in the sale of shares in the
LifePath Master Portfolios, such fees are deemed approved and may be paid
pursuant to this Distribution Plan and in accordance with Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). The portion of such fees that
is deemed approved pursuant to this Distribution Plan shall not exceed 0.20% of
the average daily net assets of the Fund on an annual basis.
Section 2. Any person authorized to direct the disposition of monies
paid or payable pursuant to this Distribution Plan or any related agreement
shall provide to the Company's Board of Directors, and the Directors shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made. All expenses incurred by the
Fund in connection with this Distribution Plan shall be borne entirely by the
holders of the shares of the Fund involved.
Section 3. This Distribution Plan will become effective on the later of
(a) the date the Fund commences operations or (b) the date of it approval by a
majority of the Board of Directors, including a majority of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Company and
who have no direct or indirect financial interest in the operation of this
Distribution Plan or in any agreements entered into in connection with this
Distribution Plan, pursuant to a vote cast in person at a meeting called for
the purpose of voting on the approval of this Distribution Plan.
Section 4. This Distribution Plan shall continue in effect for so long
as its continuance is specifically approved at least annually by the Company's
Board of Directors in the manner described in Section 3(b).
Section 5. This Distribution Plan may be amended at any time by the
Company's Board of Directors, provided that (a) any amendment to increase
materially the amount to be spent by the Fund for distribution pursuant to
this Distribution Plan shall be effective only upon approval by a vote of a
majority of the outstanding shares of such Fund, and (b) any material
amendments of the terms of this Distribution Plan shall become effective only
upon approval by the Board of Directors as provided in Section 3(b) hereof.
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<PAGE> 2
Section 6. This Distribution Plan is terminable, as to the Fund's
shares, without penalty at any time by (a) a vote of a majority of the
Directors who are not "interested persons" (as defined in the 1940 Act) of the
Company and who have no direct or indirect financial interest in the operation
of this Distribution Plan or in any agreements entered into in connection with
this Distribution Plan, or (b) a vote of a majority of the outstanding shares
of such Fund.
Section 7. While this Distribution Plan is in effect, the selection and
nomination of those Directors who are not "interested persons" (as defined in
the 1940 Act) of the Company shall be committed to the discretion of such non-
interested Directors.
Section 8. The Company will preserve copies of this Distribution Plan,
any written reports regarding this Distribution Plan presented to the Board of
Directors, and any agreements related to this Distribution Plan for a period of
not less than six years.
Adopted by Board of Directors: October 24, 1996
Effective: ____________, 1996
2
