<PAGE> 1
As filed with the Securities and Exchange Commission
on February 29, 1996
Registration No. 33-42927; 811-6419
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
/X/
Post-Effective Amendment No. 21
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 22 /X/
(Check appropriate box or boxes)
--------------------
STAGECOACH FUNDS, INC.
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
--------------------
Registrant's Telephone Number, including Area Code: (800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant / / on _________ pursuant
to Rule 485(b), or to Rule 485(b), or
/X/ 60 Days after filing pursuant / / on _________ pursuant
to Rule 485(a), or to Rule 485(a)
/ / 75 days after filing pursuant / / on May 1, 1996 pursuant
to paragraph (a)(2) paragraph (a)(2) of Rule 485
<PAGE> 2
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of shares of its Common
Stock, $.001 par value, under the Securities Act of 1933, pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended. The Rule 24f-2
Notice for the fiscal year ending December 31, 1995, will be filed with the
Securities and Exchange Commission on or about February 28, 1996.
This Post-Effective Amendment to the Registrant's Registration Statement also
has been executed by Master Investment Trust (a registered investment company
with separate series in which this series of the Registrant will invest
substantially all of its assets) and its trustees and principal officers.
<PAGE> 3
EXPLANATORY NOTE
This Post-Effective Amendment No. 21 to the Registration
Statement (the "Amendment") of Stagecoach Funds, Inc. (the "Company") is being
filed to describe the conversion to master/feeder structure of three of the
Company's existing funds, the Asset Allocation, Corporate Stock and U.S.
Government Allocation Funds (the "Funds"). Each of the Funds will invest
substantially all of its assets in a corresponding master portfolio of Master
Investment Trust, a management investment company organized as a Delaware
business trust (SEC File No. 811-6415). This Amendment also adds to the
Company's Registration Statement the audited financial statements for the year
ended December 31, 1995 and certain related financial information pertaining to
the Funds. This Amendment does not affect the Registration Statement for the
Company's Aggressive Growth, California Tax-Free Bond, California Tax-Free
Income, California Tax-Free Money Market Mutual, Diversified Income, Ginnie
Mae, Growth and Income, Money Market Mutual, National Tax-Free Money Market
Mutual and Short-Intermediate U.S. Government Income Funds.
<PAGE> 4
Cross Reference Sheet
ASSET ALLOCATION FUND
U.S. GOVERNMENT ALLOCATION FUND
Form N-1A Item Number
<TABLE>
<S> <C>
Part A Prospectus Captions
- ------ -------------------
1 Cover Page
2 Prospectus Summary; Summary of Fund Expenses
3 Financial Highlights
4 The Funds, the Master Portfolio and Management; Prospectus Appendix
5 How the Funds Work; The Funds, the Master Portfolio and
Management; Management and Servicing Fees
6 The Funds, the Master Portfolio and Management; Investing in the Fund
7 Investing in the Funds; Dividends; Taxes; Additional Shareholder Services
8 How to Redeem Shares
9 Not Applicable
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page
11 Table of Contents
12 Introduction
13 Investment Restrictions; Portfolio Transactions; Additional Permitted
Investment Activities; SAI Appendix
14 Management of the Company
15 Management of the Company
16 Management of the Company; Distribution Plans; Custodian and Transfer
and Dividend Disbursing Agent; Independent Auditors
17 Portfolio Transactions
18 Capital Stock; Other
19 Determination of Net Asset Value; Fund Expenses
20 Federal Income Taxes
21 Distribution Plans
22 Calculation of Yield and Total Return
23 Financial Information
Part C Other Information
- ------ -----------------
24-32 Information required to be included in Part C is set forth under the appropriate Item, so numbered, in
Part C of this Document.
</TABLE>
<PAGE> 5
LOGO
------------------------------
PROSPECTUS
------------------------------
ASSET ALLOCATION FUND
U.S. GOVERNMENT ALLOCATION FUND
April 29, 1996
<PAGE> 6
STAGECOACH FUNDS(R)
ASSET ALLOCATION FUND
U.S. GOVERNMENT ALLOCATION FUND
Stagecoach Funds, Inc. (the "Company") is a professionally managed, open-end
series investment company. This Prospectus contains information about two of the
funds in the Stagecoach Family of Funds - the ASSET ALLOCATION FUND and the U.S.
GOVERNMENT ALLOCATION FUND (each a "Fund" and, collectively, the "Funds"). Two
classes of shares of each Fund (each, a "Class") are described in this
Prospectus - Class A Shares and Class B Shares.
Each Fund seeks to achieve its investment objective by investing all of its
assets in a separate portfolio (each, a "Master Portfolio") of Master Investment
Trust ("MIT"), an open-end, management investment company, rather than in a
portfolio of securities and, as such, may be considered a feeder fund in a
master/feeder structure. Each Master Portfolio has the same investment objective
as the Fund bearing the corresponding name. Therefore, each Fund's investment
experience corresponds directly with the relevant Master Portfolio's investment
experience. Interests in the Master Portfolio may be purchased only by other
investment companies or accredited investors.
The ASSET ALLOCATION FUND seeks to earn over the long term a high level of
total return, including net realized and unrealized capital gains and net
investment income, consistent with reasonable risk. See "How the Funds
Work -- Investment Objective and Policies" and "How the Funds
Work -- Master-Feeder Structure."
The U.S. GOVERNMENT ALLOCATION FUND seeks to achieve over the long term a high
level of total return, including net realized and unrealized capital gains and
net investment income, consistent with reasonable risk. See "How the Funds
Work -- Investment Objective and Policies" and "How the Funds
Work -- Master-Feeder Structure."
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 a Fund's goals match your own. A Statement of Additional
Information ("SAIs"), dated April 29, 1996, for the Funds has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference.
The SAI for each Fund is available free of charge by writing to Stagecoach
Funds, Inc., c/o Stagecoach Shareholder Services, Wells Fargo Bank, N.A., P.O.
Box 7066, San Francisco, CA 94120-7066 or by calling the Company at
800-222-8222. If you hold shares in an IRA, please call 1-800-BEST-IRA for
information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") , BZW
BARCLAYS GLOBAL INVESTORS, N.A. OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUNDS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
PROSPECTUS DATED APRIL 29, 1996
PROSPECTUS
<PAGE> 7
The ASSET ALLOCATION FUND seeks to achieve its objective by investing in the
corresponding Master Portfolio, which pursues an "asset allocation" strategy of
allocating and reallocating its investments among three asset classes - common
stocks, U.S. Treasury bonds, and money market instruments. The Fund is designed
for investors with investment horizons of at least five years. See "How the
Funds Work -- Investment Objective and Policies" and "How the Funds
Work -- Master-Feeder Structure."
The U.S. GOVERNMENT ALLOCATION FUND seeks to achieve its objective by
investing in the corresponding Master Portfolio, which pursues a strategy of
allocating and reallocating its investments among three classes of debt
securities - long-term U.S. Treasury bonds, intermediate-term U.S. Treasury
notes, and short-term money market instruments - at least 65% of which will be
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. The Fund is designed for investors with investment horizons
of at least five years. See "How the Funds Work -- Investment Objective and
Policies" and "How the Funds Work -- Master-Feeder Structure."
The Master Portfolios are advised by Wells Fargo Bank. BZW Barclays Global
Fund Advisors ("BGFA"), an affiliate of Barclays Bank PLC ("Barclays") which is
not affiliated with Wells Fargo Bank, serves as sub-adviser to the Master
Portfolios. Wells Fargo Bank also serves as the Funds' transfer and dividend
disbursing agent, and is a Shareholder Servicing Agent (as defined below) and a
Selling Agent (as defined below). BZW Barclays Global Investors, N.A. ("BGI")
serves as the Master Portfolios' custodian. Stephens Inc. ("Stephens") is the
Funds' sponsor and administrator and serves as the distributor of the Funds'
shares.
THE FUNDS' SHARES AND PORTFOLIO INVESTMENTS (EXCEPT AS NOTED UNDER "HOW THE
FUNDS WORK - INVESTMENT OBJECTIVES AND POLICIES" AND "PROSPECTUS APPENDIX -
ADDITIONAL INVESTMENT POLICIES") ARE NOT INSURED OR GUARANTEED BY THE UNITED
STATES OR ANY FEDERAL AGENCY OR INSTRUMENTALITY.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND PROVIDES CERTAIN OTHER SERVICES
TO THE MASTER PORTFOLIOS, FOR WHICH IT IS COMPENSATED. BGFA IS THE SUB-ADVISER
AND BGFA AND BGI PROVIDE CERTAIN OTHER SERVICES TO THE MASTER PORTFOLIO, FOR
WHICH THEY ARE COMPENSATED. STEPHENS, WHICH IS NOT AFFILIATED WITH WELLS FARGO
BANK, BGFA OR BGI IS THE SPONSOR AND DISTRIBUTOR FOR THE FUNDS.
PROSPECTUS
<PAGE> 8
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 9
HOW THE FUNDS WORK 15
THE FUNDS AND MANAGEMENT 21
INVESTING IN THE FUNDS 22
DIVIDENDS 34
HOW TO REDEEM SHARES 35
ADDITIONAL SHAREHOLDER SERVICES 39
MANAGEMENT AND SERVICING FEES 42
TAXES 46
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 9
PROSPECTUS SUMMARY
The Funds provide you with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides you with summary information about the Funds. For more information,
please refer specifically to the identified Prospectus sections and generally to
the Prospectus and SAI for each Fund.
Q. WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
A. The ASSET ALLOCATION FUND'S investment objective is to seek over the long
term a high level of total return, including net realized and unrealized
capital gains and net investment income, consistent with reasonable risk.
The Fund seeks to achieve this objective by investing all of its assets in
the Master Portfolio of MIT which has an identical investment objective. The
Master Portfolio attempts to achieve this objective by pursuing an "asset
allocation" strategy by allocating its investments among three asset
classes - common stocks, U.S. Treasury bonds and money market instruments.
The Fund is designed for investors with investment horizons of at least five
years. See "How the Funds Work" and "Prospectus Appendix -- Additional
Investment Policies."
The U.S. GOVERNMENT ALLOCATION FUND'S investment objective is to seek over
the long term a high level of total return, including net realized and
unrealized capital gains and net investment income, consistent with
reasonable risk. The Fund seeks to achieve this objective by investing all
of its assets in the Master Portfolio of MIT which has an identical
investment objective. The Master Portfolio attempts to achieve this
objective by pursuing a strategy of allocating and reallocating its
investments among three classes of debt securities: long-term U.S. Treasury
bonds, intermediate-term U.S. Treasury notes and short-term money market
instruments. Under normal market conditions, at least 65% of such Master
Portfolio's total assets will be invested in obligations that are issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
including government-sponsored enterprises ("U.S. Government obligations").
The Fund is designed for investors with investment horizons of at least five
years. See "How the Funds Work" and "Prospectus Appendix -- Additional
Investment Policies."
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank is investment adviser to the Master Portfolios. BFGA serves
as sub-adviser to the Master Portfolios and provides allocation advice based
on certain proprietary models. The Company has not retained the services of
a separate investment adviser for the Funds because each Fund invests all of
its assets in the corresponding Master Portfolio. Wells Fargo Bank provides
the Funds with transfer agency and dividend disbursing agency services. BGI
provides the Funds and the Master Portfolios with custodial services. In
addition, Wells Fargo Bank is a Shareholder Servicing Agent and a Selling
Agent under Selling Agreements with
1 PROSPECTUS
<PAGE> 10
Stephens, the Funds' distributor. See "The Funds and Management" and
"Management and Servicing Fees."
Q. HOW DO I INVEST IN THE FUND?
A. You may invest in the Fund by purchasing shares of a Fund at their public
offering price, which is the net asset value per share plus any applicable
sales charge. Class A Shares are subject to a maximum front-end sales charge
of 4.50%. Class B Shares that are redeemed within four years of purchase are
subject to a maximum contingent deferred sales charge of 3.00% of the lesser
of net asset value at purchase or net asset value at redemption. In some
cases, such as for investments by certain fiduciary or retirement accounts,
the front-end sales charge may be waived. In particular, no front-end sales
charge is imposed on sales of Class A Shares made to various retirement plan
customers of Wells Fargo Bank, including IRAs, Simplified Employee Pension
Plans and other self-directed retirement plans for which Wells Fargo Bank
serves as trustee. In other cases, the front-end sales charge may be
reduced. You may open an account by investing at least $1,000 and may add to
your account by making additional investments of at least $100, although
certain exceptions to these minimums may be available. Shares may be
purchased by wire, by mail or by an automatic investment feature called the
AutoSaver Plan on any day the New York Stock Exchange is open. See
"Investing in the Funds." For more details, contact Stephens (the Funds'
Sponsor and Distributor), a Shareholder Servicing Agent or a Selling Agent
(such as Wells Fargo Bank).
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income of the Asset Allocation Fund are
declared quarterly and dividends from the net investment income of the U.S.
Government Allocation Fund are declared daily. Dividends paid by each Fund
are automatically reinvested in additional shares of the same Class of the
respective Fund at net asset value without a sales charge unless you elect
to receive dividends in cash. You may also elect to reinvest dividends of
the Funds in shares of the same class of another multi-class fund or in
shares of certain other funds in the Stagecoach Family of Funds with which
you have an established account that has met the applicable minimum initial
investment requirement. Any capital gains will be distributed at least
annually in the same manner. Each Fund's net investment income available for
distribution to holders of Class B Shares will be reduced by the amount of
the higher Rule 12b-1 Fee payable on behalf of the Class B Shares. Class B
Shares automatically convert into Class A Shares of the same Fund six years
after the end of the month in which they were acquired. See "Dividends" and
"Additional Shareholder Services."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares by telephone, by letter or by an automatic
feature called the Systematic Withdrawal Plan on any day the New York Stock
Exchange is open. Contingent deferred sales charges may be charged upon
redemption of Class B Shares. In addition, the Company reserves the right
to impose charges for wiring redemption proceeds. See "How To Redeem
Shares" and "How to Purchase
PROSPECTUS 2
<PAGE> 11
Shares - Contingent Deferred Sales Charges - Class B Shares." For more
details, contact Stephens, a Shareholder Servicing Agent or a Selling Agent
(such as Wells Fargo Bank).
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF
INVESTMENT?
A. An investment in shares of the Funds (or the Master Portfolios) is not
insured against loss of principal. When the value of the securities
attributable to a Fund declines, so does the value of your shares of the
Fund. Therefore, you should be prepared to accept some risk with the money
you invest in a Fund. Since the investment risks associated with an
investment in each Fund correspond to those of the Master Portfolio in which
such Fund invests, the following is a summary of certain of the risks
associated with an investment in the Master Portfolios. Because each Master
Portfolio in which a Fund invests may shift its investment allocations
significantly from time to time, its performance and that of the Fund may
differ from funds which invest in one asset class or from funds with a
stable mix of assets. Further, shifts among asset classes may result in
relatively high portfolio turnover rates, which may, in turn, result in
increased brokerage and transaction costs, and/or increased short-term
capital gains or losses. The portfolio debt instruments of the Master
Portfolios are subject to interest rate risk and credit risk. Interest rate
risk is the risk that increases in market interest rates may adversely
affect the value of the instruments in which a Master Portfolio invests and
hence the value of your investment in the Fund which invests in such Master
Portfolio. The value of instruments held by the Master Portfolios generally
changes inversely to changes in market interest rates. During those periods
in which a high percentage of the portfolio of a Master Portfolio is
invested in long-term bonds, its exposure to interest rate risk will be
greater because the longer maturity of those instruments means they
generally are more sensitive to interest rate fluctuations than shorter-term
debt instruments. Credit risk is the risk that the issuer of a debt
instrument is unable, due to financial constraints, to make timely payments
on its outstanding obligations. The portfolio equity investments of the
Master Portfolios are subject to equity market risk. Equity market risk is
the risk that common stock prices will fluctuate or decline over short or
even extended periods. The U.S. stock market tends to be cyclical, with
periods when stock prices generally rise and periods when prices generally
decline. Although each Fund's investment experience will correspond directly
to the investment experience of the Master Portfolio in which it invests, to
the extent other funds invest in the Master Portfolio, their performance may
differ from that of the Fund due to different expense levels.
As with all mutual funds, there can be no assurance that the Funds or the
corresponding Master Portfolio will achieve their investment objectives.
Investors should be prepared to accept that risk, as well as the risk that a
Fund may under-perform (over the short and/or long term) one or more of the
three classes of securities in which the corresponding Master Portfolio
invests.
3 PROSPECTUS
<PAGE> 12
Q. WHAT ARE DERIVATIVES AND DO THE FUNDS AND THE MASTER PORTFOLIOS USE THEM?
A. Some of the permissible investments described throughout this Prospectus are
considered "derivative" securities because their values are derived, at
least in part, from the prices of other securities or specified assets,
indices or rates. For example, the futures contracts and options on futures
contracts that the Master Portfolios may purchase are considered
derivatives. The Master Portfolios may purchase or sell these contracts or
options as substitutes for comparable market positions in the underlying
securities. Certain of the floating- and variable-rate instruments in which
the Master Portfolios may invest also can be considered derivatives. Some
derivatives may be more sensitive than direct securities to changes in
interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms.
Q. WHAT STEPS DO THE FUNDS AND MASTER PORTFOLIOS TAKE TO CONTROL
DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank (as investment adviser to the Master Portfolios) and BGFA
(as sub-adviser to the Master Portfolios) uses a variety of internal risk
management procedures to ensure that derivatives use is consistent with both
the Master Portfolios' and the Funds' investment objectives, does not expose
either the Master Portfolios or the Funds to undue risks and is closely
monitored. These procedures include providing periodic reports to the Boards
of Trustees and Directors, respectively, concerning the use of derivatives.
The use of derivatives is also subject to broadly applicable investment
policies. For example, the Master Portfolios may not invest more than a
specified percentage of its assets in "illiquid securities," including those
derivatives that do not have active secondary markets. In addition, the
Master Portfolios may not use derivatives without establishing adequate
"cover" in compliance with SEC rules limiting the use of leverage. For
additional information, see "Appendix -- Additional Investment Policies."
PROSPECTUS 4
<PAGE> 13
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
FOR CLASS A SHARES
<TABLE>
<CAPTION>
ASSET ALLOCATION U.S. GOVERNMENT
FUND ALLOCATION FUND
---------------- ---------------
<S> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)................ 4.50% 4.50%
Sales Charge Imposed on
Reinvested Dividends.............. None None
Sales Charge Imposed on
Redemptions*...................... None None
Exchange Fees......................... None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
FOR CLASS A SHARES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)**
<TABLE>
<CAPTION>
U.S.
ASSET GOVERNMENT
ALLOCATION ALLOCATION
FUND FUND
------------- --------------
<S> <C> <C> <C> <C>
Management Fee.................................. 0.37% 0.50%
Rule 12b-1 Fee.................................. 0.05% 0.05%
Total Other Expenses(after any waivers or
reimbursements):
Shareholder Servicing Fee***................ 0.30% 0.30%
Administrative Fee.......................... 0.03% 0.03%
Other Expenses(after any waivers or
reimbursements)........................... 0.09% 0.16%
----- -----
0.42% 0.49%
----- -----
TOTAL FUND OPERATING
EXPENSES(1)................................. 0.84% 1.04%
</TABLE>
- -------------------------------
<TABLE>
<C> <S>
* The Company reserves the right to impose a charge for wiring
redemption proceeds.
** Other mutual funds may invest in the Master Portfolios and such
other Funds' expenses and, correspondingly, investment returns
may differ from those of the Funds.
*** The Funds understand that a Shareholder Servicing Agent also
may impose certain conditions on its customers, subject to the
terms of this Prospectus, in addition to or different from
those imposed by the Funds, such as requiring a higher minimum
initial investment or payment of a separate fee for additional
services.
</TABLE>
5 PROSPECTUS
<PAGE> 14
<TABLE>
<CAPTION>
EXAMPLE OF EXPENSES --
CLASS A SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment in Class A Shares of a
Fund, assuming (A) a 5% annual return and (B)
redemption at the end of each time period
indicated:
Asset Allocation Fund..................... $ 53 $71 $ 89 $144
U.S. Government Allocation Fund........... $ 55 $77 $ 100 $166
</TABLE>
SHAREHOLDER TRANSACTION EXPENSES
FOR CLASS B SHARES
<TABLE>
<CAPTION>
ASSET ALLOCATION U.S. GOVERNMENT
FUND ALLOCATION FUND
---------------- ---------------
<S> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)............. None None
Sales Charge Imposed on
Reinvested Dividends........... None None
Maximum Sales Charge Imposed on
Redemptions*................... 3.00% 3.00%
Exchange Fees...................... None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
FOR CLASS B SHARES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)**
<TABLE>
<CAPTION>
U.S.
ASSET GOVERNMENT
ALLOCATION ALLOCATION
FUND FUND
------------- --------------
<S> <C> <C> <C> <C>
Management Fee............................ 0.37% 0.50%
Rule 12b-1 Fee............................ 0.70% 0.70%
Total Other Expenses(after any waivers or
reimbursements):
Shareholder Servicing Fee***.......... 0.30% 0.30%
Administrative Fee.................... 0.03% 0.03%
Other Expenses(after any waivers or
reimbursements)..................... 0.13% 0.12%
----- -----
0.46% 0.45%
----- -----
TOTAL FUND OPERATING
EXPENSES(1)........................... 1.53% 1.65%
</TABLE>
- -------------------------------
<TABLE>
<C> <S>
* The Company reserves the right to impose a charge for wiring
redemption proceeds.
** Other mutual funds may invest in the Master Portfolios and such
other Funds' expenses and, correspondingly, investment returns may
differ from those of the Funds.
*** The Funds understand that a Shareholder Servicing Agent also may
impose certain conditions on its customers, subject to the terms
of this Prospectus, in addition to or different from those imposed
by the Funds, such as requiring a higher minimum initial
investment or payment of a separate fee for additional services.
</TABLE>
PROSPECTUS 6
<PAGE> 15
EXAMPLE OF EXPENSES -- CLASS B SHARES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment in Class B
Shares of a Fund, assuming (A) a 5%
annual return and (B) redemption at
the end of each time period indicated:
Asset Allocation Fund............ $ 46 $58 $83 $147
U.S. Government Allocation
Fund........................... $ 47 $62 $90 $165
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment in Class B
Shares of a Fund, assuming a 5%
annual return but no redemption:
Asset Allocation Fund............ $ 16 $48 $83 $147
U.S. Government Allocation
Fund........................... $ 17 $52 $90 $165
</TABLE>
EXPLANATION OF TABLES
The purpose of the foregoing tables is to help you understand the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. The foregoing tables reflect expenses at both the Fund and Master
Portfolio levels.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell Fund
shares. You are subject to a front-end sales charge on purchases of Class A
Shares of the Funds and may be subject to a contingent deferred sales charge on
Class B Shares if you sell such shares within a specified period. See "Investing
in the Funds - Sales Charges." The Company reserves the right to impose a charge
for wiring redemption proceeds. In certain instances, you may qualify for a
reduction or waiver of the front-end sales charge. See "Investing in the
Funds - Sales Charges."
ANNUAL FUND OPERATING EXPENSES for Class A Shares of each Fund are based on
amounts incurred during the most recent fiscal year reflecting voluntary fee
waivers and expense reimbursements that are expected to continue to reduce
expenses during the current fiscal year. Wells Fargo Bank and Stephens each has
agreed to waive or reimburse all or a portion of its respective fees if certain
Fund and/or Master Portfolio expenses exceed limits set by state securities laws
or regulations. In addition, Wells Fargo Bank and Stephens, at their sole
discretion, may waive or reimburse all or a portion
7 PROSPECTUS
<PAGE> 16
of the respective fees charged to, or expenses paid by, a Fund and/or Master
Portfolio. Any waivers or reimbursements would reduce a Fund's total expenses.
There can be no assurances that waivers or reimbursements will continue. Absent
waivers or reimbursements, the percentages shown above under "Other Expenses",
"Total Other Expenses" and "Total Fund Operating Expenses" would be 0.19%, 0.52%
and 1.07%, respectively, for the Class A Shares of the U.S. Government
Allocation Fund. Absent waivers and reimbursements, "Other Expenses", "Total
Other Expenses" and "Total Fund Operating Expenses" would be 0.36%, 0.69% and
1.76%, respectively, for the Class B Shares of the Asset Allocation Fund and
0.83%, 1.16% and 2.36%, respectively, for the Class B Shares of the U.S.
Government Allocation Fund. The Funds could pay more in sales charges than the
economic equivalent of the maximum front-end sales charges applicable to mutual
funds sold by members of the National Association of Securities Dealers
("NASD"). For more complete descriptions of the various costs and expenses you
can expect to incur as an investor in each Fund, please see the Prospectus
sections captioned "Investing in the Funds - How To Buy Shares" and "Management
and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical example which illustrates the expenses
associated with a $1,000 investment in Class A Shares or Class B Shares over
stated periods, based on the expenses in the respective tables above and an
assumed annual rate of return of 5%. This rate of return should not be
considered an indication of actual or expected performance of a Fund. In
addition, the example should not be considered a representation of past or
future expenses and actual expenses may be greater or lesser than those shown.
PROSPECTUS 8
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following information, for each of the five years in the period ending
December 31, 1995, has been derived from the Financial Highlights in the Funds'
1995 annual financial statements. The financial statements are included in the
SAI for each Fund. Except for periods ending prior to January 1, 1992, which
were audited by other auditors whose report dated February 19, 1992 expressed an
unqualified opinion on this information, the financial statements have been
audited by KPMG Peat Marwick LLP, independent auditors, whose report dated
February 14, 1996 also is included in the SAIs. This information should be read
in conjunction with the Funds' 1995 annual financial statements and notes
thereto. The SAIs have been incorporated by reference into this Prospectus.
ASSET ALLOCATION FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991*
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $16.73 $18.80 $17.89 $17.65 $14.45
Income from investment
operations:
Net investment income........ 0.74 0.77 0.77 0.87 0.92
Net realized and unrealized
capital
gain/(loss) on
investments................. 4.07 (1.31) 1.88 0.31 2.28
Total from investment
operations.................. 4.81 (0.54) 2.65 1.18 3.20
Less distributions:
Dividends from net investment
income...................... (0.74) (0.77) (0.77) (0.87) 0.00
Distributions from net
realized gain............... (0.06) (0.76) (0.97) (0.07) 0.00
Total from distributions..... (0.80) (1.53) (1.74) (0.94) 0.00
Net asset value, end of
period...................... $20.74 $16.73 $18.80 $17.89 $17.65
Total return (not
annualized)**............... 29.18% (2.82)% 15.00% 7.00% 22.13%
Ratios/supplemental data:
Net assets, end of period
(000)....................... $1,077,935 $896,943 $1,048,667 $542,226 $367,251
Number of shares outstanding,
end of period (000)......... 51,962 53,618 55,790 30,303 20,811
Ratios to average net assets
(annualized):
Ratio of expenses to average
net assets(1)............... 0.84% 0.84% 0.86% 0.95% 0.95%
Ratio of net investment
income to average net
assets(2)................... 3.81% 4.30% 4.20% 5.22% 5.88%
Portfolio turnover........... 15% 49% 40% 5% 25%
- ------------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses...... N/A N/A 0.86% 0.97% N/A
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses................. N/A N/A 4.20% 5.20% N/A
</TABLE>
- ---------------
* The financial information for the fiscal periods prior to, and including,
1991 is based on the financial information for the Asset Allocation Fund
("IRA Asset Allocation Fund") of the Wells Fargo Investment Trust for
Retirement Programs ("Trust") which was reorganized into the Asset Allocation
Fund on January 2, 1992.
** Total returns do not include any sales charges.
9 PROSPECTUS
<PAGE> 18
ASSET ALLOCATION FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1990* 1989* 1988* 1987* 1986*+
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $13.42 $12.00 $10.93 $10.07 $10.00
Income from investment
operations:
Net investment income.......... 0.91 0.93 0.72 0.72 0.07
Net realized and unrealized
capital
gain/(loss) on investments... 0.12 0.49 0.35 0.14 0.00
Total from investment
operations................... 1.03 1.42 1.07 0.86 0.07
Less distributions:
Dividends from net investment
income....................... 0.00 0.00 0.00 0.00 0.00
Distributions from net realized
gain......................... 0.00 0.00 0.00 0.00 0.00
Total from distributions....... 0.00 0.00 0.00 0.00 0.00
Net asset value, end of
period....................... $14.45 $13.42 $12.00 $10.93 $10.07
Total return (not
annualized)**................ 7.68% 11.83% 9.79% 8.54% 0.70%
Ratios/supplemental data:
Net assets, end of period
(000)........................ $261,881 $229,211 $172,326 $111,025 $1,600
Number of shares outstanding,
end of period (000).......... 18,124 17,078 14,362 10,158 159
Ratios to average net assets
(annualized):
Ratio of expenses to average
net assets(1)................ 0.96% 1.02% 1.00% 1.04% 0%
Ratio of net investment income
to average net assets(2)..... 6.59% 7.35% 6.23% 6.79% 0.29%
Portfolio turnover............. 88% 117% 94% 81% 0%
- ------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior to
waived fees and reimbursed
expenses................... N/A N/A N/A N/A N/A
(2) Ratio of net investment
income to average net
assets prior to waived fees
and reimbursed expenses.... N/A N/A N/A N/A N/A
</TABLE>
- ---------------
* The financial information for the fiscal periods prior to, and including,
1991 is based on the financial information for the Asset Allocation Fund
("IRA Asset Allocation Fund") of the Wells Fargo Investment Trust for
Retirement Programs ("Trust") which was reorganized into the Asset Allocation
Fund on January 2, 1992.
+ The Fund commenced operations on November 13, 1986.
** Total returns do not include any sales charges.
PROSPECTUS 10
<PAGE> 19
ASSET ALLOCATION FUND
FOR A CLASS B SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR
ENDED
DEC. 31,
1995*
---------
<S> <C>
Net asset value, beginning of period.............................. $10.00
Income from investment operations:
Net investment income............................................. 0.22
Net realized and unrealized capital
gain/(loss) on investments...................................... 2.53
Total from investment operations.................................. 2.75
Less distributions:
Dividends from net investment income.............................. (0.22)
Distributions from net realized gain.............................. (0.03)
Total from distributions.......................................... (0.25)
Net asset value, end of period.................................... $12.50
Total return (not annualized)**................................... 27.72%
Ratios/supplemental data:
Net assets, end of period (000)................................... $26,271
Number of shares outstanding, end of period (000)................. 2,101
Ratios to average net assets (annualized):
Ratio of expenses to average net assets(1)........................ 1.53%
Ratio of net investment income to average net assets(2)........... 2.71%
Portfolio turnover................................................ 15%
- -----------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to waived fees
and reimbursed expenses......................................... 1.76%
(2) Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses............................. 2.48%
</TABLE>
- ---------------
* Class B Shares commenced operations on January 1, 1995
** Total returns do not include any sales charges.
11 PROSPECTUS
<PAGE> 20
U.S. GOVERNMENT ALLOCATION FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $13.76 $15.71 $15.41 $15.41 $13.14
Income from investment operations:
Net investment income............. 0.79 0.87 0.96 0.87 0.94
Net realized and unrealized
capital gain/(loss) on
investments...................... 1.22 (1.95) 1.69 0.04 1.33
Total from investment
operations....................... 2.01 (1.08) 2.65 0.91 2.27
Less distributions:
Dividends from net investment
income........................... (0.79) (0.87) (0.96) (0.87) 0.00
Distributions from net realized
gain............................. 0.00 0.00 (1.39) (0.04) 0.00
Total from distributions.......... (0.79) (0.87) (2.35) (0.91) 0.00
Net asset value, end of period.... $14.98 $13.76 $15.71 $15.41 $15.41
Total return (not annualized)**... 14.91% (6.99)% 17.46% 6.30% 17.21%
Ratios/supplemental data:
Net assets, end of period (000)... $135,577 $140,066 $283,206 $127,504 $30,098
Number of shares outstanding, end
of period
(000)............................ 9,048 10,177 18,031 8,272 1,954
Ratios to average net assets
(annualized):
Ratio of expenses to average net
assets(1)........................ 1.04% 1.01% 0.99% 1.00% 1.01%
Ratio of net investment income to
average net assets(2)............ 5.41% 5.94% 5.92% 6.06% 6.77%
Portfolio turnover................ 292% 112% 150% 33% 147%
- ------------------------------------------------------------------------------------------------
(1) Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses... 1.07% 1.08% 1.02% 1.08% N/A
(2) Ratio of net investment
income to average net assets prior
to waived fees and reimbursed
expenses....................... 5.38% 5.87% 5.89% 5.98% N/A
</TABLE>
- ---------------
* The financial information for the fiscal periods prior to, and including,
1991 is based on the financial information for the Fixed Income Strategy
Fund ("IRA Fixed Income Strategy Fund") of the Trust which was reorganized
into the U.S. Government Allocation Fund on January 2, 1992.
+ The Fund commenced operations on March 31, 1987.
** Total returns do not include any sales charges.
PROSPECTUS 12
<PAGE> 21
U.S. GOVERNMENT ALLOCATION FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1990* 1989* 1988* 1987*+
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..... $12.49 $11.05 $10.34 $10.00
Income from investment operations:
Net investment income.................... 0.92 0.93 0.87 0.64
Net realized and unrealized capital
gain/(loss)
on investments......................... (0.27) 0.51 (0.16) (0.30)
Total from investment operations......... 0.65 1.44 0.71 0.34
Less distributions:
Dividends from net investment income..... 0.00 0.00 0.00 0.00
Distributions from net realized gain..... 0.00 0.00 0.00 0.00
Total from distributions................. 0.00 0.00 0.00 0.00
Net asset value, end of period........... $13.14 $12.49 $11.05 $10.34
Total return (not annualized)**.......... 5.20% 13.03% 6.87% 3.50%
Ratios/supplemental data:
Net assets, end of period (000).......... $19,777 $14,367 $10,330 $7,469
Number of shares outstanding, end of
period
(000).................................. 1,505 1,151 935 722
Ratios to average net assets
(annualized):
Ratio of expenses to average net
assets(1).............................. 1.03% 1.05% 0.99% 0.99%
Ratio of net investment income to average
net
assets(2).............................. 7.34% 7.90% 8.04% 6.33%
Portfolio turnover....................... 558% 17% 42% 21%
- ---------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses.................. N/A N/A N/A N/A
(2) Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses........... N/A N/A N/A N/A
</TABLE>
- ---------------
* The financial information for the fiscal periods prior to, and including,
1991 is based on the financial information for the Fixed Income Strategy
Fund ("IRA Fixed Income Strategy Fund") of the Trust which was reorganized
into the U.S. Government Allocation Fund on January 2, 1992.
+ The Fund commenced operations on March 31, 1987.
** Total returns do not include any sales charges.
13 PROSPECTUS
<PAGE> 22
U.S. GOVERNMENT ALLOCATION FUND
FOR A CLASS B SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR
ENDED
DEC. 31,
1995*
--------
<S> <C>
Net asset value, beginning of period......................................... $10.00
Income from investment operations:
Net investment income (loss)................................................. 0.49
Net realized and unrealized capital gain/(loss) on investments............... 0.91
Total from investment operations............................................. 1.40
Less distributions:
Dividends from net investment income......................................... (0.49)
Distributions from net realized gain......................................... 0.00
Total from distributions..................................................... (0.49)
Net asset value, end of period............................................... $10.91
Total return (not annualized)**.............................................. 14.11%
Ratios/supplemental data:
Net assets, end of period (000).............................................. $4,077
Number of shares outstanding, end of period
(000)....................................................................... 374
Ratios to average net assets (annualized):
Ratio of expenses to average net assets(1)................................... 1.65%
Ratio of net investment income to average net assets(2)...................... 4.31%
Portfolio turnover........................................................... 292%
- ---------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses....................................................... 2.36%
(2) Ratio of net investment income to
average net assets prior to waived fees and reimbursed expenses........... 3.60%
- ---------------
* Class B shares commenced operations on January 1, 1995.
+ The Fund commenced operations on March 31, 1987.
** Total returns do not include any sales charges.
</TABLE>
PROSPECTUS 14
<PAGE> 23
HOW THE FUNDS WORK
INVESTMENT OBJECTIVE AND POLICIES
ASSET ALLOCATION FUND
The Asset Allocation Fund's investment objective is to seek over the long term
a high level of total return, including net realized and unrealized capital
gains and net investment income, consistent with reasonable risk. This
investment objective is fundamental and cannot be changed without shareholder
approval. The Fund seeks to achieve its investment objective by investing all of
its assets in the Master Portfolio, which has the same fundamental objective as
the Fund. As with all mutual funds, there can be no assurance that the Fund or
the Master Portfolio, which is a diversified portfolio, will achieve their
investment objectives. The Master Portfolio seeks to achieve its objective by
pursuing an asset allocation strategy. This strategy is based upon the premise
that these asset classes from time to time are undervalued or overvalued
relative to each other by the market and that undervalued asset classes
represent relatively better long-term, risk-adjusted investment opportunities.
Timely, low-cost shifts among common stocks, U.S. Treasury bonds and money
market instruments (as determined by their perceived relative overvaluation or
undervaluation) can therefore produce attractive investment returns. Using this
strategy, BGFA regularly determines the appropriate mix of asset classes and the
portfolio of the Master Portfolio is periodically adjusted to achieve this mix.
In determining the recommended mix, BGFA uses an investment model developed
over the past 17 years, which is presently used as a basis for managing large
employee benefit trust funds and other institutional accounts. The Asset
Allocation Model, which is proprietary to BGFA, analyzes extensive financial
data from numerous sources and recommends a portfolio allocation among common
stocks, U.S. Treasury bonds and money market instruments. As further described
in the "Prospectus Appendix - Additional Investment Policies," BGFA bases its
investment decisions on the Asset Allocation Model's recommendations. At any
given time, substantially all of the Master Portfolio's assets may be invested
in a single asset class and the relative allocation among the asset classes may
shift significantly from time to time. The Master Portfolio may use stock index
futures and options thereon, and interest rate futures and options thereon, as a
substitute for a comparable market position in the underlying securities.
The Asset Allocation Master Portfolio's assets will be invested as follows:
Stock Investments. In making its stock investments, the Master Portfolio
invests in the common stocks which comprise the Standard & Poor's 500 Composite
Stock Price Index
15 PROSPECTUS
<PAGE> 24
("S&P 500 Index")* using, to the extent feasible, the same weighting formula
used by that index. The Master Portfolio does not individually select common
stocks on the basis of traditional investment analysis.
Bond Investments. The Master Portfolio purchases U.S. Treasury bonds with
maturities greater than 20 years. The bond portion of the portfolio of the
Master Portfolio is generally managed to attain an average maturity of between
22 and 28 years for the U.S. Treasury bonds held. This form of debt instrument
has been selected by BGFA because of the relatively low transaction costs of
buying and selling U.S. Treasury bonds and because of the low default risk
associated with such instruments.
Money Market Investments. The money market instrument portion of the portfolio
of the Master Portfolio generally will be invested in high-quality money market
instruments, including U.S. Government obligations, obligations of domestic and
foreign banks, short-term corporate debt instruments and repurchase agreements.
A more complete description of the Asset Allocation Model, certain trading
policies relating to the implementation of the model's recommendations, and the
Master Portfolio's investments is contained in the "Prospectus
Appendix -- Additional Investment Policies" and in the SAI.
U.S. GOVERNMENT ALLOCATION FUND
The U.S. Government Allocation Fund's investment objective is to seek over the
long term a high level of total return, including net realized and unrealized
capital gains and net investment income, consistent with reasonable risk. This
investment objective is fundamental and cannot be changed without shareholder
approval. The Fund seeks to achieve its investment objective by investing all of
its assets in the Master Portfolio, which has substantially the same fundamental
objective as the Fund. As with all mutual funds, there can be no assurance that
the Fund, or the Master Portfolio will achieve their investment objectives. The
Master Portfolio seeks to achieve its objective by pursuing a strategy of
allocating and reallocating its investments among the following three classes of
debt instruments: long-term U.S. Treasury bonds, intermediate-term U.S. Treasury
notes, and short-term money market instruments. This strategy is based upon the
premise that these asset classes from time to time are overvalued or undervalued
relative to each other by the market and that undervalued asset classes
represent relatively better long-
- ---------------
* The S&P 500 Index is an unmanaged index of stocks comprised of 500
companies, including industrial, financial, utility and transportation
companies. "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard &
Poor's 500", and "500" are trademarks of McGraw-Hill, Inc. Neither the Asset
Allocation Master Portfolio nor the Asset Allocation Fund is sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes
no representation regarding the advisability of investing in the Fund or
Master Portfolio.
PROSPECTUS 16
<PAGE> 25
term investment opportunities. Timely, low-cost shifts among such securities (as
determined by their perceived relative overvaluation or undervaluation) can
therefore produce attractive long-term investment returns. Using this strategy,
BGFA regularly determines the recommended mix of asset classes and the portfolio
of the Master Portfolio is periodically adjusted to achieve this mix. Under
normal market conditions, the Master Portfolio will invest at least 65% of the
value of its total assets in U.S. Government obligations.
In determining the recommended mix, BGFA uses an investment model which is
presently used as a basis for managing large employee benefit trust funds and
other institutional accounts. The model, which is proprietary to BGFA, analyzes
risk, correlation and expected return data and recommends a portfolio allocation
among the three classes of debt instruments. As further described in the
"Prospectus Appendix - Additional Investment Policies," BGFA bases its
investment decisions on the model's recommendations. At any given time,
substantially all of the Master Portfolio's assets may be invested in a single
asset class and the relative allocation among the asset classes may shift
significantly from time to time. The Master Portfolio is not designed to profit
from short-term market changes. Instead, it is designed for investors with
investment horizons of five years and greater.
The U.S. Government Allocation Fund's assets will be invested and reinvested
in the following types of debt instruments:
Long-Term Investments. The Master Portfolio purchases U.S. Treasury bonds with
maturities greater than 20 years. This portion of the portfolio of the Master
Portfolio is generally managed to attain an average maturity of between 22 and
28 years.
Intermediate-Term Investments. The Master Portfolio purchases U.S. Treasury
notes with maturities generally ranging from 5 to 7 years. This portion of the
portfolio of the Master Portfolio is generally managed to attain an average
maturity of approximately 6 years.
Short-Term Investments. The Master Portfolio purchases short-term money market
instruments with remaining maturities of one year or less. This portion of the
portfolio of the Master Portfolio may be invested in various types of short-term
money market instruments, including U.S. Government obligations, commercial
paper, bankers' acceptances, certificates of deposit, fixed time deposits, and
repurchase agreements. Obligations of both domestic and foreign banks may be
included.
U.S. Government obligations have been selected by Wells Fargo Bank as the
Master Portfolio's principal investments because of their relatively low
purchase and sale transaction costs and because of the low default risk
associated with them (i.e., they are issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities, including
government-sponsored enterprises). The Master Portfolio may use interest rate
futures and options thereon as a substitute for a comparable market position in
the underlying securities.
17 PROSPECTUS
<PAGE> 26
A key component of the U.S. Government Allocation model is a set of
assumptions concerning expected risk and return and investor attitudes toward
risk, which are incorporated into the allocation decision. The principal inputs
of financial data to the model currently are: (i) yields on 90-day U.S. Treasury
bills, 5-year U.S. Treasury notes, and 30-year U.S. Treasury bonds; (ii) the
expected statistical standard deviation in investment returns for each class of
fixed income instrument; and (iii) the expected statistical correlation of
investment return among the various classes of fixed income instruments. Using
these and other data, the model is run daily to determine the recommended
allocation. The model's recommendations are presently implemented in 10%
increments. Because the Master Portfolio may shift its investment allocations
significantly from time to time, its performance may differ from funds which
invest in one asset class or from funds with a constant mix of assets.
A more complete description of the model and the Master Portfolio's
investments and investment activities is contained in the "Prospectus
Appendix -- Additional Investment Policies" and in the SAI.
MASTER/FEEDER STRUCTURE
As of April , 1996, the Funds converted to a feeder fund in a master/feeder
structure. Accordingly, each of the Funds invests all of its assets in the
corresponding Master Portfolio, which has the same investment objective as the
Fund. See, "The Funds -- Investment Objectives and Policies." MIT is organized
as a trust under the laws of the State of Delaware. See "General
Information -- Description of the Company." In addition to selling its shares to
the corresponding Fund, each of the Master Portfolios may sell its shares to
certain other mutual funds or accredited investors. Information regarding
additional options, if any, for investment in shares of any of the Master
Portfolios is available from Stephens and may be obtained by calling
1-800-643-9691. The expenses and, correspondingly, the returns of other
investment options in MIT may differ from those of the Funds.
The Board of Directors believes that, if other investors invest their assets
in the Master Portfolios, certain economic efficiencies may be realized with
respect to each of the Master Portfolios. For example, fixed expenses that
otherwise would have been borne solely by one of the Funds would be spread
across a larger asset base provided by more than one fund investing in the
corresponding Master Portfolios. Each of the Funds and other entities investing
(if any) in the corresponding Master Portfolios would each be liable for all
obligations of such Master Portfolios. However, the risk of one of the Funds
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and MIT itself is unable
to meet its obligations. Accordingly, the Company's Board of Directors believes
that neither of the Funds nor its respective shareholders will be adversely
affected by reason of investing the Funds' assets in the respective Master
Portfolios. However, if there is no other investor in the Master Portfolios, the
economic efficiencies (e.g., spreading fixed expenses across a
PROSPECTUS 18
<PAGE> 27
larger asset base) that the Company's Board believes should be available through
investment in the Master Portfolios may not be fully achieved. In addition,
given the relatively novel nature of the master/feeder structure, accounting and
operational difficulties could occur.
The Master Portfolios' investment objectives and other fundamental policies,
which are substantially the same as those of either of the corresponding Funds,
cannot be changed without approval by the holders of a majority (as defined in
the Investment Company Act of 1940 (the "1940 Act")) of the Master Portfolios'
outstanding voting shares. Whenever either of the Funds, as a Master Portfolios'
shareholder, is requested to vote on matters pertaining to any fundamental
policy of the Master Portfolios, the Fund will hold a meeting of its
shareholders to consider such matters and the Fund will cast its votes in
proportion to the votes received from Fund shareholders. The Fund will vote
Master Portfolios' shares for which it receives no voting instructions in the
same proportion as the votes received from Fund shareholders. In addition,
certain policies of the Master Portfolios that are non-fundamental can be
changed by vote of a majority of MIT's Trustees without a shareholder vote. If
the Master Portfolio's investment objective or policies are changed, the Fund
could subsequently change its objective or policies to correspond to those of
the Master Portfolios or the Fund could redeem its Master Portfolios' shares and
either seek a new investment company with a substantially matching objective in
which to invest or retain its own investment adviser to manage the Fund's
portfolio in accordance with its objective. In the latter case, the Fund's
inability to find a substitute investment company in which to invest or
equivalent management services could adversely affect shareholders' investments
in the Fund. A Fund's investment objective and other fundamental policies cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. The Fund will provide shareholders
with 30 days' written notice prior to the implementation of any change in the
investment objective of the Fund or Master Portfolio, to the extent possible.
PRINCIPAL INVESTMENT RISKS
An investment in shares of the Funds (and the Master Portfolios) is not
insured against loss of principal. When the value of the securities attributable
to a Fund declines, so does the value of your shares of the Fund. Therefore, you
should be prepared to accept some risk with the money you invest in a Fund.
Since the investment characteristics and, therefore, investment risks associated
with an investment in each Fund correspond to those of the Master Portfolio in
which such Fund invests, the following is summary of certain of the risks
associated with an investment in the Master Portfolio. Because each Master
Portfolio in which a Fund invests may shift its investment allocations
significantly from time to time, its performance and that of the Fund may differ
from funds which invest in one asset class or from funds with a stable mix of
assets. Further, shifts among asset classes may result in relatively high
portfolio turnover rates, which may, in turn, result in increased brokerage and
transaction costs, and/or increased short-term capital
19 PROSPECTUS
<PAGE> 28
gains or losses. The portfolio debt instruments of the Master Portfolios are
subject to interest rate risk and credit risk. Interest rate risk is the risk
that increases in market interest rates may adversely affect the value of the
instruments in which a Master Portfolio invests and hence the value of your
investment in the Fund which invests in such Master Portfolio. The value of
instruments held by the Master Portfolios generally changes inversely to changes
in market interest rates. During those periods in which a high percentage of the
portfolio of a Master Portfolio is invested in long-term bonds, its exposure to
interest rate risk will be greater because the longer maturity of those
instruments means they generally are more sensitive to interest rate
fluctuations than shorter-term debt instruments. Credit risk is the risk that
the issuer of a debt instrument is unable, due to financial constraints, to make
timely payments on its outstanding obligations. The portfolio equity investments
of the Master Portfolios are subject to equity market risk. Equity market risk
is the risk that common stock prices will fluctuate or decline over short or
even extended periods. The U.S. stock market tends to be cyclical, with periods
when stock prices generally rise and periods when prices generally decline.
Although each Fund's investment experience will correspond directly to the
investment experience of the Master Portfolio in which it invests, to the extent
other funds invest in the Master Portfolio, their performance may differ from
that of the Fund due to different expense levels.
As with all mutual funds, there can be no assurance that the Funds or the
corresponding Master Portfolio will achieve their investment objectives.
Investors should be prepared to accept that risk, as well as the risk that a
Fund may under-perform (over the short and/or long term) one or more of the
three classes of securities in which the corresponding Master Portfolio invests.
PERFORMANCE
The performance of each Class of shares of the Asset Allocation Fund may be
advertised in terms of average annual total return. The performance of each
Class of shares of the U.S. Government Allocation Fund may be advertised in
terms of average annual total return and yield. These performance figures are
based on historical results and are not intended to indicate future performance.
Each Fund's performance corresponds directly to the investment experience of the
corresponding Master Portfolio.
Average annual total return of the shares of a Class of a Fund is based on the
overall dollar or percentage change in value of a hypothetical investment in the
Class and assumes that all dividends and capital gain distributions are
reinvested in shares of that Class. Yield of the shares of each Class is
calculated by dividing the net investment income per Class share earned during a
specified period (usually 30 days) by net asset value per share, on the last day
of such period and annualizing the result. In addition to presenting a
standardized total return, at times, each Class also may present nonstandardized
total returns, yield information and distribution rates.
PROSPECTUS 20
<PAGE> 29
Because of differences in the fees and/or expenses borne by Class B Shares of
the Funds, the net performance quotations on such shares can be expected, at any
given time, to be lower than the net performance quotations on Class A Shares.
Standardized performance quotations are computed separately for Class A Shares
and Class B Shares.
Additional information about the performance of each Fund is contained in the
Annual Report for each Fund. The Annual Reports may be obtained free of charge
by calling the Company at 800-222-8222.
THE FUNDS AND MANAGEMENT
The Funds are two of the funds in the Stagecoach Family of Funds. The Company
was organized as a Maryland corporation on September 9, 1991, and currently
offers shares of eleven other series: the Aggressive Growth Fund, the California
Tax-Free Bond Fund, the California Tax-Free Income Fund, the California Tax-Free
Money Market Mutual Fund, the Corporate Stock Fund, the Diversified Income Fund,
the Ginnie Mae Fund, the Growth and Income Fund, the Money Market Mutual Fund,
the National Tax-Free Money Market Fund, and the Short-Intermediate U.S.
Government Income Fund. The Board of Directors of the Company supervises the
Funds' activities and monitors their contractual arrangements with various
service providers. Although the Company is not required to hold annual
shareholder meetings, special meetings may be requested for purposes such as
electing or removing Directors, approving advisory contracts and distribution
plans, and changing a Fund's investment objective or fundamental investment
policies. All shares of the Company have equal voting rights and will be voted
in the aggregate, rather than by series or Class, unless otherwise required by
law (such as when the voting matter affects only one series or Class). As a
shareholder of a Fund, you receive one vote for each share you own and
fractional votes for fractional shares owned. A more detailed description of the
voting rights and attributes of the shares is contained in the "Capital Stock"
section of the Funds' SAIs.
MASTER PORTFOLIO INVESTMENT ADVISER AND SUB-ADVISER
Wells Fargo Bank is the Master Portfolios' investment adviser. In addition,
Wells Fargo Bank is the Funds' transfer and dividend disbursing agent, a
Shareholder Servicing Agent and a Selling Agent under Selling Agreements with
the Funds' distributor. Wells Fargo Bank, one of the ten largest banks in the
United States, was founded in 1852 and is the oldest bank in the western United
States. As of January 1, 1996, various divisions and affiliates of Wells Fargo
Bank provided investment advisory services for approximately $33 billion of
assets of individuals, trusts, estates and institutions. Wells Fargo Bank also
serves as the investment adviser and as the investment adviser or sub-adviser to
the other separately managed series of the Company, and to three other
registered, open-end, management investment companies, which consist of several
separately managed investment portfolios. Wells Fargo Bank, a wholly owned
subsidiary
21 PROSPECTUS
<PAGE> 30
of Wells Fargo & Company, is located at 420 Montgomery Street, San Francisco,
California 94105.
As investment adviser, Wells Fargo Bank, subject to the overall supervision of
the Board of Trustees, provides guidance and policy direction in connection with
the management of the Master Portfolios' assets. Wells Fargo Bank also furnishes
the Board of Trustees with periodic reports on the Master Portfolios' investment
strategies and performance.
BGFA, located at 45 Fremont Street, San Francisco, California 94105, serves as
sub-adviser to the Master Portfolios. BGFA is a wholly owned subsidiary of BGI
and an indirect subsidiary of Barclays Bank PLC. As of January 1, 1996, BGFA and
its affiliates provide investment advisory services for over $220 billion of
assets. BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an
affiliate of Wells Fargo Institutional Trust Company, N.A. BGFA also serves as
the sub-adviser to some of the other portfolios of MIT, and as investment
adviser to two other registered, open-end, management investment companies, each
of which consists of several separately managed investment portfolios.
Pursuant to a Sub-Investment Advisory Agreement, BFGA, subject to the
supervision and approval of Wells Fargo Bank, provides investment advisory
assistance and the day-to-day management of the Master Portfolio's assets,
subject to the overall authority of MIT's Board of Trustees and in conformity
with Delaware law and the stated policies of the Master Portfolio.
Stephens is the Funds' sponsor and administrator, and distributes the Funds'
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit sharing plans, individual investors, foundations,
insurance companies and university endowments.
INVESTING IN THE FUNDS
OPENING AN ACCOUNT
You can buy shares in either Fund in one of the several ways described below.
You must complete and sign an Account Application to open an account. Additional
documentation may be required from corporations, associations and certain
fiduciaries. Do not mail cash. If you have any questions or need extra forms,
you may call 800-222-8222.
PROSPECTUS 22
<PAGE> 31
After an application has been processed and an account has been established,
subsequent purchases of different funds of the Company under the same umbrella
account do not require the completion of additional applications. A separate
application must be processed for each different umbrella account number (even
if the registration is the same). Call the number on your confirmation statement
to obtain information about what is required to change registration.
To invest in the Funds through a tax-deferred retirement plan, please contact
a Shareholder Servicing Agent or a Selling Agent to receive information and the
required separate application. See "Tax-Deferred Retirement Plans" below.
The Company or Stephens may make the Prospectus available in an electronic
format. Upon request, the Company or Stephens will transmit or cause to be
transmitted promptly, without charge, a paper copy of the electronic Prospectus.
SHARE VALUE
The value of a share of a Class of the Funds is its "net asset value," or NAV.
The NAV of a share of each Class of the Asset Allocation Fund or U.S. Government
Allocation Fund is the value of total net assets attributable to such Class
divided by the number of outstanding shares of that Class. The value of the net
assets per Class is determined daily by adjusting the net assets per Class at
the beginning of the day by the value of each Class's shareholder activity, net
investment income and net realized and unrealized gains or losses for that day.
Net investment income is calculated each day for each Class by attributing to
each Class a pro rata share of daily income and common expenses, and by
assigning class-specific expenses to each Class as appropriate. The NAV of each
Class is expected to fluctuate daily.
The Funds are open for business each day the New York Stock Exchange ("NYSE")
is open for trading ("Business Day"). Currently, the NYSE is closed on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day (each a "Holiday"). When any Holiday
falls on a weekend, the NYSE is closed on the weekday immediately before or
after such Holiday. Wells Fargo Bank calculates the NAV of each Class of the
Funds each Business Day as of the close of regular trading on the NYSE (referred
to hereafter as "the close of the NYSE"), which is currently 1:00 p.m. (Pacific
time).
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the Funds' other assets are valued at
current market prices, or if such prices are not readily available, at fair
value as determined in good faith by the Company's Board of Directors. Prices
used for such valuations may be provided by independent pricing services.
23 PROSPECTUS
<PAGE> 32
HOW TO BUY SHARES
Shares of each Fund are offered continuously at the applicable offering price
(the NAV plus the applicable sales charge) next determined after a purchase
order is received in the form specified for the purchase method being used, as
described in the following sections. Payment for shares purchased through a
Selling Agent will not be due from the Selling Agent until the settlement date.
The settlement date normally is three Business Days after the order is placed.
It is the responsibility of the Selling Agent to forward payment for shares
being purchased to a Fund promptly. Payment must accompany orders placed
directly through the Transfer Agent.
Payments for shares of each Class of a Fund will be invested in full and
fractional shares of such Class at the applicable offering price. If shares are
purchased by a check which does not clear, the Company reserves the right to
cancel the purchase and hold the investor responsible for any losses or fees
incurred. In addition, the Funds may hold payment on any redemption until
reasonably satisfied that your investments made by check have been collected
(which may take up to 15 days). The Company reserves the right to reject any
purchase order or suspend sales at any time.
The minimum initial investment amount is generally $1000. The minimum
investment amount is $100 by the AutoSaver Plan purchase method (described
below) and $250 for any tax-deferred retirement account for which Wells Fargo
Bank serves as trustee or custodian under a prototype trust approved by the
Internal Revenue Service ("IRS") (a "Plan Account"). Generally subsequent
investments must be made in amounts of $100 or more. Plan Accounts that invest
in the Fund through Wells Fargo ExpressInvest(TM) (available to certain Wells
Fargo tax-deferred retirement plans) are not subject to the minimum initial
investment amount or the subsequent investment amount requirements. If you have
questions regarding purchases of shares or ExpressInvest(TM) please contact the
Company at 800-222-8222, or a Shareholder Servicing Agent or Selling Agent. For
additional information on tax-deferred accounts, please refer to the section
"How to Buy Shares" under Tax-Deferred Retirement Plans or contact a Shareholder
Servicing Agent.
Federal regulations require that an investor provide a certified Taxpayer
Identification Number ("TIN") upon opening or reopening an account. See "Taxes"
for further information concerning this requirement. Failure to furnish a
certified TIN to the Company could subject the investor to a penalty imposed by
the IRS.
PROSPECTUS 24
<PAGE> 33
SALES CHARGES
Set forth below is a Front-end Sales Charge Schedule listing the front-end
sales charges applicable to purchases of Class A Shares of the Funds. As shown
below, reductions in the rate of front-end sales charges ("Volume Discounts")
are available as you purchase additional shares (other than Class B Shares). You
should consider the front-end sales charge information set forth below and the
other information contained in this Prospectus when making your investment
decisions.
The following is the Front-end Sales Charge Schedule for purchasing Class A
Shares of each Fund:
<TABLE>
<CAPTION>
FRONT-END FRONT-END
SALES CHARGE SALES CHARGE DEALER ALLOWANCE
AS % OF AS % OF NET AS % OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ----------------------- -------------- --------------- ----------------
<S> <C> <C> <C>
Less than $50,000....... 4.50% 4.71% 4.00%
$ 50,000 up to
$ 99,999.............. 4.00 4.17 3.55
$100,000 up to
$249,999.............. 3.50 3.63 3.125
$250,000 up to
$499,999.............. 3.00 3.09 2.65
$500,000 up to
$999,999.............. 2.00 2.04 1.75
$1,000,000 and over..... 1.00 1.01 0.85
</TABLE>
Class B Shares of the Fund are not subject to a front-end sales charge.
However, Class B Shares which are redeemed within one, two, three or four years
from the receipt of a purchase order affecting such shares will be subject to a
contingent deferred sales charge equal to 3.00%, 2.00%, 1.00% and 1.00%,
respectively, of the dollar amount equal to the lesser of the NAV at the time of
purchase of the shares being redeemed or the NAV of such shares at the time of
redemption. See "Investing in the Funds - Contingent Deferred Sales
Charges - Class B Shares."
A Selling Agent or Servicing Agent and any other person entitled to receive
compensation for selling or servicing shares may receive different compensation
for selling or servicing Class A Shares as compared with Class B Shares.
If Class A Shares are purchased through a Selling Agent, Stephens reallows the
portion of the front-end sales charge shown above as the Dealer Allowance.
Stephens also compensates Selling Agents for sales of Class B Shares, and is
then reimbursed out of applicable Rule 12b-1 Fees and contingent deferred sales
charges applicable to such shares. In addition, Stephens has established a
non-cash compensation program, pursuant to which broker/dealers or financial
institutions that sell shares of the Funds may earn additional compensation in
the form of trips to sales seminars or vacation destinations, tickets to
sporting events, theater or other entertainment, opportunities to
25 PROSPECTUS
<PAGE> 34
participate in golf or other outings and gift certificates for meals or
merchandise. When shares are purchased directly through the Transfer Agent and
no Selling Agent is involved with the purchase, the entire front-end sales
charge is paid to Stephens.
REDUCED SALES CHARGE
Volume Discounts
The Volume Discounts described in the Front-end Sales Charge Schedule are
available to you based on the combined dollar amount you invest in shares of one
or more of the Company's funds which assess a front-end sales charge (the "Load
Funds"). Since Class B Shares are not subject to front-end sales charges, you
may not consider the amount of any Class B Shares you hold in determining any
Volume Discount.
Right of Accumulation
The Right of Accumulation allows you to combine the amount you invest in Class
A Shares of a Fund with the total NAV of shares (other than Class B Shares) in
any of the Load Funds to determine reduced front-end sales charges in accordance
with the above Front-end Sales Charge Schedule. In addition, you also may
combine the total NAV of shares (other than Class B Shares) which you currently
have invested in any other mutual fund that assesses a front-end sales charge
and is advised by Wells Fargo Bank and sponsored by Stephens. For example, if
you own Class A Shares of the Load Funds with an aggregate NAV of $90,000 and
you invest an additional $20,000 in Class A Shares of a Fund, the front-end
sales charge on the additional $20,000 investment would be 3.50% of the
applicable offering price. To obtain such discount, you must provide sufficient
information at the time of your purchase to verify that your purchase qualifies
for the reduced front-end sales charge. Confirmation of the order is subject to
such verification. The Right of Accumulation may be modified or discontinued at
any time without prior notice with respect to all subsequent shares purchased.
Letter of Intent
A Letter of Intent allows you to purchase Class A Shares of a Fund over a
13-month period at a reduced front-end sales charge based on the total amount of
Class A Shares you intend to purchase plus the total NAV of shares (other than
Class B Shares) in any of the Load Funds you already own. Each investment in
Class A Shares that you make during the period may be made at the reduced
front-end sales charge that is applicable to the total amount you intend to
invest. If you do not invest the total amount within the period, you must pay
the difference between the higher front-end sales charge rate that would have
been applied to the purchases you made and the reduced sales charge rate you
have paid. The minimum initial investment for a Letter of Intent is 5% of the
total amount you intend to purchase, as specified in the Letter. Shares of a
Fund equal to 5% of the amount you intend to invest will be held in escrow and,
if you do not pay the difference within 20 days following the mailing of a
request, a sufficient amount of
PROSPECTUS 26
<PAGE> 35
escrowed shares will be redeemed for payment of the additional front-end sales
charge. Dividend and capital gains paid on such shares held in escrow will be
reinvested in additional Fund shares.
Reinvestment
You may reinvest proceeds from a redemption of Class A Shares in Class A
Shares of a Fund or in shares of another of the Company's funds registered in
your state of residence at NAV, without a front-end sales charge, within 120
days after your redemption. However, if the other investment portfolio charges a
front-end sales charge that is higher than the sales load that you have paid in
connection with the Class A Shares you have redeemed, you must pay the
difference between the dollar amount of the two front-end sales charges. You may
reinvest at this NAV price up to the total amount of the redemption proceeds. A
written purchase order for the shares must be delivered to the Company, a
Selling Agent, a Shareholder Servicing Agent, or the Transfer Agent at the time
of reinvestment.
If you realized a gain on your redemption, your reinvestment would not alter
the amount of any federal capital gains tax you pay on the gain. If you realized
a loss on your redemption, your reinvestment may cause some or all of the loss
to be disallowed as a tax deduction, depending on the number of shares you
purchase by reinvestment, whether those shares are in the same portfolio as
those redeemed, and the period of time that elapses after the redemption. For
tax purposes, however, the amount disallowed is added to the cost of the shares
you acquire upon the reinvestment.
Reductions for Families or Fiduciaries
Reductions in front-end sales charges apply to purchases by a single "person,"
including an individual, members of a family unit, consisting of a husband, wife
and children under the age of 21 purchasing securities for their own account, or
a trustee or other fiduciary purchasing for a single fiduciary account or single
trust estate.
Waivers for Investments of Proceeds From Other Investments
Purchases may be made at NAV, without a front-end sales charge, to the extent
that: (i) you are investing proceeds from a redemption of shares of another
open-end investment company or (ii) you are investing proceeds from a redemption
of units of a unit investment trust sold through Wells Fargo Securities Inc. on
which you paid a front-end sales charge; (iii) such redemption occurred within
thirty (30) days prior to the date of the purchase order; and (iv) such other
investment company or trust is distributed and advised by entities other than
Stephens and Wells Fargo Bank, respectively, or their affiliates. You must
notify the Fund and/or the Transfer Agent at the time you place such purchase
order of your eligibility for the waiver of front-end sales charges and provide
satisfactory evidence thereof (e.g., a confirmation of the redemption).
27 PROSPECTUS
<PAGE> 36
Reductions for Qualified Groups
Reductions in front-end sales charges also apply to purchases by individual
members of a "qualified group." The reductions are based on the aggregate dollar
amount of Class A Shares purchased by all members of the qualified group. For
purposes of this paragraph, a qualified group consists of a "company," as
defined in the 1940 Act, which has been in existence for more than six months
and which has a primary purpose other than acquiring shares of a Fund at a
reduced sales charge, and the "related parties" of such company. For purposes of
this paragraph, a "related party" of a company is: (i) any individual or other
company who directly or indirectly owns, controls or has the power to vote 5% or
more of the outstanding voting securities of such company; (ii) any other
company of which such company directly or indirectly owns, controls or has the
power to vote 5% or more of its outstanding voting securities; (iii) any other
company under common control with such company; (iv) any executive officer,
director or partner of such company or of a related party; and (v) any
partnership of which such company is a partner. Investors seeking to rely on
their membership in a qualified group to purchase shares at a reduced sales load
must provide evidence satisfactory to the Transfer Agent of the existence of a
bona fide qualified group and their membership therein.
Waivers for Certain Parties
Class A Shares of a Fund may be purchased at NAV, without a front-end sales
charge, by directors, officers and employees (and their spouses and children
under the age of 21) of the Company, Stephens, its affiliates and Selling
Agents. Class A Shares of a Fund also may be purchased at NAV, without a
front-end sales charge, by present and retired directors, officers and employees
(and their spouses and children under the age of 21) of Wells Fargo Bank and its
affiliates if Wells Fargo Bank and/or the respective affiliates agree. Class A
Shares of a Fund also may be purchased at NAV, without a front-end sales charge,
by employee benefit and thrift plans for such persons and by any investment
advisory, trust or other fiduciary account, including a Plan Account, that is
maintained, managed or advised by Wells Fargo Bank or its affiliates ("Fiduciary
Accounts"), or by institutions purchasing shares for the sole purpose of
creating a unit investment trust for exclusive distribution through Wells Fargo
Securities Inc. In addition, you may purchase Class A Shares of a Fund at NAV,
without a front-end sales charge, with proceeds from a required minimum
distribution from any Individual Retirement Account ("IRA"), Simplified Employee
Pension Plan or other self-directed retirement plan for which Wells Fargo Bank
serves as trustee, provided that the proceeds are invested in the Funds within
30 days of such distribution and such distribution is required as a result of
reaching age 70 1/2.
CONTINGENT DEFERRED SALES CHARGES - CLASS B SHARES
Class B Shares of the Funds are not subject to front-end sales charges but may
be subject to contingent deferred sales charges. Class B Shares which are
redeemed within
PROSPECTUS 28
<PAGE> 37
one, two, three or four years from the receipt of a purchase order for such
shares will be subject to a contingent deferred sales charge equal to 3.00%,
2.00%, 1.00% and 1.00%, respectively, of the dollar amount equal to the lesser
of the NAV at the time of purchase of the shares being redeemed or the NAV of
such shares at the time of redemption. Accordingly, a contingent deferred sales
charge will not be imposed on amounts representing increases in NAV above the
NAV at the time of purchase. Contingent deferred sales charges will not be
assessed on Class B Shares purchased through reinvestment of dividends or
capital gains distributions. Class B Shares automatically convert into Class A
Shares of the same Fund six years after the end of the month in which such Class
B Shares were acquired.
The amount of a contingent deferred sales charge, if any, paid upon redemption
of Class B Shares is determined in a manner designed to result in the lowest
sales charge rate being assessed. When a redemption request is made, Class B
Shares acquired pursuant to the reinvestment of dividends and capital gain
distributions are considered to be redeemed first. After this, Class B Shares
are considered redeemed on a first-in, first-out basis so that Class B Shares
held for a longer period of time are considered redeemed prior to more recently
acquired Class B Shares. For a discussion of the interaction between the
optional Exchange Privilege and contingent deferred sales charges on Class B
Shares, see "Additional Shareholder Services - Exchange Privilege."
Contingent deferred sales charges are waived on redemptions of Class B Shares
of a Fund (i) following the death or disability (as defined in the Internal
Revenue Code of 1986, as amended (the "Code")) of a shareholder, (ii) to the
extent that the redemption represents a minimum required distribution from an
individual retirement account or other retirement plan to a shareholder who has
reached age 70 1/2, (iii) effected pursuant to the Company's right to liquidate
a shareholder's account if the aggregate net asset value of the shareholder's
account is less than the minimum account size, or (iv) in connection with the
combination of the Company with any other registered investment company by a
merger, acquisition of assets, or by any other transaction.
In deciding whether to purchase Class A or Class B Shares, you should compare
the fees assessed on Class A Shares (including front-end sales charges) against
those assessed on Class B Shares (including potential contingent deferred sales
charges and higher Rule 12b-1 fees than Class A Shares) in light of the amount
to be invested and the anticipated time that the shares will be owned.
29 PROSPECTUS
<PAGE> 38
You may buy shares of the Funds on any Business Day by any of the methods
described below.
INITIAL PURCHASES BY WIRE
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
($1,000 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Name of Fund) (designate Class A or B)
Account Name(s): Name(s) in which to be registered
Account Number: (if investing into an existing account)
3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after the funds are wired and must be received and accepted by the Transfer
Agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at the public offering price or, in the case of
Class B Shares, at the NAV next determined after the Account Application is
received and accepted.
INITIAL PURCHASES BY MAIL
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $1,000 or more payable to
"Stagecoach Funds (Name of Fund) (designate Class A or B)," to the address
above.
3. Share purchases are effected at the public offering price or, in the case of
Class B Shares, at the NAV next determined after the Account Application is
received and accepted.
AUTOSAVER PLAN PURCHASES
The Company's AutoSaver Plan provides you with a convenient way to establish
and automatically add to a Fund account on a monthly basis. To participate in
the AutoSaver
PROSPECTUS 30
<PAGE> 39
Plan, you must specify an amount ($100 or more) to be withdrawn automatically by
the Transfer Agent on a monthly basis from an account with a bank, which is
designated in your Account Application and which is approved by the Transfer
Agent ("Approved Bank"). Wells Fargo Bank is an Approved Bank. The Transfer
Agent withdraws and uses this amount to purchase specified Fund shares on your
behalf on or about the fifth Business Day of each month. There are no separate
fees charged to you by the Funds for participating in the AutoSaver Plan.
You may change your investment amount, suspend purchases or terminate your
election at any time by providing notice to the Transfer Agent at least five
Business Days prior to any scheduled transaction.
TAX-DEFERRED RETIREMENT PLANS
You may be entitled to invest in the Funds through a Plan Account or other
tax-deferred retirement plan. Contact a Shareholder Servicing Agent (such as
Wells Fargo Bank) or a Selling Agent for materials describing Plan Accounts
available through it, and the benefits, provisions, and fees of such Plan
Accounts. The minimum initial investment amount for Fund shares acquired through
a Plan Account is $250 (the minimum initial investment amount is not applicable
if you participate in ExpressInvest(TM) through a Plan Account).
Pursuant to the Code, individuals who are not active participants (and who do
not have a spouse who is an active participant) in certain types of retirement
plans ("qualified retirement plans") may deduct contributions to an IRA, up to
specified limits. Investment earnings in the IRA will be tax-deferred until
withdrawn, at which time the individual may be in a lower tax bracket.
The maximum annual deductible contribution to an IRA for individuals under age
70 1/2 is 100% of includible compensation up to a maximum of (i) $2,000 for
single individuals; (ii) $4,000 for a married couple when both spouses earn
income; and (iii) $2,250 when one spouse earns, or elects for IRA purposes to be
treated as earning, no income (together, the "IRA contribution limits").
The IRA deduction is also available for single individual taxpayers and
married couples who are active participants in qualified retirement plans but
who have adjusted gross incomes which do not exceed certain specified limits. If
their adjusted gross income exceeds these limits, the amount of the deductible
contribution is phased down and eventually eliminated.
Any individual who works may make nondeductible contributions to an IRA in
addition to any deductible contributions. Total aggregate deductible and
nondeductible contributions are limited to the IRA contribution limits discussed
above. Nondeductible contributions in excess of the applicable IRA contribution
limit are "nondeductible excess contributions." In addition, contributions made
to an IRA for the year in which an individual attains the age of 70 1/2, or any
year thereafter, are also nondeductible excess
31 PROSPECTUS
<PAGE> 40
contributions. Nondeductible excess contributions are subject to a 6% excise tax
penalty which is charged each year that the nondeductible excess contribution
remains in the IRA.
An employer also may contribute to an individual's IRA by establishing a
Simplified Employee Pension Plan through a Shareholder Servicing Agent or a
Selling Agent, known as a SEP-IRA. Participating employers may make an annual
contribution in an amount up to the lesser of 15% of earned income or $30,000,
subject to certain provisions of the Code. Investment earnings will be
tax-deferred until withdrawn.
The foregoing discussion regarding IRAs is based on the Code and federal
regulations in effect as of the date of this Prospectus and summarizes only some
of the important federal tax considerations generally affecting IRA
contributions made by individuals or their employers. It is not intended as a
substitute for careful tax planning. Investors should consult their tax advisors
with respect to their specific tax situations as well as with respect to state
and local taxes. Further federal tax information is contained under the heading
"Taxes" in this Prospectus and in the SAI.
A Shareholder Servicing Agent or Selling Agent also may offer other types of
tax-deferred or tax-advantaged plans, including a Keogh retirement plan for
self-employed professional persons, sole proprietors and partnerships.
Application materials for opening a tax-deferred retirement plan can be
obtained from a Shareholder Servicing Agent or a Selling Agent. Return your
completed tax-deferred retirement plan application to your Shareholder Servicing
Agent or a Selling Agent for approval and processing. If your tax-deferred
retirement plan application is incomplete or improperly filled out, there may be
a delay before a Fund account is opened. You should ask your Shareholder
Servicing Agent or Selling Agent about the investment options available to your
tax-deferred retirement plan, since some of the funds in the Stagecoach Family
of Funds may be unavailable as options. Moreover, certain features described
herein, such as the AutoSaver Plan and the Systematic Withdrawal Plan, may not
be available to individuals or entities who invest through a tax-deferred
retirement plan.
ADDITIONAL PURCHASES
You may make additional purchases of $100 or more by instructing a Fund's
Transfer Agent to debit an Approved Bank account designated in your Account
Application, by wire by instructing the wiring bank to transmit the specified
amount as directed above for initial purchases, or by mail with a check payable
to "Stagecoach Funds (Name of Fund) (designate Class A or B)" to the address set
forth in "Initial Purchases by Wire". Write your Fund account number on the
check and include the detachable stub from your Statement of Account or a letter
providing your Fund account number.
PROSPECTUS 32
<PAGE> 41
PURCHASES THROUGH SELLING AGENTS
You may place a purchase order for Class A or Class B Shares of a Fund through
a broker/dealer or financial institution which has entered into a Selling
Agreement with Stephens, as the Funds' Distributor ("Selling Agent"). If your
order is placed by the close of the NYSE, the purchase order generally will be
executed on the same day if the order is received by the Transfer Agent before
the close of business. If your purchase order is received by a Selling Agent
after the close of the NYSE or by the Transfer Agent after the close of
business, then your purchase order will be executed on the next Business Day
following the day your order is placed. The Selling Agent is responsible for the
prompt transmission of your purchase order to the Fund. Because payment for
shares of the Funds will not be due until settlement date, the Selling Agent
might benefit from temporary use of your payment. A financial institution acting
as a Selling Agent, Shareholder Servicing Agent, or in certain other capacities,
may be required to register as a dealer pursuant to applicable state securities
laws, which may differ from federal law and any interpretations expressed
herein.
PURCHASES THROUGH SHAREHOLDER SERVICING AGENTS
Purchase orders for Class A or Class B Shares of the Funds may be transmitted
to the Transfer Agent through any entity that has entered into a Shareholder
Servicing Agreement with the Fund ("Shareholder Servicing Agent"), such as Wells
Fargo Bank. See "Management and Servicing Fees -- Shareholder Servicing Agent."
The Shareholder Servicing Agent may transmit a purchase order to the Transfer
Agent, on your behalf, including a purchase order for which payment is to be
transferred from an account with an Approved Bank or wired from a financial
institution. If your order is transmitted by the Shareholder Servicing Agent, on
your behalf, to the Transfer Agent before the close of the NYSE, the purchase
order generally will be executed on the same day. If your Shareholder Servicing
Agent transmits your purchase order to the Transfer Agent after the close of the
NYSE, then your order will be executed on the next Business Day following the
day your order is received. The Shareholder Servicing Agent is responsible for
the prompt transmission of your purchase order to the Transfer Agent.
STATEMENTS AND REPORTS
The Funds, or a Shareholder Servicing Agent on their behalf, will typically
send you a confirmation or statement of your account after every transaction
that affects your share balance or your Fund account registration. A statement
with tax information will be mailed to you by January 31 of each year, and also
will be filed with the IRS. At least twice a year, you will receive financial
statements.
33 PROSPECTUS
<PAGE> 42
DIVIDENDS
The Asset Allocation Fund intends to declare a quarterly dividend and the U.S.
Government Allocation Fund intends to declare a daily dividend of substantially
all of their respective net investment income to shareholders of record.
Dividends declared by the U.S. Government Allocation Fund in a month generally
are paid on the last Business Day of each month to shareholders of record. With
regard to the U.S. Government Allocation Fund, dividends for a Saturday, Sunday
or Holiday are declared payable to shareholders of record as of the preceding
Business Day. The Funds will distribute any capital gains at least annually. You
have several options for receiving dividends and capital gain distributions.
They are discussed under "Additional Shareholder Services - Dividend and
Distribution Options."
Dividends and capital gain distributions will have the effect of reducing the
NAV per share by the amount distributed. Although a distribution paid to you on
newly issued shares shortly after your purchase would represent, in substance, a
return of your capital, the distribution would consist of net investment income
and, accordingly, would be taxable to you as ordinary income.
Net investment income available for distribution to the holders of Class B
Shares is reduced by the amount of the higher Rule 12b-1 Fee payable on such
shares. Other expenses, such as state securities registration fees and transfer
agency fees, that are attributable to a particular class also may affect the
relative dividends and/or capital gains distributions of Class A Shares and
Class B Shares.
PROSPECTUS 34
<PAGE> 43
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares in a Fund on any Business Day.
Your shares will be redeemed at the next NAV calculated after the Funds have
received your redemption request in proper form. Redemption proceeds may be more
or less than the amount invested and, therefore, a redemption may result in a
gain or loss for federal and state income tax purposes. The Funds ordinarily
will remit redemption proceeds, net of any contingent deferred sales charge
applicable with respect to Class B Shares (the "net redemption proceeds"),
within seven days after your redemption order is received in proper form, unless
the SEC permits a longer period under extraordinary circumstances. Such
extraordinary circumstances could include a period during which an emergency
exists as a result of which (a) disposal by a Fund of securities owned by it is
not reasonably practicable or (b) it is not reasonably practicable for a Fund
fairly to determine the value of its net assets, or a period during which the
SEC by order permits deferral of redemptions for the protection of security
holders of such Fund. In addition, a Fund may hold payment on your redemptions
until reasonably satisfied that your investments made by check have been
collected (which can take up to 15 days from the purchase date). To ensure
acceptance of your redemption request, please follow the procedures described
below. Although it is not the Funds' current intention, the Funds may make
payment of redemption proceeds in securities if conditions warrant, subject to
regulation by some state securities commissions. In addition, the Funds reserve
the right to impose charges for wiring redemption proceeds.
Due to the high cost of maintaining Fund accounts with small balances, the
Funds reserve the right to close your account and send you the proceeds if the
balance falls below the applicable minimum balance because of a redemption
(including a redemption of shares of a Fund after an investor has made only the
applicable minimum initial investment). However, you will be given 30 days'
notice to make an additional investment to increase your account balance to an
amount equal to or greater than the applicable minimum balance. Plan Accounts
are not subject to minimum Fund account balance requirements. For a discussion
of applicable minimum balance requirements, see "Investing in the Funds - How To
Buy Shares."
REDEMPTIONS BY TELEPHONE
Telephone redemption or exchange privileges are made available to you
automatically upon opening an account, unless you specifically decline the
privileges. Telephone redemption privileges authorize the Transfer Agent to act
on telephone instructions from any person representing himself or herself to be
the investor and reasonably believed by the Transfer Agent to be genuine. The
Company will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company and the Transfer
Agent may be liable for any losses due to
35 PROSPECTUS
<PAGE> 44
unauthorized or fraudulent instructions. Neither the Company nor the Transfer
Agent will be liable for following telephone instructions reasonably believed to
be genuine.
REDEMPTIONS BY MAIL
1. Write a letter of instruction. Indicate the Class and the dollar amount or
number of Fund shares you want to redeem. Refer to your Fund account number
and give your social security or taxpayer identification number (where
applicable).
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. Signature guarantees are not required for redemption requests unless
redemption proceeds of $5,000 or more are to be paid to someone other than
yourself at your address of record or your designated Approved Bank account,
or other unusual circumstances exist which cause the Transfer Agent to
determine that a signature guarantee is necessary or prudent to protect
against unauthorized redemption requests. If required, a signature must be
guaranteed by an "eligible guarantor institution," which includes a
commercial bank that is an FDIC member, a trust company, a member firm of a
domestic stock exchange, a savings association, or a credit union that is
authorized by its charter to provide a signature guarantee. Signature
guarantees by notaries public are not acceptable. Further documentation may
be requested from corporations, administrators, executors, personal
representatives, trustees or custodians.
4. Mail your letter to the Transfer Agent at the mailing address set forth under
"Investing in the Funds - Initial Purchases by Wire."
Unless other instructions are given in proper form, a check for your net
redemption proceeds will be sent to your address of record.
EXPEDITED REDEMPTIONS BY MAIL OR TELEPHONE
You may request an expedited redemption of shares of a Fund by letter, in
which case your receipt of redemption proceeds, but not the Fund's receipt of
your redemption request, would be expedited. In addition, you also may request
an expedited redemption of shares of a Fund by telephone on any Business Day, in
which case both your receipt of redemption proceeds and the Fund's receipt of
your redemption request would be expedited. You may request expedited redemption
by telephone only if the total value of the shares redeemed is $100 or more.
You may request expedited redemption by telephone by calling the Transfer
Agent at the telephone number listed on your transaction confirmation or by
calling 800-222-8222.
PROSPECTUS 36
<PAGE> 45
You may request expedited redemption by mail by mailing your expedited
redemption request to the Transfer Agent at the mailing address set forth under
"Investing in the Funds - Initial Purchases by Wire."
Upon request, net redemption proceeds of your expedited redemptions of $5,000
or more will be wired or credited to an Approved Bank account designated in your
Account Application or wired to the Selling Agent designated in your Account
Application. The Company reserves the right to impose a charge for wiring
redemption proceeds. When proceeds of your expedited redemption are to be paid
to someone else, to an address other than that of record, or to an account with
an Approved Bank or Selling Agent that you have not predesignated in your
Account Application, your expedited redemption request must be made by letter
and the signature(s) on the letter may be required to be guaranteed, regardless
of the amount of the redemption. If your expedited redemption request is
received by the Transfer Agent by the close of the NYSE on a Business Day, your
redemption proceeds will be transmitted to your designated account with an
Approved Bank or Selling Agent on the next Business Day (assuming your
investment check has cleared as described above), absent extraordinary
circumstances. Such extraordinary circumstances could include those described
above as potentially delaying redemptions, and also could include situations
involving an unusually heavy volume of wire transfer orders on a national or
regional basis or communication or transmittal delays that could cause a brief
delay in the wiring or crediting of funds. A check for the net redemption
proceeds will be mailed to your address of record or, at your election, credited
to an Approved Bank account designated in your Account Application.
During periods of drastic economic or market activity or changes, you may
experience problems implementing an expedited redemption by telephone. In the
event you are unable to reach the Transfer Agent by telephone, you should
consider using overnight mail to implement an expedited redemption. The Funds
reserve the right to modify or terminate the expedited telephone redemption
privilege at any time.
SYSTEMATIC WITHDRAWAL PLAN
The Company's Systematic Withdrawal Plan provides you with a convenient way to
redeem Fund shares from your account and have the net redemption proceeds
distributed to you on a monthly basis. You may participate in the Systematic
Withdrawal Plan only if you have a Fund account valued at $10,000 or more as of
the date of your election to participate, your dividends and capital gain
distributions are being reinvested automatically and you are not participating
in the AutoSaver Plan at any time while participating in the Systematic
Withdrawal Plan. You specify an amount ($100 or more) to be distributed by check
to your address of record or deposited in your Approved Bank account designated
in the Account Application. The Transfer Agent redeems sufficient shares and
mails or deposits your net redemption proceeds as instructed on or about the
fifth Business Day prior to the end of each month. There are no
37 PROSPECTUS
<PAGE> 46
separate fees charged to you by the Funds for participating in the Systematic
Withdrawal Plan. However, you should not participate in the Systematic
Withdrawal Plan if you also are purchasing shares of the same Fund that are
subject to a sales charge.
You may change your withdrawal amount, suspend withdrawals or terminate your
election at any time by notifying the Transfer Agent at least ten Business Days
prior to any scheduled transaction. Your participation in the Systematic
Withdrawal Plan will be terminated automatically if your Fund account is closed
or, in some cases, if your Approved Bank account is closed.
REDEMPTIONS THROUGH SELLING AGENTS
If your redemption order is received by a Selling Agent before the close of
the NYSE and received by the Transfer Agent before the close of business on the
same day, the order will be executed at the NAV determined as of the close of
the NYSE on that day. If your redemption order is received by a Selling Agent
after the close of the NYSE, or not received by the Transfer Agent prior to the
close of business, your order will be executed at the NAV determined as of the
close of the NYSE on the next Business Day. The Selling Agent is responsible for
the prompt transmission of your redemption order to the Funds.
Unless you have made other arrangements with the Selling Agent, and the
Transfer Agent has been informed of such arrangements, net redemption proceeds
of a redemption order made by you through a Selling Agent will be credited to an
account with an Approved Bank that you have designated in your Account
Application. If no such account is designated, a check for the net redemption
proceeds will be mailed to your address of record or, if such address is no
longer valid, the net redemption proceeds will be credited to your account with
the Selling Agent. You may request a check from the Selling Agent or may elect
to retain the net redemption proceeds in such account. The Selling Agent may
charge you a service fee. In addition, the Selling Agent may benefit from the
use of your redemption proceeds until the check it issues to you has cleared or
until such proceeds have been disbursed or reinvested on your behalf.
REDEMPTIONS THROUGH SHAREHOLDER SERVICING AGENTS
You may request a redemption of shares of a Fund through your Shareholder
Servicing Agent. Any redemption request made by telephone through your
Shareholder Servicing Agent must redeem shares with a total value equal to $100
or more. If your redemption order is transmitted by the Shareholder Servicing
Agent, on your behalf, to the Transfer Agent before the close of the NYSE, the
redemption order will be executed at the NAV determined as of the close of the
NYSE on that day. If your Shareholder Servicing Agent transmits your redemption
order to the Transfer Agent after the close of the NYSE, then your order will be
executed on the next Business Day following the date your order is received. The
Shareholder Servicing Agent is responsible for the prompt transmission of your
redemption order to the Funds.
PROSPECTUS 38
<PAGE> 47
Unless you have made other arrangements with your Shareholder Servicing Agent,
and the Transfer Agent has been informed of such arrangements, net redemption
proceeds of a redemption order made by you through your Shareholder Servicing
Agent will be credited to an account with the Approved Bank that you have
designated in the Account Application. If no such account is designated, a check
for the net redemption proceeds will be mailed to your address of record or, if
such address is no longer valid, the net redemption proceeds will be credited to
your account with your Shareholder Servicing Agent or to another account
designated in your agreement with your Shareholder Servicing Agent.
ADDITIONAL SHAREHOLDER SERVICES
In addition to the optional services described above, the Funds offer you
several dividend and distribution payment options and an exchange privilege,
which are described below. If you have any questions about the dividend and
distribution payment options available to you, please call 800-222-8222.
DIVIDEND AND DISTRIBUTION OPTIONS
When you fill out your Account Application, you can choose from the following
dividend and distribution options:
A. The Automatic Reinvestment Option provides for the reinvestment of your
dividends and capital gain distributions in additional shares of the same Class
of the Fund which paid such dividends or capital gain distributions. Dividends
and distributions declared in a month generally are reinvested at NAV on the
last Business Day of such month. You are assigned this option automatically if
you make no choice on your Account Application.
B. The Fund Purchase Option lets you use your dividends and/or capital gain
distributions from the Funds to purchase, at NAV, shares of another fund in the
Stagecoach Family of Funds with which you have an established account that has
met the applicable minimum initial investment requirement. Dividends and
distributions paid on Class A or Class B Shares may be invested in Class A or
Class B Shares, respectively, of another fund, in Retail Shares of another fund,
in Class A Shares of the Money Market Mutual Fund or in shares of the California
Tax-Free Money Market Mutual Fund (the Money Market Mutual Fund and California
Tax-Free Money Market Mutual Fund are, collectively, the Money Market Mutual
Funds.). Dividends and distributions paid on Class A Shares may also be invested
in shares of a non-money market fund of the Stagecoach Family of Funds with a
single class of shares (a "single class fund"). Dividends and distributions paid
on Class B Shares may not be invested in shares of a single class fund.
39 PROSPECTUS
<PAGE> 48
C. The Automatic Clearing House Option permits you to have dividends and
capital gain distributions deposited in your Approved Bank account designated in
the Account Application. In the event your Approved Bank account is closed, your
distribution will be held in a non-interest-bearing omnibus bank account
established by the Funds' dividend disbursing agent on your behalf.
D. The Check Payment Option lets you receive a check for all dividends and/or
capital gain distributions, which generally is mailed either to your designated
address or your designated Approved Bank shortly following declaration. If the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, your distributions will be held in a
non-interest-bearing omnibus bank account established by the Funds' dividend
disbursing agent on your behalf.
EXCHANGE PRIVILEGE
Wells Fargo Bank advises a variety of other funds, each with its own
investment objective and policies. The exchange privilege is a convenient way to
buy shares in the other funds of the Stagecoach Family of Funds that are
registered in your state of residence in order to respond to changes in your
investment and savings goal or in market conditions. Class A and Class B Shares
of the Funds may be exchanged for Class A and Class B Shares, respectively, of
another fund, for Class A Shares of the Money Market Mutual Fund, or for shares
of the California Tax-Free Money Market Mutual Fund. Class A Shares may also be
exchanged for shares of a single-class fund or for Retail Shares of another
fund. Before making an exchange from a Fund into another fund advised by Wells
Fargo Bank, please observe the following:
- Obtain and carefully read the prospectus of the fund into which you want to
exchange.
- If you exchange into another fund with a front-end sales charge, you must
pay the difference between that fund's sales charge and any sales charge you
already have paid in connection with the shares you are exchanging.
- If you exchange Class B Shares for Class B Shares of another fund, for
shares of the California Tax-Free Money Market Mutual Fund or for Class A
Shares of the Money Market Mutual Fund, a contingent deferred sales charge
will not be imposed upon the exchange.
- Each exchange, in effect, represents the redemption of shares of one fund
and the purchase of shares of another, which may produce a gain or loss for
federal income tax purposes. A confirmation of each exchange transaction
will be sent to you.
- The dollar amount of shares you exchange must meet the minimum initial
and/or subsequent investment amounts of the other fund.
- The Company reserves the right to limit the number of times shares may be
exchanged between funds, to reject any telephone exchange order, or
otherwise to
PROSPECTUS 40
<PAGE> 49
modify or discontinue exchange privileges at any time. Under SEC rules,
subject to limited exceptions, the Company must notify you 60 days before it
modifies or discontinues the exchange privilege.
- If you exchange Class B Shares for Class B Shares of another fund, for
shares of the California Tax-Free Money Market Mutual Fund or for Class A
Shares of the Money Market Mutual Fund, the remaining period of time (if
any) that the contingent deferred sales charge applicable to such shares is
in effect will be computed from the time of initial purchase of the
previously held shares. For example, if you exchange Class B Shares of a
Fund for shares of the California Tax-Free Money Market Mutual Fund and
redeem those shares of the California Tax-Free Money Market Mutual Fund
within four years of the purchase of the exchanged Class B Shares, you will
be required to pay a contingent deferred sales charge equal to the charge
which would have applied had you redeemed the original Class B Shares at
that time.
- If you exchange Class B Shares for shares of one of the Money Market Mutual
Funds as described above, you subsequently may re-exchange the acquired
shares only for Class B Shares of one of the Company's funds or for shares
of the other Money Market Mutual Fund.
The procedures applicable to Fund share redemptions also apply to Fund share
exchanges.
To exchange shares, write the Transfer Agent at the mailing address under
"Investing in the Funds - Initial Purchases by Wire" or call the Transfer Agent
at the telephone number listed on your transaction confirmation, or contact your
Shareholder Servicing Agent or Selling Agent. The procedures applicable to
telephone redemptions, including the discussion regarding the responsibility for
the authenticity of telephone instructions, are also applicable to telephone
exchange requests. See "How to Redeem Shares - Expedited Redemptions by Letter
and Telephone."
CONVERSION
Class B Shares of a Fund that have been outstanding for six years after the
end of the month in which the shares were initially purchased automatically
convert to Class A Shares of such Fund and, consequently, will no longer be
subject to the higher Rule 12b-1 Fees applicable to Class B Shares. Such
conversion will be on the basis of the relative net asset values of the two
Classes, without the imposition of any sales charge or other charge except that
the lower Rule 12b-1 Fees applicable to Class A Shares shall thereafter be
applied to such converted shares. Because the per share net asset value of the
Class A Shares may be higher than that of the Class B Shares at the time of
conversion, a shareholder may receive fewer Class A Shares than the number of
Class B Shares converted, although the dollar value will be the same.
Reinvestments of dividends and distributions on Class B Shares will be
considered new purchases for purposes of the
41 PROSPECTUS
<PAGE> 50
conversion feature. A conversion should not produce gain or loss for federal tax
purposes.
If a shareholder effects one or more exchanges among Class B Shares, Class A
Shares of the Money Market Mutual Fund or shares of the California Tax-Free
Money Market Mutual Fund during the six-year period, the holding period for
shares so exchanged will be counted toward the six-year period and any Class B
Shares held at the end of six years will be converted into Class A Shares.
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of MIT's Board of Trustees, Wells Fargo
Bank, as the Master Portfolios' investment adviser, provides investment guidance
and policy direction in connection with the management of the Master Portfolios'
assets. Wells Fargo Bank also furnishes the Board of Trustees with periodic
reports on the Master Portfolios' investment strategy and performance.
For these services, Wells Fargo Bank is entitled to a monthly advisory fee at
the annual rate of 0.50% of the first $250 million of each Master Portfolio's
average daily net assets, 0.40% of the next $250 million, and 0.30% of the
average daily net assets in excess of $500 million. From time to time, Wells
Fargo Bank may waive its fees in whole or in part. Any such waiver will reduce
the expenses of the Master Portfolios and the Funds and, accordingly, have a
favorable impact on the total return and yield of the Master Portfolios and the
Funds.
Wells Fargo Bank has delegated certain advisory responsibilities to BGFA.
Nevertheless, Wells Fargo Bank has retained authority over the management of
each Master Portfolio, and the investment and disposition of each Master
Portfolio's assets, and Wells Fargo Bank may reject any investment
recommendations or decisions for a Master Portfolio if Wells Fargo Bank
determines that such recommendations or decisions are not consistent with the
best interests of the Master Portfolio. Wells Fargo Bank pays BGFA for its
sub-advisory services annual fees equal to 0.20% of the average daily net assets
of the Asset Allocation Master Portfolio and $40,000 plus 0.15% of the average
daily net assets of the U.S. Government Allocation Master Portfolio.
Prior to the Funds' conversion to master/feeder structure, Wells Fargo Bank
provided investment advisory services directly to the Funds. For its services as
investment adviser, Wells Fargo Bank was entitled to receive a monthly fee at
the annual rate of 0.50% of the first $250 million of each Fund's average daily
net assets, 0.40% of the next $250 million, and 0.30% of each Fund's average
daily net assets in excess of $500 million. WFNIA, the sub-adviser to the Funds
prior to January 1, 1996, was entitled to annual sub-advisory fees equal to
0.20% of the average daily net assets of the Asset
PROSPECTUS 42
<PAGE> 51
Allocation Fund and $40,000 plus 0.15% of the average daily net assets of the
U.S. Government Allocation Fund. For the year ended December 31, 1995, the
Company paid an amount equal to 0.37% of the average daily net assets of the
Asset Allocation Fund and 0.50% of the average daily net assets of the U.S.
Government Allocation Fund to Wells Fargo Bank for its services as investment
adviser to such Funds. For the year ended December 31, 1995, Wells Fargo Bank
paid an amount equal to 0.20% of the average daily net assets of the Asset
Allocation Fund and 0.18% of the average daily net assets of the U.S. Government
Allocation Fund to WFNIA for its services as sub-adviser to such Funds.
From time to time, each of the Funds, consistent with its investment
objectives, policies and restrictions, may invest in securities of companies
with which Wells Fargo Bank or BGI has a lending relationship.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
BGI serves as the custodian to the Funds and Master Portfolios. BGI, located
at 45 Fremont Street, San Francisco, California 94105, is a special purpose
trust company that is owned indirectly by Barclays. BGFA is a wholly owned
subsidiary of BGI.
Wells Fargo Bank serves as the Funds' transfer and dividend disbursing agent.
Wells Fargo Bank performs the transfer and dividend disbursing agency activities
at 525 Market Street, San Francisco, California 94105.
SHAREHOLDER SERVICING AGENT
The Funds have entered into Shareholder Servicing Agreements with Wells Fargo
Bank on behalf of each Class of Shares of the Funds, and may enter into similar
agreements with other entities. Under such agreements, Shareholder Servicing
Agents (including Wells Fargo Bank) will, as agent for their customers, among
other things: answer customer inquiries regarding account status and history,
and the manner in which purchases, redemptions and exchanges of Fund shares may
be effected; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase, redemption and exchange transactions; arrange for the wiring of money;
transfer money in connection with customer orders to purchase or redeem shares;
verify shareholder signatures in connection with redemption and exchange orders
and transfers and changes in accounts with Approved Banks; furnish (either
separately or on an integrated basis with other reports sent to a shareholder by
the Shareholder Servicing Agent) monthly and year-end statements and
confirmations of purchases, redemptions and exchanges; furnish, on behalf of
each of the Funds, proxy statements, annual reports, updated prospectuses and
other communications to shareholders; receive, tabulate and send to the Funds
proxies executed by shareholders; and provide such other related services as the
Funds or a shareholder may reasonably request. For these services, a Shareholder
Servicing Agent
43 PROSPECTUS
<PAGE> 52
receives a fee, which may be paid periodically, 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 activity in such
accounts during such period, and the expenses incurred by the Shareholder
Servicing Agent. In no event will the fees charged to each Class, as calculated
on an annualized basis for each Fund's then-current fiscal year, exceed the
lesser of (1) 0.30% of the average daily net assets attributable to the Class A
or Class B Shares, as the case may be, owned during the period for which payment
is being made by investors with whom the Shareholder Servicing Agent maintains a
servicing relationship, or (2) an amount which equals the maximum amount payable
to the Shareholder Servicing Agent under applicable laws, regulations or rules,
including the Rules of Fair Practice of the NASD ("NASD Rules"). In no event
will the portion of such fees that constitutes a "service fee," as that term is
used by the NASD, exceed 0.25% of the average NAV attributable to the Class A or
Class B Shares of each Fund.
The Funds understand that a Shareholder Servicing Agent also may impose
certain conditions on its customers, subject to the terms of this Prospectus, in
addition to or different from those imposed by the Funds, such as requiring a
higher minimum initial investment or payment of a separate fee for additional
services. Each Shareholder Servicing Agent will be required to agree to disclose
any fees it may directly charge its customers who are shareholders of a Fund and
to notify them in writing at least 30 days before it imposes any transaction
fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Stephens, located at 111 Center Street, Little Rock, Arkansas, 72201, serves
as the Company's and MIT's administrator pursuant to separate Administration
Agreements with the Company and MIT, subject to the overall supervision of the
Board of Directors of the Company and the Board of Trustees of MIT,
respectively. Under the Administration Agreement with the Company, Stephens
provides the Funds with administrative services, including general supervision
of each Fund's operation, coordination of the other services provided to each
Fund, compilation of information for reports to the SEC and the state securities
commissions, preparation of proxy statements and shareholder reports, and
general supervision of data compilation in connection with preparing periodic
reports to the Company's Directors and officers. Stephens also furnishes office
space and certain facilities to conduct each Fund's business, and compensates
the Company's Directors, officers and employees who are affiliated with
Stephens. For these services, Stephens is entitled to receive from each Fund a
monthly fee at the annual rate of 0.03% of each Fund's average daily net assets
from each of the Funds. Stephens does not receive a separate administration fee
from the Master Portfolios. From time to time, Stephens may waive its fees from
a Fund in whole or in part. Any such waiver will reduce a Fund's expenses and,
accordingly, have a favorable impact on such Fund's yield and total return.
PROSPECTUS 44
<PAGE> 53
Stephens, as the principal underwriter of the Funds within the meaning of the
1940 Act, has entered into a Distribution Agreement with the Company pursuant to
which Stephens is responsible for distributing Class A and Class B Shares of the
Funds. The Company also has adopted a Distribution Plan on behalf of each Class
of shares of the Funds under the SEC's Rule 12b-1 ("Plans"). Under the Class A
Plans for each Fund, each Fund may defray all or part of the cost of preparing
and printing prospectuses and other promotional materials and of delivering
prospectuses and those materials to prospective Class A shareholders by paying
on an annual basis up to 0.05% of the average daily net assets attributable to
the Class A Shares of the Funds. The Class A Plans provide only for the
reimbursement of actual expenses. Under the Class B Plans, each Fund may defray
all or part of such costs and pay compensation to the Distributor and Selling
Agents for sales support services. The Class B Plans provide for payments, on an
annual basis, of up to 0.70% of the average daily net assets attributable to the
Class B Shares of each Fund. The Distribution Agreement provides that Stephens
shall act as agent for the Funds for the sale of their shares, and may enter
into Selling Agreements with Selling Agents that wish to make available shares
of the Funds to their respective customers. The Funds may participate in joint
distribution activities with any of the other funds of the Company, in which
event expenses reimbursed out of the assets of the Fund may be attributable, in
part, to the distribution-related activities of another fund of the Company.
Generally, the expenses attributable to joint distribution activities will be
allocated among each Fund and the other funds of the Company in proportion to
their relative net asset sizes, although the Company's Board of Directors may
allocate such expenses in any other manner that it deems fair and equitable. In
addition, Stephens has established a non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Funds may
earn additional compensation in the form of trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift certificates for
goods or merchandise.
In addition, the Plans contemplate that, to the extent any fees payable
pursuant to a Shareholder Servicing Agreement (discussed above) are deemed to be
for distribution-related services, such payments are approved and payable
pursuant to the Plans subject to any limits under applicable law, regulations or
rules, including the NASD Rules. Financial institutions acting as Selling
Agents, Shareholder Servicing Agents, or in certain other capacities may be
required to register as dealers pursuant to applicable state securities laws
which may differ from federal law and any interpretations expressed herein.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees owned by each Fund or the pro rata share of the fees owed by each Master
Portfolio in whole or in part and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a Fund's expenses and, accordingly, have a
favorable
45 PROSPECTUS
<PAGE> 54
impact on such Fund's yield and total return. Except for the expenses borne by
Wells Fargo Bank and Stephens, the Company bears its pro rata share of all costs
of its operations, including advisory, shareholder servicing, transfer agency,
custody and administration fees, payments pursuant to any Plans, fees and
expenses of its independent auditors and legal counsel, and any extraordinary
expenses. Expenses attributable to each Fund or Class are charged against the
assets of the Fund or Class. General expenses of the Company and MIT are
allocated among all of the funds of the Company, including the Funds, or all of
the portfolios of MIT, including the Master Portfolios, 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 or Trustees of the Company or MIT
deems equitable.
TAXES
By complying with the applicable provisions of the Code, and regulations
promulgated thereunder, it is expected that the Funds and the Master Portfolios
will not be subject to federal income taxes with respect to net investment
income and net realized capital gains distributed to their shareholders or
interestholders, as applicable. The Master Portfolios will each qualify for
federal tax purposes as a partnership. As such, each Fund will generally be
deemed to own directly its proportionate share of the assets of the Master
Portfolio. Therefore, any interest, dividends, gains or losses of the Master
Portfolio will be "passed through" to each Fund and other investors in the
Master Portfolio. If the Master Portfolio were to accrue but not distribute any
interest, dividends or gains, each Fund would be deemed to have realized and
recognized its proportionate share of interest, dividends, or gains without
receipt of any corresponding distribution. Each Master Portfolio seeks to
minimize recognition by investors of interest, dividends or gains without a
corresponding distribution. Dividends from the investment income (including net
short-term capital gains, if any) declared and paid by each Fund will be taxable
as ordinary income to a Fund's shareholders. Whether you take such dividend
payments in cash or have them automatically reinvested in additional shares,
they will be taxable. Generally, dividends are taxable to shareholders at the
time they are paid. However, dividends declared payable in October, November and
December and made payable to shareholders of record in such a month are treated
as paid and are thereby taxable as of December 31, provided that such dividends
are actually paid no later than January 31 of the following year. You may be
eligible to defer the taxation of dividend and capital gain distributions on
shares of a Fund which are held under a qualified tax-deferred retirement plan.
See "Investing in the Funds - Tax-Deferred Retirement Plans" above. The Funds
intend to pay out all their net investment income and net realized capital gains
(if any) for each year. Corporate shareholders of the Asset Allocation Fund may
be eligible for the dividends-received deduction on the dividends (excluding the
net capital gain dividends) paid by such Fund to the extent such Fund's income
is derived from certain dividends received from domestic corporations. The U.S.
PROSPECTUS 46
<PAGE> 55
Government Allocation Fund's dividends will not qualify for the
dividends-received deduction allowed to corporate shareholders. In order to
qualify for the dividends received deduction a corporate shareholder must hold
the Fund shares paying the dividends upon which such deduction is based for at
least 46 days.
The Funds, or your Shareholder Servicing Agent on their behalf, will inform
you of the amount and nature of such dividends and capital gains. You should
keep all statements you receive to assist in your personal record keeping. The
Company is required to withhold, subject to certain exemptions, at a rate of 31%
on dividends paid and redemption proceeds (including proceeds from exchanges)
paid or credited to individual shareholders of the Funds if a correct Taxpayer
Identification Number, certified when required, is not on file with the Company
or the Transfer Agent. In connection with this withholding requirement, you will
be asked to certify on your Account Application that the social security or
taxpayer identification number you provide is correct and that you are not
subject to 31% backup withholding for previous underreporting to the IRS.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes -- Foreign Shareholders" in the SAIs.
The foregoing discussion regarding taxes is based on federal tax laws and
regulations which were in effect as of the date of this Prospectus and
summarizes only some of the important federal tax considerations generally
affecting a Fund and its shareholders. It is not intended as a substitute for
careful tax planning; investors should consult their tax advisors with respect
to their specific tax situations as well as with respect to state and local
taxes. Further tax information is contained in the SAI.
47 PROSPECTUS
<PAGE> 56
PROSPECTUS APPENDIX -
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
ASSET ALLOCATION MODEL
BGFA compares the Asset Allocation Master Portfolio's investments daily to the
Asset Allocation Model's recommended allocation. The investment model recommends
allocations among each asset class in 10% increments only. Any recommended
reallocation will be implemented in accordance with trading policies that have
been designed to take advantage of market opportunities and to reduce
transaction costs. Under current trading policies employed by BGFA, recommended
reallocations may be implemented promptly upon receipt of recommendations or may
not be acted upon for as long as two or three months thereafter depending on
factors such as the percentage change from previous recommendations and the
consistency of recommended reallocations over a period of time. In addition, the
Asset Allocation Master Portfolio generally will invest the net proceeds from
the sale of shares of the Master Portfolio and will liquidate existing Master
Portfolio investments to meet net redemption requirements in a manner that best
allows the Master Portfolio's existing asset allocation to follow that
recommended by the Model. Notwithstanding any recommendation of the model to the
contrary, the Asset Allocation Master Portfolio will generally maintain at least
that portion of its assets in money market instruments reasonably considered
necessary to meet redemption requirements. In general, cash maintained for
short-term liquidity needs is only invested in U.S. Treasury bills, shares of
other mutual funds and repurchase agreements. There is no requirement that the
Master Portfolio maintain positions in any particular asset class or classes.
Wells Fargo Bank and BGFA manage other portfolios which also invest in
accordance with the Asset Allocation Model. The performance of each of those
other portfolios is likely to vary among themselves and from the performance of
the Fund and the Master Portfolio. Such variation in performance is primarily
due to different equilibrium asset mix assumptions used for the various
portfolios, timing differences in the implementation of the model's
recommendations and differences in expenses and liquidity requirements.
There are 500 common stocks, including Wells Fargo & Company stock, which make
up the S&P 500 Index. S&P occasionally makes changes in the S&P 500 Index based
on its criteria for inclusion of stocks in the S&P 500 Index. The S&P 500 Index
is market-capitalization-weighted so that each stock in the S&P 500 Index
represents its proportion of the total market value of all stocks in the S&P 500
Index. In making its stock investments, the policy of the Asset Allocation
Master Portfolio is to invest its assets
A-1 PROSPECTUS
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in substantially the same stocks, and in substantially the same percentages, as
the S&P 500 Index, including Wells Fargo & Company stock.
U.S. GOVERNMENT ALLOCATION MODEL
BGFA compares the U.S. Government Allocation Master Portfolio's investments
daily to the U.S. Government Allocation Model's recommended allocation. Any
recommended reallocation will be implemented in accordance with trading policies
that have been designed to take advantage of market opportunities and to reduce
transaction costs. Under current trading policies employed by BGFA, recommended
reallocations may be implemented promptly upon receipt of recommendations or may
not be acted upon for as long as two to three months thereafter depending on
factors such as the percentage change from previous recommendations and the
consistency of recommended reallocations over a period of time. In addition, the
U.S. Government Allocation Master Portfolio generally will invest the net
proceeds from the sale of shares of the Master Portfolio and will liquidate
existing Master Portfolio investments to meet net redemption requirements in a
manner that best allows the Master Portfolio's existing asset allocation to
follow the allocation recommended by the computer Model. Notwithstanding any
recommendation of the computer model to the contrary, the Master Portfolio will
generally maintain at least that portion of its assets in money market
instruments reasonably considered necessary to meet redemption requirements. In
general, cash maintained for short-term liquidity needs is only invested in U.S.
Treasury bills, shares other mutual funds and repurchase agreements. There is no
requirement that the Master Portfolio maintain positions in any particular asset
class or classes.
BGFA manages other funds which invest in accordance with a substantially
similar version of the Model. The performance of each of those other funds is
likely to vary among themselves and from the performance of the Master
Portfolio. Such variation in performance is primarily due to timing differences
in the implementation of the Model's recommendations, differences in expenses
and liquidity requirements, and the ability of other funds to invest a higher
portion of their assets in short-term investments that may generate a higher
yield, but are not issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Although BGFA intends to use the Models as bases for its investment decisions
with respect to the Asset Allocation Master Portfolio and U.S. Government
Allocation Master Portfolio, BGFA may change from time to time the criteria and
methods it uses to implement the model's recommendations if it believes such a
change is desirable for a Master Portfolio. Nevertheless, Wells Fargo Bank has
continuing and exclusive authority over the management of the Master Portfolios,
the conduct of their affairs and the disposition of the Master Portfolios'
assets, and Wells Fargo Bank has the right to reject BGFA's investment decisions
for a Master Portfolio if Wells Fargo Bank determines that any such decision is
not consistent with the best interests of a Master Portfolio.
PROSPECTUS A-2
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Money Market Instruments and Temporary Investments
In accordance with its investment policies, the Master Portfolios will invest
varying percentages of their assets in money market instruments. In addition,
the Master Portfolios may have temporary cash balances on account of new
purchases, dividends, interest and reserves for redemptions, and which the
Master Portfolios may invest in the following high-quality money market
instruments: (i) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, including government-sponsored enterprises ("U.S.
Government obligations"); (ii) negotiable certificates of deposit, bankers'
acceptances and fixed time deposits and other obligations of domestic banks
(including foreign branches) that have more than $1 billion in total assets at
the time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are insured by the
FDIC; (iii) commercial paper rated at the date of purchase "P-1" by Moody's
Investors Service, Inc. ("Moody's") or "A-1+" or "A-1" by S&P, or, if unrated,
of comparable quality as determined by Wells Fargo Bank, as investment adviser;
(iv) nonconvertible corporate debt securities (e.g., bonds and debentures) with
remaining maturities at the date of purchase of no more than one year that are
rated at least "Aa" by Moody's or "AA" by S&P; (v) repurchase agreements; and
(vi) short-term, U.S. dollar-denominated obligations of foreign banks (including
U.S. branches) that at the time of investment: (a) have more than $10 billion,
or the equivalent in other currencies, in total assets; (b) are among the 75
largest foreign banks in the world as determined on the basis of assets; (c)
have branches or agencies in the United States; and (d) in the opinion of Wells
Fargo Bank, as investment adviser, are of comparable quality to obligations of
U.S. banks which may be purchased by a Master Portfolio.
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. 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
A-3 PROSPECTUS
<PAGE> 59
support to its agencies or instrumentalities where it is not obligated to do so.
In addition, U.S. Government obligations are subject to fluctuations in market
value due to fluctuations in market interest rates. As a general matter, the
value of debt instruments, including U.S. Government obligations, declines when
market interest rates increase and rises when market interest rates decrease.
Certain types of U.S. Government obligations are subject to fluctuations in
yield or value due to their structure or contract terms.
Short-Term Corporate Debt Instruments
The Master Portfolios may invest in commercial paper (including variable
amount master demand notes), which refers to short-term, unsecured promissory
notes issued by corporations to finance short-term credit needs. Commercial
paper is usually sold on a discount basis and has a maturity at the time of
issuance not exceeding nine months. Variable amount master demand notes are
demand obligations that permit the investment of fluctuating amounts at varying
market rates of interest pursuant to arrangements between the issuer and a
commercial bank acting as agent for the payee of such notes whereby both parties
have the right to vary the amount of the outstanding indebtedness on the notes.
The Master Portfolios also may invest in nonconvertible corporate debt
securities (e.g., bonds and debentures) with no more than one year remaining to
maturity at the date of settlement. The Master Portfolios will invest only in
such corporate bonds and debentures that are rated at the time of purchase at
least "Aa" by Moody's or "AA" by S&P.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Master Portfolios may purchase bear
interest at rates that are not fixed, but vary for example, with changes in
specified market rates or indices or specified intervals. Certain of these
instruments may carry a demand feature that would permit the holder to tender
them back to the issuer at par value prior to maturity. The floating- and
variable-rate instruments that the Master Portfolios may purchase include
certificates of participation in such obligations. Wells Fargo Bank or BGFA, as
appropriate will monitor on an ongoing basis the ability of an issuer of a
demand instrument to pay principal and interest on demand. Events affecting the
ability of the issuer of a demand instrument to make payment when due may occur
between the date a Master Portfolio elects to demand payment and the date
payment is due. Such events may affect the ability of the issuer of the
instrument to make payment when due, thereby affecting a Master Portfolio'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.
PROSPECTUS A-4
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Repurchase Agreements
The Master Portfolios may enter into repurchase agreements wherein the seller
of a security to a Master Portfolio agrees to repurchase that security from such
Master Portfolio at a mutually agreed-upon time and price. The period of
maturity is usually quite short, often overnight or a few days, although it may
extend over a number of months. The Master Portfolios may enter into repurchase
agreements only with respect to U.S. Government obligations and those securities
which are permissible investments for a Master Portfolio. All repurchase
agreements will be fully collateralized based on values that are marked to
market daily. The maturities of the underlying securities in a repurchase
agreement transaction entered into by the Master Portfolios may be greater than
one year. If the seller defaults and the value of the underlying securities has
declined, a Master Portfolio may incur a loss. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security, a Master
Portfolio's disposition of the security may be delayed or limited. The Master
Portfolios will enter into repurchase agreements only with registered
broker/dealers and commercial banks that meet guidelines established by MIT's
Board of Trustees and are not affiliated with the Master Portfolios' investment
adviser. The Master Portfolios may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank.
Futures Contracts and Options Transactions - General
A futures transaction involves a firm agreement to buy or sell a commodity or
financial instrument at a particular price on a specified future date, while an
option transaction generally involves a right, which may or may not be
exercised, to buy or sell a commodity or financial instrument at a particular
price on a specified future date. Futures contacts and options are standardized
and exchange-traded, where the exchange serves as the ultimate counterparty for
all contracts. Consequently, the only credit risk on futures contracts is the
creditworthiness of the exchange. Futures contracts, however, are subject to
market risk (i.e., exposure to adverse price changes).
The Master Portfolios may trade futures contracts and options on futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange.
The Master Portfolios' futures transactions must constitute permissible
transactions pursuant to regulations promulgated by the Commodity Futures
Trading Commission. In addition, the Master Portfolios may not engage in futures
transactions if the sum of the amount of initial margin deposits and premiums
paid for unexpired options on futures contracts, other than those contracts
entered into for bona fide hedging purposes, would exceed 5% of the liquidation
value of a Master Portfolio's assets, after taking into account unrealized
profits and unrealized losses on such contracts; provided, however, that in the
case of an option on a futures contract that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
liquidation amount. Pursuant to regulations and/or published positions of the
SEC, each Master
A-5 PROSPECTUS
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Portfolio may be required to segregate cash, U.S. Government obligations or
other high-quality debt instruments in connection with its futures transactions
in an amount generally equal to the entire value of the underlying commitment.
Initially, when purchasing or selling futures contracts a Master Portfolio
will be required to deposit with the Master Portfolio's custodian in the
broker's name an amount of cash or cash equivalents up to approximately 10% of
the contract amount. This amount is subject to change by the exchange or board
of trade on which the contract is traded, and members of such exchange or board
of trade may impose their own higher requirements. This amount is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract that is returned to the Master Portfolio upon
termination of the futures position, assuming all contractual obligations have
been satisfied. Subsequent payments, known as "variation margin", to and from
the broker will be made daily as the price of the index or securities underlying
the futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable. At any time prior to the expiration of a
futures contract, a Master Portfolio may elect to close the position by taking
an opposite position, at the then prevailing price, thereby terminating its
existing position in the contract.
Although the Master Portfolios intend to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contracts prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting a Master
Portfolio to substantial losses. If it is not possible, or a Master Portfolio
determines not to close a futures position in anticipation of adverse price
movements, the Master Portfolio will be required to make daily cash payments of
variation margin.
An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer (i.e.,
seller) of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by both the writer and the holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account in the amount by which the market price of the futures contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the futures contract.
PROSPECTUS A-6
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Stock Index Options. The Master Portfolios may purchase and write (i.e., sell)
put and call options on stock indices as a substitute for comparable market
positions in the underlying securities. A stock index fluctuates with changes in
the market values of the stocks included in the index. The aggregate premiums
paid on all options purchased may not exceed 20% of a Master Portfolio's total
assets and the value of the options written may not exceed 10% of the value of
the Master Portfolio's total assets.
The effectiveness of purchasing or writing stock index options will depend
upon the extent to which price movements in a Master Portfolio's portfolio
correlate with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index rather than the
price of a particular stock, whether a Master Portfolio will realize a gain or
loss from purchasing or writing stock index options depends upon movements in
the level of stock prices in the stock market generally or, in the case of
certain indices, in an industry or market segment, rather than movements in the
price of particular stock.
When a Master Portfolio writes an option on a stock index, the Master
Portfolio will place in a segregated account with the Master Portfolio's
custodian cash, U.S. Government obligations or other high-quality debt
instruments in an amount at least equal to the market value of the underlying
stock index and will maintain the account while the option is open or otherwise
will cover the transaction.
Stock Index Futures and Options on Stock Index Futures. Each Master Portfolio
may invest in stock index futures and options on stock index futures as a
substitute for a comparable market position in the underlying securities. A
stock index future obligates the seller to deliver (and the purchaser to take),
effectively, an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. With respect to
stock indices that are permitted investments, each Master Portfolio intends to
purchase and sell futures contracts on the stock index for which it can obtain
the best price with consideration also given to liquidity.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. Each Master Portfolio may invest in interest-rate futures contracts
and options on interest-rate futures contracts as a substitute for a comparable
market position in the underlying securities. Each Master Portfolio may also
sell options on interest-rate futures contracts as part of closing purchase
transactions to terminate its options positions. No assurance can be given that
such closing transactions can be effected or the degree of correlation between
price movements in the options on interest rate futures and price movements in
the Master Portfolio's securities which are the subject of the transaction.
Interest-Rate and Index Swaps. Each Master Portfolio may enter into
interest-rate and index swaps in pursuit of its investment objective.
Interest-rate swaps involve the exchange by a Master Portfolio with another
party of their respective commitments to
A-7 PROSPECTUS
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pay or receive interest (for example, an exchange of floating-rate payments for
fixed-rate payments). Index swaps involve the exchange by the Master Portfolio
with another party of cash flows based upon the performance of an index of
securities or a portion of an index of securities that usually include dividends
or income. In each case, the exchange commitments can involve payments to be
made in the same currency or in different currencies. Each Master Portfolio will
usually enter into swaps on a net basis. In so doing, the two payment streams
are netted out, with the Master Portfolio receiving or paying, as the case may
be, only the net amount of the two payments. If a Master Portfolio enters into a
swap, it will maintain a segregated account on a gross basis, unless the
contract provides for a segregated account on a net basis. If there is a default
by the other party to such a transaction, the Master Portfolio will have
contractual remedies pursuant to the agreements related to the transaction.
The use of interest-rate and index swaps is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. There is no limit, except as
provided below, on the amount of swap transactions that may be entered into by a
Master Portfolio. These transactions generally do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps generally is limited to the net amount of payments
that the Master Portfolio is contractually obligated to make. There is also a
risk of a default by the other party to a swap, in which case the Master
Portfolio may not receive net amount of payments that the Master Portfolio
contractually is entitled to receive.
The permissible investments described herein are considered "derivative"
securities because their value is derived, at least in part, from the price of
another security or a specified asset, index or rate. The futures contracts and
options on futures contracts that the Master Portfolios may purchase are
considered derivatives. The Master Portfolios may only purchase or sell these
contracts or options as substitutes for comparable market positions in the
underlying securities. Also, asset-backed securities issued or guaranteed by
U.S. Government agencies or instrumentalities and certain floating- and
variable-rate instruments can be considered derivatives. Some derivatives may be
more sensitive than direct securities to change in interest rates or sudden
market moves. Some derivatives also may be susceptible to fluctuations in yield
or value due to their structure or contract terms.
Wells Fargo Bank and BGFA use a variety of internal risk management procedures
to ensure that derivatives use is consistent with a Master Portfolio's
investment objective, does not expose such Master Portfolio or corresponding
Fund to undue risk and is closely monitored. These procedures include providing
periodic reports to the Board of Trustees of MIT and the Board of Directors of
the Company concerning the use of derivatives.
The use of derivatives by the Master Portfolios also is subject to broadly
applicable investment policies. For example, a Fund may not invest more than a
specified
PROSPECTUS A-8
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percentage of its assets in "illiquid securities," including those derivatives
that do not have active secondary markets. Nor may a Master Portfolio use
certain derivatives without establishing adequate "cover" in compliance with SEC
positions regarding the use of leverage.
Loans of Portfolio Securities
The Master Portfolios may lend securities from their portfolios to brokers,
dealers and financial institutions (but not individuals) if cash, U.S.
Government obligations or other high-quality debt instruments equal to at least
100% of the current market value of the securities loan (including accrued
interest thereon) plus the interest payable to a Master Portfolio with respect
to the loan is maintained with the Master Portfolio. In determining whether to
lend a security to a particular broker, dealer or financial institution, a
Master Portfolio's investment adviser will consider all relevant facts and
circumstances, including the creditworthiness of the broker, dealer or financial
institution. Any loans of portfolio securities will be fully collateralized
based on values that are marked to market daily. The Master Portfolios will not
enter into any portfolio security lending arrangement having a duration of
longer than one year. Any securities that a Master Portfolio may receive as
collateral will not become part of the portfolio of the Master Portfolio at the
time of the loan and, in the event of a default by the borrower, the Master
Portfolio, if permitted by law, will dispose of such collateral except for such
part thereof that is a security in which the Master Portfolio is permitted to
invest. During the time securities are on loan, the borrower will pay a Master
Portfolio any accrued income on those securities, and the Master Portfolio may
invest the cash collateral and earn additional income or receive an agreed-upon
fee from a borrower that has delivered cash-equivalent collateral. Neither
Master Portfolio will lend securities having a value that exceeds one-third of
the current value of its total assets. Loans of securities by a Master Portfolio
will be subject to termination at the Master Portfolio's or the borrower's
option. The Master Portfolios may pay reasonable administrative and custodial
fees in connection with a securities loan and may pay a negotiated portion of
the interest or fee earned with respect to the collateral to the borrower or the
placing broker. Borrowers and placing brokers may not be affiliated, directly or
indirectly, with the Company, MIT, the investment adviser, or the Distributor.
Foreign Obligations
Each Master Portfolio may invest up to 25% of its respective 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,
A-9 PROSPECTUS
<PAGE> 65
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.
INVESTMENT POLICIES -- THE FUNDS
Each Fund's investment objective, as set forth in the first paragraph of the
"How The Funds Work - Investment Objectives and Policies" section, is
fundamental; that is, it may not be changed without approval by the vote of the
holders of a majority of a Fund's outstanding voting securities, as described
under "Capital Stock" in the SAI for each Fund. In addition, any fundamental
investment policy may not be changed without such shareholder approval. If the
Board of Directors determines, however, that a Fund's investment objective can
best be achieved by a substantive change in a nonfundamental investment policy
or strategy, the Company's Board may make such change without shareholder
approval and will disclose any such material changes in the then-current
prospectus.
As matters of fundamental policy, each Fund may: (i) not purchase securities
of any issuer (except securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities) if as a result more than 5% of the value of
the Fund's total assets would be invested in the securities of such issuer or
the Fund would own more than 10% of the outstanding voting securities of such
issuer, provided that a Fund may invest all its assets in a diversified,
open-end management investment company, or a series thereof, with the same
investment objective, policies and restrictions as such Fund, without regard to
the limitations set forth in this clause (i); (ii) borrow from banks up to 20%
of the current value of its net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of up to 20%
of the current value of its net assets (but investments may not be purchased
while any such outstanding borrowings exceed 5% of its net assets); (iii) make
loans of portfolio securities in accordance with its investment policies; and
(iv) not invest 25% or more of its assets (i.e., concentrate) in any particular
industry, except that (a) each Fund may invest 25% or more of its assets in
obligations of the U.S. Government, its agencies or instrumentalities, and (b)
the Asset Allocation Fund is permitted to concentrate its assets in any industry
for the same period as does the S&P 500 Index, (c) the Asset Allocation Fund's
money market investments may be invested in the banking industry and in
obligations of the U.S. Government, its agencies or instrumentalities, (d) such
investments may, from time to time, represent 25% or more of the Asset
Allocation Fund's total assets, and (e) each Fund may invest all of its assets
in a diversified, open-end management investment company or a series thereof,
with the same investment objective, policies and restrictions as the Fund,
without regard to these limitations. However, the Asset Allocation Fund's money
market investments in the banking industry will not represent 25% or more of its
total assets unless the SEC staff has confirmed that
PROSPECTUS A-10
<PAGE> 66
it does not object to the Fund reserving freedom of action to concentrate
investments in the banking industry. With respect to paragraph (ii) above, each
Fund presently does not intend to put at risk more than 5% of its assets during
the coming year. With respect to paragraph (iii) above, the Asset Allocation
Fund presently does not intend to put at risk more than 5% of its assets during
the coming year. With respect to paragraph (i), it may be possible that the
Company would own more than 10% of the outstanding voting securities of an
issuer.
As a matter of nonfundamental policy, each Fund may not invest more than 15%
of the current value of its net assets in illiquid securities, including
repurchase agreements having maturities of more than seven days.
INVESTMENT POLICIES -- THE MASTER PORTFOLIOS
As matters of fundamental policy, each Master Portfolio may: (i) not purchase
securities of any issuer (except securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if as a result more than 5% of
the value of the Master Portfolio's total assets would be invested in the
securities of such issuer or the Master Portfolio would own more than 10% of the
outstanding voting securities of such issuer; (ii) borrow from banks up to 20%
of the current value of its net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of up to 20%
of the current value of its net assets (but investments may not be purchased
while any such outstanding borrowings exceed 5% of its net assets); (iii) make
loans of portfolio securities in accordance with its investment policies; and
(iv) not invest 25% or more of its assets (i.e., concentrate) in any particular
industry, except that (a) each Master Portfolio may invest 25% or more of its
assets in obligations of the U.S. Government, its agencies or instrumentalities,
and (b) the Asset Allocation Master Portfolio is permitted to concentrate its
assets in any industry for the same period as does the S&P 500 Index, (c) the
Asset Allocation Master Portfolio's money market investments may be invested in
the banking industry and in obligations of the U.S. Government, its agencies or
instrumentalities, and (d) such investments may, from time to time, represent
25% or more of the Asset Allocation Master Portfolio's total assets. However,
the Asset Allocation Master Portfolio's money market investments in the banking
industry will not represent 25% or more of its total assets unless the SEC staff
has confirmed that it does not object to the Fund reserving freedom of action to
concentrate investments in the banking industry. With respect to paragraph (ii)
above, each Master Portfolio presently does not intend to put at risk more than
5% of its assets during the coming year. With respect to paragraph (iii) above,
the Asset Allocation Master Portfolio presently does not intend to put at risk
more than 5% of its assets during the coming year. With respect to paragraph
(i), it may be possible that MIT would own more than 10% of the outstanding
voting securities of an issuer.
A-11 PROSPECTUS
<PAGE> 67
As a matter of nonfundamental policy, each Master Portfolio may not invest
more than 15% of the current value of its net assets in illiquid securities,
including repurchase agreements having maturities of more than seven days.
PROSPECTUS A-12
<PAGE> 68
- --------------------------------------------------------------------------------
Advised by WELLS FARGO BANK, N.A. - Sponsored/Distributed by
Stephens Inc., Member NYSE/SIPC
NOT FDIC INSURED
<PAGE> 69
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 70
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
SUB-INVESTMENT ADVISER
BZW Barclays Global Fund Advisors
45 Fremont Street
San Francisco, California 94105
CUSTODIAN
BZW Barclays Global Investors, N.A.
45 Fremont Street
San Francisco, California 94105
LEGAL COUNSEL
Morrison & Foerster
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
For more information about the Fund
simply call 1-800-222-8222 or write:
Stagecoach Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank, BGFA or BGI
- are NOT deposits or obligations of such banks or entities LOGO
- involve investment risk, including possible loss
of principal
</TABLE>
LOGO SC 1021 (4/96)
Printed on Recycled Paper
<PAGE> 71
LOGO
P.O. Box 7066
San Francisco, CA 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank, BGFA or BGI
- are NOT deposits or obligations of such banks or entities LOGO
- involve investment risk, including possible loss
of principal
</TABLE>
LOGO SC 1021 (4/96)
Printed on Recycled Paper
<PAGE> 72
Cross Reference Sheet
CORPORATE STOCK FUND
Form N-1A Item Number
<TABLE>
<S> <C>
Part A Prospectus Captions
- ------ -------------------
1 Cover Page
2 Prospectus Summary; Summary of Fund Expenses
3 Financial Highlights
4 The Fund, the Master Portfolio and Management; Prospectus Appendix
5 How the Fund Works; The Fund, the Master Portfolio and
Management; Management and Servicing Fees
6 The Fund, the Master Portfolio and Management; Investing in the Fund
7 Investing in the Fund; Dividends; Taxes; Additional Shareholder Services
8 How to Redeem Shares
9 Not Applicable
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page
11 Table of Contents
12 Introduction
13 Investment Restrictions; Portfolio Transactions; Additional Permitted
Investment Activities; SAI Appendix
14 Management of the Company
15 Management of the Company
16 Management of the Company; Distribution Plans; Custodian and Transfer
and Dividend Disbursing Agent; Independent Auditors
17 Portfolio Transactions
18 Capital Stock; Other
19 Determination of Net Asset Value; Fund Expenses
20 Federal Income Taxes
21 Distribution Plans
22 Calculation of Yield and Total Return
23 Financial Information
Part C Other Information
- ------ -----------------
24-32 Information required to be included in Part C is set forth under the appropriate Item, so numbered, in
Part C of this Document.
</TABLE>
<PAGE> 73
LOGO
------------------------------
PROSPECTUS
------------------------------
CORPORATE STOCK FUND
April 29, 1996
<PAGE> 74
STAGECOACH FUNDS(R)
CORPORATE STOCK FUND
Stagecoach Funds, Inc. (the "Company") is a professionally managed, open-end
series investment company. This Prospectus contains information about one of the
funds in the Stagecoach Family of Funds -- the CORPORATE STOCK FUND (the
"Fund").
The Fund seeks to achieve its investment objective by investing all of its
assets in a separate portfolio (the "Master Portfolio") of Master Investment
Trust ("MIT"), an open-end management investment company which has the same
investment objective as the Fund, rather than investing in a portfolio of
securities. Therefore, the Fund's investment experience corresponds directly
with the Master Portfolio's investment experience. Interests in the Master
Portfolio may be purchased only by other investment companies or accredited
investors.
The Fund's investment objective is to approximate to the extent practicable
the total rate of return of substantially all of the common stocks comprising
the Standard & Poor's 500 Composite Stock Price Index. The Master Portfolio
attempts to achieve this objective by investing in most of the common stocks
which comprise that index. See "How the Fund Works -- Investment Objective and
Policies" and "How the Funds Work-- Master-Feeder Structure."
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 April 29, 1996, for the
Fund has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated by reference. The SAI is available free of charge by writing to
Stagecoach Funds, Inc., c/o Stagecoach Shareholder Services, Wells Fargo Bank,
N.A., P.O. Box 7066, San Francisco, CA 94120-7066 or by calling the Company at
800-222-8222. If you hold shares in an IRA, please call 1-800-BEST-IRA for
information or assistance.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED
OR GUARANTEED BY, WELLS FARGO BANK, N.A. OR BZW BARCLAYS GLOBAL INVESTORS, N.A.
OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND INVOLVES
CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
PROSPECTUS DATED APRIL 29, 1996
PROSPECTUS
<PAGE> 75
The Master Portfolio is advised by Wells Fargo Bank, N.A. ("Wells Fargo
Bank"). BZW Barclays Global Fund Advisors ("BGFA"), an affiliate of Barclays
Bank PLC ("Barclays") which is not affiliated with Wells Fargo Bank, serves as
sub-advisor to the Master Portfolio. Wells Fargo Bank also serves as the Fund's
transfer and dividend disbursing agent, and is a Shareholder Servicing Agent (as
defined below) and a Selling Agent (as defined below). BZW Barclays Global
Investors, N.A. ("BGI") serves as the Master Portfolio's custodian. Stephens
Inc. ("Stephens") is the Fund's sponsor and administrator and serves as the
distributor of the Fund's shares.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND PROVIDES CERTAIN OTHER SERVICES
TO THE MASTER PORTFOLIO AND THE FUND, FOR WHICH IT IS COMPENSATED. BGFA IS THE
SUB-ADVISER AND BGFA AND BGI PROVIDE CERTAIN OTHER SERVICES TO THE MASTER
PORTFOLIO, FOR WHICH THEY ARE COMPENSATED. STEPHENS, WHICH IS NOT AFFILIATED
WITH WELLS FARGO BANK, BGFA OR BGI, IS THE SPONSOR AND DISTRIBUTOR FOR THE FUND.
PROSPECTUS
<PAGE> 76
TABLE OF CONTENTS
-------
PROSPECTUS SUMMARY 1
SUMMARY OF FUND EXPENSES 4
FINANCIAL HIGHLIGHTS 6
HOW THE FUND WORKS 8
THE FUND AND MANAGEMENT 12
INVESTING IN THE FUND 14
DIVIDENDS 20
HOW TO REDEEM SHARES 20
ADDITIONAL SHAREHOLDER SERVICES 24
MANAGEMENT AND SERVICING FEES 26
TAXES 30
PROSPECTUS APPENDIX - ADDITIONAL INVESTMENT POLICIES A-1
PROSPECTUS
<PAGE> 77
PROSPECTUS SUMMARY
The Fund provides you with a convenient way to invest in a portfolio of
securities selected and supervised by professional management. The following
provides you with summary information about the Fund. For more information,
please refer specifically to the identified Prospectus sections and generally to
the Prospectus and SAI.
Q. WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A. The CORPORATE STOCK FUND'S investment objective is to approximate to the
extent practicable the total rate of return of substantially all of the
common stocks comprising the Standard & Poor's 500 Composite Stock Price
Index. The Fund attempts to achieve this objective by investing all of its
assets in the Master Portfolio of MIT which has an identical investment
objective. The Master Portfolio attempts to achieve this objective by
investing in most of the common stocks which comprise that index. See "How
the Fund Works" and "Prospectus Appendix -- Additional Investment Policies."
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank is the Master Portfolio's investment adviser and BFGA serves
as the sub-adviser to the Master Portfolio. The Company has not retained the
services of a separate investment adviser for the Fund because the Fund
invests all of its assets in the Master Portfolio. Wells Fargo Bank provides
the Fund with transfer agency and dividend disbursing agency services; BGI
provides the Fund and the Master Portfolio with custodial services. In
addition, Wells Fargo Bank is a Shareholder Servicing Agent (as defined
below) and a Selling Agent (as defined below). See "The Fund and Management"
and "Management and Servicing Fees."
Q. HOW DO I INVEST IN THE FUND?
A. You may invest in the Fund by purchasing Fund shares at net asset value. You
may open an account by investing at least $1,000 and may add to your account
by making additional investments of at least $100, although certain
exceptions to these minimums may be available. Shares may be purchased by
wire, by mail or by an automatic investment feature called the AutoSaver
Plan on any day the New York Stock Exchange is open. See "Investing in the
Fund." For more details, contact Stephens (the Fund's sponsor and
distributor), a Shareholder Servicing Agent or a Selling Agent (such as
Wells Fargo Bank).
Q. HOW WILL I RECEIVE DIVIDENDS AND ANY CAPITAL GAINS?
A. Dividends from net investment income are declared quarterly and automatically
reinvested in additional Fund shares at net asset value without a sales
charge unless you elect to receive dividends in cash. Any capital gains will
be distributed at least
1 PROSPECTUS
<PAGE> 78
annually in the same manner. See "Dividends" and "Additional Shareholder
Services."
Q. HOW MAY I REDEEM SHARES?
A. You may redeem your shares, without charge by the Fund, by telephone, by
letter or by an automatic feature called the Systematic Withdrawal Plan, on
any day the New York Stock Exchange is open. See "How To Redeem Shares." For
more details, contact Stephens, a Shareholder Servicing Agent or a Selling
Agent (such as Wells Fargo Bank).
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH THIS TYPE OF
INVESTMENT?
A. An investment in the Fund (or the Master Portfolio) is not insured against
loss of principal. When the value of the securities attributable to the Fund
declines, so does the value of your Fund shares. Therefore, you should be
prepared to accept some risk with the money you invest in the Fund. Since
the investment risks associated with an investment in the Fund correspond to
those of the Master Portfolio in which the Fund invests, a summary of
certain of the risks associated with an investment in the Master Portfolio
follows. The portfolio equity securities of the Master Portfolio are subject
to equity market risk. Equity market risk is the risk that common stock
prices will fluctuate or decline over short or even extended periods. The
U.S. stock market tends to be cyclical, with periods when stock prices
generally rise and periods when prices generally decline. As with all mutual
funds, there can be no assurance that the Fund or the Master Portfolio will
achieve their investment objectives. Investors should be prepared to accept
that risk, as well as the risk that the Fund and the Master Portfolio could
underperform the Standard & Poor's 500 Composite Stock Price Index over the
long-term and/or the short-term.
Although the Fund's investment experience will correspond directly to the
investment experience of the Master Portfolios, to the extent other funds
invest in the Master Portfolio, their performance may differ from that of
the Fund due to different expense levels.
Q. WHAT ARE DERIVATIVES AND DO THE FUND AND THE MASTER PORTFOLIO USE THEM?
A. Some of the permissible investments described throughout this Prospectus are
considered "derivative" securities because their values are derived, at
least in part, from the prices of other securities or specified assets,
indices or rates. For example, the futures contracts and options on futures
contracts that the Master Portfolio may purchase are considered derivatives.
The Master Portfolio may purchase or sell these contracts or options as
substitutes for comparable market positions in the underlying securities.
Certain of the floating- and variable-rate instruments in which
PROSPECTUS 2
<PAGE> 79
the Master Portfolio may invest also can be considered derivatives. Some
derivatives may be more sensitive than direct securities to changes in
interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms.
Q. WHAT STEPS DO THE FUND AND MASTER PORTFOLIO TAKE TO CONTROL
DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank (as investment adviser to the Master Portfolio) and BGFA
(as sub-adviser to the Master Portfolio) use a variety of internal risk
management procedures to ensure that derivatives use is consistent with the
investment objectives of the Master Portfolio and the Fund, does not expose
either the Master Portfolio or the Fund to undue risks and is closely
monitored. These procedures include providing periodic reports to the Boards
of Trustees and Directors concerning the use of derivatives. The use of
derivatives is also subject to broadly applicable investment policies. For
example, the Master Portfolio may not invest more than a specified
percentage of its assets in "illiquid securities," including those
derivatives that do not have active secondary markets. In addition, the
Master Portfolio may not use derivatives without establishing adequate
"cover" in compliance with SEC rules limiting the use of leverage. For
additional information, see "Appendix -- Additional Investment Policies."
3 PROSPECTUS
<PAGE> 80
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)**
<TABLE>
<S> <C> <C>
Management Fee............................................... 0.50%
Rule 12b-1 Fee............................................... 0.05%
Total Other Expenses (after any waivers or reimbursements):
Shareholder Servicing Fee***............................. 0.30%
Administrative Fee....................................... 0.03%
Other Expenses (after any waivers or reimbursements)..... 0.08%
------
0.41%
------
TOTAL FUND OPERATING
EXPENSES (after any waivers or reimbursements)........... 0.96%
</TABLE>
- -------------------------------
<TABLE>
<C> <S>
* The Company reserves the right to impose a charge for wiring
redemption proceeds.
** Other mutual funds may invest in the Master Portfolio and such
other funds' expenses and, correspondingly, investment returns
may differ from those of the Fund.
*** The Fund understands that a Shareholder Servicing Agent also
may impose certain conditions on its customers, subject to the
terms of this prospectus, in addition to or different from
those imposed by the Fund, such as requiring a minimum initial
investment or payment of a separate fee for additional
services.
</TABLE>
PROSPECTUS 4
<PAGE> 81
EXAMPLE OF EXPENSES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- -------
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000
investment in the Fund, assuming a 5%
annual return
and redemption at the end of each
time period indicated:............... $ 10 $31 $53 $118
</TABLE>
EXPLANATION OF TABLES
The purpose of the foregoing tables is to help you understand the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. The foregoing tables reflect expenses at both the Fund and Master
Portfolio levels.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell Fund
shares. There are no shareholder transaction expenses. However, the Company
reserves the right to impose a charge for wiring redemption proceeds.
ANNUAL FUND OPERATING EXPENSES are based on amounts incurred during the most
recent fiscal year reflecting voluntary fee waivers and expense reimbursements
that are expected to continue to reduce expenses during the current fiscal year.
Wells Fargo Bank and Stephens each has agreed to waive or reimburse all or a
portion of their respective fees if certain Fund and/or Master Portfolio
expenses exceed limits set by state securities laws or regulations. In addition,
Wells Fargo Bank and Stephens at their sole discretion, may waive or reimburse
all or a portion of their respective fees charged to, or expenses paid by, the
Fund and/or Master Portfolio. Any waivers or reimbursements would reduce the
Fund's total expenses. There can be no assurances that waivers or reimbursements
will continue. Absent waivers or reimbursements, the percentages shown above
under "Other Expenses", "Total Other Expenses" and "Total Fund Operating
Expenses" would be 0.12%, 0.45% and 1.00%, respectively. Long-term shareholders
in the Fund could pay more in sales charges than the economic equivalent of the
maximum front-end sales charges applicable to mutual funds sold by members of
the National Association of Securities Dealers ("NASD"). For more complete
descriptions of the various costs and expenses you can expect to incur as an
investor in the Fund, please see the prospectus sections captioned "Investing in
the Fund -- How To Buy Shares" and "Management and Servicing Fees."
EXAMPLE OF EXPENSES is a hypothetical example which illustrates the expenses
associated with a $1,000 investment over a period of one, three, five and ten
years, based on the expenses in the table above and an assumed annual rate of
return of 5%. This rate of return should not be considered an indication of
actual or expected Fund performance. In addition, the example should not be
considered a representation of past or future expenses and actual expenses may
be greater or lesser than those shown.
5 PROSPECTUS
<PAGE> 82
FINANCIAL HIGHLIGHTS
The following information, for each of the five years in the period ending
December 31, 1995, has been derived from the Financial Highlights in the Fund's
1995 annual financial statements. The financial statements are included in the
Fund's SAI. Except for periods ending prior to January 1, 1992, which were
audited by other auditors whose report dated February 19, 1992, expressed an
unqualified opinion on this information, the financial statements have been
audited by KPMG Peat Marwick LLP, independent auditors, whose report dated
February 14, 1996 also is included in the SAI. This information should be read
in conjunction with the Fund's 1995 annual financial statements and notes
thereto. The SAI has been incorporated by reference into this Prospectus.
CORPORATE STOCK FUND
FOR A SHARE OUTSTANDING
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $31.42 $33.00 $31.40 $30.38 $23.60
Income from investment operations:
Net investment income (loss).................. 0.59 0.63 0.59 0.62 0.62
Net realized and unrealized gain/(loss) on
investments.................................. 10.65 (0.50) 2.19 1.35 6.16
Total from investment operations.............. 11.24 0.13 2.78 1.97 6.78
Less distributions:
Dividends from net investment income.......... (0.59) (0.63) (0.59) (0.62) 0.00
Distributions from net realized gain.......... (0.62) (1.08) (0.59) (0.33) 0.00
Total from distributions...................... (1.21) (1.71) (1.18) (0.95) 0.00
Net asset value, end of period................ $41.45 $31.42 $33.00 $31.40 $30.38
Total return (not annualized)**............... 35.99% 0.42% 8.91% 6.59% 28.72%
Ratios/supplemental data:
Net assets, end of period (000)............... $327,208 $236,265 $258,327 $230,457 $204,926
Number of shares outstanding, end of period
(000)........................................ 7,893 7,520 7,827 7,340 6,745
Ratios to average net assets (annualized):
Ratio of expenses to average net assets(1).... 0.96% 0.97% 0.97% 0.93% 0.97%
Ratio of net investment income to average net
assets(2).................................... 1.59% 1.92% 1.81% 2.05% 2.30%
Portfolio turnover............................ 6% 7% 5% 4% 4%
- -----------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses.................................. 1.00% 1.00% 0.99% 1.00% N/A
(2) Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses....................... 1.55% 1.89% 1.79% 1.98% N/A
- ---------------
* The financial information for the fiscal periods prior to, and including, 1991 is based on
the financial information for the Corporate Stock Fund ("IRA Fund") of the Wells Fargo
Investment Trust for Retirement Programs ("Trust") which was reorganized into the Corporate
Stock Fund on January 1, 1992.
** Total returns do not include any sales charges.
</TABLE>
PROSPECTUS 6
<PAGE> 83
CORPORATE STOCK FUND
FOR A SHARE OUTSTANDING
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1990* 1989* 1988* 1987* 1986*+
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $24.57 $18.93 $16.44 $15.93 $13.65
Income from investment operations:
Net investment income (loss)............... 0.64 0.60 0.57 0.45 0.43
Net realized and unrealized gain/(loss) on
investments............................... (1.61) 5.04 1.92 0.06 1.85
Total from investment operations........... (0.97) 5.64 2.49 0.51 2.28
Less distributions:
Dividends from net investment income....... 0.00 0.00 0.00 0.00 0.00
Distributions from net realized gain....... 0.00 0.00 0.00 0.00 0.00
Total from distributions................... 0.00 0.00 0.00 0.00 0.00
Net asset value, end of period............. $23.60 $24.57 $18.93 $16.44 $15.93
Total return (not annualized)**............ (3.95)% 29.79% 15.15% 3.20% 16.70%
Ratios/supplemental data:
Net assets, end of period (000)............ $151.742 $153,126 $115,119 $119,155 $33,667
Number of shares outstanding, end of period
(000)..................................... 6,429 6,233 6,081 7,246 2,114
Ratios to average net assets (annualized):
Ratio of expenses to average net
assets(1)................................. 0.97% 1.04% 1.02% 1.05% 1.02%
Ratio of net investment income to average
net assets(2)............................. 2.71% 2.69% 3.17% 2.43% 2.75%
Portfolio turnover......................... 6% 6% 3% 12% 15%
- -------------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses............................... N/A N/A N/A N/A N/A
(2) Ratio of net investment income to
average net assets prior to waived fees
and reimbursed expenses................ N/A N/A N/A N/A N/A
- ---------------
+ The Fund commenced operations on January 25, 1984.
* The financial information for the fiscal periods prior to, and including, 1991 is based on the
financial information for the Corporate Stock Fund ("IRA Fund") of the Wells Fargo Investment
Trust for Retirement Programs ("Trust") which was reorganized into the Corporate Stock Fund on
January 1, 1992.
** Total returns do not include any sales charges.
</TABLE>
7 PROSPECTUS
<PAGE> 84
HOW THE FUND WORKS
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to approximate to the extent practicable
the total rate of return of substantially all the common stocks comprising the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index").* This
investment objective is fundamental and cannot be changed without shareholder
approval. The Fund seeks to achieve its investment objective by investing all of
its assets in the Master Portfolio, which has an identical investment objective
as the Fund. As with all mutual funds, there can be no assurance that the Fund,
or the Master Portfolio will achieve their investment objectives. Because the
Master Portfolio invests in a number of different companies, its investments are
broadly "diversified" thereby tending to reduce the effects of a few poorly
performing companies on the overall portfolio.
The Master Portfolio seeks to create, to the extent feasible, a portfolio
which substantially replicates the total return of the securities comprising the
S&P 500 Index, taking into consideration redemptions, sales of additional shares
and other adjustments described below. The Master Portfolio is not managed
through traditional methods of fund management, which typically involve frequent
changes in a portfolio of securities on the basis of economic, financial and
market analyses. Therefore, brokerage costs, transfer taxes and certain other
transaction costs for the Master Portfolio may be lower than those incurred by
non-index, traditionally managed funds. Precise replication of the holdings of
the Master Portfolio and the capitalization weighting of the securities in the
S&P 500 Index is not feasible, but the Master Portfolio seeks correlation
between the price and total return performance of securities comprising the S&P
Index and the investment results of the Master Portfolio. The Master Portfolio
will attempt to achieve, in both rising and falling markets, a correlation of at
least 95% between the total return of its net assets before expenses and the
total return of the S&P 500 Index. There can be no assurance that the Master
Portfolio will achieve this correlation.
The Master Portfolio may invest some of its assets in high-quality money
market instruments, which include U.S. Government obligations, obligations of
domestic and foreign banks, repurchase agreements, commercial paper (including
variable amount master demand notes) and short-term corporate debt obligations.
Such investments are
- ---------------
* The S&P 500 Index is an unmanaged index of stocks comprised of 500
companies, including industrial, financial, utility and transportation
companies. "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard &
Poor's 500", and "500" are trademarks of McGraw-Hill, Inc. Neither the
Corporate Stock Master Portfolio nor the Corporate Stock Fund is sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes
no representation regarding the advisability of investing in the Fund or
Master Portfolio.
PROSPECTUS 8
<PAGE> 85
made on an ongoing basis to provide liquidity and, to a greater extent on a
temporary basis, when there is an unexpected or abnormal level of investor
purchases or redemptions of Master Portfolio shares or because of unusual market
conditions which limit the Master Portfolio's ability to invest effectively its
assets in accordance with its investment strategies. In addition, the Master
Portfolio may engage in securities lending to increase its income and may use
stock index futures and options thereon as a substitute for a comparable market
position in the underlying securities. A more complete description of the Master
Portfolio's investments and investment activities is contained in the
"Prospectus Appendix - Additional Investment Policies" and in the SAI.
MASTER/FEEDER STRUCTURE
As of April , 1996, the Fund converted to a feeder fund in a master/feeder
structure. Accordingly, the Fund invests all of its assets in the Master
Portfolio, which has an identical investment objective as the Fund. See, "The
Fund - Investment Objectives and Policies." MIT is organized as a trust under
the laws of the State of Delaware. See "General Information - Description of the
Company." In addition to selling its shares to the Fund, the Master Portfolio
may sell its shares to certain other mutual funds or accredited investors.
Information regarding additional options, if any, for investment in shares of
the Master Portfolio is available from Stephens and may be obtained by calling
1-800-643-9691. The expenses and, correspondingly, the returns of other
investment options in MIT may differ from those of the Fund.
The Board of Directors believes that, if other investors invest their assets
in the Master Portfolio, certain economic efficiencies may be realized with
respect to the Master Portfolio. For example, fixed expenses that otherwise
would have been borne solely by the Fund would be spread across a larger asset
base provided by more than one fund investing in the Master Portfolio. The Fund
and other entities investing (if any) in the Master Portfolio would each be
liable for all obligations of the Master Portfolio. However, the risk of the
Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and MIT itself is unable
to meet its obligations. Accordingly, the Company's Board of Directors believes
that neither the Fund nor its shareholders will be adversely affected by reason
of investing the Fund's assets in the Master Portfolio. However, if there is no
other investor in the Master Portfolio, the economic efficiencies (e.g.,
spreading fixed expenses across a larger asset base) that the Company's Board
believes should be available through investment in the Master Portfolio may not
be fully achieved. In addition, given the relatively novel nature of the
master/feeder structure, accounting and operational difficulties could occur.
The Master Portfolio's investment objective and other fundamental policies,
which are substantially the same as those of the Fund, cannot be changed without
approval by the holders of a majority (as defined in the Investment Company Act
of 1940 (the "1940 Act")) of the Master Portfolio's outstanding voting shares.
Whenever the Fund, as a
9 PROSPECTUS
<PAGE> 86
Master Portfolio shareholder, is requested to vote on matters pertaining to any
fundamental policy of the Master Portfolio, the Fund will hold a meeting of its
shareholders to consider such matters and the Fund will cast its votes in
proportion to the votes received from Fund shareholders. The Fund will vote
Master Portfolio shares for which it receives no voting instructions in the same
proportion as the votes received from Fund shareholders. In addition, certain
policies of the Master Portfolio that are non-fundamental can be changed by vote
of a majority of MIT's Trustees without a shareholder vote. If the Master
Portfolio's investment objective or policies are changed, the Fund could
subsequently change its objective or policies to correspond to those of the
Master Portfolio or the Fund could redeem its Master Portfolio shares and either
seek a new investment company with a substantially matching objective in which
to invest or retain its own investment adviser to manage the Fund's portfolio in
accordance with its objective. In the latter case, the Fund's inability to find
a substitute investment company in which to invest or equivalent management
services could adversely affect shareholders' investments in the Fund. The
Fund's investment objective and other fundamental policies cannot be changed
without approval by the holders of a majority (as defined in the 1940 Act) of
the Fund's outstanding voting shares. The Fund will provide shareholders with 30
days' written notice prior to the implementation of any change in the investment
objective of the Fund or Master Portfolio, to the extent possible.
PRINCIPAL INVESTMENT RISKS
An investment in the Fund (or the Master Portfolio) is not insured against
loss of principal. When the value of the securities attributable to the Fund
declines, so does the value of your Fund shares. Therefore, you should be
prepared to accept some risk with the money you invest in the Fund. Since the
investment risks associated with an investment in the Fund correspond to those
of the Master Portfolio in which the Fund invests, the following is a summary of
certain of the risks associated with an investment in the Master Portfolio. The
portfolio equity securities of the Master Portfolio are subject to equity market
risk. Equity market risk is the risk that common stock prices will fluctuate or
decline over short or even extended periods. The U.S. stock market tends to be
cyclical, with periods when stock prices generally rise and periods when prices
generally decline. As with all mutual funds, there can be no assurance that the
Fund or the Master Portfolio will achieve their investment objectives. Investors
should be prepared to accept that risk, as well as the risk that the Fund and
the Master Portfolio could underperform the Standard & Poor's 500 Composite
Stock Price Index over the long-term and/or the short-term.
Although the Fund's investment experience will correspond directly to the
investment experience of the Master Portfolio, to the extent other funds invest
in the Master Portfolio, their performance may differ from that of the Fund due
to different expense levels.
PROSPECTUS 10
<PAGE> 87
PERFORMANCE
The Fund's performance may be advertised in terms of average annual total
return and yield. These performance figures are based on historical results and
are not intended to indicate future performance.
Average annual total return is based on the overall dollar or percentage
change in value of a hypothetical investment in the Fund and assumes that all
the dividends and capital gain distributions attributable to the Fund are
reinvested at net asset value in the Fund. The Fund's performance corresponds
directly to the investment experience of the Master Portfolio. In addition to
presenting standardized total return information, at times, the Fund also may
present nonstandardized total return information and distribution rates.
Additional information about the performance of the Fund is contained in the
Annual Report for the Fund. The Annual Report may be obtained free of charge by
calling the Company at 800-222-8222.
11 PROSPECTUS
<PAGE> 88
THE FUND AND MANAGEMENT
The Fund is one of the funds in the Stagecoach Family of Funds. The Company
was organized as a Maryland corporation on September 9, 1991, and currently
offers shares of twelve other series--the Aggressive Growth Fund, the Asset
Allocation Fund, the California Tax-Free Bond Fund, the California Tax-Free
Income Fund, the California Tax-Free Money Market Mutual Fund, the Diversified
Income Fund, the Ginnie Mae Fund, the Growth and Income Fund, the Money Market
Mutual Fund, the National Tax-Free Money Market Fund, the Short-Intermediate
U.S. Government Income Fund and the U.S. Government Allocation Fund. The Board
of Directors of the Company supervises the Fund's activities and monitors its
contractual arrangements with various service providers. Although the Company is
not required to hold annual shareholder meetings, special meetings may be
requested for purposes such as electing or removing Directors, approving
advisory contracts and distribution plans, and changing the Fund's investment
objective or fundamental investment policies. All shares of the Company have
equal voting rights and will be voted in the aggregate, rather than by series,
unless otherwise required by law (such as when the voting matter affects only
one series). As a shareholder of the Fund, you receive one vote for each share
you own and fractional votes for fractional shares owned. A more detailed
description of the voting rights and attributes of the shares is contained in
the "Capital Stock" section of the SAI.
MASTER PORTFOLIO INVESTMENT ADVISER AND SUB-ADVISER
Wells Fargo Bank is the Master Portfolio's investment adviser. In addition,
Wells Fargo Bank is the Fund's transfer and dividend disbursing agent, a
Shareholder Servicing Agent and a Selling Agent under a Selling Agreement with
the Fund's distributor. Wells Fargo Bank, one of the largest banks in the United
States, was founded in 1852 and is the oldest bank in the western United States.
As of January 1, 1996, various divisions and affiliates of Wells Fargo Bank
provided investment advisory services for approximately $33 billion of assets of
individuals, trusts, estates and institutions. Wells Fargo Bank also serves as
the investment adviser to the other portfolios of MIT, to the other separately
managed series of the Company, and as the investment adviser or sub-adviser to
three other registered, open-end, management investment companies, each of which
consists of several separately managed investment portfolios. Wells Fargo Bank,
a wholly owned subsidiary of Wells Fargo & Company, is located at 420 Montgomery
Street, San Francisco, California 94105.
As investment adviser, Wells Fargo Bank, subject to the overall supervision of
the Board of Trustees, provides guidance and policy direction in connection with
the management of the Master Portfolio's assets. Wells Fargo Bank also furnishes
the Board with periodic reports on the Master Portfolio's investment strategy
and performance.
BGFA, located at 45 Fremont Street, San Francisco, California 94105, serves as
sub-adviser to the Master Portfolio. BGFA is a wholly owned subsidiary of BGI
and an indirect
PROSPECTUS 12
<PAGE> 89
subsidiary of Barclays Bank PLC. As of January 1, 1996, BGFA and its affiliates
provided investment advisory services for over $220 billion of assets. BGFA was
created by the reorganization of Wells Fargo Nikko Investment Advisors
("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an affiliate of
Wells Fargo Institutional Trust Company, N.A. BGFA also serves as the
sub-adviser to some of the other portfolios of MIT and as investment adviser to
two other registered, open-end, management investment companies, each of which
consists of several separately managed investment portfolios. Pursuant to a
Sub-Investment Advisory Agreement, BGFA, subject to the supervision and approval
of Wells Fargo Bank, provides investment advisory assistance and the day-to-day
management of the Master Portfolio's assets, subject to the overall authority of
MIT's Board of Trustees and in conformity with Delaware law and the stated
policies of the Master Portfolio.
Stephens is the Fund's sponsor and administrator, and distributes the Fund's
shares. Stephens is a full service broker/dealer and investment advisory firm
located at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more than
60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment portfolios
for pension and profit sharing plans, individual investors, foundations,
insurance companies and university endowments.
13 PROSPECTUS
<PAGE> 90
INVESTING IN THE FUND
OPENING AN ACCOUNT
You can buy Fund shares in one of the several ways described below. You must
complete and sign an Account Application to open an account. Additional
documentation may be required from corporations, associations and certain
fiduciaries. Do not mail cash. If you have any questions or need extra forms,
you may call 800-222-8222.
After an application has been processed and an account has been established,
subsequent purchases of different funds of the Company under the same umbrella
account do not require the completion of additional applications. A separate
application must be processed for each different umbrella account number (even
if the registration is the same).
Call the telephone number on your confirmation statement to obtain information
about what is required to change registration.
If you wish to invest in the Fund through a tax-deferred retirement plan
please contact a Shareholder Servicing Agent or a Selling Agent to receive
information and the required separate application. See "Tax-Deferred Retirement
Plans" below. The Company or Stephens may make the Prospectus available in an
electronic format. Upon request, the Company or Stephens will transmit or cause
to be transmitted promptly, without charge, a paper copy of the electronic
Prospectus.
SHARE VALUE
The value of each Fund share is its "net asset value," or NAV. The NAV is
computed by adding the value of the Fund's portfolio investments plus cash and
other assets, deducting liabilities and then dividing the result by the number
of shares outstanding. NAV is expected to fluctuate daily.
The Fund is open for business each day the New York Stock Exchange ("NYSE") is
open for trading ("Business Day"). Currently, the NYSE is closed on New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day (each a "Holiday"). When any Holiday falls on
a weekend, the NYSE is closed on the weekday immediately before or after such
Holiday. Wells Fargo Bank calculates the Fund's NAV each Business Day as of the
close of regular trading on the NYSE (referred to hereafter as "the close of the
NYSE"), which is currently 1:00 p.m. (Pacific time).
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, the Fund's other assets are valued at
current market prices, or if such prices are not readily available, at fair
value as determined in good faith by the
PROSPECTUS 14
<PAGE> 91
Company's Board of Directors. Prices used for such valuations may be provided by
independent pricing services.
HOW TO BUY SHARES
Fund shares are offered continuously at the NAV next determined after a
purchase order is received in the form specified for the purchase method being
used, as described in the following sections. Payment for shares purchased
through a Selling Agent will not be due from the Selling Agent until the
settlement date. The settlement date normally is three Business Days after the
order is placed. It is the responsibility of the Selling Agent to forward
payment for shares being purchased to the Fund promptly. Payment must accompany
orders placed directly through the Transfer Agent.
Payments for Fund shares will be invested in full and fractional shares at the
applicable offering price. If shares are purchased by a check which doesn't
clear, the Company reserves the right to cancel the purchase and hold the
investor responsible for any losses or fees incurred. In addition, the Fund may
hold payment on any redemption until reasonably satisfied that your investments
made by check have been collected (which may take up to 15 days). The Company
reserves the right to reject any purchase order or suspend sales at any time.
The minimum initial investment amount is generally $1000. The minimum
investment amount is $100 by the AutoSaver Plan purchase method (described
below) and $250 for any tax-deferred retirement account for which Wells Fargo
Bank serves as trustee or custodian under a prototype trust approved by the
Internal Revenue Service ("IRS") (a "Plan Account"). Generally subsequent
investments must be made in amounts of $100 or more. Plan Accounts that invest
in the Fund through Wells Fargo ExpressInvest(TM) (available to certain Wells
Fargo tax-deferred retirement plans) are not subject to the minimum initial
investment amount or the subsequent investment amount requirements. If you have
questions regarding purchases of shares or ExpressInvest(TM) please contact the
Company at 800-222-8222, or a Shareholder Servicing Agent or Selling Agent. For
additional information on tax-deferred accounts, please refer to the section
"How to Buy Shares" under Tax-Deferred Retirement Plans or contact a Shareholder
Servicing Agent.
Federal regulations require that an investor provide a certified Taxpayer
Identification Number ("TIN") upon opening or reopening an account. See "Taxes"
for further information concerning this requirement. Failure to furnish a
certified TIN to the Company could subject the investor to a penalty imposed by
the IRS.
15 PROSPECTUS
<PAGE> 92
You may buy Fund shares on any Business Day by any of the methods described
below.
INITIAL PURCHASES BY WIRE
If you wish to purchase Fund shares by wire, please follow the instructions
set forth below.
1. Complete an Account Application.
2. Instruct the wiring bank to transmit the specified amount in federal funds
($1,000 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000587
Attention: Stagecoach Funds (Corporate Stock Fund)
Account Name(s): (name(s) in which to be registered)
Account Number: (if investing into an existing account)
3. A completed Account Application should be mailed, or sent by telefacsimile
with the original subsequently mailed, to the following address immediately
after the funds are wired and must be received and accepted by the Transfer
Agent before an account can be opened:
Wells Fargo Bank, N.A.
Stagecoach Shareholder Services
P.O. Box 7066
San Francisco, California 94120-7066
Telefacsimile: 1-415-543-9538
4. Share purchases are effected at NAV next determined after the Account
Application is received and accepted.
INITIAL PURCHASES BY MAIL
If you wish to purchase Fund shares by mail, please follow the instructions
set forth below.
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $1,000 or more, payable to
"Stagecoach Funds (Corporate Stock Fund)," to the address above.
3. Share purchases are effected at the NAV next determined after the Account
Application is received and accepted.
PROSPECTUS 16
<PAGE> 93
AUTOSAVER PLAN PURCHASES
The Company's AutoSaver Plan provides you with a convenient way to establish
and automatically add to a Fund account on a monthly basis. To participate in
the AutoSaver Plan, you must specify an amount ($100 or more) to be withdrawn
automatically by the Transfer Agent on a monthly basis from an account with a
bank, which is designated in your Account Application and which is approved by
the Transfer Agent ("Approved Bank"). Wells Fargo Bank is an Approved Bank. The
Transfer Agent withdraws and uses this amount to purchase specified shares of
the designated Fund on your behalf each month on or about the day that you have
selected, or, if you have not selected a day, on or about the 20th day of each
month. The Transfer Agent requires a minimum of ten (10) Business Days to
implement your AutoSaver Plan purchases or to process your request to change the
day on which the AutoSaver purchase is processed. There are no separate fees
charged to you by the Fund for participating in the AutoSaver Plan.
You may change your investment amount, suspend purchases or terminate your
election at any time by providing notice to the Transfer Agent at least five
Business Days prior to any scheduled transaction.
TAX-DEFERRED RETIREMENT PLANS
You may be entitled to invest in the Fund through a Plan Account or other
tax-deferred retirement plan. Contact a Shareholder Servicing Agent (such as
Wells Fargo Bank) or a Selling Agent for materials describing Plan Accounts
available through it, and the benefits, provisions, and fees of such Plan
Accounts. The minimum initial investment amount for Fund shares acquired through
a Plan Account is $250 (the minimum initial investment amount is not applicable
if you participate in ExpressInvest(TM) through a Plan Account.
Pursuant to the Code, individuals who are not active participants (and who do
not have a spouse who is an active participant) in certain types of retirement
plans ("qualified retirement plans") may deduct contributions to an Individual
Retirement Account ("IRA"), up to specified limits. Investment earnings in the
IRA will be tax-deferred until withdrawn, at which time the individual may be in
a lower tax bracket.
The maximum annual deductible contribution to an IRA for individuals under age
70 1/2 is 100% of includible compensation up to a maximum of (i) $2,000 for
single individuals; (ii) $4,000 for a married couple when both spouses earn
income; and (iii) $2,250 when one spouse earns, or elects for IRA purposes to be
treated as earning, no income (together the "IRA contribution limits").
The IRA deduction is also available for single individual taxpayers and
married couples who are active participants in qualified retirement plans but
who have adjusted gross incomes which do not exceed certain specified limits. If
their adjusted gross income exceeds these limits, the amount of the deductible
contribution is phased down and eventually eliminated.
17 PROSPECTUS
<PAGE> 94
Any individual who works may make nondeductible contributions to an IRA in
addition to any deductible contributions. Total aggregate deductible and
nondeductible contributions are limited to the IRA contribution limits discussed
above. Nondeductible contributions in excess of the applicable IRA contribution
limit are "nondeductible excess contributions". In addition, contributions made
to an IRA for the year in which an individual attains the age of 70 1/2, or any
year thereafter, are also nondeductible excess contributions. Nondeductible
excess contributions are subject to a 6% excise tax penalty which is charged
each year that the nondeductible excess contribution remains in the IRA.
An employer also may contribute to an individual's IRA by establishing a
Simplified Employee Pension Plan through a Shareholder Servicing Agent or a
Selling Agent, known as a SEP-IRA. Participating employers may make an annual
contribution in an amount up to the lesser of 15% of earned income or $30,000,
subject to certain provisions of the Code. Investment earnings will be
tax-deferred until withdrawn.
The foregoing discussion regarding IRAs is based on the Code and federal
regulations in effect as of the date of this Prospectus and summarizes only some
of the important federal tax considerations generally affecting IRA
contributions made by individuals or their employers. It is not intended as a
substitute for careful tax planning. Investors should consult their tax advisors
with respect to their specific tax situations as well as with respect to state
and local taxes. Further federal tax information is contained under the heading
"Taxes" in this Prospectus and in the SAI.
A Shareholder Servicing Agent or Selling Agent also may offer other types of
tax-deferred or tax-advantaged plans, including a Keogh retirement plan for
self-employed professional persons, sole proprietors and partnerships.
Application materials for opening a tax-deferred retirement plan can be
obtained from a Shareholder Servicing Agent or a Selling Agent. Return your
completed tax-deferred retirement plan application to your Shareholder Servicing
Agent or a Selling Agent for approval and processing. If your tax-deferred
retirement plan application is incomplete or improperly filled out, there may be
a delay before the Fund account is opened. You should ask your Shareholder
Servicing Agent or Selling Agent about the investment options available to your
tax-deferred retirement plan, since some of the funds in the Stagecoach Family
of Funds may be unavailable as options. Moreover, certain features described
herein, such as the AutoSaver Plan and the Systematic Withdrawal Plan, may not
be available to individuals or entities who invest through a tax-deferred
retirement plan.
ADDITIONAL PURCHASES
You may make additional purchases of $100 or more by instructing the Fund's
Transfer Agent to debit an Approved Bank account designated in your Account
Application, by wire by instructing the wiring bank to transmit the specified
amount as directed above
PROSPECTUS 18
<PAGE> 95
for initial purchases, or by mail with a check payable to "Stagecoach Funds
(Corporate Stock Fund)" to the address set forth in "Initial Purchases by Wire."
Write your Fund account number on the check and include the detachable stub from
your Statement of Account or a letter providing your Fund account number.
PURCHASES THROUGH SELLING AGENTS
You may place a purchase order for Fund shares through a broker/dealer or
financial institution which has entered into a Selling Agreement with Stephens,
as the Fund's Distributor ("Selling Agent"). If your order is placed by the
close of the NYSE, the purchase order generally will be executed on the same day
if the order is received by the Transfer Agent before the close of business. If
your purchase order is received by a Selling Agent after the close of the NYSE
or by the Transfer Agent after the close of business, then your purchase order
will be executed on the next Business Day following the day your order is
placed. The Selling Agent is responsible for the prompt transmission of your
purchase order to the Fund. Because payment for Fund shares will not be due
until settlement date, the Selling Agent might benefit from temporary use of
your payment. A Selling Agent which is a financial institution may be required
to register as a dealer pursuant to applicable state securities laws, which may
differ from federal law and any interpretations expressed herein.
PURCHASES THROUGH SHAREHOLDER SERVICING AGENTS
Purchase orders for Fund shares may be transmitted to the Transfer Agent
through any entity that has entered into a Shareholder Servicing Agreement with
the Fund ("Shareholder Servicing Agent"), such as Wells Fargo Bank. See
"Management and Servicing Fees - Shareholder Servicing Agent."
The Shareholder Servicing Agent may transmit a purchase order to the Transfer
Agent, on your behalf, including a purchase order for which payment is to be
transferred from an account with an Approved Bank or wired from a financial
institution. If your order is transmitted by the Shareholder Servicing Agent, on
your behalf, to the Transfer Agent before the close of the NYSE, the purchase
order generally will be executed on the same day. If your Shareholder Servicing
Agent transmits your purchase order to the Transfer Agent after the close of the
NYSE, then your order will be executed on the next Business Day following the
day your order is received. The Shareholder Servicing Agent is responsible for
the prompt transmission of your purchase order to the Transfer Agent.
STATEMENTS AND REPORTS
The Fund, or a Shareholder Servicing Agent on its behalf, will typically send
you a statement of your account after every transaction that affects your share
balance or your Fund account registration. A statement with tax information will
be mailed to you by January 31 of each year, and also will be filed with the
IRS. At least twice a year, you will receive financial statements.
19 PROSPECTUS
<PAGE> 96
DIVIDENDS
The Fund intends to declare a quarterly dividend of substantially all of its
net investment income. The Fund will distribute any capital gains at least
annually. You have several options for receiving dividends and capital gain
distributions. They are discussed under "Additional Shareholder
Services - Dividend and Distribution Options."
Dividends and capital gain distributions will have the effect of reducing the
Fund's NAV per share by the amount distributed. Although a distribution paid to
you on newly issued shares shortly after your purchase would represent, in
substance, a return of your capital, the distribution would consist of net
investment income and, accordingly, would be taxable to you as ordinary income.
HOW TO REDEEM SHARES
You may redeem all or a portion of your Fund shares on any Business Day
without any charge by the Fund. Your shares will be redeemed at the next NAV
calculated after the Fund has received your redemption request in proper form.
Redemption proceeds may be more or less than the amount invested and, therefore,
a redemption may result in a gain or loss for federal and state income tax
purposes. The Fund ordinarily will remit redemption proceeds within seven days
after your redemption order is received in proper form, unless the SEC permits a
longer period under extraordinary circumstances. Such extraordinary
circumstances could include a period during which an emergency exists as a
result of which (a) disposal by the Fund of securities owned by it is not
reasonably practicable or (b) it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or a period during which the
SEC by order permits deferral of redemptions for the protection of security
holders of the Fund. In addition, the Fund may hold payment on your redemptions
until reasonably satisfied that your investments made by check have been
collected (which can take up to 15 days from the purchase date). To ensure
acceptance of your redemption request, please follow the procedures described
below. Although it is not the Fund's current intention, the Fund may make
payment of redemption proceeds in securities, if conditions warrant subject to
regulation by some state securities commissions. In addition, the Fund reserves
the right to impose charges for wiring redemption proceeds.
Due to the high cost of maintaining Fund accounts with small balances, the
Fund reserves the right to close your account and send you the proceeds if the
balance falls below the applicable minimum balance because of a redemption
(including a redemption of Fund shares after an investor has made only the
applicable minimum initial investment). However, you will be given 30 days'
notice to make an additional investment to increase your account balance to an
amount equal to or greater than the
PROSPECTUS 20
<PAGE> 97
applicable minimum balance. For a discussion of applicable minimum balance
requirements. (see "Investing in the Funds -- How to Buy Shares."
REDEMPTIONS BY TELEPHONE
Telephone redemption or exchange privileges are made available to you
automatically upon opening an account, unless you specifically decline the
privileges. Telephone redemption privileges authorize the Transfer Agent to act
on telephone instructions from any person representing himself or herself to be
the investor and reasonably believed by the Transfer Agent to be genuine. The
Company will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Company and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Company nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
REDEMPTIONS BY MAIL
You may redeem all or a portion of your Fund shares by mail. If you wish to do
so, please observe the following.
1. Write a letter of instruction. Indicate the dollar amount or number of Fund
shares you want to redeem. Refer to your Fund account number and give your
social security or tax identification number (where applicable).
2. Sign the letter in exactly the same way the account is registered. If there
is more than one owner of the shares, all must sign.
3. Signature guarantees are not required for redemption requests unless
redemption proceeds of $5,000 or more are to be paid to someone other than
you at your address of record or your designated Approved Bank account, or
other unusual circumstances exist which cause the Transfer Agent to determine
that a signature guarantee is necessary or prudent to protect against
unauthorized redemption requests. If required, a signature must be guaranteed
by an "eligible guarantor institution," which includes a commercial bank that
is an FDIC member, a trust company, a member firm of a domestic stock
exchange, a savings association, or a credit union that is authorized by its
charter to provide a signature guarantee. Signature guarantees by notaries
public are not acceptable. Further documentation may be requested from
corporations, administrators, executors, personal representatives, trustees
or custodians.
4. If shares to be redeemed are held in certificated form, enclose the
certificates with the letter. Do not sign the certificates and for protection
use registered mail.
5. Mail your letter to the Transfer Agent at the mailing address set forth under
"Investing in the Fund - Initial Purchases By Wire."
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<PAGE> 98
Unless other instructions are given in proper form, a check for your redemption
proceeds will be sent to your address of record.
EXPEDITED REDEMPTIONS BY MAIL OR TELEPHONE
You may request an expedited redemption of Fund shares by letter, in which
case your receipt of redemption proceeds, but not the Fund's receipt of your
redemption request, would be expedited. You also may request an expedited
redemption of Fund shares by telephone on any Business Day, in which case both
your receipt of redemption proceeds and the Fund's receipt of your redemption
request would be expedited. You may request expedited redemption by telephone
only if the total value of the shares redeemed is $100 or more.
You may request expedited redemption by telephone by calling the Transfer
Agent at the telephone number listed on your transaction confirmation or by
calling 800-222-8222.
You may request expedited redemption by mail by mailing your expedited
redemption request to the Transfer Agent at the mailing address set forth under
"Investing in the Fund - Initial Purchases by Wire."
Upon request, proceeds of your expedited redemptions of $5,000 or more will be
wired or credited to an Approved Bank account designated in your Account
Application or wired to the Selling Agent designated in your Account
Application. The Company reserves the right to impose a charge for wiring
redemption proceeds. When proceeds of your expedited redemption are to be paid
to someone else, to an address other than that of record, or to an account with
an Approved Bank or Selling Agent that you have not predesignated in your
Account Application, your expedited redemption request must be made by letter
and the signature(s) on the letter may be required to be guaranteed, regardless
of the amount of the redemption. If your expedited redemption request is
received by the Transfer Agent by the close of the NYSE on a Business Day, your
redemption proceeds will be transmitted to your designated account with an
Approved Bank or Selling Agent on the next Business Day (assuming your
investment check has cleared as described above), absent extraordinary
circumstances. Such extraordinary circumstances could include those described
above as potentially delaying redemptions, and also could include situations
involving an unusually heavy volume of wire transfer orders on a national or
regional basis or communication or transmittal delays that could cause a brief
delay in the wiring or crediting of funds. A check for proceeds will be mailed
to your address of record or, at your election, credited to an Approved Bank
account designated in your Account Application.
During periods of drastic economic or market activity or changes, you may
experience problems implementing an expedited redemption by telephone. In the
event you are unable to reach the Transfer Agent by telephone, you should
consider using overnight
PROSPECTUS 22
<PAGE> 99
mail to implement an expedited redemption. The Fund reserves the right to modify
or terminate the expedited telephone redemption privilege at any time.
SYSTEMATIC WITHDRAWAL PLAN
The Company's Systematic Withdrawal Plan provides you with a convenient way to
have Fund shares redeemed from your account and the proceeds distributed to you
on a monthly basis. You may participate in the Systematic Withdrawal Plan only
if you have a Fund account valued at $10,000 or more as of the date of your
election to participate, your dividends and capital gain distributions are being
reinvested automatically and you are not participating in the AutoSaver Plan at
any time while participating in the Systematic Withdrawal Plan. You specify an
amount ($100 or more) to be distributed by check to your address of record or
deposited in your Approved Bank account designated in the Account Application.
The Transfer Agent redeems sufficient shares and mails or deposits your
redemption proceeds as instructed on or about the fifth Business Day prior to
the end of each month. There are no separate fees charged to you by the Fund for
participating in the Systematic Withdrawal Plan.
You may change your withdrawal amount, suspend withdrawals or terminate your
election at any time by notifying the Transfer Agent at least ten Business Days
prior to any scheduled transaction. Your participation in the Systematic
Withdrawal Plan will be terminated automatically if your Fund account is closed,
or, in some cases, if your Approved Bank account is closed.
REDEMPTIONS THROUGH SELLING AGENTS
If your redemption order is received by a Selling Agent before the close of
the NYSE and received by the Transfer Agent before the close of business on the
same day, the order will be executed at the NAV determined as of the close of
the NYSE on that day. If your redemption order is received by a Selling Agent
after the close of the NYSE, or not received by the Transfer Agent prior to the
close of business, your order will be executed at NAV determined as of the close
of the NYSE on the next Business Day. The Selling Agent is responsible for the
prompt transmission of your redemption order to the Fund.
Unless you have made other arrangements with the Selling Agent, and the
Transfer Agent has been informed of such arrangements, proceeds of a redemption
order made by you through a Selling Agent will be credited to an account with an
Approved Bank that you have designated in your Account Application. If no such
account is designated, a check for the proceeds will be mailed to your address
of record or, if such address is no longer valid, the proceeds will be credited
to your account with the Selling Agent. You may request a check from the Selling
Agent or may elect to retain the redemption proceeds in such account. The
Selling Agent may charge you a service fee. In addition, it may benefit from the
use of your redemption proceeds until the check it issues to you has cleared or
until such proceeds have been disbursed or reinvested on your behalf.
23 PROSPECTUS
<PAGE> 100
REDEMPTIONS THROUGH SHAREHOLDER SERVICING AGENTS
You may request a redemption of Fund shares through your Shareholder Servicing
Agent. Any redemption request made by telephone through your Shareholder
Servicing Agent must redeem shares with a total value of $100 or more. If your
redemption order is transmitted by the Shareholder Servicing Agent, on your
behalf, to the Transfer Agent before the close of the NYSE, the redemption order
will be executed at NAV determined as of the close of the NYSE on that day. If
your Shareholder Servicing Agent transmits your redemption order to the Transfer
Agent after the close of the NYSE, then your order will be executed on the next
Business Day following the date your order is received. The Shareholder
Servicing Agent is responsible for the prompt transmission of your redemption
order to the Fund.
Unless you have made other arrangements with your Shareholder Servicing Agent,
and the Transfer Agent has been informed of such arrangements, proceeds of a
redemption order made by you through your Shareholder Servicing Agent will be
credited to an account with the Approved Bank that you have designated in the
Account Application. If no such account is designated, a check for the proceeds
will be mailed to your address of record or, if such address is no longer valid,
the proceeds will be credited to your account with your Shareholder Servicing
Agent or to another account designated in your agreement with your Shareholder
Servicing Agent.
ADDITIONAL SHAREHOLDER SERVICES
In addition to the optional services described above, the Fund offers you
three dividend and distribution payment options and an exchange privilege, which
are described below.
DIVIDEND AND DISTRIBUTION OPTIONS
When you fill out your Account Application, you can choose from the dividend
and distribution options listed below. If you have questions about the dividend
and distribution options available to you, please call 800-222-8222.
A. The Automatic Reinvestment Option provides for the reinvestment of your
dividends and capital gain distributions in additional Fund shares. Dividends
and distributions declared in a month generally is reinvested at NAV on the last
Business Day of such month. You are assigned this option automatically if you
make no choice on your Account Application.
B. The Automatic Clearing House Option permits you to have dividends and
capital gain distributions deposited in your Approved Bank account designated in
the Account Application. In the event your Approved Bank account is closed, your
distribution will be
PROSPECTUS 24
<PAGE> 101
held in a non-interest-bearing omnibus bank account established by the Fund's
dividend disbursing agent on your behalf.
C. The Check Payment Option lets you receive a check for all dividends and/or
capital gain distributions, which generally is mailed either to your designated
address or your designated Approved Bank shortly following declaration. If the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, your distributions will be held in a
non-interest-bearing omnibus bank account established by the Fund's dividend
disbursing agent on your behalf.
The Company forwards monies to the dividend disbursing agent so that it may
issue you dividend checks under the Check Payment Option. The dividend
disbursing agent may benefit from the temporary use of such monies until these
checks clear.
EXCHANGE PRIVILEGE
Wells Fargo Bank advises a variety of other funds, each with its own
investment objective and policies. The exchange privilege is a convenient way to
buy shares in the other funds of the Stagecoach Family of Funds that are
registered in your state of residence in order to respond to changes in your
investment and savings goals or in market conditions. Shares of the Corporate
Stock Fund may be exchanged for Class A Shares of one of the Company's
multi-class funds, for Retail Shares of another fund or for shares of any of the
Company's single-class funds. Before you make an exchange from the Fund into
another fund of the Stagecoach Family of Funds, please observe the following:
- Obtain and carefully read the prospectus of the fund into which you want to
exchange.
- If you exchange into another fund with a sales charge, you must pay the
difference between that fund's sales charge and any sales charge you
already have paid in connection with the shares you are exchanging.
- Each exchange, in effect, represents the redemption of shares of one fund
and the purchase of shares of another, which may produce a gain or loss for
federal income tax purposes. A confirmation of each exchange transaction
will be sent to you.
- The dollar amount of shares you exchange must meet the minimum initial
and/or subsequent investment amounts of the other fund.
- The Company reserves the right to limit the number of times shares may be
exchanged between funds, to reject any telephone exchange order, or
otherwise to modify or discontinue exchange privileges at any time. Under
SEC rules, subject to limited exceptions, the Company ordinarily must
notify you 60 days before it modifies or discontinues the exchange
privilege.
25 PROSPECTUS
<PAGE> 102
The procedures applicable to Fund share redemptions also apply to Fund share
exchanges.
To exchange shares, write the Transfer Agent at the mailing address under
"Investing in the Fund - Initial Purchases by Wire" or call the Transfer Agent
at the telephone number listed on your transaction confirmation, or contact your
Shareholder Servicing Agent or Selling Agent. The procedures applicable to
telephone redemptions, including the discussion regarding the responsibility for
the authenticity of telephone instructions, are also applicable to telephone
exchange requests. See "How To Redeem Shares - Expedited Redemptions by Letter
and Telephone."
MANAGEMENT AND SERVICING FEES
INVESTMENT ADVISER
Subject to the overall supervision of MIT's Board of Trustees, Wells Fargo
Bank, as the Master Portfolio's investment adviser, provides investment guidance
and policy direction in connection with the management of the Master Portfolio's
assets. Wells Fargo Bank also furnishes the Board of Trustees with periodic
reports on the Master Portfolio's investment strategy and performance. For these
services, Wells Fargo Bank is entitled to a monthly advisory fee at the annual
rate of 0.50% of the first $250 million of the Master Portfolio's average daily
net assets, 0.40% of the next $250 million, and 0.30% of the Master Portfolio's
average daily net assets in excess of $500 million. From time to time, Wells
Fargo Bank may waive its fees in whole or in part. Any such waiver will reduce
the expenses of the Master Portfolio and the Fund and, accordingly, have a
favorable impact on the total return of the Master Portfolio and the Fund. From
time to time, the Master Portfolio, consistent with its investment objectives,
policies and restrictions, may invest in securities of companies with which
Wells Fargo Bank or BGI has a lending relationship.
Wells Fargo Bank has delegated certain advisory responsibilities to BGFA.
Nevertheless, Wells Fargo Bank has retained continuing and exclusive authority
over the management of the Master Portfolio, and the investment and disposition
of the Master Portfolio's assets, and Wells Fargo Bank may reject any investment
recommendations or decisions for the Master Portfolio if Wells Fargo Bank
determines that such recommendations or decisions are not consistent with the
best interests of the Master Portfolio. Wells Fargo Bank has agreed to pay BGFA
for its sub-advisory services an annual fee equal to $40,000 plus .08% of the
average daily net assets of the Master Portfolio.
Prior to the Fund's conversion to a master/feeder structure, Wells Fargo Bank
provided investment advisory services directly to the Fund. For its services as
investment adviser, Wells Fargo Bank was entitled to receive a monthly fee at
the annual rate of 0.50% of the first $250 million of the Fund's average daily
net assets, 0.40% of the next
PROSPECTUS 26
<PAGE> 103
$250 million, and 0.30% of the Fund's average daily net assets in excess of $500
million. WFNIA, the sub-adviser to the Fund prior to January 1, 1996, was
entitled to receive from Wells Fargo Bank an annual fee equal to $40,000 plus
.08% of the average daily net assets of the Fund. For the year ended December
31, 1995, the Company paid an amount equal to 0.50% of the average daily net
assets of the Fund to Wells Fargo Bank for its services as investment adviser to
the Fund. For the year ended December 31, 1995, Wells Fargo Bank paid an amount
equal to 0.09% of the average daily net assets of the Fund to WFNIA for its
services as sub-adviser to the Fund.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
BGI serves as the custodian to the Fund and the Master Portfolio. BGI, located
at 45 Fremont Street, San Francisco, California 94105, is a special purpose
trust company that is owned indirectly by Barclays. BGFA is a wholly owned
subsidiary of BGI.
Wells Fargo Bank also serves as the Fund's transfer and dividend disbursing
agent. Wells Fargo Bank performs the transfer and dividend disbursing agency
activities at 525 Market Street, San Francisco, California 94105.
SHAREHOLDER SERVICING AGENT
The Fund has entered into a Shareholder Servicing Agreement with Wells Fargo
Bank, and may enter into similar agreements with other entities. Under such
agreements, Shareholder Servicing Agents (including Wells Fargo Bank) as agents
for their customers, will, among other things: answer customer inquiries
regarding account status and history, and the manner in which purchases,
redemptions and exchanges of Fund shares may be effected; assist shareholders in
designating and changing dividend options, account designations and addresses;
provide necessary personnel and facilities to establish and maintain shareholder
accounts and records; assist in processing purchase, redemption and exchange
transactions; arrange for the wiring of money; transfer money in connection with
customer orders to purchase or redeem shares; verify shareholder signatures in
connection with redemption and exchange orders and transfers and changes in
accounts with Approved Banks; furnish (either separately or on an integrated
basis with other reports sent to a shareholder by the Shareholder Servicing
Agent) monthly and year-end statements and confirmations of purchases,
redemptions and exchanges; furnish, on behalf of the Fund, proxy statements,
annual reports, updated prospectuses and other communications to shareholders;
receive, tabulate and send to the Fund proxies executed by shareholders; and
provide such other related services as the Fund or a shareholder may reasonably
request. For these services, a Shareholder Servicing Agent receives a fee, which
may be paid periodically, 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 activity in such accounts during such
period, and the expenses incurred by the Shareholder Servicing Agent. In no
event will the fees, as calculated on an annualized basis for the Fund's then
27 PROSPECTUS
<PAGE> 104
current fiscal year, exceed the lesser of (1) .0.30% of the average daily net
assets of the Fund, represented by shares owned during the period for which
payment is being made by investors with whom the Shareholder Servicing Agent
maintains a servicing relationship, or (2) an amount which equals the maximum
amount payable to the Shareholder Servicing Agent under applicable laws,
regulations or rules including the Rules of Fair Practice of the NASD. In no
event will the portion of such fees that constitutes a "service fee," as that
term is used by the NASD, exceed 0.25% of the Fund's average net asset value.
A Shareholder Servicing Agent may impose certain conditions on its customers,
subject to the terms of this prospectus, in addition to or different from those
imposed by the Fund, such as requiring a minimum initial investment or payment
of a separate fee for additional services. Each Shareholder Servicing Agent will
be required to agree to disclose any fees it may directly charge its customers
who are Fund shareholders and to notify them in writing at least 30 days before
it imposes any transaction fees.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Stephens, located at 111 Center Street, Little Rock, Arkansas 72201, serves as
the Company's and MIT's administrator pursuant to separate Administration
Agreements with the Company and MIT, subject to the overall supervision of the
Board of Directors of the Company and the Board of Trustees of MIT,
respectively. Under the Administration Agreement with the Company, Stephens
provides the Fund with administrative services, including general supervision of
the Fund's operation, coordination of the other services provided to the Fund,
compilation of information for reports to the SEC and the state securities
commissions, preparation of proxy statements and shareholder reports, and
general supervision of data compilation in connection with preparing periodic
reports to the Company's Directors and officers. Stephens also furnishes office
space and certain facilities to conduct the Fund's business, and compensates the
Company's Directors, officers and employees who are affiliated with Stephens.
For these services, Stephens is entitled to a monthly fee at the annual rate of
0.03% of the Fund's average daily net assets from the Fund. Stephens does not
receive a separate administration fee from the Master Portfolio. From time to
time, Stephens may waive its fees from the Fund in whole or in part. Any such
waiver will reduce Fund expenses and, accordingly, have a favorable impact on
the Fund's yield and total return.
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. The Company also has
adopted a Distribution Plan on behalf of the Fund under the SEC's Rule 12b-1
(the "Plan"). Under the Plan, the Fund may defray all or part of the cost of
preparing and printing prospectuses and other promotional materials and of
delivering prospectuses and those materials to prospective Fund shareholders by
paying on an annual basis up to 0.05% of the Fund's average daily net assets.
The Plan provides only for the reimbursement of
PROSPECTUS 28
<PAGE> 105
actual expenses. The Distribution Agreement provides that Stephens shall act as
agent for the Fund for the sale of its shares, and may enter into Selling
Agreements with Selling Agents that wish to make Fund shares available to their
respective customers. The Fund may participate in joint distribution activities
with any of the other funds of the Company, in which event expenses reimbursed
out of the assets of the Fund may be attributable, in part, to the
distribution-related activities of another fund of the Company. Generally, the
expenses attributable to joint distribution activities will be allocated among
the Fund and the other funds of the Company in proportion to their relative net
asset sizes, although the Company's Board of Directors may allocate such
expenses in any other manner that it deems fair and equitable. In addition,
Stephens has established a non-cash compensation program, pursuant to which
broker/dealers or financial institutions that sell shares of the Fund may earn
additional compensation in the form of trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift certificates for
meals or merchandise.
In addition, the Plan also contemplates that, to the extent any fees payable
pursuant to a Shareholder Servicing Agreement (discussed above) are deemed to be
for distribution-related services, such payments are approved and payable
pursuant to the Plan, subject to any limits under applicable law, regulations or
rules, including the NASD rules. Financial institutions acting as Selling
Agents, Shareholder Servicing Agents, or in certain other capacities may be
required to register as dealers pursuant to applicable state securities laws
which may differ from federal law and any interpretations expressed herein.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive their respective
fees owed by the Fund or the pro rata share of the fees owed by the Master
Portfolio 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 yield and total return. Except for the expenses
borne by Wells Fargo Bank and Stephens, the Company bears its pro rata share of
all costs of its operations, including advisory, shareholder servicing, transfer
agency, custody and administration fees, payments pursuant to any Plans, fees
and expenses of its independent auditors and legal counsel, and any
extraordinary expenses. Expenses attributable to the Fund are charged against
the assets of the Fund. General expenses of the Company and MIT are allocated
among all of the funds of the Company, including the Fund, or all of the
portfolios of MIT, including the Master Portfolio, as the case may be, 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 or Trustees of the Company or
MIT deems equitable.
29 PROSPECTUS
<PAGE> 106
TAXES
By complying with the applicable provisions of the Code, and the regulations
promulgated thereunder, the Fund and the Master Portfolio will not be subject to
federal income taxes with respect to net investment income and net realized
capital gains distributed to its shareholders or interest holders as applicable.
The Fund will generally be deemed to own directly its proportionate share of the
assets of the Master Portfolio. Therefore, any interest, dividends, gains or
losses of the Master Portfolio will be "passed through" to the Fund and other
investors in the Master Portfolio. If the Master Portfolio were to accrue but
not distribute any interest, dividends or gains, the Fund would be deemed to
have realized and recognized its proportionate share of interest, dividends, or
gains without receipt of any corresponding distribution. The Master Portfolio
seeks to minimize recognition by investors of interest, dividends or gains
without a corresponding distribution. Dividends from the investment income
(including net short-term capital gains, if any) declared and paid by the Fund
will be taxable as ordinary income to Fund shareholders. Whether you take
dividend payments in cash or have them automatically reinvested in additional
shares, they will be taxable as ordinary income. Generally, dividends and
distributions are taxable to shareholders at the time they are paid. However,
dividends and distributions declared payable in October, November and December
and made payable to shareholders of record in such a month are treated as paid
and are thereby taxable as of December 31, provided that such dividends or
distributions are actually paid no later than January 31 of the following year.
However, you may be eligible to defer the taxation of dividend and capital gain
distributions on Fund shares which are held under a qualified tax-deferred
retirement plan. See "Investing in the Fund - Tax-Deferred Retirement Plans"
above. The Fund intends to pay out substantially all its net investment income
and net realized capital gains (if any) for each year. Corporate shareholders of
the Fund will be eligible for the dividends-received deduction on the dividends
(excluding the net capital gain dividends) paid by the Fund to the extent the
Fund's income is derived from certain dividends received from domestic
corporations. In order to qualify for the dividends-received deduction, a
corporate shareholder must hold Fund shares paying the dividends upon which a
dividend-received deduction is based for at least 46 days.
The Fund, or your Shareholder Servicing Agent on its behalf, will inform you
of the amount and nature of such dividends and capital gains. You should keep
all statements you receive to assist in your personal recordkeeping. The Company
is required by federal law to withhold, subject to certain exemptions, at a rate
of 31% on dividends paid and redemption proceeds (including proceeds from
exchanges) paid or credited to individual shareholders of the Fund, if a
shareholder has not complied with IRS regulations or if a correct Taxpayer
Identification Number, certified when required, is not on file with the Company
or the Transfer Agent. In connection with this withholding requirement, you will
be asked to certify on your Account Application that the social
PROSPECTUS 30
<PAGE> 107
security or taxpayer identification number you provide is correct and that you
are not subject to 31% backup withholding for previous underreporting to the
IRS.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Taxes - Foreign Shareholders" in the SAI.
The foregoing discussion regarding taxes is based on federal tax laws and
regulations which were in effect as of the date of this Prospectus and
summarizes only some of the important federal tax considerations generally
affecting a Fund and its shareholders. It is not intended as a substitute for
careful tax planning; investors should consult their tax advisors with respect
to their specific tax situations as well as with respect to state and local
taxes. Further tax information is contained in the SAI.
31 PROSPECTUS
<PAGE> 108
PROSPECTUS APPENDIX -
ADDITIONAL INVESTMENT POLICIES
FUND INVESTMENTS
The Master Portfolio's investment objective requires that it replicate, to the
extent practicable, the total rate of return of the stocks comprising the S&P
500 Index.
There are 500 common stocks, including Wells Fargo & Company stock, which make
up the S&P 500 Index. As of March 31, 1996, those stocks represented
approximately [71]% of the total market value of all publicly traded common
stocks in the United States. S&P occasionally makes changes in the S&P 500 Index
based on its criteria for inclusion of stocks in the S&P 500 Index. The S&P 500
Index is market-capitalization-weighted so that each stock in the S&P 500 Index
represents its proportion of the total market value of all stocks in the S&P 500
Index.
In making its stock investments, the policy of the Master Portfolio is to
invest its assets in substantially the same stocks, and in substantially the
same percentages, as the S&P 500 Index, including Wells Fargo & Company stock.
The Master Portfolio may avoid investments in, or dispose of stocks of,
companies that have become bankrupt or that otherwise exhibit extreme financial
distress.
Temporary Money Market Investments
The Master Portfolio may have temporary cash balances on account of new
purchases, dividends, interest and reserves for redemptions, which will
generally be less than 5% of the Master Portfolio's portfolio, and which the
Master Portfolio may invest in the following high-quality money market
instruments: (i) short-term obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including government-sponsored
enterprises ("U.S. Government obligations"); (ii) negotiable certificates of
deposit, bankers' acceptances and fixed time deposits and other obligations of
domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the FDIC; (iii) commercial paper rated at the date of purchase "P-1"
by Moody's Investors Service, Inc. ("Moody's") or "A-1+" or "A-1" by S&P, or, if
unrated, of comparable quality as determined by Wells Fargo Bank, as investment
adviser; (iv) non-convertible corporate debt securities (e.g., bonds and
debentures) with remaining maturities at the date of purchase of no more than
one year that are rated at least "Aa" by Moody's or "AA" by S&P; (v) repurchase
agreements; and (vi) short-term, U.S. dollar-denominated obligations of foreign
banks (including U.S. branches) that, at the time of investment: (a) have more
than $10 billion, or the equivalent in other currencies, in total assets; (b)
are among the 75 largest foreign banks in the world as determined on the basis
of
A-1 PROSPECTUS
<PAGE> 109
assets; (c) have branches or agencies in the United States; and (d) in the
opinion of Wells Fargo Bank, as investment adviser, are of comparable quality to
obligations of U.S. banks which may be purchased by the Master Portfolio.
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. 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 interest rates increase and rises when market interest
rates decrease. Certain types of U.S. Government obligations, such as
mortgage-backed securities, are subject to fluctuations in yield or value due to
their structure or contract terms.
Short-Term Corporate Debt Instruments
The Master Portfolio may invest in commercial paper (including variable amount
master demand notes), which refers to short-term, unsecured promissory notes
issued by corporations to finance short-term credit needs. Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes.
The Master Portfolio also may invest in non-convertible corporate debt
securities (e.g., bonds and debentures) with no more than one year remaining to
maturity at the date of
PROSPECTUS A-2
<PAGE> 110
settlement. The Master Portfolio will invest only in such corporate bonds and
debentures that are rated at the time of purchase at least "Aa" by Moody's or
"AA" by S&P.
Floating- and Variable-Rate Instruments
Certain of the debt instruments that the Master Portfolio may purchase bear
interest at rates that are not fixed, but vary with, for example, changes in
specified market rates or indices or specified intervals. Certain of these
instruments may carry a demand feature that would permit the holder to tender
them back to the issuer at par value prior to maturity. The floating- and
variable-rate instruments that the Master Portfolio may purchase include
certificates of participation in such obligations purchased from banks. Wells
Fargo Bank or BGFA as appropriate, will monitor on an ongoing basis the ability
of an issuer of a demand instrument to pay principal and interest on demand.
Events affecting the ability of the issuer of a demand instrument to make
payment when due may occur between the date the Master Portfolio elects to
demand payment and the date payment is due. Such events may affect the ability
of the issuer of the instrument to make payment when due, thereby affecting the
Master Portfolio'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 Master Portfolio may enter into repurchase agreements wherein the seller
of a security to the Master Portfolio agrees to repurchase that security from
the Master Portfolio at a mutually agreed-upon time and price. The period of
maturity is usually quite short, often overnight or a few days, although it may
extend over a number of months. The Master Portfolio may enter into repurchase
agreements only with respect to U.S. Government obligations and other
obligations that are permissible investments for the Master Portfolio. All
repurchase agreements will be fully collateralized based on values that are
marked to market daily. The maturities of the underlying securities in a
repurchase agreement transaction may be greater than one year. If the seller
defaults and the value of the underlying securities has declined, the Master
Portfolio may incur a loss. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the security, the Master Portfolio's disposition
of the security may be delayed or limited. The Master Portfolio only will enter
into repurchase agreements with registered broker/dealers and commercial banks
that meet guidelines established by MIT's Board of Trustees and that are not
affiliated with the Master Portfolio's investment adviser. The Master Portfolio
may participate in pooled repurchase agreement transactions with other funds
advised by Wells Fargo Bank.
A-3 PROSPECTUS
<PAGE> 111
Futures Contracts and Options Transactions - General
A futures transaction involves a firm agreement to buy or sell a commodity or
financial instrument at a particular price on a specified future date, while an
option transaction generally involves a right, which may or may not be
exercised, to buy or sell a commodity of financial instrument at a particular
price on a specified future date. Futures contacts and options are standardized
and exchange-traded, where the exchange serves as the ultimate counterparty for
all contracts. Consequently, the only credit risk on futures contracts is the
creditworthiness of the exchange. Futures contracts, however, are subject to
market risk (i.e., exposure to adverse price changes).
The Master Portfolio may trade futures contracts and options on futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange.
The Master Portfolios' futures transactions must constitute permissible
transactions pursuant to regulations promulgated by the Commodity Futures
Trading Commission. In addition, the Master Portfolio may not engage in futures
transactions if the sum of the amount of initial margin deposits and premiums
paid for unexpired options on futures contracts, other than those contracts
entered into for bona fide hedging purposes, would exceed 5% of the liquidation
value of the Master Portfolio's assets, after taking into account unrealized
profits and unrealized losses on such contracts; provided, however, that in the
case of an option on a futures contract that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
liquidation amount. Pursuant to regulations and/or published positions of the
SEC, the Master Portfolio may be required to segregate cash, U.S. Government
obligations or other high-quality debt instruments in connection with its
futures transactions in an amount generally equal to the entire value of the
underlying commitment.
Initially, when purchasing or selling futures contracts the Master Portfolio
will be required to deposit with the Master Portfolio's custodian in the
broker's name an amount of cash or cash equivalents up to approximately 10% of
the contract amount. This amount is subject to change by the exchange or board
of trade on which the contract is traded, and members of such exchange or board
of trade may impose their own higher requirements. This amount is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract that is returned to the Master Portfolio upon
termination of the futures position, assuming all contractual obligations have
been satisfied. Subsequent payments, known as "variation margin", to and from
the broker will be made daily as the price of the index or securities underlying
the futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable. At any time prior to the expiration of a
futures contract, the Master Portfolio may elect to close the position by taking
an opposite position, at the then prevailing price, thereby terminating its
existing position in the contract.
PROSPECTUS A-4
<PAGE> 112
Although the Master Portfolio intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contracts prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the Master
Portfolio and the Fund to substantial losses. If it is not possible, or the
Master Portfolio determines not, to close a futures position in anticipation of
adverse price movements, the Master Portfolio will be required to make daily
cash payments of variation margin.
An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer (i.e.,
seller) of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by both the writer and the holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account in the amount by which the market price of the futures contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the futures contract.
Stock Index Options. The Master Portfolio may purchase and write (i.e., sell)
put and call options on stock indices as a substitute for comparable market
positions in the underlying securities. A stock index fluctuates with changes in
the market values of the stocks included in the index. The aggregate premiums
paid on all options purchased may not exceed 20% of a Master Portfolio's total
assets and the value of the options written may not exceed 10% of the value of
the Master Portfolio's total assets.
The effectiveness of purchasing or writing stock index options will depend
upon the extent to which price movements in the Master Portfolio's portfolio
correlate with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index rather than the
price of a particular stock, whether the Master Portfolio will realize a gain or
loss from purchasing or writing stock index options depends upon movements in
the level of stock prices in the stock market generally or, in the case of
certain indices, in an industry or market segment, rather than movements in the
price of particular stock.
When the Master Portfolio writes an option on a stock index, the Master
Portfolio will place in a segregated account with the Master Portfolio's
custodian cash or, U.S. Government obligations or other high-quality debt
instruments in an amount at least
A-5 PROSPECTUS
<PAGE> 113
equal to the market value of the underlying stock index and will maintain the
account while the option is open or otherwise will cover the transaction.
Stock Index Futures and Options on Stock Index Futures. The Master Portfolio
may invest in stock index futures and options on stock index futures as a
substitute for a comparable market position in the underlying securities. A
stock index future obligates the seller to deliver (and the purchaser to take),
effectively, an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. With respect to
stock indices that are permitted investments, the Master Portfolio intends to
purchase and sell futures contracts on the stock index for which it can obtain
the best price with consideration also given to liquidity.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. The Master Portfolio may invest in interest-rate futures contracts
and options on interest-rate futures contracts as a substitute for a comparable
market position in the underlying securities. The Master Portfolio may also sell
options on interest-rate futures contracts as part of closing purchase
transactions to terminate its options positions. No assurance can be given that
such closing transactions can be effected or the degree of correlation between
price movements in the options on interest rate futures and price movements in
the Master Portfolio's portfolio securities which are the subject of the
transaction.
Interest-Rate and Index Swaps. The Master Portfolio may enter into
interest-rate and index swaps in pursuit of its investment objective.
Interest-rate swaps involve the exchange by the Master Portfolio with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating-rate payments for fixed-rate payments). Index swaps
involve the exchange by the Master Portfolio with another party of cash flows
based upon the performance of an index of securities or a portion of an index of
securities that usually include dividends or income. In each case, the exchange
commitments can involve payments to be made in the same currency or in different
currencies. The Master Portfolio will usually enter into swaps on a net basis.
In so doing, the two payment streams are netted out, with the Master Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. If the Master Portfolio enters into a swap, it will maintain a
segregated account on a gross basis, unless the contract provides for a
segregated account on a net basis. If there is a default by the other party to
such a transaction, the Master Portfolio will have contractual remedies pursuant
to the agreements related to the transaction.
The use of interest-rate and index swaps is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. There is no limit, except as
provided below, on the amount of swap transactions that may be entered into by
the Master Portfolio. These transactions generally do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps generally is limited to the net amount
PROSPECTUS A-6
<PAGE> 114
of payments that the Master Portfolio is contractually obligated to make. There
is also a risk of a default by the other party to a swap, in which case the
Master Portfolio may not receive net amount of payments that the Master
Portfolio contractually is entitled to receive.
The permissible investments described herein are considered "derivative"
securities because their value is derived, at least in part, from the price of
another security or a specified asset, index or rate. The futures contracts and
options on futures contracts that the Master Portfolio may purchase are
considered derivatives. The Master Portfolio may only purchase or sell these
contracts or options as substitutes for comparable market positions in the
underlying securities. Also, asset-backed securities issued or guaranteed by
U.S. Government agencies or instrumentalities and certain floating- and
variable-rate instruments can be considered derivatives. Some derivatives may be
more sensitive than direct securities to changes in interest rates or sudden
market moves. Some derivatives also may be susceptible to fluctuations in yield
or value due to their structure or contract terms.
Wells Fargo Bank and BGFA use a variety of internal risk management procedures
to ensure that derivatives use is consistent with the investment objectives of
the Fund and Master Portfolio, does not expose the Fund or Master Portfolio to
undue risk and is closely monitored. These procedures include providing periodic
reports to the Board of Trustees of MIT and the Board of Directors of the
Company concerning the use of derivatives.
The use of derivatives by the Master Portfolio also is subject to broadly
applicable investment policies. For example, a Master Portfolio may not invest
more than a specified percentage of its assets in "illiquid securities,"
including those derivatives that do not have active secondary markets. Nor may
the Master Portfolio use certain derivatives without establishing adequate
"cover" in compliance with SEC positions regarding the use of leverage.
Foreign Obligations
The Master Portfolio may invest up to 25% or more 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
A-7 PROSPECTUS
<PAGE> 115
the ability to enforce contractual obligations with respect to, securities of
issuers located in those countries.
Loans of Portfolio Securities
The Master Portfolio may lend securities from its portfolio to brokers,
dealers and financial institutions (but not individuals) if cash, U.S.
Government obligations or other high-quality debt instruments equal to at least
100% of the current market value of the securities loan (including accrued
interest thereon) plus the interest payable to the Master Portfolio with respect
to the loan is maintained with the Master Portfolio. In determining whether to
lend a security to a particular broker, dealer or financial institution, the
Master Portfolio's investment adviser will consider all relevant facts and
circumstances, including the creditworthiness of the broker, dealer or financial
institution. Any loans of portfolio securities will be fully collateralized
based on values that are marked to market daily. Any securities that the Master
Portfolio may receive as collateral will not become part of the Master
Portfolio's portfolio at the time of the loan and, in the event of a default by
the borrower, the Master Portfolio, if permitted by law, will dispose of such
collateral except for such part thereof that is a security in which the Master
Portfolio is permitted to invest. During the time securities are on loan, the
borrower will pay the Master Portfolio any accrued income on those securities,
and the Master Portfolio may invest the cash collateral and earn additional
income or receive an agreed-upon fee from a borrower that has delivered
cash-equivalent collateral. The Master Portfolio will not lend securities having
a value that exceeds one-third of the current value of its total assets. Loans
of securities by the Master Portfolio will be subject to termination at the
Master Portfolio's or the borrower's option. The Master Portfolio may pay
reasonable administrative and custodial fees in connection with a securities
loan and may pay a negotiated portion of the interest or fee earned with respect
to the collateral to the borrower or the placing broker. Borrowers and placing
brokers may not be affiliated, directly or indirectly, with the Company, MIT,
the investment adviser, or the Distributor.
INVESTMENT POLICIES
The Fund's investment objective, as set forth in the first paragraph of the
"How The Fund Works - Investment Objectives and Policies" section, is
fundamental; that is, it may not be changed without approval by the vote of the
holders of a majority of the Fund's outstanding voting securities, as described
under "Capital Stock" in the SAI. In addition, any fundamental investment policy
may not be changed without such shareholder approval. If the Board of Directors
determines, however, that the Fund's investment objective can best be achieved
by a substantive change in a non-fundamental investment policy or strategy, the
Company's Board may make such change without shareholder approval and will
disclose any such material changes in the then-current prospectus.
PROSPECTUS A-8
<PAGE> 116
As matters of fundamental policy, the Fund may: (i) not purchase securities of
any issuer (except securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities) if as a result more than 5% of the value of the
total assets of the Fund would be invested in the securities of such issuer or
the Fund would own more than 10% of the outstanding voting securities of such
issuer, provided that a Fund may invest all its assets in a diversified,
open-end management investment company, or a series thereof, with the same
investment objective, policies and restrictions as such Fund, without regard to
the limitations set forth in this clause (i); (ii) borrow from banks up to 20%
of the current value of its net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of up to 20%
of the current value of its net assets (but investments may not be purchased
while any such outstanding borrowing in excess of 5% of its net assets exists);
(iii) make loans of portfolio securities in accordance with its investment
policies; and (iv) not invest 25% or more of its assets (i.e., concentrate) in
any particular industry, except that (a) the Fund is permitted to concentrate
its assets in any one industry for the same period as does the S&P 500 Index (b)
the Fund may invest 25% or more of its assets in obligations of the U.S.
Government, its agencies or instrumentalities, and (c) the Fund may invest all
of its assets in a diversified, open-end management investment company or a
series thereof, with the same investment objective, policies and restrictions as
the Fund, without regard to these limitations. With respect to Fundamental
Policy (ii) above, the Fund presently does not intend to put at risk more than
5% of its assets during the coming year. With respect to Fundamental Policy (i),
it may be possible that the Company would own more than 10% of the outstanding
voting securities of an issuer.
As a matter of non-fundamental policy, the Fund may not invest more than 15%
of the current value of its net assets in illiquid securities, including
repurchase agreements having maturities of more than seven days.
INVESTMENT POLICIES -- THE MASTER PORTFOLIO
As matters of fundamental policy, the Master Portfolio may: (i) not purchase
securities of any issuer (except securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if as a result more than 5% of
the value of the total assets of the Master Portfolio would be invested in the
securities of such issuer or the Master Portfolio would own more than 10% of the
outstanding voting securities of such issuer; (ii) borrow from banks up to 20%
of the current value of its net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of up to 20%
of the current value of its net assets (but investments may not be purchased
while any such outstanding borrowing in excess of 5% of its net assets exists);
(iii) make loans of portfolio securities in accordance with its investment
policies; and (iv) not invest 25% or more of its assets (i.e., concentrate) in
any particular industry, except that (a) the Master Portfolio is permitted to
concentrate its assets in any one industry for the same period as does the S&P
500 Index (b) the Master Portfolio
A-9 PROSPECTUS
<PAGE> 117
may invest 25% or more of its assets in obligations of the U.S. Government, its
agencies or instrumentalities. With respect to Fundamental Policy (ii) above,
the Master Portfolio presently does not intend to put at risk more than 5% of
its assets during the coming year. With respect to Fundamental Policy (i), it
may be possible that MIT would own more than 10% of the outstanding voting
securities of an issuer.
As a matter of non-fundamental policy, the Master Portfolio may not invest
more than 15% of the current value of its net assets in illiquid securities,
including repurchase agreements having maturities of more than seven days.
PROSPECTUS A-10
<PAGE> 118
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<PAGE> 119
SPONSOR, DISTRIBUTOR AND ADMINISTRATOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
INVESTMENT ADVISER, TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
SUB-INVESTMENT ADVISER
BZW Barclays Global Fund Advisors
45 Fremont Street
San Francisco, California 94105
CUSTODIAN
BZW Barclays Global Investors, N.A.
45 Fremont Street
San Francisco, California 94105
LEGAL COUNSEL
Morrison & Foerster
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
For more information about the Fund, simply call 1-800-222-8222, or write:
Stagecoach Funds, Inc.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, California 94120-7066
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank, BGFA or BGI
- are NOT deposits or obligations of such banks or entities LOGO
- involve investment risk, including possible loss
of principal
</TABLE>
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<PAGE> 120
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<PAGE> 121
<TABLE>
<S> <C>
[STAGECOACH LOGO]
P.O. Box 7066
San Francisco, CA 94120-7066
</TABLE>
STAGECOACH FUNDS:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- are NOT FDIC insured
- are NOT guaranteed by Wells Fargo Bank, BGFA or BGI
- are NOT deposits or obligations of the such banks or
entities LOGO
- involve investment risk, including possible loss
of principal
</TABLE>
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<PAGE> 122
STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 29, 1996
U.S. GOVERNMENT ALLOCATION FUND
CORPORATE STOCK FUND
ASSET ALLOCATION FUND
------------------------------------
Stagecoach Funds, Inc. is a professionally managed, open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about three of the funds in the Stagecoach Family of Funds. This
SAI is not a prospectus, but supplements and should be read in conjunction with
the current Prospectus relating to the U.S. GOVERNMENT ALLOCATION FUND, the
CORPORATE STOCK FUND and the ASSET ALLOCATION FUND (each, a "Fund" and
collectively, the "Funds") of Stagecoach Funds, Inc. (the "Company") dated
April 29, 1996, as it may be revised from time to time. All terms used in this
SAI that are defined in each Fund's Prospectus will have the meaning assigned
in such Prospectus. A copy of the Prospectus for each Fund may be obtained
without charge by writing Stephens Inc., the Company's sponsor, administrator
and distributor, at 111 Center Street, Little Rock, Arkansas 72201, or calling
the Transfer Agent at the telephone number indicated above.
As described in each Prospectus, each of these Funds invests all of
its assets in a separate Master Portfolio of Master Investment Trust ("MIT"),
an open-end management investment company, having the same investment objective
as the Fund bearing the corresponding name. Each of the Funds, other than the
Corporate Stock Fund, offers two classes (each a "Class") of shares -- Class A
Shares and Class B Shares. This SAI relates to the shares offered by the
Corporate Stock Fund and to both Classes of shares offered by the other Funds.
The investment objective of each Fund is described in its Prospectus under the
Section entitled "How the Funds Work -- Investment Objectives and Policies."
Wells Fargo Bank, N.A. ("Wells Fargo Bank") is investment adviser and
BZW Barclays Global Fund Advisors ("BGFA"), an affiliate of Barclays Bank PLC
("Barclays"), is investment sub-adviser to each of the Master Portfolios of
MIT. Stephens Inc. ("Stephens") serves as the Company's administrator and as
distributor of each Fund's shares.
------------------------------------
1
<PAGE> 123
TABLE OF CONTENTS
Statement of Additional Information
<TABLE>
PAGE NO
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 3
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES . . . . . . . . . . . . . . . 8
MANAGEMENT OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 14
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
CALCULATION OF YIELD AND TOTAL RETURN . . . . . . . . . . . . . . . . . . 23
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . 29
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 29
FEDERAL INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FUND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
CUSTODIANS AND TRANSFER AND DIVIDEND DISBURSING AGENT . . . . . . . . . . 38
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . 39
FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SAI APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
2
<PAGE> 124
INTRODUCTION
The Company is a registered investment company consisting of eight
series including the Funds. MIT is a registered investment company consisting
of thirteen series including the Master Portfolios. Each Fund invests all of
its assets in the corresponding Master Portfolio of MIT (as illustrated below),
which has the same investment objectives as the related Fund.
Fund Corresponding Master Portfolio
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U.S. Government Allocation Fund U.S. Government Allocation Master Portfolio
Corporate Stock Fund Corporate Stock Master Portfolio
Asset Allocation Fund Asset Allocation Master Portfolio
INVESTMENT RESTRICTIONS
General. Each Master Portfolio has the same investment objective as
its related Fund. Each Fund may withdraw its investment in the corresponding
Master Portfolio at any time if the Board of Directors of the Company
determines that such action is in the best interests of the Fund and its
shareholders. Upon such withdrawal, the Company's Board of Directors would
consider alternative investments, including investing all of the Fund's assets
in another investment company with the same investment objective as the Fund or
hiring an investment adviser to manage the Fund's assets in accordance with the
investment policies and restrictions described in the Fund's Prospectus and
this SAI.
Investment Restrictions of the Funds. Each Fund has adopted the
following investment restrictions, all of which are fundamental policies; that
is, they may not be changed without approval by the vote of the holders of a
majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the outstanding voting securities of such Fund. Whenever a
Fund is requested to vote on a fundamental policy of the Master Portfolio in
which it invests, such Fund holds a meeting of Fund shareholders and casts its
votes as instructed by such Fund's shareholders.
None of the Funds may:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of any Fund's investments in that industry would
be 25% or more of the current value of its total assets, provided that there is
no limitation with respect to investments in (i) obligations of the United
States Government, its agencies or instrumentalities, (ii) in the case of the
Corporate Stock Fund and the Asset Allocation Fund, any industry in which the
S&P 500 Index becomes concentrated to the same degree during the same period,
and (iii) in the case of the Asset Allocation Fund, money market instruments
invested in the
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banking industry (but the Fund will not do so unless the SEC staff confirms
that it does not object to the Fund reserving freedom of action to concentrate
investments in the banking industry); and provided further, that a Fund may
invest all of its assets in a diversified, open-end management investment
company, or a series thereof, with substantially the same investment objective,
policies and restrictions as such Fund, without regard to the limitations set
forth in this paragraph (1);
(2) purchase or sell real estate or real estate limited
partnerships (other than securities secured by real estate or interests therein
or securities issued by companies that invest in real estate or interests
therein);
(3) purchase or sell commodities or commodity contracts; except
that each Fund may purchase and sell (i.e., write) options, forward contracts,
futures contracts, including those relating to indices, and options on futures
contracts or indices, and may participate in interest rate and index swaps;
(4) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;
(5) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and except for margin payments in
connection with transactions in options, forward contracts, futures contracts,
including those relating to indices, and options on futures contracts or
indices) or make short sales of securities;
(6) underwrite securities of other issuers, except to the extent
that the purchase of 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; and provided further, that the purchase by a Fund of securities
issued by a diversified, open-end management investment company, or a series
thereof, with substantially the same investment objective, policies and
restrictions as such Fund shall not constitute an underwriting for purposes of
this paragraph (6);
(7) make investments for the purpose of exercising control or
management; provided that a Fund may invest all its assets in a diversified,
open-end management investment company, or a series thereof, with substantially
the same investment objective, policies and restrictions as such Fund, without
regard to the limitations set forth in this paragraph (7);
(8) issue senior securities, except to the extent the activities
permitted in Investment Restrictions Nos. 3 and 5 may be deemed to give rise to
a senior security but do not violate the provisions of section 18 of the 1940
Act, and except that each Fund may borrow up to 20% of the current value of
each such Fund's net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 20% of
the current value of each such Fund's net assets (but investments
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may not be purchased by such Funds while any such outstanding borrowings exceed
5% of the respective Fund's net assets);
(9) write, purchase or sell puts, calls, straddles, spreads,
warrants, options or any combination thereof, except that each Fund may engage
in options transactions to the extent permitted in Investment Restrictions Nos.
3 and 5, and except that each Fund may purchase securities with put rights in
order to maintain liquidity; or
(10) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, more than 5% of the value of the Fund's total assets would be invested
in the securities of any one issuer or the Fund's ownership would be more than
10% of the outstanding voting securities of such issuer, provided that a Fund
may invest all its assets in a diversified, open-end management investment
company, or a series thereof, with substantially the same investment objective,
policies and restrictions as such Fund, without regard to the limitations set
forth in this paragraph (10).
Each Fund may make loans in accordance with their investment policies.
As a fundamental policy, each Fund may invest, notwithstanding any
other investment restrictions (whether or not fundamental), all of its assets
in the securities of a single open-end, management investment company with
substantially the same fundamental investment objectives, policies and
restrictions as such Fund.
Each Fund is subject to the following non-fundamental policies which
may be changed by a majority vote of the Board of Directors of the Company at
any time and without approval of the shareholders.
No Fund may:
(1) purchase or retain securities of any issuer if the officers or
Directors of the Company or the investment adviser owning beneficially more
than one-half of one percent (0.50%) of the securities of the issuer together
owned beneficially more than 5% of such securities;
(2) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence
at least three years, or the securities are backed by the assets and revenues
of any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets;
(3) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of its aggregate investment in such classes of securities
will exceed 5% of its total assets; or
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(4) invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.
Investment Restrictions of the Master Portfolios. Each Master
Portfolio has adopted the following investment restrictions, all of which are
fundamental policies; that is, they may not be changed without approval by the
vote of the holders of a majority (as defined in the 1940 Act) of the
outstanding voting securities of such Master Portfolio.
None of the Master Portfolios may:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of any Master Portfolio's investments in that
industry would be 25% or more of the current value of its total assets,
provided that there is no limitation with respect to investments in (i)
obligations of the United States Government, its agencies or instrumentalities,
(ii) in the case of the Corporate Stock Master Portfolio and the Asset
Allocation Master Portfolio, any industry in which the S&P 500 Index becomes
concentrated to the same degree during the same period, and (iii) in the case
of the Asset Allocation Master Portfolio, money market instruments invested in
the banking industry (but the Master Portfolio will not do so unless the SEC
staff confirms that it does not object to the Master Portfolio reserving
freedom of action to concentrate investments in the banking industry);
(2) purchase or sell real estate or real estate limited
partnerships (other than securities secured by real estate or interests therein
or securities issued by companies that invest in real estate or interests
therein);
(3) purchase or sell commodities or commodity contracts; except
that each Master Portfolio may purchase and sell (i.e., write) options, forward
contracts, futures contracts, including those relating to indices, and options
on futures contracts or indices, and may participate in interest rate and index
swaps;
(4) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;
(5) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and except for margin payments in
connection with transactions in options, forward contracts, futures contracts,
including those relating to indices, and options on futures contracts or
indices) or make short sales of securities;
(6) underwrite securities of other issuers, except to the extent
that the purchase of 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 Master Portfolio's investment program may be deemed to
be an underwriting;
(7) make investments for the purpose of exercising control or
management;
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(8) issue senior securities, except to the extent the activities
permitted in Investment Restrictions Nos. 3 and 5 may be deemed to give rise to
a senior security but do not violate the provisions of section 18 of the 1940
Act, and except that each Master Portfolio may borrow up to 20% of the current
value of each such Master Portfolio's net assets for temporary purposes only in
order to meet redemptions, and these borrowings may be secured by the pledge of
up to 20% of the current value of each such Master Portfolio's net assets (but
investments may not be purchased by such Master Portfolios while any such
outstanding borrowings exceed 5% of the respective Master Portfolio's net
assets);
(9) write, purchase or sell puts, calls, straddles, spreads,
warrants, options or any combination thereof, except that each Master Portfolio
may engage in options transactions to the extent permitted in Investment
Restrictions Nos. 3 and 5, and except that each Master Portfolio may purchase
securities with put rights in order to maintain liquidity; or
(10) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, more than 5% of the value of the Master Portfolio's total assets would
be invested in the securities of any one issuer or the Master Portfolio's
ownership would be more than 10% of the outstanding voting securities of such
issuer.
Each Master Portfolio may make loans in accordance with their
investment policies.
Each Master Portfolio is subject to the following non-fundamental
policies which may be changed by a majority vote of the Board of Trustees of
MIT at any time and without approval of the shareholders.
No Master Portfolio may:
(1) purchase or retain securities of any issuer if the officers or
Directors of MIT or Wells Fargo Bank owning beneficially more than one-half of
one percent (0.50%) of the securities of the issuer together owned beneficially
more than 5% of such securities;
(2) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets;
(3) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers
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which are not readily marketable if by reason thereof the value of its
aggregate investment in such classes of securities will exceed 5% of its total
assets; or
(4) invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.
In addition, the Master Portfolios 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
and Wells Fargo Bank will waive its advisory fees for that portion of the
Master Portfolios' assets so invested, except when such purchase is part of a
plan of merger, consolidation, reorganization or acquisition.
MIT may make commitments more restrictive than the restrictions listed
above, so as to permit the sale of shares of a feeder fund that invests in the
Master Portfolio in certain states. Should MIT determine that a commitment is
no longer in the best interest of the Master Portfolio and its interest
holders, MIT reserves the right to revoke the commitment by terminating the
sale of such Master Portfolio's shares in the state involved.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
PORTFOLIO SECURITIES. To the extent set forth in the Prospectus and
SAI, each Master Portfolio may invest in the securities described below.
Asset Allocation Model. A key component of the Asset Allocation Model
is a set of assumptions concerning expected risk and return and investor
attitudes toward risk which are incorporated into the asset allocation
decision. The principal inputs of financial data to the Asset Allocation Model
currently are (i) consensus estimates of the earnings, dividends and payout
ratios on a broad cross-section of common stocks as reported by independent
financial reporting services which survey a broad cross-section of Wall Street
analysts, (ii) the estimated current yield to maturity on new long-term
corporate bonds rated "AA" by S&P, (iii) the present yield on money market
instruments, (iv) the historical statistical standard deviation in investment
return for each class of asset, and (v) the historical statistical correlation
of investment returns among the various asset classes in which the Asset
Allocation Master Portfolio invests. Using these data, the Asset Allocation
Model is run daily to determine the recommended asset allocation. The model's
recommendations are presently made in 10% increments.
Unrated Investments. Each Master Portfolio may purchase instruments
that are not rated if, in the opinion of Wells Fargo Bank, such obligations are
of investment quality comparable to other rated investments that are permitted
to be purchased by such Master Portfolio. After purchase by a Master
Portfolio, a security may cease to be rated or its rating may be reduced below
the minimum required for purchase by such Master Portfolio.
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Neither event will require a sale of such security by such Master Portfolio.
To the extent the ratings given by Moody's or S&P may change as a result of
changes in such organizations or their rating systems, each Master Portfolio
will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in its 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
certificates of participation, commercial paper and other short-term
obligations) which the Master Portfolios 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 such Fund may be used for letter of credit-backed investments.
Pass-Through Obligations. The Master Portfolios may invest in
pass-through obligations that are supported by the full faith and credit of the
U.S. Government (such as those issued by the Government National Mortgage
Association) or those that are guaranteed by an agency or instrumentality of
the U.S. Government or government-sponsored enterprise (such as the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation) or
bonds collateralized by any of the foregoing.
When-Issued Securities. Certain of the securities in which the U.S.
Government Allocation Master Portfolio and the Asset Allocation Master
Portfolio 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. These Master Portfolios only will make commitments to
purchase securities on a when-issued basis with the intention of actually
acquiring the securities, but may sell them before the settlement date if it is
deemed advisable. When-issued securities are subject to market fluctuation,
and no income accrues to the purchaser during the period prior to issuance.
The purchase price and the interest rate that will be received on debt
securities are fixed at the time the purchaser enters into the commitment.
Purchasing a security on a when-issued basis can involve a risk that the market
price at the time of delivery may be lower than the agreed-upon purchase price,
in which case there could be an unrealized loss at the time of delivery.
Each Master Portfolio will segregate cash, U.S. Government obligations
or other high-quality debt instruments in an amount at least equal in value to
the Master Portfolio's commitments to purchase when-issued securities. If the
value of these assets declines, the Master Portfolio will segregate additional
liquid assets on a daily basis so that the value of the segregated assets is
equal to the amount of such commitments.
Loans of Portfolio Securities. All of the Master Portfolios may lend
securities from their portfolios to brokers, dealers and financial institutions
(but not individuals) if
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cash, U.S. Government obligations or other high-quality debt instruments equal
to at least 100% of the current market value of the securities loan (including
accrued interest thereon) plus the interest payable to such Master Portfolio
with respect to the loan is maintained with the Master Portfolio. In
determining whether to lend a security to a particular broker, dealer or
financial institution, Wells Fargo Bank will consider all relevant facts and
circumstances, including the creditworthiness of the broker, dealer, or
financial institution. Any loans of portfolio securities will be fully
collateralized based on values that are marked to market daily. The Master
Portfolios will not enter into any portfolio security lending arrangement
having a duration of longer than one year. Any securities that a Master
Portfolio may receive as collateral will not become part of the Master
Portfolio's portfolio at the time of the loan and, in the event of a default by
the borrower, the Master Portfolio will, if permitted by law, dispose of such
collateral except for such part thereof that is a security in which the Master
Portfolio is permitted to invest. During the time securities are on loan, the
borrower will pay the Master Portfolio any accrued income on those securities,
and the Master Portfolio may invest the cash collateral and earn additional
income or receive an agreed-upon fee from a borrower that has delivered
cash-equivalent collateral. None of the Master Portfolios will lend securities
having a value that exceeds 33 1/3% of the current value of its total assets.
Loans of securities by any of the Master Portfolios will be subject to
termination at the Master Portfolio's or the borrower's option. The Master
Portfolios may pay reasonable administrative and custodial fees in connection
with a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with the Company, MIT, its Adviser, or its Distributor.
Futures Contracts and Options Transactions - General. A futures
transaction involves a firm agreement to buy or sell a commodity or financial
instrument at a particular price on a specified future date, while an option
transaction generally involves a right, which may or may not be exercised, to
buy or sell a commodity or financial instrument at a particular price on a
specified future date. Futures contracts and options are standardized and
exchange-traded, where the exchange serves as the ultimate counterparty for all
contracts. Consequently, the only credit risk on futures contracts is the
market risk (i.e., exposure to adverse price changes).
The Master Portfolios may trade futures contracts and options on
futures contracts in U.S. domestic markets, such as the Chicago Board of Trade
and the International Monetary Market of the Chicago Mercantile Exchange.
The Master Portfolios' futures transactions must constitute
permissible transactions pursuant to regulations promulgated by the Commodity
Futures Trading Commission. In addition, the Master Portfolios may not engage
in futures transactions if the sum of the amount of initial margin deposits and
premiums paid for unexpired options on futures contracts, other than those
contracts entered into for bona fide hedging purposes, would exceed 5% of the
liquidation value of a Master Portfolio's assets, after
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taking into account unrealized profits and unrealized losses on such contracts;
provided, however, that in the case of an option on a futures contract that is
in-the-money at the time of purchase, the in-the-money amount may be excluded
in calculating the 5% liquidation amount. Pursuant to regulations and/or
published positions of the Securities and Exchange Commission, each Fund may be
required to segregate cash or high quality money market instruments in
connection with its futures transactions in an amount generally equal to the
entire value of the underlying security.
Initially, when purchasing or selling futures contracts a Master
Portfolio will be required to deposit with the Master Portfolio's custodian in
the broker's name an amount of cash or cash equivalents up to approximately 10%
of the contract amount. This amount is subject to change by the exchange or
board of trade on which the contract is traded, and members of such exchange or
board of trade may impose their own higher requirements. This amount is known
as "initial margin" and is in the nature of a performance bond or good faith
deposit on the contract that is returned to the Fund upon termination of the
futures position, assuming all contractual obligations have been satisfied.
Subsequent payments, known as "variation margin", to and from the broker will
be made daily as the price of the index or securities underlying the futures
contract fluctuates, making the long and short positions in the futures
contract more or less valuable. At any time prior to the expiration of a
futures contract, a Master Portfolio may elect to close the position by taking
an opposite position, at the then prevailing price, thereby terminating its
existing position in the contract.
Although the Master Portfolios intend to purchase or sell futures
contracts only if there is an active market for such contracts, no assurance
can be given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount
of fluctuation permitted in futures contract prices during a single trading
day. Once the daily limit has been reached in a particular contract, no trades
may be made that day at a price beyond that limit or trading may be suspended
for specified periods during the trading day. Futures contracts prices could
move to the limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting a Master Portfolio to substantial losses. If it is not
possible, or a Master Portfolio determines not, to close a futures position in
anticipation of adverse price movements, the Master Portfolio will be required
to make daily cash payments of variation margin.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the option exercise period.
The writer (i.e., seller) of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a
long position if the option is a put). Upon exercise of the option, the
assumption of offsetting futures positions by both the writer and the holder of
the option will be accompanied by delivery of the accumulated cash balance in
the writer's futures margin account in the amount by which the market price of
the futures contract, at exercise,
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exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the futures contract.
Stock Index Options. The Master Portfolios may purchase and write
(i.e., sell) put and call options on stock indices as a substitute for
comparable market positions in the underlying securities. A stock index
fluctuates with changes in the market values of the stocks included in the
index. The aggregate premiums paid on all options purchased may not exceed 20%
of a Master Portfolio's total assets and the value of the options written may
not exceed 10% of the value of the Master Portfolio's total assets.
The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in a Master Portfolio's
portfolio correlate with price movements of the stock index selected. Because
the value of an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether a Master Portfolio will
realize a gain or loss from purchasing or writing stock index options depends
upon movements in the level of stock prices in the stock market generally or,
in the case of certain indices, in an industry or market segment, rather than
movements in the price of particular stock.
When a Master Portfolio writes an option on a stock index, the Master
Portfolio will place in a segregated account with the Master Portfolio's
custodian cash or liquid securities in an amount at least equal to the market
value of the underlying stock index and will maintain the account while the
option is open or otherwise will cover the transaction.
Stock Index Futures and Options on Stock Index Futures. Each Master
Portfolio may invest in stock index futures and options on stock index futures
as a substitute for a comparable market position in the underlying securities.
A stock index future obligates the seller to deliver (and the purchaser to
take), effectively, an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks in the index is made. With
respect to stock indices that are permitted investments, each Master Portfolio
intends to purchase and sell futures contracts on the stock index for which it
can obtain the best price with consideration also given to liquidity.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. Each Master Portfolio may invest in interest-rate futures contracts
and options on interest-rate futures contracts as a substitute for a comparable
market position in the underlying securities. Each Master Portfolio may also
sell options on interest-rate futures contracts as part of closing purchase
transactions to terminate its options positions. No assurance can be given
that such closing transactions can be effected or as to the degree of
correlation between price movements in the options on interest rate futures and
price movements in the Master Portfolio's portfolio securities which are the
subject of the transaction.
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Interest-Rate and Index Swaps. Each Master Portfolio may enter into
interest-rate and index swaps in pursuit of its investment objective.
Interest-rate swaps involve the exchange by a Master Portfolio with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating-rate payments for fixed-rate payments). Index swaps
involve the exchange by the Master Portfolio with another party of cash flows
based upon the performance of an index of securities or a portion of an index
of securities that usually include dividends or income. In each case, the
exchange commitments can involve payments to be made in the same currency or in
different currencies. Each Master Portfolio will usually enter into swaps on a
net basis. In so doing, the two payment streams are netted out, with the
Master Portfolio receiving or paying, as the case may be, only the net amount
of the two payments. If a Master Portfolio enters into a swap, it will
maintain a segregated account on a gross basis, unless the contract provides
for a segregated account on a net basis. If there is a default by the other
party to such a transaction, the Master Portfolio will have contractual
remedies pursuant to the agreements related to the transaction.
The use of interest-rate and index swaps is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. There is no limit,
except as provided below, on the amount of swap transactions that may be
entered into by a Master Portfolio. These transactions generally do not
involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to swaps generally is limited to the
net amount of payments that the Master Portfolio is contractually obligated to
make. There is also a risk of a default by the other party to a swap, in which
case the Fund may not receive net amount of payments that the Master Portfolio
contractually is entitled to receive.
Some of the permissible investments described herein are considered
"derivative" securities because their value is derived, at least in part, from
the price of another security or a specified asset, index or rate. For
example, the futures contracts and options on futures contracts that the Master
Portfolios may purchase are considered derivatives. The Master Portfolios may
only purchase or sell these contracts or options as substitutes for comparable
market positions in the underlying securities. Also, asset-backed securities
issued or guaranteed by U.S. Government agencies or instrumentalities and
certain floating- and variable-rate instruments can be considered derivatives.
Some derivatives may be more sensitive than direct securities to changes in
interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms.
Wells Fargo Bank and BGFA use a variety of internal risk management
procedures to ensure that derivatives use is consistent with a Master
Portfolio's investment objective, does not expose the Master Portfolio to undue
risk and is closely monitored. These procedures include providing periodic
reports to the Board of Trustees concerning the use of derivatives.
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The use of derivatives by the Master Portfolios also is subject to
broadly applicable investment policies. For example, a Master Portfolio may
not invest more than a specified percentage of its assets in "illiquid
securities," including those derivatives that do not have active secondary
markets. Nor may a Master Portfolio use certain derivatives without
establishing adequate "cover" in compliance with Securities and Exchange
Commission rules limiting the use of leverage.
Foreign Obligations. Investments in foreign obligations involve
certain considerations that are not typically associated with investing in
domestic obligations. There may be less publicly available information about a
foreign issuer than about a domestic issuer. Foreign issuers also are not
generally subject to uniform accounting, auditing and financial reporting
standards or governmental supervision comparable to those applicable to
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. None of the
Master Portfolios may invest 25% or more of its assets in foreign obligations.
MANAGEMENT OF THE COMPANY
Directors and officers of the Company, together with information as to
their principal business occupations during at least the last five years, are
shown below. The address of each, unless otherwise indicated, is 111 Center
Street, Little Rock, Arkansas 72201. Each of the Directors and officers of the
Company serves in the identical capacity as an officer and/or Director of
Overland Express Funds, Inc. and Stagecoach, Inc. (all of which consist of
several separately managed investment portfolios) and as a Trustee and/or
officer of Stagecoach Trust, Life & Annuity Trust, Master Investment Trust,
Master Investment Portfolio and Managed Series Investment Trust. Each Director
who is deemed to be an "interested person" of the Company, as defined in the
1940 Act, is indicated by an asterisk.
<TABLE>
<CAPTION>
Name, Address and Age Position During Past 5 Years
- ---------------------- -------- ------------------
<S> <C> <C>
Jack S. Euphrat, 73 Director Private Investor.
415 Walsh Road
Atherton, CA 94027
</TABLE>
14
<PAGE> 136
<TABLE>
<S> <C> <C>
*R. Greg Feltus, 44 Director, Chairman Senior Vice President of Stephens; Manager of
and President Financial Services Group; President of Stephens
Inurance Services Inc.,; Senior Vice President
of Stephens Sports Management Inc.; and President
of Investors Brokerage Insurance Inc.
Thomas S. Goho, 53 Director T.B. Rose Faculty Fellow - Business, Wake Forest
321 Beechcliff Court University, Calloway School of Business and
Winston-Salem, NC 271 Accountancy; Associate Professor of Finance of
the School of Business and Accounting at Wake
Forest University since 1983.
*Zoe Ann Hines, 46 Director Senior Vice President of Stephens and Director
of Brokerage Accounting; and Secretary of
Stephens Resource Management.
*W. Rodney Hughes, 69 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 77 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 51 Director Private Investor; Real Estate Developer;
10 Legrae Street Chairman of Renaissance Properties Ltd.;
Charleston, SC 29401 President of Morse Investment Corporation; and
Co-Managing Partner of Main Street Ventures.
Richard H. Blank, Jr., Chief Operating Associate of Financial Services Group of
Officer, Secretary Stephens; Director of Stephens Sports Management
and Treasurer Inc.; and Director of Capo Inc.
</TABLE>
15
<PAGE> 137
COMPENSATION TABLE
For the Fiscal Year Ended 1995
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
----------------- ------------------------------- --------------------
<S> <C> <C>
Jack S. Euphrat $10,188 $34,188
Director
*R. Greg Feltus 0 0
Director
Thomas S. Goho 10,188 34,188
Director
*Zoe Ann Hines 0 0
Director
*W. Rodney Hughes 9,438 32,188
Director
Robert M. Joses 9,938 34,188
Director
*J. Tucker Morse 8,313 32,188
Director
</TABLE>
As stated above, each of the Directors and officers of the Company
serves in an identical capacity as a Director and/or Officer of Overland
Express Funds, Inc. and Masterworks Funds, Inc. and as a Trustee and/or officer
of Stagecoach Trust, Life & Annuity Trust, Master Investment Trust, Master
Investment Portfolio and Managed Series Investment Trust. All of these
entities are open-end management investment companies, and each is considered
to be in the same "fund complex," as such term is defined in Form N-1A under
the 1940 Act, as the Company. Directors of the Company are compensated
annually by the Company and by all registrants in the fund complex for their
services as indicated in the above Compensation Table and also are reimbursed
for all out-of-pocket expenses relating to attendance at board meetings.
Currently the Directors do not receive any retirement benefits or deferred
compensation from the Company or any other member of the fund complex.
As of the date of this SAI, Directors and officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.
16
<PAGE> 138
Investment Adviser. Wells Fargo Bank provides investment advisory
services to each Master Portfolio pursuant to an Investment Advisory Agreement
dated April 30, 1996 with MIT. Each such Investment Advisory Agreement will be
referred to as the "Advisory Agreement". The Advisory Agreements provide that
Wells Fargo Bank shall furnish to the Master Portfolios investment guidance and
policy direction in connection with the daily portfolio management of each
Master Portfolio. Pursuant to the Advisory Agreements, Wells Fargo Bank
furnishes to the Board of Trustees periodic reports on the investment strategy
and performance of each Master Portfolio. As to each Master Portfolio, the
applicable Advisory Agreement has an initial two-year term, and will thereafter
be subject to annual approval by (i) MIT's Board of Trustees or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
such Master Portfolio, provided that in either event the continuance also is
approved by a majority of MIT's Board of Trustees who are not "interested
persons" (as defined in the 1940 Act) of MIT or Wells Fargo Bank, by vote cast
in person at a meeting called for the purpose of voting on such approval. As
to each Master Portfolio, the Advisory Agreement is terminable without penalty,
on 60 days' written notice, by MIT's Board of Trustees or by vote of the
holders of a majority of such Master Portfolio's shares or, on not less than 60
days' written notice, by Wells Fargo Bank. Each Advisory Agreement terminates
automatically, as to the relevant Master Portfolio, in the event of its
assignment (as defined in the 1940 Act).
Wells Fargo Bank has engaged BGFA to provide sub-investment advisory
services to each Master Portfolio of MIT pursuant to a Sub-Investment Advisory
Agreement (the "Sub-Advisory Agreement") dated April 30, 1996. As to each
Master Portfolio, the Sub-Advisory Agreement has an initial two-year term, and
will thereafter be subject to annual approval by (i) MIT's Board of Trustees or
(ii) vote of a majority (as defined in the 1940 Act) of the outstanding
securities of such Master Portfolio, provided that in either event the
continuance also is approved by a majority of MIT's Board of Trustees who are
not interested persons (as defined in the 1940 Act) of the Master Portfolio or
BGFA, by vote cast in person at a meeting called for the purpose of voting on
such approval. As to each Master Portfolio, the Sub-Advisory Agreement is
terminable without penalty, on 60 days' written notice, by MIT's Board of
Trustees or by vote of the holders of a majority of such Master Portfolio's
interests. The Sub-Advisory Agreement terminates automatically upon an
assignment (as defined in the 1940 Act). Subject to the direction of MIT's
Board of Trustees and the overall supervision and control of Wells Fargo Bank
and MIT, BGFA is responsible for investing and reinvesting the Master
Portfolios' assets. BGFA has agreed to furnish to Wells Fargo Bank periodic
reports on the investment activity and performance of the Master Portfolios,
and such additional reports and information as Wells Fargo Bank and MIT's Board
of Trustees and officers shall reasonably request.
Wells Fargo Bank has agreed to provide to the Master Portfolios, 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, in the
case of the U.S. Government
17
<PAGE> 139
Allocation Master Portfolio and the Asset Allocation Master Portfolio, average
maturities of the portfolios of each of those Master Portfolios.
BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an
affiliate of Wells Fargo Institutional Trust Company, N.A. (the
"Reorganization"). Prior to the Funds' conversion to master/feeder structure,
Wells Fargo Bank provided investment advisory services directly to the Funds.
For the years ended December 31, 1993, 1994 and 1995, the Funds paid to Wells
Fargo Bank the fees indicated below and Wells Fargo Bank waived the indicated
amounts:
<TABLE>
<CAPTION>
1993 1994 1995
Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asset Allocation $3,136,581 -0- $3,907,880 -0- $3,814,364 -0-
Corporate Stock $1,248,207 -0- $1,259,739 -0- $1,398,439 -0-
U.S. Government $1,090,400 -0- $1,034,079 -0- $680,049 -0-
Allocation
</TABLE>
Prior to the Reorganization on January 1, 1996 and the Funds'
conversion to master/feeder structure, WFNIA provided sub-advisory services
directly to the Funds. For the years ended December 31, 1993, 1994 and 1995,
Wells Fargo paid to WFNIA the fees indicated below with respect to the Funds
(before the conversion to master/feeder structure):
<TABLE>
<CAPTION>
FUND 1993 1994 1995
Fund Fees Paid Fees Paid Fees Paid
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation $1,586,982 $2,106,980 $2,043,249
Corporate Stock $239,319 $241,489 $269,787
U.S. Government $366,951 $353,761 $244,478
Allocation
</TABLE>
18
<PAGE> 140
Morrison & Foerster, special counsel to each of Wells Fargo Bank, BGFA
and BGI and counsel to the Company, has advised each of Wells Fargo Bank, BGFA,
BGI and the Company that (i) Wells Fargo Bank should be able to perform the
services contemplated by the Advisory Contract, the Shareholder Servicing
Agreement, the Selling Agent Agreement, the Agency Agreement and the
Prospectus, without violation of the Glass-Steagall Act, (ii) BGFA should be
able to perform the services contemplated in the Sub-Advisory Agreement and the
Prospectus, and BGI should be able to perform the services contemplated in the
Custodian Agreement and the Prospectus, without violation of the Glass-Steagall
Act. Such counsel have pointed out, however, that there are no controlling
judicial or administrative interpretations or decisions and that future
judicial or administrative interpretations of, or decisions relating to,
present federal or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in federal or state statutes and regulations and judicial or
administrative decisions or interpretations thereof, could prevent Wells Fargo
Bank, BGFA or BGI, respectively, from continuing to perform, in whole or in
part, such services. If Wells Fargo Bank, BGFA or BGI, respectively, were
prohibited from performing any of such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Administrator and Distributor. The Company has retained Stephens as
administrator and distributor on behalf of each of its Funds. Each
Administration Agreement between Stephens and each Fund states that Stephens
shall provide as administrative services, among other things: (i) general
supervision of the operation of the Fund, including coordination of the
services performed by Wells Fargo Bank, transfer and dividend disbursing agent,
custodian, shareholder servicing agent(s), independent public accountants and
legal counsel, regulatory compliance, including the compilation of information
for documents such as reports to, and filings with, the SEC and state
securities commissions; and preparation of proxy statements and shareholder
reports for the Fund; and (ii) general supervision relative to the compilation
of data required for the preparation of periodic reports distributed to the
Company's officers and Board of Directors. Stephens also furnishes office
space and certain facilities required for conducting the business of the Fund
together with those ordinary clerical and bookkeeping services that are not
being furnished by Adviser. Stephens also pays the compensation of the
Company's Directors, officers and employees who are affiliated with Stephens.
19
<PAGE> 141
For the fiscal years ended December 31, 1993, 1994 and 1995, the Funds
paid administrative fees to Stephens as follows:
<TABLE>
<CAPTION>
FUND 1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund $238,347 $315,787 $306,436
Corporate Stock Fund $74,804 $75,748 $92,555
U.S. Government Allocation Fund $65,395 $62,168 $40,803
</TABLE>
For the fiscal years ended December 31, 1993 and 1994, the Funds'
distributor retained $26,215,173 and $5,415,227, respectively, in underwriting
commissions (front-end sales loads and CDSCs, if any) in connection with the
purchase or redemption of Fund shares. For the fiscal years ended December 31,
1993 and 1994, Wells Fargo Securities Inc., and its registered representatives
received $378,895 and $904,274, respectively, in underwriting commissions in
connection with the purchase or redemption of Fund shares.
For the fiscal year ended December 31, 1995, the aggregate amount of
underwriting commissions paid to Stephens on sales/redemptions of the
Registrant's shares was $1,251,311. Stephens retained $162,660 of such
commissions. WFSI and its registered representatives retained $399,809 of such
commissions.
The Advisory Agreement for each Master Portfolio and the
Administration Agreements for each Fund and Master Portfolio provide that if,
in any fiscal year, the total expenses of the Fund and corresponding Master
Portfolio incurred by, or allocated to, the Fund or corresponding Master
Portfolio (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 the Plan (defined below) but including the fees
provided for in the Advisory Agreement and the Administration Agreements)
exceed the most restrictive expense limitation applicable to the Fund and/or
corresponding Master Portfolio imposed by the securities laws or regulations of
the states from time to time in which the Fund's shares are registered for
sale, Adviser and Stephens shall waive or reimburse their fees proportionately
under the Advisory Agreement and the Administration Agreements, respectively,
for each Fund or corresponding Master Portfolio 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 Agreement for each Master Portfolio and the
Administration Agreements for each Fund and Master Portfolio further provide
that the total expenses of the Fund or Master Portfolio shall be reviewed
monthly so that, to the extent the annualized expenses for such month exceed
the most restrictive applicable
20
<PAGE> 142
annual expense limitation, the monthly fees under the agreements 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 average
net assets of the Fund and/or the corresponding Master Portfolio, 2.00% of the
next $70 million of average net assets, and 1.50% of the average net assets in
excess of $100 million. To the extent the Funds and/or the Master Portfolios
will incur miscellaneous expense in connection with the conversion to
master/feeder structure, Wells Fargo Bank has agreed to absorb such expenses
for at least one year following the Reorganization.
Shareholder Servicing Agent. As discussed in each Fund's Prospectus
under the heading "Shareholder Servicing Agent," the Funds have entered into
shareholder servicing agreements with Wells Fargo Bank. The dollar amount of
shareholder servicing fees paid by the Corporate Stock Fund and each class of
the Asset Allocation and U.S. Government Allocation Funds is listed below:
<TABLE>
<CAPTION>
FUND 1995
------------------------------------------------------------
<S> <C>
Corporate Stock Fund $ 861,478
Asset Allocation Fund
Class A $3,029,551
Class B $ 34,813
U.S. Government Allocation Fund
Class A $ 406,707
Class B $ 1,322
</TABLE>
DISTRIBUTION PLANS
As indicated in each Fund's respective Prospectus, each of the Funds
has adopted a distribution plan (a "Plan") under Section 12(b) of the 1940 Act
and Rule 12b-1 thereunder (the "Rule"). The Plans for the Corporate Stock Fund
and the shares now designated the Class A Shares of each other Fund were
adopted by the Company's Board of Directors on October 22, 1991, including a
majority of the Directors who were not "interested persons" (as defined in the
1940 Act) of the respective Fund and who had no
21
<PAGE> 143
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Qualified Directors"), and were approved by
the initial shareholder of each Fund on December 31, 1991. The Plans for the
Class B shares of each Fund having such shares were adopted by the Company's
Board of Directors, including a majority of the Qualified Directors, on July
27, 1994.
The Plans in effect for the Corporate Stock Fund and the Class A Shares
of each other Fund allow such Funds to defray all or part of the cost of
preparing and printing prospectuses and other promotional materials and of
delivering prospectuses and those materials to prospective shareholders of each
such Fund by paying on an annual basis up to 0.05% of the respective Fund's
average daily net assets or average daily net assets attributable to Class A
Shares of such Fund, as the case may be. The plans for the Corporate Stock
Fund and Class A Shares of the other Funds provide only for the reimbursement
of actual expenses. The plans for the Class B Shares allow each Fund with such
shares to pay to Stephens Inc., as compensation for distribution-related
services provided, or as reimbursement for distribution-related expenses
incurred, a monthly fee at the annual rate of up to 0.70% of the average daily
net assets attributable to the Class B Shares of each respective Fund. The
actual fee payable to Stephens shall, within such limit, be determined from
time to time by mutual agreement between the Company and Stephens. In addition,
each Plan contemplates that to the extent any fees payable pursuant to a
Shareholder Servicing Agreement are deemed to be for distribution-related
services, rather than shareholder services, such payments are approved and
payable pursuant to such Plan.
Each Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Qualified Directors. Any agreements related to the Plans
("Agreements") also must be approved by majority vote of the Directors and the
Qualified Directors. Such Agreements will terminate automatically if assigned.
The Corporate Stock Fund may terminate such Agreements at any time, without
payment of any penalty, by a vote of a majority of the outstanding voting
securities of such Fund. Each of the Funds with Class A and Class B shares may
terminate such Agreements at any time, without payment of any penalty, by a
vote of a majority of outstanding voting securities of the Class of shares
affected by such Agreement. The amounts payable under each Plan may not be
increased materially without, in the case of the Corporate Stock Fund, the
approval of a majority of the voting securities of such Fund, or, in the case
of the other Funds, without the approval of a majority of the voting securities
of each Class of Funds effected by such Agreements. Material amendments to a
Plan may not be made except by affirmative vote of a majority of both the
Directors of the Company and the Qualified Directors.
Each Plan requires that the Treasurer of the Company shall provide to
the Directors, and the Directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Plan. The
Rule also requires that the selection and nomination of Directors who are not
"interested persons" of the Company be made by such disinterested directors.
22
<PAGE> 144
For the year ended December 31, 1995, the Funds paid the fees
and/or expenses listed below pursuant to their 12b-1 distribution plans.
<TABLE>
<CAPTION>
PRINTING & MARKETING COMPENSATION
FUND TOTAL MAILING BROCHURES TO DEALERS
PROSPECTUS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Allocation Fund
Class A $ 955,893 $58,656 $897,237 N/A
Class B $ 59,525 N/A N/A $59,525
Corporate Stock Fund $ 41,620 $16,503 $ 25,117 N/A
U.S. Government Allocation
Fund
Class A $ 95,225 $19,422 $ 75,803 N/A
Class B $ 13,468 N/A N/A $13,468
</TABLE>
CALCULATION OF YIELD AND TOTAL RETURN
As described in the Prospectuses for each Fund, the IRA Funds of the
Trust were reorganized into the corresponding Funds of the Company on January
2, 1992. Therefore, the performance information for the Funds is based on that
of the IRA Funds for the periods prior to January 2, 1992, and reference should
be made to the footnotes to the condensed financial information in the
"Financial Highlights" section of each Prospectus regarding differences in
investment objectives, policies and/or restrictions between certain of the
Funds and the IRA Funds, which may affect the relevance of the performance
information provided below.
The Corporate Stock Fund may advertise certain total return
information computed in the manner described in each Funds' Prospectus. As and
to the extent required by the SEC, an average annual compound rate of return
("T") will be computed by using the redeemable value at the end of a specified
period ("ERV") of a hypothetical initial investment in shares of the Fund ("P")
over a period of years ("n") according to the following formula: P(1+T)n = ERV.
In addition, the Corporate Stock Fund, at times, may calculate total return
based on net asset value per share (rather than the public offering price), in
which case the figures would not reflect the effect of any sales charges that
would have been paid by an investor, or based on the assumption that a sales
charge other than the maximum sales charge (reflecting a Volume Discount) was
assessed, provided that total return data derived pursuant to the calculation
described above also are presented.
23
<PAGE> 145
The Asset Allocation and U.S. Government Allocation Funds may
advertise certain total return information with respect to each class of shares
computed in the manner described in such Fund's Prospectus. As and to the
extent required by the SEC, an average annual compound rate of return ("T")
will be computed by using the redeemable value at the end of a specified period
("ERV") of a hypothetical initial investment in a Class of shares ("P") over a
period of years ("n") according to the following formula: P(1+T)n = ERV. In
addition, the Funds that assess a sales charge, at times, also may calculate
total return based on net asset value per share of each Class (rather than the
public offering price), in which case the figures would not reflect the effect
of any sales charges that would have been paid by an investor, or based on the
assumption that a sales charge other than the maximum sales charge (reflecting
a Volume Discount) was assessed, provided that total return data derived
pursuant to the calculation described above also are presented.
The average annual total return for the period since inception (March
31, 1987) to December 31, 1995 for the Class A Shares of the U.S. Government
Allocation Fund, assuming a 4.50% sales load, was 7.93%. The average annual
total return on Class A Shares for the same period, assuming no sales load, was
8.50%. The average annual total return on Class A Shares for the five-year
period ended December 31, 1995, assuming a 4.50% sales load, was 8.36%. The
average annual total return on Class A Shares for the same period, assuming no
sales load, was 9.36%. The annual total return on Class A Shares for the year
ended December 31, 1995, assuming a 4.50% sales load, was 9.73%. The annual
total return for the Class A Shares for the same period, assuming no sales
load, was 14.91%.
The annual total return on the Class B Shares of the U.S. Government
Allocation Fund for the year ended December 31, 1995, assuming payment of the
maximum CDSC was 11.11%. The annual total return on the Class B Shares for the
same period if no CDSC was paid was 14.11%.
The average annual total return for the period since inception
(November 13, 1986) to December 31, 1995, for the Class A Shares of the Asset
Allocation Fund, assuming a 4.50% sales load was 11.05%. The average annual
return for the same period on Class A Shares, assuming no sales load, was
11.61%. The average annual total return on Class A Shares for the five-year
period ended December 31, 1995, assuming a 4.50% sales load, was 12.49%. For
the same period the average annual total return on Class A Shares, assuming no
sales load, was 13.53%. The annual total return on Class A Shares for the year
ended December 31, 1995, assuming a 4.50% sales load, was 23.36%. For the same
period, the annual total return on Class A Shares, assuming no sales load, was
29.18%.
The annual total return on the Class B Shares of the Asset Allocation
Fund for the year ended December 31, 1995, assuming payment of the maximum CDSC
was 24.72%. The annual total return on Class B Shares for the same period if
the CDSC was not paid was 27.72%.
The average annual total return assuming a purchase at net asset
value, for the period since inception (January 25, 1984) to December 31, 1995,
for the Corporate Stock Fund was 14.10%. Similarly, the average annual total
return for the five-year period ended December 31, 1995, was 15.33%. For the
year ended December 31, 1995 was 35.99%.
24
<PAGE> 146
The Asset Allocation and U.S. Government Allocation Funds may advertise
certain cumulative total return information. Cumulative total return is
computed by determining the aggregate compounded rate of return during
specified periods that equate the initial amount invested to the ending
redeemable value of such investment.
The cumulative total return for the Class A Shares of the Asset
Allocation Fund from inception to December 31, 1995, assuming a 4.50% sales
load and no sales load, was 160.28% and 172.52%, respectively. The cumulative
total return for the Class A Shares for the five-year period ended December 31,
1995, assuming a 4.50% sales load and no sales load, was 80.12% and 88.59%,
respectively. The cumulative total return on the Class A Shares for the
three-year period ended December 31, 1995, assuming a 4.50% sales load and no
sales load, was 37.82% and 44.29%, respectively.
The cumulative total return for the Class A Shares of the U.S.
Government Allocation Fund from inception to December 31, 1995, assuming a
4.50% sales load and no sales load, was 96.30% and 105.53%, respectively. The
cumulative total return for the Class A Shares for the five-year period ended
December 31, 1995, assuming a 4.50% sales load and no sales load, was 49.36%
and 56.41%, respectively. The cumulative total return on the Class A Shares for
the three-year period ended December 31, 1995, assuming a 4.50% sales load and
no sales load, was 19.87% and 25.54%, respectively.
The cumulative total return on the shares of the Corporate Stock Fund
from inception to December 31, 1995 was 381.62%. The cumulative total return for
the ten-year period ended December 31, 1995 was 253.09%. The cumulative total
return for the five-year period ended December 31, 1995 was 104.08. The
cumulative total return for the three-year period ended December 31, 1995 was
48.73%.
As indicated in its Prospectus, the U.S. Government Allocation Fund
may advertise certain yield information on their shares. As and to the extent
required by the SEC, yield on each Class of shares, will be calculated based on
a 30-day (or one month) period, computed by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period, according to the following formula: YIELD = 2[((a-
b/cd)+1)6-1], where a = dividends and interest earned during the period; b =
expenses accrued for the period (net of reimbursements); c = the average daily
number of shares outstanding during the period that were entitled to receive
dividends; and d = the maximum offering price per share on the last day of the
period. The net investment income of a Fund includes actual interest income,
plus or minus amortized purchase discount (which may include original issue
discount) or premium, less accrued expenses. Realized and unrealized gains and
losses on portfolio securities are not included in a Fund's net investment
income. For purposes of sales literature, yield also may be calculated on the
basis of the net asset value per share rather than the public offering price,
provided that the yield data derived pursuant to the calculation described
above also are presented.
The yield for the 30-day period ended December 31, 1995, assuming a
maximum sales load of 4.50%, on the Class A Shares of the U.S. Government
Allocation Fund was 4.24%. The 30-day yield for the same period on the Class A
Shares, assuming no sales charge, was 4.25%.
The yield on each Class of the U.S. Government Allocation 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.
In addition, investors should recognize that changes in the net asset
values of shares of each Class of the U.S. Government Allocation Fund will
affect the yield of each such Class for any specified period, and such changes
should be considered together with the yield of each Class in ascertaining the
total return for the period to shareholders of each Fund. Yield information
for each Fund or each Class of shares of the Funds, as the case may be, may be
useful in reviewing the performance of such Funds and for providing a basis for
comparison with investment alternatives. The yield of each Fund or each Class
of a Fund, however, may not be comparable to the yields from investment
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate yield.
25
<PAGE> 147
From time to time and only to the extent the comparison is appropriate
for a Fund or Class of shares of a Fund, the Company may quote the performance
or price-earning ratio of a Fund or Class of shares in advertising and other
types of literature as compared to the performance of the Lehman Brothers
Municipal Bond Index, the 1-Year Treasury Bill Rate, the S&P Index, the Dow
Jones Industrial Average, the Lehman Brothers 20+ Treasury Index, the Lehman
Brothers 5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate
Investment Averages (as reported by the National Association of Real Estate
Investment Trusts), Gold Investment Averages (provided by the World Gold
Council), Bank Averages (which is calculated from figures supplied by the U.S.
League of Savings Institutions based on effective annual rates of interest on
both passbook and certificate accounts), average annualized certificate of
deposit rates (from the Federal Reserve G-13 Statistical Releases or the Bank
Rate Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer
Price Index (as published by the U.S. Bureau of Labor Statistics), Ten Year
U.S. Government Bond Average, sap's Corporate Bond Yield Averages, Schabacter
Investment Management Indices, Salomon Brothers High Grade Bond Index, Lehman
Brothers Long-Term High Quality Government/Corporate Bond Index, other managed
or unmanaged indices or performance data of bonds, stocks or government
securities (including data provided by Ibbotson Associates), or by other
services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices. The
performance of a Fund or Class of shares, as appropriate, also may be compared
to those of other mutual funds having similar objectives. This comparative
performance could be expressed as a ranking prepared by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Bloomberg Financial Markets
or Morningstar, Inc., independent services which monitor the performance of
mutual funds. The performance of a Fund or Class of shares, as appropriate,
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. Any
such comparisons may be useful to investors who wish to compare the past
performance of a Fund or Class of shares with that of its competitors. Of
course, past performance cannot be a guarantee of future results. The Company
also may include, from time to time, a reference to certain marketing
approaches of the Distributor, including, for example, a reference to a
potential shareholder being contacted by a selected broker or dealer. General
mutual fund statistics provided by the Investment Company Institute may also be
used.
In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
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Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."
The Company also may use the following information in advertisements
and other types of literature, only to the extent the information is
appropriate for a Fund: (i) the Consumer Price Index may be used to assess the
real rate of return from an investment in a Fund; (ii) other government
statistics, including, but not limited to, The Survey of Current Business, may
be used to illustrate investment attributes of a Fund or the general economic,
business, investment, or financial environment in which a Fund operates; (iii)
the effect of tax-deferred compounding on the investment returns of a Fund or a
Class of shares, or on returns in general, may be illustrated by graphs,
charts, etc., where such graphs or charts would compare, at various points in
time, the return from an investment in a Fund or Class of shares (or returns in
general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the return on a taxable
basis; and (iv) the sectors or industries in which a Fund invests may be
compared to relevant indices of stocks or surveys (e.g., S&P Industry Surveys)
to evaluate a Fund's historical performance or current or potential value with
respect to the particular industry or sector.
In addition, performance information for a Class of shares of the U.S.
Government Allocation Fund, the Asset Allocation Fund and the shares of the
Corporate Stock Fund may be compared, in reports and promotional literature, to
the S&P 500 Index, the Wilshire 5000 Equity Index, the Lehman Brothers 20+
Treasury Index, Donoghue's Money Fund Averages, the Lehman Brothers 5-7 Year
Treasury Index, or other appropriate managed or unmanaged indices of the
performance of various types of investments, so that investors may compare
results of a Fund or Class of shares with those of indices widely regarded by
investors as representative of the security markets in general. Unmanaged
indices may assume the reinvestment of dividends, but generally do not reflect
deductions for administrative and management costs and expenses. Managed
indices generally do reflect such deductions.
From time to time, the Company also may include in advertisements or
other marketing materials a discussion of certain of the objectives of the
investment strategy of the U.S. Government Allocation Fund and the
corresponding Master Portfolio and the Asset Allocation Fund and the
corresponding Master Portfolio and a comparison of this strategy with other
investment strategies. In particular, the responsiveness of these Funds as to
changing market conditions may be discussed. For example, the Company may
describe the benefits derived by having Wells Fargo Bank monitor and reallocate
investments among the asset categories described in the Prospectus of each Fund
and Master Portfolio. The Company's advertising or other marketing material
also might set forth illustrations depicting examples of recommended
allocations in different market conditions. It may state, for example, that
when the model indicates that stocks represent a better value than bonds or
money market instruments, the Asset Allocation Master Portfolio might consist
of 70% stocks, 25% bonds and 5% money market instruments and that when the
model indicates that bonds represent a better value than stocks or money
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market instruments, the balance of assets might shift to 60% bonds, 20% stocks
and 20% money market instruments.
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.
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 a Fund's performance with other investments which are assigned ratings
by NRSROs. Any such comparisons may be useful to investors who wish to compare
the Fund's past performance with other rated investments.
From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability
of combined Wells Fargo Bank and Stagecoach Funds account statements." The
Company may also disclose in advertising and other types of sales literature
the assets and categories of assets under management by its investment adviser
or sub-adviser and the total amount of assets under management by Wells Fargo
Investment Management Group. As of December 31, 1995, IMG had $30.1 billion in
assets under management.
The Company also may disclose in advertising and other types of
literature, information and statements the distribution rate on the shares of
each class of the Fund. Distribution rate, which may be annualized, is the
amount determined by dividing the dollar amount per share of the most recent
dividend by the most recent NAV or maximum offering price per share as of a
date specified in the sales literature. Distribution rate will be accompanied
by the standard 30-day yield as required by the SEC.
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DETERMINATION OF NET ASSET VALUE
Net asset value per share for each Master Portfolio or per share for
each Class of each Master Portfolio is determined by the Custodian of the
Master Portfolio on each day the NYSE is open for trading.
Securities of a Master Portfolio for which market quotations are
available are valued at latest prices. Securities of a Master Portfolio for
which the primary market is a national securities exchange or the National
Association of Securities Dealers Automated Quotations National Market System
are valued at last sale prices. In the absence of any sale of such securities
on the valuation date and in the case of other securities, including U.S.
Government securities but excluding money market instruments maturing in 60
days or less, the valuations are based on latest quoted bid prices. Money
market instruments maturing in 60 days or less are valued at amortized cost.
Futures contracts will be marked to market daily at their respective settlement
prices determined by the relevant exchange. These prices are not necessarily
final closing prices, but are intended to represent prices prevailing during
the final 30 seconds of the trading day. Options listed on a national exchange
are valued at the last sale price on the exchange on which they are traded at
the close of the NYSE, or, in the absence of any sale on the valuation date, at
latest quoted bid prices. Options not listed on a national exchange are valued
at latest quoted bid prices. Debt securities maturing in 60 days or less are
valued at amortized cost. In all cases, bid prices will be furnished by a
reputable independent pricing service approved by the Board of Directors.
Prices provided by an independent pricing service may be determined without
exclusive reliance on quoted prices and may take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data. All other securities and other assets of the Master
Portfolios for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Company's Directors and
in accordance with procedures adopted by the Directors.
PORTFOLIO TRANSACTIONS
GENERAL
MIT 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 MIT's Board of Trustees, Wells Fargo Bank is responsible for
each Master Portfolio's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the MIT 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 Master
Portfolios will not necessarily be paying the lowest spread or commission
available.
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Except in the case of equity securities purchased by the Corporate
Stock Master Portfolio and the Asset Allocation Master Portfolio, 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. Each of the Master Portfolios
also will purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, money market
securities, ARMs and CMOs are traded on a net basis and do not involve brokerage
commissions. The cost of executing a Master Portfolio's portfolio securities
transactions will consist primarily of dealer spreads and underwriting
commissions. Under the 1940 Act, persons affiliated with MIT are prohibited
from dealing with MIT 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.
Wells Fargo Bank, as the investment adviser of each of the Funds, may,
in circumstances in which two or more dealers are in a position to offer
comparable results for a Master Portfolio 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 Agreements, 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 a Master
Portfolio 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 Master Portfolios.
The Corporate Stock Fund and the Asset Allocation Fund. Purchases and
sales of equity securities on a securities exchange are effected through
brokers who charge a negotiated commission for their services. Orders may be
directed to any broker including, to the extent and in the manner permitted by
applicable law, Stephens or Wells Fargo Securities Inc. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price that includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. No Master Portfolio will deal with
Stephens, Wells Fargo Bank or their affiliates in any transaction in which any
of them acts as principal without an exemptive order from the SEC or unless an
exemption is otherwise available.
In placing orders for portfolio securities of these Master Portfolios,
Wells Fargo Bank is required to give primary consideration to obtaining the
most favorable price and efficient execution. This means that Wells Fargo Bank
will seek to execute each transaction at a price and commission, if any, that
provide the most favorable total cost or proceeds reasonably attainable in the
circumstances. While Wells Fargo Bank will
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generally seek reasonably competitive spreads or commissions, these Master
Portfolios will not necessarily be paying the lowest spread or commission
available. Commission rates are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
broker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Board of Trustees of MIT.
For the fiscal year ended December 31, 1993, the Asset Allocation Fund
and the Corporate Stock Fund paid brokerage commissions in the amounts of
$294,861 and $30,123, respectively. For the fiscal year ended December 31,
1994, the Asset Allocation Fund and the Corporate Stock Fund paid brokerage
commissions in the amounts of $99,002 and $31,896, respectively. For the
fiscal year ended December 31, 1995, the Asset Allocation Fund and Corporate
Stock Fund paid brokerage commissions in the amounts of $34,488 and $8,697,
respectively. The U.S. Government Allocation Fund did not pay any brokerage
commissions during 1995 and none of the Funds paid brokerage commissions to
affiliated brokers.
The higher portfolio turnover rate for the U.S. Government Allocation
Master Portfolio should not adversely affect this Master Portfolio because
portfolio transactions ordinarily are made directly with principals on a net
basis and, consequently, this Master Portfolio usually does not incur brokerage
expenses. Portfolio turnover rate is not a limiting factor when Wells Fargo
Bank deems portfolio changes appropriate.
As of December 31, 1995, each Fund owned securities of its regular
broker-dealers as follows:
Asset Allocation Fund $1,895,104 of J.P. Morgan & Co. Inc.
FEDERAL INCOME TAXES
The Prospectus describes generally the tax treatment of distributions
by each Master Portfolio and each 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 each Fund's annual gross income be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of securities or options thereon; (b) each 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) each 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 each 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 each Fund's
assets and 10% of the outstanding voting
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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. For purposes of complying with these qualification
requirements, each Fund will be deemed to own a proportionate share of the
Master Portfolio assets As a regulated investment company, each Fund will not
be subject to federal income tax on its net investment income and net capital
gains distributed to its shareholders, provided that it distributes to its
stockholders at least 90% of its net investment income and tax-exempt income
earned in each year.
A 4% nondeductible excise tax will be imposed on each Fund (other than
to the extent of each Fund's tax-exempt income) to the extent it does not meet
certain minimum distribution requirements by the end of each calendar year.
For this purpose, any income or gain retained by each Fund that is subject to
income tax will be considered to have been distributed by year-end. Each Fund
intends to distribute substantially all of its net investment income and net
capital gains and, thus, expects not to be subject to the excise tax.
Income and dividends received by each Fund from sources within foreign
countries may be subject to withholding and other taxes (generally at rates
from 10% to 40%) imposed by such countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Because
not more than 50% of the value of the total assets of each Fund is expected to
consist of securities of foreign issuers, each Fund will not be eligible to
elect to "pass through" foreign tax credits to shareholders.
Each Master Portfolio will be treated as a non-publicly traded
partnership rather than as a regulated investment company or a corporation
under the Code. As a non-publicly traded partnership under the Code, any
interest, dividends and gains or losses of each Master Portfolio will be deemed
to have been "passed through" to its corresponding Fund bearing the same name
and any other investors in each Master Portfolio, regardless of whether or not
such interest, dividends or gains have been distributed by the Master Portfolio
or losses have been realized (through contribution) by its corresponding Fund
and any other investors. Therefore, to the extent each Master Portfolio were
to accrue but not distribute any interest, dividends, or gains, its
corresponding Fund would be deemed to have realized and recognized its
proportionate share of interest, dividends, or gains without receipt of any
corresponding distribution. However, each Master Portfolio will seek to
minimize recognition by investors of interest, dividends, or gains without a
corresponding distribution.
Gains or losses on sales of portfolio securities by each Master
Portfolio will generally be long-term capital gains or losses if the securities
have been held by it for more than one year, except in certain cases including
where each Master Portfolio acquires a put or writes a call thereon. Other
gains or losses on the sale of securities will be short-term
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capital gains or losses. Gain recognized on the disposition of a debt
obligation (including, with respect to obligations purchased after April 30,
1993, tax-exempt obligations) purchased by each Master Portfolio 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 Master Portfolio held the debt
obligation.
To the extent that a Fund recognizes long-term capital gains, such
gains will be distributed at least annually. Such distributions will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares. Such distributions will be designated as a
capital gains distribution in a written notice mailed by the Fund to
shareholders not later than 60 days after the close of the Fund's taxable year.
If a Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as a long-term capital loss to the extent of the designated capital gain
distribution thereon.
Any loss realized on a redemption or exchange of shares of any Fund
will be disallowed to the extent shares are reacquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.
In addition, if a shareholder exchanges or otherwise disposes of Fund shares
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.
As of the printing of this SAI, the maximum individual tax rate
applicable to ordinary income is 39.6%, the maximum individual rate applicable
to net realized capital gains is 28% and the maximum corporate tax rate
applicable to ordinary income and net realized capital gains is 35%. However,
to eliminate the benefit of lower marginal corporate income tax rates,
corporations which have taxable income in excess of $100,000 for a taxable year
will be required to pay an additional amount of income tax of up to $11,750 and
corporations which have taxable income in excess of $15,000,000 for a taxable
year will be required to pay an additional amount of income tax of up to
$100,000.
If an option written by a Master Portfolio lapses or is terminated
through a closing transaction, such as a repurchase by such Master Portfolio of
the option from its holder, the Master Portfolio will realize a short-term
capital gain or loss, depending on whether the premium income is greater or
less than the amount paid by the Master Portfolio in the closing transaction.
Some realized capital losses may be deferred if they result from a position
which is part of a tax straddle.
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If securities are sold by a Master Portfolio pursuant to the exercise
of a call option written by it, such Master Portfolio will add the premium
received to the sale price of the securities delivered in determining the
amount of gain or loss on the sale. If securities are purchased by a Master
Portfolio pursuant to the exercise of a put option written by it, such Master
Portfolio will subtract the premium received from its cost basis in the
securities purchased. The requirement that the Master Portfolio derive less
than 30% of its gross income from gains from the sale of securities held for
less than three months may limit the Master Portfolio's ability to write
options.
The amount of any gain or loss realized by a Master Portfolio on
closing out a futures contract will generally result in a realized capital gain
or loss for tax purposes. Futures contracts held at the end of each fiscal
year will be required to be "marked to market" for federal income tax purposes.
In this regard, they will be deemed to have been sold at market value. Sixty
percent (60%) of any net gain or loss recognized on these deemed sales and
sixty percent (60%) of any net realized gain or loss from any actual sales,
generally will be treated as long-term capital gain or loss, and the remainder
will be treated as short-term capital gain or loss. Transactions that qualify
as designated hedges are excepted from the marked to market rule and the
"60%/40%" rule. Currency transactions may be subject to Section 988 of the
Code, under which foreign currency gains or losses would generally be computed
separately and treated as ordinary income or losses. Each Master Portfolio
will attempt to monitor Section 988 transactions to avoid an adverse tax
impact.
Offsetting positions held by a regulated investment company involving
certain financial forward, futures or option contracts may be considered, for
tax purposes, to constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax treatment
of "straddles" is governed by Section 1092 of the Code which, in certain
circumstances, overrides or modifies the provisions of Section 1256.
If a regulated investment company were treated as entering into
"straddles" by reason of its engaging in certain financial forward, futures or
option contracts, such straddles could be characterized as "mixed straddles" if
the futures, forwards, or options comprising a part of such straddles were
governed by Section 1256 of the Code. The regulated investment company may
make one or more elections with respect to "mixed straddles." Depending upon
which election is made, if any, the results with respect to the regulated
investment company may differ. Generally, to the extent the straddle rules
apply to positions established by the regulated investment company, losses
realized by the regulated investment company may be deferred to the extent of
unrealized gain in any offsetting positions. Moreover, as a result of the
straddle and the conversion transaction rules, short-term capital loss on
straddle positions may be recharacterized as long-term capital loss, and
long-term capital gain may be characterized as short-term capital gain or
ordinary income.
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If, in the opinion of the Company, ownership of its shares has or may
become concentrated to an extent that could cause the Company to be deemed a
personal holding company within the meaning of the Code, the Company 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 any Fund to a nonresident alien individual, non-resident 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
each 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 or domestic corporations will apply. Distributions
of net long-term capital gains are not subject to tax withholding, but, in the
case of a foreign shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a rate of 30% if
the individual is physically present in the U.S. for more than 182 days during
the taxable year.
Other Matters. Investors should be aware that the investments to be
made by the Master Portfolios may involve sophisticated tax rules such as the
original issue discount and real estate mortgage investment conduit ("REMIC")
rules that would result in income or gain recognition by the Master Portfolios
without corresponding current cash receipts. Although the Master Portfolios
will seek to avoid significant noncash income, such noncash income could be
recognized by a Master Portfolio, and thereby its corresponding Fund, in which
case the Fund may distribute cash derived from other sources in order to meet
the minimum distribution requirements described above.
The foregoing discussion, and the discussions in the prospectus
applicable to each shareholder, address only some of the federal tax
considerations generally affecting investments in a Fund. Each investor is
urged to consult his or her tax advisor regarding specific questions as to
federal, state or local taxes.
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 Adviser 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,
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notices, proxy statements and reports to regulatory agencies; insurance
premiums and certain expenses relating to insurance coverage; trade association
membership dues; brokerage and other expenses connected with the execution of
portfolio transactions; fees and expenses of its custodian, including those for
keeping books and accounts and calculating the NAV per share of a Fund;
expenses of shareholders' meetings; expenses relating to the issuance,
registration and qualification of Fund shares; pricing services, and any
extraordinary expenses. Expenses attributable to a Fund are charged against a
Fund's assets. General expenses of the Company are allocated among all of the
funds of the Company, including a Fund, in a manner proportionate to the net
assets of each Fund, on a transactional basis, or on such other basis as the
Company's Board of Directors deems equitable.
CAPITAL STOCK
The Company, an open-end, management investment company, was
incorporated in Maryland on September 9, 1991. The authorized capital stock of
the Company consists of 10,000,000,000 shares having a par value of $.001 per
share. As of the date of this SAI, the Company's Board of Directors has
authorized the issuance of fourteen series of shares, each representing an
interest in one portfolio -- the Aggressive Growth, the Asset Allocation Fund,
the California Tax-Free Bond Fund, the California Tax-Free Income Fund, the
California Tax-Free Money Market Mutual Fund, the Corporate Stock Fund, the
Diversified Income Fund, the Ginnie Mae Fund, the Growth and Income Fund, the
Money Market Mutual Fund, the Short-Intermediate U.S. Government Income Fund,
the U.S. Government Allocation Fund, the Variable Rate Government Fund and the
Strategic Growth Fund -- and the Board of Directors may, in the future,
authorize the issuance of other series of capital stock representing shares of
additional investment portfolios.
The Asset Allocation and U.S. Government Allocation Funds have two
classes of shares -- Class A Shares and Class B Shares. The Corporate Stock
Fund has a single class of shares. With respect to matters affecting one Class
but not another, shareholders vote as a Class. Subject to the foregoing, all
shares of a Fund have equal voting rights and will be voted in the aggregate,
and not by series, except where voting by a series is required by law or where
the matter involved only affects one series. For example, a change in a Fund's
fundamental investment policy affects only one series and would be voted upon
only by shareholders of the Fund involved. Additionally, approval of an advisory
contract, since it affects only one Fund, is a matter to be determined
separately by Series. Approval by the shareholders of one Series is effective
as to that Series whether or not sufficient votes are received from the
shareholders of the other Series to approve the proposal as to those Series. As
used in the Prospectus of each Fund
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and in this SAI, the term "majority," when referring to approvals to be
obtained from shareholders of a Class of shares of a Fund, means the vote of
the lesser of (i) 67% of the shares of the Class represented at a meeting if
the holders of more than 50% of the outstanding shares of the Class are present
in person or by proxy, or (ii) more than 50% of the outstanding shares of the
Class of the Fund. As used in the Prospectus of each Fund and in this SAI, the
term "majority," when referring to approvals to be obtained from shareholders
of 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 share of a Fund or Class represents an equal proportional
interest in the Fund or Class with each other share and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
the Fund as are declared in the discretion of the Directors. In the event of
the liquidation or dissolution of the Company, shareholders of a Fund are
entitled to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular investment portfolio that are available for distribution in such
manner and on such basis as the Directors in their sole discretion may
determine.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non- assessable by the Company.
MIT is an open-end, series management investment company organized as
a Delaware business trust. In accordance with Delaware law and in connection
with the tax treatment sought by MIT, MIT's Declaration of Trust provides that
its investors would be personally responsible for MIT's liabilities and
obligations, but only to the extent MIT property is not sufficient to satisfy
such liabilities and obligations. The Declaration of Trust also provides that
MIT shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of MIT, its investors,
Trustees, officers, employees and agents covering possible tort and other
liabilities, and that investors will be indemnified to the extent they are held
liable for a disproportionate share of MIT obligations. Thus, the risk of an
investor incurring financial loss on account of investor liability is limited
to circumstances in which both inadequate insurance existed and MIT itself was
unable to meet its obligations.
The Declaration of Trust further provides that obligations of MIT are
not binding upon its Trustees individually but only upon the property of MIT
and that the Trustees
37
<PAGE> 159
will not be liable for any action or failure to act, but nothing in the
Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of the Trustee's office.
The interests in each Master Portfolio of MIT have substantially
identical voting and other rights as those rights described above for shares of
the Funds. MIT may dispense with annual meetings, but is required by Section
16(c) of the Act to hold a special meeting and assist investor communications
under the circumstances described above with respect to the Company. Whenever
a Fund is required to vote on a matter with respect to MIT, the Fund will hold
a meeting of Fund shareholders and will cast its votes as instructed by such
shareholders. In a situation where a Fund does not receive instruction from
certain of its shareholders on how to vote the corresponding shares of MIT,
such Fund will vote such shares in the same proportion as the shares for which
the Fund does receive voting instructions.
As of December 31, 1995, no shareholders of the Corporate Stock Fund,
nor any Class A or Class B shareholder of the Asset Allocation Fund and U.S.
Government Allocation Fund, were known by the Company to own 5% or more of
their respective outstanding shares.
OTHER
The Registration Statements for MIT and the Company, including the
Prospectus for each Fund, the SAI and the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C. Statements contained in
a Prospectus or the SAI as to the contents of any contract or other document
referred to herein or in a Prospectus are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. The Annual Report will be sent
free of charge to any shareholder who requests the Annual Report.
CUSTODIANS AND TRANSFER AND
DIVIDEND DISBURSING AGENT
BZW Barclays Global Investors, N.A. ("BGI") acts as the custodian for
the Funds and the Master Portfolios. For its services as custodian, BGI
receives an asset-based fee and transaction charge from the respective Funds.
Wells Fargo Bank has been retained to act as the Transfer and Dividend
Disbursing Agent for the Funds, and receives for its services a base fee and
per-account fees from each Fund.
38
<PAGE> 160
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been selected as the independent auditors
for the Company and MIT. KPMG Peat Marwick LLP provides audit services, tax
return preparation and assistance and consultation in connection with review of
certain SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero
Center, San Francisco, California 94111.
FINANCIAL INFORMATION
The audited financial statements and portfolio of investments
contained in the Annual Reports for the Asset Allocation Fund, Corporate Stock
Fund, U.S. Government Allocation Fund and certain other of the Company's Funds
for the most recent fiscal year are attached to the SAI. The Annual Reports
will be sent free of charge to any shareholder who requests them.
39
<PAGE> 161
SAI APPENDIX
The following is a description of the ratings given by Moody's and S&P
to corporate bonds and commercial paper.
Corporate Bonds
Moody's: The four highest ratings for corporate 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 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.
Corporate Commercial Paper
Moody's: The highest rating for corporate 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 commercial paper indicates that
the "degree of safety regarding timely payment is either overwhelming or very
strong." Commercial
A-1
<PAGE> 162
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."
A-2
<PAGE> 163
ASSET ALLOCATION FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 52.23%
99,295 Abbott Laboratories $ 2,978,052 $ 4,145,566
13,190 Advanced Micro Devices+ 350,768 217,635
14,274 Aetna Life & Casualty Co 855,482 988,475
14,781 Ahmanson (H F) & Co 277,246 391,697
14,081 Air Products & Chemicals Inc 630,570 742,773
62,198 Airtouch Communications+ 1,458,655 1,757,094
3,518 Alberto-Culver Co Class B 81,141 120,931
31,984 Albertson's Inc 875,086 1,051,474
28,292 Alcan Aluminium Ltd 622,321 880,589
13,992 Alco Standard Corp 381,237 638,385
5,369 Alexander & Alexander Services 116,905 102,011
8,115 Allergan Inc 194,321 263,738
35,652 Allied Signal Inc 1,328,768 1,693,470
56,357 Allstate Corp 1,595,267 2,317,682
23,770 Alltel Corp 723,185 701,215
22,416 Aluminum Co of America 816,102 1,185,246
10,331 ALZA Corp+ 251,037 255,692
14,570 Amdahl Corp+ 93,657 123,845
11,694 Amerada Hess Corp 590,704 619,782
22,743 American Brands Inc 785,512 1,014,906
23,420 American Electric Power Inc 862,563 948,510
60,875 American Express Corp 1,785,821 2,518,703
25,758 American General Corp 809,211 898,310
9,369 American Greetings Corp Class A 286,544 258,819
39,336 American Home Products Corp 2,596,139 3,815,592
59,632 American International Group Inc 3,773,840 5,515,960
18,697 American Stores Co 416,473 500,145
69,742 Ameritech Corp 2,902,173 4,114,778
33,246 Amgen Inc+ 785,945 1,973,981
62,451 Amoco Corp 3,551,777 4,488,666
27,384 AMP Inc 904,774 1,050,861
9,621 AMR Corp+ 648,175 714,359
4,876 Andrew Corp+ 109,787 186,507
32,101 Anheuser-Busch Inc 1,605,103 2,146,754
</TABLE>
- ------------------------
8
<PAGE> 164
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
15,285 Apple Computer Inc $ 466,938 $ 487,209
22,186 Applied Materials Inc+ 616,024 873,574
66,634 Archer-Daniels-Midland Co 988,829 1,199,412
13,591 Armco Inc+ 88,955 79,847
4,711 Armstrong World Industries Inc 210,736 292,082
5,212 ASARCO Inc 108,015 166,784
7,992 Ashland Inc 271,834 280,719
200,194 AT & T Corp 11,310,476 12,962,562
20,177 Atlantic Richfield Corp 2,258,855 2,234,603
5,962 Autodesk Inc 155,826 204,199
18,080 Automatic Data Processing 985,357 1,342,440
6,746 Avery Dennison Corp 203,809 338,143
8,636 Avon Products Inc 465,226 650,939
17,743 Baker Hughes Inc 407,239 432,486
3,782 Ball Corp 111,465 104,005
6,141 Bally Entertainment Corp+ 56,546 85,974
18,591 Baltimore Gas & Electric Co 474,040 529,844
49,151 Banc One Corp 1,691,594 1,855,450
14,081 Bank of Boston Corp 362,102 651,246
25,122 Bank of New York Inc 862,155 1,224,698
46,449 BankAmerica Corp 2,117,598 3,007,573
9,847 Bankers Trust N Y Corp 731,676 654,826
6,905 Bard (C R) Inc 173,618 222,686
12,234 Barnett Banks Inc 531,072 721,806
44,478 Barrick Gold Corp 1,260,543 1,173,107
7,295 Bausch & Lomb Inc 341,858 289,064
34,845 Baxter International Inc 922,009 1,459,134
8,245 Becton Dickinson & Co 337,437 618,375
54,915 Bell Atlantic Corp 3,274,105 3,672,441
124,916 BellSouth Corp 3,720,428 5,433,846
6,361 Bemis Co Inc 148,614 163,001
6,687 Beneficial Corp 258,986 311,781
13,811 Bethlehem Steel Corp+ 246,059 193,354
12,176 Beverly Enterprises+ 144,215 129,370
14,643 Biomet Inc+ 164,755 261,744
10,773 Black & Decker Corp 239,048 379,748
13,187 Block (H & R) Inc 544,398 534,074
</TABLE>
---------------------
9
<PAGE> 165
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
15,866 Boatmen's Bancshares Inc $ 482,796 $ 648,523
43,060 Boeing Co 1,796,787 3,374,828
6,041 Boise Cascade Corp 157,458 209,170
20,342 Boston Scientific Corp+ 470,459 996,758
3,805 Briggs & Stratton Corp 146,417 165,042
63,773 Bristol-Myers Squibb Co 3,760,859 5,476,506
2,363 Brown Group Inc 77,409 33,673
8,764 Brown-Forman Corp Class B 241,274 319,886
26,795 Browning-Ferris Industries Inc 747,095 790,453
12,042 Brunswick Corp 206,547 289,008
17,892 Burlington Northern Santa Fe 900,860 1,395,576
15,942 Burlington Resources Inc 701,281 625,724
8,962 Cabletron Systems Inc+ 477,397 725,922
31,433 Campbell Soup Co 1,329,349 1,885,980
19,391 Capital Cities/ABC Inc 1,275,687 2,392,365
19,591 Carolina Power & Light Co 601,818 675,890
25,037 Caterpillar Inc 1,143,485 1,470,924
3,539 Centex Corp 134,287 122,980
24,082 Central & South West Corp 732,043 671,286
8,299 Ceridian Corp+ 231,395 342,334
12,140 Champion International Corp 415,839 509,880
13,191 Charming Shoppes Inc 149,844 37,924
22,543 Chase Manhattan Corp 797,062 1,366,669
31,689 Chemical Banking Corp Class A 1,315,604 1,861,729
82,029 Chevron Corp 3,842,541 4,306,523
48,070 Chrysler Corp 2,382,755 2,661,876
10,941 Chubb Corp 914,950 1,058,542
9,507 CIGNA Corp 652,541 981,598
4,189 Cincinnati Milacron Inc 95,502 109,961
19,614 Cinergy Corp 473,617 600,679
12,228 Circuit City Stores Inc 309,163 337,799
34,377 Cisco Systems Inc+ 1,200,014 2,565,384
53,494 Citicorp 2,152,207 3,597,472
6,644 Clorox Co 363,117 475,877
13,184 Coastal Corp 370,572 491,104
157,751 Coca-Cola Co 7,317,318 11,713,012
18,273 Colgate-Palmolive Co 1,075,068 1,283,678
</TABLE>
- ------------------------
10
<PAGE> 166
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,343 Columbia Gas System Inc+ $ 162,280 $ 278,299
55,752 Columbia HCA Healthcare Corp 2,333,629 2,829,414
30,132 Comcast Corp Class A 633,615 548,026
14,411 Comerica Inc 538,890 578,241
5,566 Community Psychiatric Centers+ 72,290 68,184
33,236 Compaq Computer Corp+ 850,751 1,595,328
30,180 Computer Associates International Inc 835,260 1,716,488
6,991 Computer Sciences Corp+ 254,742 491,118
29,963 ConAgra Inc 825,308 1,235,974
9,796 Conrail Inc 569,689 685,720
29,585 Consolidated Edison Co 986,343 946,720
5,276 Consolidated Freightways 112,291 139,814
11,728 Consolidated Natural Gas Co 558,373 532,158
13,570 Cooper Industries Inc 642,358 498,698
10,523 Cooper Tire & Rubber Co 265,297 259,129
4,720 Coors (Adolph) Co Class B 87,561 104,430
17,591 CoreStates Financial Corp 493,327 666,259
28,919 Corning Inc 878,529 925,408
18,387 CPC International Inc 897,416 1,261,808
3,876 Crane Co 109,173 142,928
3,000 Cray Research Inc+ 73,089 74,250
11,389 Crown Cork & Seal Co+ 440,723 475,491
26,498 CSX Corp 1,063,285 1,208,971
21,963 CUC International Inc+ 581,196 749,487
5,036 Cummins Engine Co Inc 235,834 186,332
11,740 Cyprus Amax Minerals 315,016 306,708
12,765 Dana Corp 351,456 373,376
19,732 Darden Restaurants Inc+ 217,520 234,318
4,772 Data General Corp+ 42,052 65,615
9,076 Dayton-Hudson Corp 623,745 680,700
21,234 Dean Witter Discover & Co 851,231 997,998
32,722 Deere & Co 820,340 1,153,451
6,381 Delta Air Lines Inc 363,690 471,396
10,475 Deluxe Corp 362,556 303,775
18,513 Detroit Edison Co 596,158 638,699
11,777 Dial Corp 250,922 348,894
18,891 Digital Equipment Corp+ 693,210 1,211,385
</TABLE>
---------------------
11
<PAGE> 167
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
14,334 Dillard Department Stores Inc Class A $ 501,949 $ 408,519
65,457 Disney (Walt) Co 2,924,193 3,861,963
21,858 Dominion Resources Inc 979,915 901,643
19,269 Donnelley (R R) & Sons Co 602,473 758,717
14,304 Dover Corp 413,298 527,460
32,923 Dow Chemical Co 1,999,764 2,316,956
12,152 Dow Jones & Co Inc 434,824 484,561
22,940 Dresser Industries Inc 498,170 559,163
14,459 DSC Communications Corp+ 468,329 533,176
25,762 Duke Power Co 1,079,010 1,220,475
21,302 Dun & Bradstreet Corp 1,319,245 1,379,305
69,814 DuPont (E I) de Nemours 3,663,925 4,878,253
2,626 Eastern Enterprises 70,402 92,567
10,213 Eastman Chemical Co 525,484 639,589
42,992 Eastman Kodak Co 2,100,667 2,880,464
9,801 Eaton Corp 511,336 525,579
7,528 Echlin Inc 240,289 274,772
14,218 Echo Bay Mines Ltd 168,829 147,512
8,116 Ecolab Inc 186,206 243,480
6,689 EG & G Inc 119,111 162,208
28,219 Emerson Electric Co 1,717,848 2,306,903
18,086 Engelhard Corp 328,132 393,371
31,680 Enron Corp 1,061,730 1,207,800
8,530 Enserch Corp 159,673 138,613
28,636 Entergy Corp 964,516 837,603
155,955 Exxon Corp 10,203,360 12,495,894
7,048 Federal Express Corp+ 465,023 520,671
22,760 Federal Home Loan Mortgage Corp 1,211,148 1,900,460
34,279 Federal National Mortgage Assoc 2,717,734 4,254,881
5,793 Federal Paper Board Co 140,354 300,512
25,530 Federated Department Stores Inc+ 693,312 702,075
16,270 First Bank System Inc 844,138 807,399
39,916 First Chicago NBD Corp 1,140,947 1,576,682
28,024 First Data Corp 1,594,453 1,874,105
10,065 First Fidelity Bancorp 452,403 758,649
9,594 First Interstate Bancorp 639,973 1,309,581
21,636 First Union Corp 932,410 1,203,503
</TABLE>
- ------------------------
12
<PAGE> 168
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
30,913 Fleet Financial Group Inc $ 925,497 $ 1,259,705
5,830 Fleetwood Enterprises Inc 133,012 150,123
4,764 Fleming Co Inc 138,492 98,258
10,454 Fluor Corp 454,301 689,964
4,623 FMC Corp+ 234,666 312,630
135,109 Ford Motor Co 3,929,788 3,918,161
5,026 Foster Wheeler Corp 181,516 213,605
23,325 FPL Group Inc 895,238 1,081,697
25,573 Freeport McMoRan Copper & Gold Inc Class B 696,732 719,241
9,594 Fruit of the Loom Inc Class A+ 259,207 233,854
17,608 Gannett Co Inc 926,838 1,080,691
18,128 Gap Inc 611,878 761,376
7,953 General Dynamics Corp 359,635 470,221
210,057 General Electric Co 10,662,103 15,124,104
19,932 General Mills Inc 1,020,050 1,151,073
93,979 General Motors Corp 4,598,857 4,969,140
14,665 General Public Utilities 435,994 498,610
10,300 General Re Corp 1,254,582 1,596,500
6,033 General Signal Corp 209,474 195,318
15,423 Genuine Parts Co 581,817 632,343
11,463 Georgia-Pacific Corp 784,469 786,648
7,442 Giant Food Inc Class A 176,015 234,423
4,396 Giddings & Lewis Inc 99,659 72,534
55,764 Gillette Co 1,783,988 2,906,699
7,344 Golden West Financial 302,707 405,756
3,232 Goodrich (B F) Co 145,998 220,180
19,190 Goodyear Tire & Rubber Co 812,177 870,746
11,935 Grace (W R) & Co 492,537 705,657
6,346 Grainger (W W) Inc 368,636 420,423
4,875 Great Atlantic & Pacific Tea Co 126,955 112,125
8,173 Great Lakes Chemical Corp 582,926 588,456
17,059 Great Western Financial Corp 313,255 435,005
121,999 GTE Corp 4,465,010 5,367,956
14,425 Halliburton Co 517,278 730,266
4,304 Handleman Co 49,964 24,748
9,167 Harcourt General Inc 355,106 383,868
</TABLE>
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13
<PAGE> 169
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,919 Harland (John H) Co 98,275 81,809
6,092 Harnischfeger Industries Inc $ 152,044 $ 202,559
12,919 Harrah's Entertainment Inc+ 419,595 313,286
4,804 Harris Corp 213,375 262,419
11,105 Hasbro Inc 399,067 344,255
45,975 Heinz (H J) Co 1,159,230 1,522,922
3,126 Helmerich & Payne Inc 95,765 92,999
13,981 Hercules Inc 508,912 788,179
9,763 Hershey Foods Corp 503,285 634,595
64,298 Hewlett Packard Co 2,773,325 5,384,958
6,087 Hilton Hotels Corp 330,753 374,351
59,912 Home Depot Inc 2,450,895 2,868,287
17,418 Homestake Mining Co 335,252 272,156
16,005 Honeywell Inc 570,013 778,243
12,268 Household International Inc 473,303 725,346
33,156 Houston Industries Inc 750,682 804,033
20,312 Humana Inc+ 568,783 556,041
14,775 Illinois Tool Works Inc 605,548 871,725
14,960 Inco Ltd 354,083 497,420
13,290 Ingersoll-Rand Co 480,310 466,811
6,215 Inland Steel Industries Inc 195,230 156,152
103,586 Intel Corp 3,536,687 5,878,506
5,843 Intergraph Corp+ 65,554 92,027
71,487 International Business Machines Corp 4,005,264 6,558,932
13,969 International Flavors & Fragrances 557,449 670,512
31,992 International Paper Co 1,068,439 1,211,697
9,759 Interpublic Group Cos Inc 309,467 423,297
14,555 ITT Corp+ 561,232 771,415
14,555 ITT Hartford Group Inc+ 543,262 704,098
14,555 ITT Industries Inc 241,910 349,320
10,416 James River Corp 208,942 251,286
8,910 Jefferson-Pilot Corp 312,444 414,315
81,399 Johnson & Johnson 3,760,466 6,969,789
5,127 Johnson Controls Inc 279,610 352,481
4,862 Jostens Inc 94,547 117,904
57,782 K Mart Corp 1,215,270 418,920
4,254 Kaufman & Broad Home Corp 80,044 63,278
</TABLE>
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14
<PAGE> 170
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
27,309 Kellogg Co 1,526,729 2,109,620
6,554 Kerr-McGee Corp $ 328,459 $ 416,179
29,826 KeyCorp 936,898 1,081,193
34,956 Kimberly-Clark Corp 1,456,456 2,892,609
4,639 King World Productions+ 179,805 180,341
6,202 Knight-Ridder Inc 346,588 387,625
15,383 Kroger Co+ 358,002 576,863
36,982 Laidlaw Inc Class B 329,811 379,066
69,306 Lilly (Eli) & Co 1,972,704 3,898,463
44,985 Limited Inc 935,719 781,614
13,083 Lincoln National Corp 579,065 703,211
9,303 Liz Claiborne Inc 184,336 258,158
25,211 Lockheed Martin Corp 1,173,680 1,991,669
14,774 Loews Corp 817,345 1,157,912
2,601 Longs Drug Stores Corp 87,305 124,523
21,562 Loral Corp 384,955 762,756
4,206 Louisiana Land & Exploration Co 180,533 180,332
13,530 Louisiana-Pacific Corp 469,043 328,103
20,198 Lowe's Co Inc 537,616 676,633
16,084 LSI Logic Corp+ 585,315 526,751
2,917 Luby's Cafeterias Inc 65,940 64,903
9,598 Mallinckrodt Group Inc 318,258 349,127
7,919 Manor Care Inc 197,405 277,165
15,752 Marriott International 453,258 602,514
9,123 Marsh & McLennan Companies Inc 771,635 809,666
19,974 Masco Corp 623,018 626,684
27,962 Mattel Inc 569,142 859,832
31,254 May Co Department Stores Co 1,288,204 1,320,482
13,362 Maytag Corp 222,986 270,581
18,645 MBNA Corp 448,384 687,534
6,698 McDermott International Inc 186,915 147,356
87,347 McDonald's Corp 2,595,479 3,941,533
14,255 McDonnell Douglas Corp 523,149 1,311,460
6,241 McGraw-Hill Inc 439,224 543,747
85,227 MCI Communications 2,177,425 2,226,555
6,760 Mead Corp 310,447 353,210
29,020 Medtronic Inc 623,971 1,621,493
</TABLE>
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15
<PAGE> 171
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
17,786 Mellon Bank Corp 663,433 955,998
13,251 Melville Corp $ 550,076 $ 407,468
4,658 Mercantile Stores Co Inc 168,254 215,433
155,160 Merck & Co Inc 5,568,491 10,201,770
3,478 Meredith Corp 72,028 145,641
22,164 Merrill Lynch & Co Inc 1,017,360 1,130,364
25,874 Micron Technology Inc 593,849 1,025,257
74,489 Microsoft Corp+ 4,368,044 6,536,410
5,714 Millipore Corp 114,665 234,988
52,871 Minnesota Mining & Manufacturing Co 2,830,616 3,502,704
49,721 Mobil Corp 4,052,577 5,568,752
14,531 Monsanto Co 1,042,297 1,780,048
12,546 Moore Corp Ltd 245,093 233,669
23,615 Morgan (J P) & Co Inc 1,666,901 1,895,104
9,637 Morgan Stanley Group 959,733 776,983
18,686 Morton International Inc 561,977 670,360
74,179 Motorola Inc 3,761,629 4,228,203
1,132 NACCO Industries Inc Class A 53,423 62,826
8,571 Nalco Chemical Co 300,482 258,201
18,524 National City Corp 516,736 613,608
15,637 National Semiconductor+ 272,744 347,923
6,080 National Service Industries Inc 155,746 196,840
34,134 NationsBank 1,683,892 2,376,580
9,618 Navistar International Corp+ 212,951 100,989
12,123 New York Times Co Class A 299,376 359,144
19,863 Newell Co 406,173 513,955
11,829 Newmont Mining Corp 495,461 535,262
17,831 Niagara Mohawk Power Corp 369,121 171,623
6,351 NICOR Inc 176,543 174,653
18,010 Nike Inc Class B 494,741 1,253,946
15,622 NorAm Energy Corp 122,673 138,645
10,362 Nordstrom Inc 354,088 419,661
16,454 Norfolk Southern Corp 1,126,002 1,306,036
8,547 Northern States Power Co 381,945 419,871
31,876 Northern Telecom Ltd 950,766 1,370,668
6,221 Northrop Grumman Corp 240,756 398,144
44,364 Norwest Corp 1,171,899 1,464,012
</TABLE>
- ------------------------
16
<PAGE> 172
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
46,379 Novell Inc+ 910,039 660,901
10,989 Nucor Corp $ 570,110 $ 627,747
53,787 NYNEX Corp 2,301,100 2,904,498
40,070 Occidental Petroleum Corp 796,689 856,496
6,100 Ogden Corp 138,545 130,388
19,325 Ohio Edison Co 449,882 454,138
3,372 ONEOK Inc 69,049 77,135
54,526 Oracle Systems Corp+ 1,254,834 2,310,539
13,160 Oryx Energy Co+ 263,261 176,015
2,541 Outboard Marine Corp 49,257 51,773
6,347 Owens Corning Fiberglass+ 267,744 284,822
4,809 PACCAR Inc 255,861 202,579
10,666 Pacific Enterprises 272,230 301,315
53,404 Pacific Gas & Electric Co 1,789,478 1,515,339
53,839 Pacific Telesis Group 1,717,769 1,810,336
35,749 PacifiCorp 692,447 759,666
14,428 Pall Corp 283,181 387,753
18,808 Panhandle Eastern Corp 437,525 524,273
9,211 Parker Hannifin Corp 224,677 315,477
27,872 PECO Energy Co 834,716 839,644
28,623 Penney (J C) Co Inc 1,393,727 1,363,170
5,851 Pennzoil Co 338,167 247,205
4,428 Peoples Energy Corp 135,611 140,589
7,730 Pep Boys-Manny Moe & Jack 205,490 198,081
99,051 Pepsico Inc 3,964,278 5,534,475
5,237 Perkin-Elmer Corp 174,535 197,697
79,688 Pfizer Inc 2,741,867 5,020,344
63,152 Pharmacia and Upjohn Inc+ 1,803,448 2,447,140
8,721 Phelps Dodge Corp 414,697 542,882
105,618 Philip Morris Co Inc 5,882,835 9,558,429
32,947 Phillips Petroleum Co 1,062,724 1,124,316
10,550 Pioneer Hi Bred International Inc 385,093 586,844
19,096 Pitney Bowes Inc 768,781 897,512
5,261 Pittston Services Group 131,744 165,064
30,046 Placer Dome Inc 693,295 724,860
28,950 PNC Bank Corp 828,591 933,638
5,702 Polaroid Corp 203,702 270,132
</TABLE>
---------------------
17
<PAGE> 173
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,654 Potlatch Corp 159,310 146,160
19,864 PP & L Resources Inc $ 514,753 $ 496,600
24,617 PPG Industries Inc 878,436 1,126,228
17,413 Praxair Inc 307,830 585,512
8,003 Premark International Inc 304,509 405,152
24,522 Price/Costco Inc+ 439,142 373,961
86,142 Procter & Gamble Co 4,881,657 7,149,786
12,017 Providian Corp 472,438 489,693
30,739 Public Services Enterprise Group 1,006,740 941,382
3,408 Pulte Corp 116,344 114,594
16,834 Quaker Oats Co 577,371 580,773
13,118 Ralston-Purina Group 522,982 818,235
5,458 Raychem Corp 214,650 310,424
30,690 Raytheon Co 994,773 1,450,103
9,874 Reebok International Ltd 287,741 278,941
7,094 Republic New York Corp 416,501 440,715
8,022 Reynolds Metals Co 380,216 454,246
10,636 Rite Aid Corp 209,796 364,283
4,813 Roadway Services Inc 289,165 235,235
27,350 Rockwell International Corp 1,017,622 1,446,131
8,467 Rohm & Haas Co 452,755 545,063
10,774 Rowan Co Inc+ 93,545 106,393
67,350 Royal Dutch Petroleum Co 7,181,517 9,504,769
19,874 Rubbermaid Inc 677,405 506,787
4,894 Russell Corp 137,529 135,809
7,079 Ryan's Family Steak House+ 57,277 49,553
9,818 Ryder System Inc 243,657 242,996
15,838 SAFECO Corp 467,684 546,411
7,341 Safety-Kleen Corp 114,792 114,703
13,381 Salomon Inc 596,053 475,026
11,526 Santa Fe Energy Resources Inc+ 113,877 110,938
16,399 Santa Fe Pacific Gold Corp 241,645 198,838
60,355 Sara Lee Corp 1,593,957 1,923,816
76,672 SBC Communication Inc 3,285,932 4,408,640
56,094 SCEcorp 1,185,580 995,669
46,144 Schering-Plough Corp 1,563,373 2,526,384
30,415 Schlumberger Ltd 1,885,498 2,106,239
</TABLE>
- ------------------------
18
<PAGE> 174
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
9,539 Scientific-Atlanta Inc 174,541 143,099
46,789 Seagram Co Ltd $ 1,338,081 $ 1,620,069
49,029 Sears Roebuck & Co 1,430,585 1,912,131
13,067 Service Corp International 356,294 574,948
2,899 Shared Medical System Corp 76,071 157,633
10,803 Sherwin Williams Co 374,945 440,222
5,283 Shoney's Inc+ 103,519 54,151
6,307 Sigma-Aldrich Corp 235,697 312,197
19,922 Silicon Graphics Inc+ 682,230 547,855
5,128 Snap-On Inc 201,372 232,042
10,889 Sonat Inc 342,556 387,921
83,750 Southern Co 1,834,495 2,062,344
18,064 Southwest Airlines Co 477,470 419,988
2,567 Springs Industries Inc Class A 96,144 106,210
43,828 Sprint Corp 1,518,521 1,747,642
8,822 St Jude Medical Inc+ 190,899 379,346
10,627 St Paul Co Inc 493,171 591,127
5,537 Stanley Works 232,290 285,156
11,983 Stone Container Corp+ 166,160 172,256
6,379 Stride Rite Corp 96,917 47,843
9,388 Sun Co Inc 283,547 256,997
24,012 Sun Microsystems Inc+ 330,448 1,095,548
14,378 SunTrust Banks Inc 663,747 984,893
8,565 Super Value Inc 286,096 269,798
22,929 Sysco Corp 647,353 745,193
14,649 Tandem Computers Inc+ 175,930 155,646
8,194 Tandy Corp 357,725 340,051
4,231 Tektronix Inc 121,312 207,848
82,098 Tele-Communication Inc Class A+ 1,577,825 1,631,698
7,094 Teledyne Inc 175,239 181,784
11,125 Tellabs Inc+ 531,320 411,625
7,102 Temple-Inland Inc 316,070 313,376
25,149 Tenet Healthcare Corp+ 335,287 521,842
22,727 Tenneco Inc 1,166,380 1,127,827
33,237 Texaco Inc 2,195,812 2,609,105
23,684 Texas Instruments Inc 870,301 1,225,647
28,408 Texas Utilities Co 1,245,849 1,168,279
</TABLE>
---------------------
19
<PAGE> 175
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
10,698 Textron Inc 605,422 722,115
2,427 Thomas & Betts Corp $ 151,802 $ 178,991
48,580 Time Warner Inc 2,021,426 1,839,968
13,953 Times Mirror Co Class A 319,644 472,658
3,968 Timken Co 131,552 151,776
9,296 TJX Companies Inc 247,599 175,462
9,059 Torchmark Corp 442,598 409,920
34,857 Toys R Us Inc+ 1,267,961 758,140
8,618 Transamerica Corp 491,939 628,037
40,162 Travelers Inc 1,541,485 2,525,186
8,182 Tribune Co 450,769 500,125
3,617 Trinova Corp 108,800 103,537
8,140 TRW Inc 547,790 630,850
19,212 Tyco International Inc 475,387 684,428
19,029 U.S. Bancorp 555,946 639,850
19,407 U.S. Healthcare Inc 901,821 902,426
4,330 U.S. Life Corp 116,489 129,359
59,242 U.S. West Inc 1,607,672 2,117,902
59,242 U.S. West Media Group+ 1,097,749 1,125,598
26,957 Unicom Corp 773,538 882,842
20,091 Unilever NV 2,299,225 2,827,808
8,863 Union Camp Corp 409,138 422,100
17,244 Union Carbide Corp 397,551 646,650
12,836 Union Electric Co 525,085 535,903
25,796 Union Pacific Corp 1,587,907 1,702,536
21,589 Unisys Corp+ 243,918 121,438
21,785 United Healthcare Corp 1,007,790 1,426,918
7,108 United States Surgical 167,180 151,934
15,485 United Technologies Corp 965,135 1,469,139
31,013 Unocal Corp 889,115 903,254
9,187 UNUM Corp 510,133 505,285
7,516 USAir Group Inc+ 94,855 99,587
14,050 USF & G Corp 222,467 237,094
24,592 UST Inc 690,577 820,758
36,093 USX - Marathon Group 672,644 703,814
10,334 USX - US Steel Group 368,183 317,771
5,211 Varity Corp+ 214,470 193,458
</TABLE>
- ------------------------
20
<PAGE> 176
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,059 VF Corp 364,695 425,112
45,370 Viacom Inc Class B+ $ 1,847,239 $ 2,149,404
21,497 Wachovia Corp 799,867 983,488
288,919 Wal Mart Stores Inc 7,492,472 6,464,563
30,934 Walgreen Co 652,699 924,153
16,960 Warner Lambert Co 1,200,419 1,647,240
6,064 Wells Fargo & Co 797,816 1,309,824
12,978 Wendy's International Inc 210,116 275,783
6,726 Western Atlas Inc+ 261,586 339,663
49,314 Westinghouse Electric Corp 720,947 813,681
12,775 Westvaco Corp 306,601 354,506
25,537 Weyerhaeuser Co 1,056,670 1,104,475
9,269 Whirlpool Corp 577,019 493,574
13,127 Whitman Corp 212,381 305,203
6,952 Willamette Industries Inc 475,976 391,050
12,812 Williams Co Inc 377,138 562,127
19,032 Winn-Dixie Stores Inc 544,971 701,805
61,008 WMX Technologies Inc 1,693,437 1,822,614
16,346 Woolworth Corp 375,563 212,498
11,326 Worthington Industries Inc 222,954 235,722
14,562 Wrigley (Wm) Jr Co 634,536 764,505
13,515 Xerox Corp 1,204,112 1,851,511
3,563 Yellow Corp 81,253 44,092
------------ ------------
TOTAL COMMON STOCKS $447,701,789 $576,728,462
</TABLE>
---------------------
21
<PAGE> 177
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 20.57%
$13,800,000 U.S. Treasury Bonds 6.25 % 08/15/23 $ 14,183,806
3,000,000 U.S. Treasury Bonds 6.88 08/15/25 3,384,375
12,300,000 U.S. Treasury Bonds 7.13 02/15/23 14,048,888
19,983,000 U.S. Treasury Bonds 7.25 05/15/16 22,818,088
7,700,000 U.S. Treasury Bonds 7.25 08/15/22 8,915,152
1,000,000 U.S. Treasury Bonds 7.50 11/15/24 1,201,250
7,900,000 U.S. Treasury Bonds 7.63 11/15/22 9,541,715
6,100,000 U.S. Treasury Bonds 7.88 02/15/21 7,508,710
20,500,000 U.S. Treasury Bonds 8.00 11/15/21 25,657,001
11,249,000 U.S. Treasury Bonds 8.13 08/15/19 14,145,618
7,000,000 U.S. Treasury Bonds 8.13 05/15/21 8,859,375
6,050,000 U.S. Treasury Bonds 8.13 08/15/21 7,664,594
10,700,000 U.S. Treasury Bonds 8.50 02/15/20 13,986,890
15,082,000 U.S. Treasury Bonds 8.75 05/15/17 19,950,636
11,125,000 U.S. Treasury Bonds 8.75 08/15/20 14,924,866
9,815,000 U.S. Treasury Bonds 8.88 02/15/19 13,241,034
4,449,000 U.S. Treasury Bonds 9.00 11/15/18 6,063,146
4,850,000 U.S. Treasury Bonds 9.13 05/15/18 6,664,196
5,624,000 U.S. Treasury Bonds 9.25 02/15/16 7,734,749
4,610,000 U.S. Treasury Bonds 9.88 11/15/15 6,674,413
------------
TOTAL U.S. TREASURY SECURITIES $227,168,502
(Cost $191,703,401)
</TABLE>
- ------------------------
22
<PAGE> 178
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
YIELD
TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 27.68%
$ 517,000 U.S. Treasury Bills 4.06 % 01/11/96 $ 516,178
14,801,000 U.S. Treasury Bills 4.54 01/18/96 14,763,128
194,255,000 U.S. Treasury Bills 4.74 02/08/96 193,167,906
1,995,000 U.S. Treasury Bills 4.81 02/22/96 1,981,398
49,067,000 U.S. Treasury Bills 5.03 03/07/96 48,635,505
47,000,000 U.S. Treasury Bills 5.06 03/14/96 46,536,533
------------
TOTAL SHORT-TERM INSTRUMENTS $305,600,648
(Cost $305,568,218)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $944,973,408)* (Notes 1 and 3) 100.48% $1,109,497,612
Other Assets and Liabilities, Net (0.48) (5,291,729)
------ --------------
TOTAL NET ASSETS 100.00% $1,104,205,883
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $174,956,849
Gross Unrealized Depreciation (10,432,645)
------------
NET UNREALIZED APPRECIATION $164,524,204
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
23
<PAGE> 179
CALIFORNIA TAX-FREE BOND FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 96.32%
$ 3,000,000 ABAG Finance Authority for Nonprofit Corp CA
Stanford University Hospital 5.50 % 11/01/13 $ 2,972,040
1,000,000 Alameda CA USD AMBAC Insured 5.95 07/01/09 1,058,850
1,000,000 Alameda CA USD AMBAC Insured 6.05 07/01/11 1,062,140
5,000,000 Alameda CA USD MBIA Insured 5.70 12/01/14 5,099,700
1,000,000 Alameda County CA Public Facilities Corp COP 6.25 06/01/06 1,059,690
3,620,000 Antioch CA Public FA Water Revenue Water
Treatment Plant Project MBIA Insured 5.63 07/01/14 3,677,739
1,330,000 Arcadia CA USD Capital Appreciation Series A
MBIA Insured 6.45 (F) 09/01/06 790,592
1,430,000 Arcadia CA USD Capital Appreciation Series A
MBIA Insured 6.41 (F) 09/01/07 795,895
250,000 Bakersfield CA City School District Series D
FGIC Insured 6.60 08/01/16 273,108
120,000 Belmont CA RDFA Tax Allocation Los Costanos
Community Development Series A 6.00 08/01/04 127,024
180,000 Belmont CA RDFA Tax Allocation Los Costanos
Community Development Series A 6.05 08/01/05 189,936
250,000 Big Bear Lake CA Water Revenue FGIC Insured 6.25 04/01/12 267,545
2,545,000 Bonita CA USD COP MBIA Insured 5.63 05/01/10 2,633,337
1,300,000 Burbank Glendale Pasadena Airport Authority CA
Airport Revenue AMBAC Insured 6.40 06/01/10 1,391,897
400,000 California State DWR Central Valley Project
Revenue Series F 6.00 12/01/11 407,492
1,830,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/13 1,884,369
1,000,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/14 1,029,710
</TABLE>
- ------------------------
30
<PAGE> 180
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 680,000 California State EDFA Revenue Mills College 6.70 % 09/01/05 $ 760,220
50,000 California State EDFA Revenue Pomona College 6.13 02/15/08 53,625
4,435,000 California State EDFA Revenue St Mary's College 4.75 10/01/20 3,938,324
750,000 California State EDFA Revenue University of San
Diego Project 6.50 10/01/08 820,703
1,000,000 California State EDFA Revenue University of San
Francisco 6.30 10/01/07 1,088,970
1,000,000 California State GO 4.75 09/01/11 929,320
50,000 California State HFA Home Mortgage Revenue
Series B FHA Collateralized 6.90 08/01/16 51,294
200,000 California State HFA Home Mortgage Revenue
Series B MBIA Insured 6.90 08/01/16 205,164
300,000 California State HFA Home Mortgage Revenue
Series G AMT Multiple Credit Enhancements 6.95 08/01/11 323,256
500,000 California State HFA Home Multi Unit Rental
Mortgage Revenue Series B-II 6.70 08/01/15 531,215
500,000 California State HFA Home Multi-Unit Rental
Mortgage Revenue Series C-II AMT 6.85 08/01/15 531,015
1,250,000 California State HFA Multi-Unit Rental Housing
Revenue Series A AMT 5.50 08/01/15 1,197,613
1,500,000 California State HFFA Revenue Kaiser Permanente
Series A 6.25 03/01/21 1,573,710
1,000,000 California State HFFA Revenue Kaiser Permanente
Series A 6.50 03/01/11 1,052,890
600,000 California State HFFA Revenue Small Insured
Health Facilities Series A 6.70 03/01/11 642,684
1,000,000 California State HFFA San Diego Hospital
Association MBIA Insured 6.20 08/01/12 1,058,660
1,795,000 California State HFFA Scripps Memorial Hospital
Series A MBIA Insured 6.25 10/01/13 1,897,369
2,500,000 California State PCFA Pacific Gas & Electric Co
AMT 6.35 06/01/09 2,659,800
</TABLE>
---------------------
31
<PAGE> 181
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,445,000 California State PCFA Pacific Gas & Electric Co
AMT 6.63 % 06/01/09 $ 1,560,759
1,000,000 California State Public Works Board Lease
Revenue University Of California Project
Series A AMBAC Insured 6.00 12/01/12 1,050,060
1,755,000 California State Public Works Board Lease
Revenue University Of California Project
Series A AMBAC Insured 6.30 12/01/09 1,900,981
1,500,000 California Statewide CDA Lease Revenue Oakland
Convention Centers Project AMBAC Insured 5.50 10/01/14 1,504,680
6,800,000 California Statewide CDA Lease Revenue Oakland
Convention Centers Project AMBAC Insured 6.00 10/01/10 7,208,340
1,000,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.20 01/01/11 991,550
1,750,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/12 1,734,705
500,000 California Statewide CDA Revenue COP Health
Facilities Barton Memorial Hospital LOC -
Banque Nationale de Paris 6.40 12/01/05 537,760
1,810,000 California Statewide CDA Revenue COP Hospital
Cedars Sinai Medical Center 6.50 08/01/12 1,996,394
1,500,000 California Statewide CDA Revenue COP Sutter
Health Obligated Group AMBAC Insured 6.00 08/15/09 1,578,360
1,935,000 California Statewide CDA Water Revenue Series A 6.00 07/01/10 2,033,298
200,000 Capitol Area Development Authority Sacramento
CA Lease Revenue Series A MBIA Insured 6.50 04/01/12 217,796
300,000 Center CA USD Series A MBIA Insured 6.63 09/01/17 325,269
</TABLE>
- ------------------------
32
<PAGE> 182
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,500,000 Cerritos CA PFA Redevelopment Los Cerritos
Redevelopment Project Revenue 6.05 % 11/01/20 $ 1,521,270
595,000 Chula Vista CA COP Town Centre II Package
Project RDA 5.80 09/01/05 620,127
400,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/07 418,264
735,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/08 762,945
820,000 Chula Vista CA COP Town Centre II Package
Project Redevelopment Agency 6.00 09/01/10 848,060
2,000,000 Coachella CA Water Revenue COP FSA Insured 6.10 03/01/22 2,092,740
1,000,000 Coachella Valley CA Water District Improvement
District 71 Storm Water District Flood
Control 6.60 10/01/06 1,086,720
985,000 Coachella Valley CA Water District Improvement
District Seven Storm Water District Flood
Control Project 6.45 10/01/05 1,069,749
2,500,000 Concord CA RDFA Tax Allocation 5.75 07/01/10 2,451,125
1,500,000 Contra Costa County CA COP Public Facilities
Merrithew Memorial Hospital Replacement 6.60 11/01/12 1,604,820
1,000,000 Contra Costa County CA Water Treatment Revenue
Series A FGIC Insured 5.60 10/01/10 1,028,590
1,045,000 Corona CA PFA Public Improvement Revenue 5.95 07/01/07 1,049,943
1,075,000 Cotati CA Facilities Financing Authority Tax
Allocation Series A 5.60 09/01/12 1,040,751
1,250,000 Cucamonga County CA Water District COP
Refinancing Facilities FGIC Insured 6.30 09/01/12 1,338,775
15,000 Culver City CA RDFA AMBAC Insured 6.75 11/01/15 16,140
5,000,000 Cupertino CA Series A AMBAC Insured 5.75 07/01/16 5,087,800
1,450,000 Cupertino CA Series B 6.25 07/01/10 1,512,176
1,045,000 Danville CA Improvement Board Sycamore Valley
Reassessment District 93-2 5.90 09/02/05 1,073,539
</TABLE>
---------------------
33
<PAGE> 183
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,855,000 Duarte CA COP City of Hope National Medical
Center 6.13 % 04/01/13 $ 1,850,789
4,685,000 East Bay CA MUD Wastewater Treatment System
Revenue 6.00 06/01/12 4,938,740
1,500,000 East Bay CA MUD Wastewater Treatment System
Revenue AMBAC Insured 6.00 06/01/09 1,592,580
3,195,000 East Bay CA Regional Park District Series B 5.75 09/01/14 3,249,986
1,850,000 East Bay CA Regional Park District Series B 6.38 09/01/10 1,991,192
495,000 Eastern Municipal Water District CA Water &
Sewer Revenue Certificates FGIC Insured 6.30 07/01/20 519,720
5,000,000 Elsinore Valley CA Municipal Water District COP
Series A FGIC Insured 5.75 07/01/19 5,104,800
1,000,000 Elsinore Valley CA Municipal Water District COP
Series A FGIC Insured 6.00 07/01/12 1,084,290
1,045,000 Emeryville CA HFA 6.20 09/01/15 1,074,803
3,000,000 Emeryville CA PFA Housing Increment Revenue
Series A 6.35 05/01/10 3,147,990
2,000,000 Escondido CA PFA Lease Revenue Escondido Civic
Center Project Series B AMBAC Insured 6.13 09/01/11 2,205,180
1,200,000 Escondido CA USD COP Series A 5.90 07/01/11 1,200,216
1,110,000 Folsom CA PFA Revenue AMBAC Insured 6.00 10/01/12 1,168,652
1,000,000 Foothill CA De Anza Community College Connie
Lee Insured 5.25 09/01/21 957,880
1,000,000 Foster City CA PFA 6.00 09/01/13 1,012,800
1,270,000 Fremont CA USD Alameda County Series E FGIC
Insured 5.90 09/01/15 1,331,684
2,000,000 Fresno CA Joint Powers Financing Authority
Street Light Acquisition Project Series A 5.50 08/01/12 1,961,160
1,500,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.50 12/01/09 1,536,045
1,000,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.50 12/01/11 1,020,140
</TABLE>
- ------------------------
34
<PAGE> 184
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
50,000 Hayward CA COP Capital Improvement Projects 6.80 08/01/17 52,191
$ 575,000 Huntington Beach CA PFA Revenue Bond 6.55 % 08/01/01 $ 567,462
1,000,000 Indian Wells CA RDFA Tax Allocation Whitewater
Project MBIA Insured 6.00 12/01/14 1,046,440
1,000,000 Industry CA GO MBIA Insured 5.50 07/01/11 1,025,850
200,000 Industry CA Urban Development Agency 6.85 11/01/04 218,482
1,270,000 Industry CA Urban Development Agency Tax
Allocation MBIA Insured 5.80 05/01/09 1,322,540
1,000,000 Industry CA Urban Development Agency Tax
Allocation MBIA Insured 6.00 05/01/15 1,046,430
1,350,000 Jackson CA COP Water System Acquisition Project 6.80 09/01/23 1,401,948
270,000 Jamul-Dulzura CA USD 6.40 08/01/16 285,560
1,185,000 La Verne CA COP Capital Improvements Projects 5.70 06/01/15 1,164,322
500,000 Lemon Grove CA CDA Lemon Grove Redevelopment
Project 6.65 08/01/06 531,560
300,000 Long Beach CA Harbor Revenue Series A AMT 7.25 05/15/19 324,810
1,000,000 Long Beach CA USD 6.20 12/01/07 1,078,010
1,000,000 Los Angeles CA Community College District COP
Series A CGIC Insured 5.90 08/15/07 1,065,020
1,750,000 Los Angeles CA DW&P Electric Plant Revenue 5.70 09/01/11 1,781,938
200,000 Los Angeles CA DW&P Electric Plant Revenue 6.38 02/01/20 213,012
2,000,000 Los Angeles CA DW&P Electric Plant Revenue
Second Issue 5.75 08/15/11 2,039,800
3,000,000 Los Angeles CA DW&P Waterworks Revenue 5.70 04/15/09 3,097,080
340,000 Los Angeles CA Municipal Improvement Corp Lease
Revenue Central Library Project Series A 6.30 06/01/16 349,370
1,300,000 Los Angeles CA Wastewater System Revenue Series
A MBIA Insured 5.70 06/01/13 1,334,489
</TABLE>
---------------------
35
<PAGE> 185
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
250,000 Los Angeles CA Wastewater System Revenue Series
C 7.10 06/01/18 278,225
$ 1,000,000 Los Angeles CA Wastewater System Revenue Series
C MBIA Insured 5.50 % 06/01/13 $ 1,008,190
7,000,000 Los Angeles CA Wastewater System Revenue Series
D FGIC Insured 5.20 11/01/21 6,825,490
1,840,000 Los Angeles County CA COP Correctional
Facilities Project MBIA Insured 6.50 09/01/13 1,970,658
1,975,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
Series A 5.50 07/01/13 1,968,107
1,370,000 Madera CA RDFA Tax Allocation Revenue CGIC
Insured 5.75 09/01/11 1,417,443
1,400,000 Martinez CA USD 6.00 08/01/11 1,445,528
2,000,000 Martinez CA USD 6.00 08/01/12 2,050,560
200,000 Menlo Park CA CDA Tax Allocation Las Pulgas
Community Project AMBAC Insured 6.70 10/01/22 219,196
2,485,000 Merced County CA COP Construction & Equipment
Project Lease Revenue FSA Insured 6.00 10/01/12 2,593,768
1,545,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 5.70 09/01/14 1,544,058
705,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 6.30 07/01/11 746,849
750,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 6.35 07/01/12 794,430
1,000,000 Modesto CA Irrigation District Financing
Authority Domestic Water Project Revenue
Series A AMBAC Insured 6.00 09/01/09 1,063,190
975,000 Montclair CA RDFA Lease Revenue Series A 5.80 11/01/10 1,010,685
100,000 Montclair CA RDFA Lease Revenue Series A 6.63 11/01/11 105,124
2,055,000 Mountain View CA Shoreline Regional Park
Community Tax Allocation Series A 5.60 08/01/09 2,027,340
</TABLE>
- ------------------------
36
<PAGE> 186
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
200,000 MSR Public Power Agency CA San Juan Project
Revenue Series C BIG Insured 6.63 07/01/13 207,664
$ 1,000,000 National City CA CDA Tax Allocation Downtown
Redevelopment Project Series A AMBAC Insured 6.25 % 08/01/12 $ 1,069,170
1,230,000 National City CA CDA Tax Allocation Downtown
Redevelopment Project Series B AMT AMBAC
Insured 6.63 08/01/12 1,341,057
720,000 Natomas CA USD Series A MBIA Insured 5.75 09/01/12 744,934
750,000 Nevada County CA Solid Waste Revenue 6.50 10/01/06 806,978
1,000,000 Northern California Power Agency Multiple
Capital Facilities Revenue Series A MBIA
Insured 6.50 08/01/12 1,092,200
7,000,000 Northern California Transmission Revenue
Transmission Project A MBIA Insured 5.50 05/01/14 7,082,320
250,000 Northern California Transmission Revenue
Transmission Project A MBIA Insured 6.50 05/01/16 272,445
1,465,000 Oakland CA FGIC Insured 6.00 06/15/12 1,545,487
500,000 Oceanside CA Community Downtown RDFA 6.10 09/01/18 498,715
2,000,000 Oceanside CA Water Reuse Finance Project A
AMBAC Insured 6.40 10/01/12 2,170,140
800,000 Orange County CA Local Transportation Authority
Sales Tax Revenue First Series Measure M 6.00 02/15/09 829,136
1,000,000 Orange County CA RDFA Tax Allocation Northwest
Redevelopment Project B 5.70 10/01/17 881,870
360,000 Orange County CA Sanitation District COP FGIC
Insured 6.40 08/01/07 387,065
1,240,000 Parlier CA RDFA Tax Allocation Series A 6.95 08/01/23 1,240,434
1,500,000 Pinole CA RDFA Tax Allocation 5.60 08/01/17 1,457,790
250,000 Pleasanton CA USD Series G 6.50 08/01/16 262,873
3,380,000 Port of Oakland CA Special Facilities Revenue
Mitsui OSK Lines Ltd Series A AMT LOC -
Industrial Bank of Japan Ltd 6.80 01/01/19 3,615,924
1,000,000 Poway CA PFA Water Services Capital Improvement
Program AMBAC Insured 5.50 11/01/15 1,005,580
</TABLE>
---------------------
37
<PAGE> 187
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
1,050,000 Redding CA Joint Powers Financing Authority
Solid Waste Revenue Series A 5.00 01/01/23 893,057
$ 1,325,000 Redding CA Joint Powers Financing Authority
Wastewater Revenue Series A FGIC Insured 6.00 % 12/01/11 $ 1,400,976
1,310,000 Rialto CA RDFA Tax Allocation Series A 5.80 09/01/08 1,336,410
4,000,000 Riverside County CA Asset Leasing Corp Revenue
Riverside County Hospital Project A 6.38 06/01/09 4,184,240
1,045,000 Riverside County CA PFA Special Tax Revenue
Series A MBIA Insured 5.25 09/01/10 1,050,862
1,000,000 Rossmoor CA Community Services District
Improvement Board Landscaping & Assessment
District 91-1 6.10 09/02/12 975,170
1,725,000 Sacramento CA COP Public Facilities Project 6.00 07/01/12 1,764,589
5,000 Sacramento CA Financing Authority Revenue
Prerefunded 6.70 11/01/11 5,377
2,300,000 Sacramento CA Light Rail Transportation Project 6.00 07/01/12 2,355,591
500,000 Sacramento CA MUD Electric Revenue Series C
FGIC Insured 5.75 11/15/08 523,370
6,695,000 Sacramento CA MUD Electric Revenue Series C
MBIA Insured 5.75 11/15/09 6,983,621
200,000 Sacramento CA MUD Electric Revenue Series Y
MBIA Insured 6.75 09/01/19 227,508
50,000 Sacramento CA MUD Electric Revenue Series Z
FGIC Insured 6.45 07/01/10 54,094
1,650,000 Sacramento CA RDFA Tax Allocation Merged
Downtown Project A MBIA Insured 6.50 11/01/13 1,769,889
250,000 Sacramento CA Regional Transit District COP
Series A 6.38 03/01/05 270,828
2,000,000 Sacramento County CA Airport System Revenue
Series A AMT FGIC Insured 6.00 07/01/12 2,074,380
380,000 San Bernardino County CA West Valley Detention
Center MBIA Insured 6.50 11/01/12 413,607
</TABLE>
- ------------------------
38
<PAGE> 188
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 200,000 San Bernardino County CA Transportation
Authority Sales Tax Revenue FGIC Insured 6.00 % 03/01/10 $ 212,722
4,000,000 San Buenaventura CA COP AMBAC Insured 6.00 01/01/12 4,210,760
1,500,000 San Diego CA Community College District COP
Financing Projects 5.38 12/01/14 1,428,720
1,695,000 San Diego CA PFA Sewer Revenue FGIC Insured 5.00 05/15/15 1,637,641
50,000 San Diego County CA COP East Mesa Detention
Facilities Project 7.00 10/01/09 52,828
4,000,000 San Diego County CA Regional Transportation
Community Sales Tax Revenue Series A Escrowed
to Maturity 6.00 04/01/08 4,338,440
1,500,000 San Diego County CA Water Authority Water
Revenue COP Series A 6.40 05/01/08 1,639,980
1,235,000 San Elijo Joint Powers Authority San Diego
County CA Water Pollution Control Facility
FGIC Insured 5.38 03/01/13 1,238,236
300,000 San Francisco CA BART Tax Revenue FGIC Insured 6.60 07/01/12 328,215
200,000 San Francisco CA City & County Public Utilities
Commission Water Revenue Series A 6.50 11/01/09 222,460
700,000 San Francisco CA City & County RDFA Tax
Allocation Capital Appreciation Project MBIA
Insured 6.76 (F) 08/01/08 365,288
1,000,000 San Francisco County CA RDFA 6.50 07/01/08 1,120,570
2,000,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road Revenue Capital Appreciation 4.39 (F) 01/01/10 1,525,220
1,055,000 San Jose CA Airport Revenue AMT FGIC Insured 5.50 03/01/08 1,074,887
500,000 San Jose CA RDFA Tax Allocation Park Center
Project 7.00 10/01/04 527,795
3,000,000 San Jose RDFA Merged Area Project MBIA Insured 5.25 08/01/16 2,951,610
</TABLE>
---------------------
39
<PAGE> 189
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 200,000 San Juan Capistrano CA Open Space Project 6.20 % 02/01/16 $ 208,292
1,200,000 San Mateo CA Joint Powers Financing Authority
Redevelopment Downtown & Shoreline Project A
AMBAC Insured 5.50 08/01/07 1,233,744
4,010,000 Santa Clara CA RDFA Tax Allocation Bayshore
North Project AMBAC Insured 5.75 07/01/14 4,121,518
2,500,000 Santa Clara County CA COP Multiple Facilities
Project AMBAC Insured 6.00 05/15/12 2,618,850
1,000,000 Santa Maria CA RDFA Town Center West Side
Parking Facilities FSA Insured 5.25 06/01/11 996,600
350,000 Shasta CA Dam Area Public Utility District COP 7.25 03/01/12 374,948
1,750,000 Shasta CA Joint Powers Financing Authority
Lease Revenue County Courthouse Improvement
Project Series 6.70 06/01/23 1,832,355
585,000 Solana Beach CA COP City Hall Project 6.30 10/01/12 611,384
4,720,000 South County CA Regional Wastewater Authority
Revenue Capital Improvement FGIC Insured 5.75 08/01/10 4,901,578
500,000 South Gate CA RDFA Tax Allocation Revenue
Prerefunded 7.38 09/01/09 561,865
1,000,000 Southern California State Public Power
Authority 5.50 07/01/12 1,002,410
1,000,000 Southern California State Rapid Transit
District CA COP Workers Compensation MBIA
Insured 6.00 07/01/10 1,054,220
3,000,000 Southern California State Rapid Transit
District Special Benefit Assesment District
A1 AMBAC Insured 6.00 09/01/08 3,200,400
2,000,000 Stanislaus County CA Capital Improvement
Program Series A MBIA Insured 5.25 05/01/14 1,981,080
900,000 Stanislaus County CA COP Series A 6.85 06/01/12 948,294
2,000,000 Stanislaus County CA COP Series B AMBAC Insured 6.13 06/01/12 2,119,300
</TABLE>
- ------------------------
40
<PAGE> 190
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
1,430,000 Temecula CA Community Services Recreational
Center Project 7.13 10/01/12 1,544,457
$ 2,000,000 Three Valleys CA Municipal Water District
Revenue COP FGIC Insured 5.25 % 11/01/10 $ 2,009,540
1,000,000 Torrance CA COP AMBAC Insured 5.50 04/01/11 1,025,190
1,000,000 Torrance CA COP AMBAC Insured 5.75 04/01/16 1,029,550
1,075,000 Tri-Cities CA Municipal Water District 6.40 12/01/10 1,031,721
2,000,000 Tulare County CA COP Public Facilities
Corporation Series A MBIA Insured 6.10 11/15/07 2,162,060
1,250,000 Twentynine Palms CA Water District CA COP 7.00 08/01/17 1,319,188
1,000,000 Union City CA Community RDFA Tax Allocation
Revenue Community Redevelopment Project AMBAC
Insured 5.65 10/01/14 1,015,880
1,645,000 University of California Revenue Housing System
Series A AMBAC Insured 5.50 11/01/11 1,677,851
6,900,000 University of California Revenue Multiple
Purpose Project C AMBAC Insured 5.25 09/01/11 6,906,417
3,950,000 University of California Revenue Seismic Safety
Project MBIA Insured 5.50 11/01/10 4,044,168
2,000,000 Ventura CA COP Public Facilities Corporation IV 5.75 12/01/07 2,072,300
2,000,000 West & Central Basin CA Financing Authority
Redevelopment AMBAC Insured 6.13 08/01/12 2,114,160
1,170,000 West Sacramento CA Financing Authority Revenue
Water System Improvement Project FGIC Insured 5.50 08/01/15 1,178,822
1,200,000 Westminster CA RDFA AMT 6.50 08/01/10 1,235,800
1,000,000 Whittier CA Educational Facilities Revenue
Whittier College Connie Lee Insured 5.40 12/01/18 985,750
1,340,000 Yolo County CA Library Special Tax Community
Facilities 6.25 12/01/22 1,372,227
------------
TOTAL CALIFORNIA MUNICIPAL BONDS $311,426,826
(Cost $297,513,691)
</TABLE>
---------------------
41
<PAGE> 191
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 3.70%
CALIFORNIA MUNICIPAL VARIABLE RATE SECURITIES+ - 3.52%
$ 900,000 California State PCFA Southern California
Edison V/R Series A 5.40 % 02/28/08 $ 900,000
1,075,000 California State PCFA Stanislaus Project V/R
AMT LOC - Swiss Bank 6.00 12/01/17 1,075,000
1,570,000 Irvine CA IDA Improvement Bond V/R LOC -
National Westminster Bank Plc 5.80 09/02/15 1,570,000
400,000 Irvine Ranch CA Water District V/R LOC -
Sumitomo Bank Ltd 5.90 10/01/10 400,000
900,000 Los Angeles County CA IDA Lee & Macho Realty
Partnership V/R LOC - Dai-Ichi Kangyo Bank
Ltd 6.25 12/01/05 900,000
1,000,000 Los Angeles County CA IDA Walter & Howard V/R
AMT LOC - Dai-Ichi Kangyo Bank Ltd 6.25 12/01/06 1,000,000
1,534,000 Orange County CA Improvement Bond V/R Multiple
LOC's 6.50 09/02/18 1,534,000
3,000,000 Orange County CA Office & Courthouse Projects
V/R LOC - Dai-Ichi Kangyo Bank 5.90 12/01/15 3,000,000
1,000,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 5.90 08/01/15 1,000,000
------------
$ 11,379,000
MONEY MARKET FUNDS - 0.18%
$ 550,520 Arbor Fund CA Tax-Exempt Portfolio $ 550,520
27,624 Nuveen Institutional CA Tax-Exempt Fund 27,624
------------
$ 578,144
TOTAL SHORT-TERM INSTRUMENTS $ 11,957,144
(Cost $11,957,144)
- -------------------------------------------------------------------------------------------------------
</TABLE>
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH REDUCES
THE REMAINING MATURITY.
- ------------------------
42
<PAGE> 192
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $309,470,835)* (Notes 1 and 3) 100.02% $ 323,383,970
Other Assets and Liabilities, Net (0.02) (51,016)
------ -------------
TOTAL NET ASSETS 100.00% $ 323,332,954
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 14,284,975
Gross Unrealized Depreciation (371,840)
------------
NET UNREALIZED APPRECIATION $ 13,913,135
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
43
<PAGE> 193
CALIFORNIA TAX-FREE INCOME FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 94.69%
$ 500,000 ABAG Finance Authority for Nonprofit Corp CA
Stanford University Hospital 4.30 % 11/01/99 $ 492,185
1,700,000 Anaheim CA Electric Revenue 4.75 10/01/01 1,725,075
2,425,000 California State DWR Central Valley Project
Revenue 8.50 12/01/98 2,720,947
4,625,000 California State DWR Central Valley Project
Revenue Series H Prerefunded 6.90 12/01/25 5,180,278
1,500,000 California State DWR Central Valley Project
Revenue Series H Prerefunded 8.50 12/01/02 1,858,095
2,000,000 California State DWR Central Valley Project
Revenue Series L 8.00 12/01/01 2,376,220
500,000 California State HFFA Kaiser Permanente Series
A 6.50 10/01/96 509,555
1,750,000 California State HFFA Revenue Childrens
Hospital Los Angeles Series A Prerefunded 7.13 06/01/21 2,009,438
2,135,000 California State Maritime Infrastructure
Authority Port of San Diego Revenue AMBAC
Insured 5.00 11/01/02 2,172,960
500,000 California State Public Works Board High
Technology Facilities Lease Revenue
Department of Correction 7.10 11/01/97 521,050
250,000 California State Veterans Bonds 8.10 10/01/98 275,793
1,500,000 California Statewide CDA Revenue COP Saint
Joseph Health System 4.30 07/01/98 1,495,080
200,000 California Statewide CDA Revenue COP Sutter
Health Obligated Group AMBAC Insured 5.00 08/15/98 204,558
250,000 Carlsbad CA USD COP Phase III 6.70 11/01/99 268,473
305,000 Culver City CA RDFA Escrowed to Maturity 6.70 11/01/98 326,347
195,000 Culver City CA RDFA Revenue Series A AMBAC
Insured 6.70 11/01/98 208,272
750,000 Cupertino CA Series A 4.50 01/01/98 748,725
</TABLE>
- ------------------------
50
<PAGE> 194
CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,700,000 Desert Sands CA USD Capital Appreciation Series
E FSA Insured 5.34 %(F) 03/01/04 $ 1,141,363
2,000,000 Desert Sands CA USD COP Series C 4.30 08/01/98 1,980,380
5,000,000 East Bay CA MUD Water System Revenue MBIA
Insured 7.50 06/01/18 5,740,700
500,000 Emeryville CA PFA Housing Increment Revenue
Series A 5.40 05/01/98 507,585
600,000 Encinitas CA USD COP Measure B Capital Projects 4.38 09/01/98 598,998
1,350,000 Foothill CA De Anza Community College
Prerefunded 8.25 07/01/98 1,518,021
820,000 Foster City CA PFA 4.70 09/01/98 820,558
685,000 Foster City CA PFA 5.40 09/01/01 705,276
1,700,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.00 12/01/01 1,753,040
500,000 Imperial Irrigation District CA Electrical
System Project 5.75 05/01/98 516,175
255,000 Industry CA GO FGIC Insured 8.00 07/01/99 286,429
500,000 Industry CA GO MBIA Insured 8.00 07/01/99 561,625
500,000 Lake Arrowhead CA Community Services FGIC
Insured 5.30 06/01/97 509,345
100,000 Las Virgenes CA MUD Capital Improvement Project
MBIA Insured 9.00 11/01/99 116,327
1,320,000 Long Beach CA Harbor Revenue AMT Series A 4.50 05/15/97 1,325,834
480,000 Long Beach CA Harbor Revenue Series A 7.00 05/15/97 500,458
500,000 Los Angeles CA Community RDFA Central Business
District Project Series G 6.20 07/01/97 509,525
2,500,000 Los Angeles CA DWP Electrical Plant Revenue 6.63 10/01/31 2,801,550
2,000,000 Los Angeles CA DWP Electrical Plant Revenue 6.75 04/01/32 2,252,600
725,000 Los Angeles CA Judgement Obligation Bonds
Series A 4.70 08/01/98 735,679
1,300,000 Los Angeles CA Waste Water System Revenue
Series A MBIA Insured 8.50 06/01/03 1,616,316
</TABLE>
---------------------
51
<PAGE> 195
CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Los Angeles CA Waste Water System Revenue
Series D Prerefunded 6.70 % 12/01/21 $ 1,126,100
100,000 Los Angeles County CA Capital Asset Leasing
Corp Leasehold Revenue AMBAC Insured 4.70 12/01/97 101,417
300,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series A 6.10 07/01/99 319,032
500,000 Milpitas CA RDFA Tax Allocation Project Number
One MBIA Insured 4.20 01/15/96 500,043
500,000 Morgan Hill CA RDFA Tax Allocation Ojo De Agua
Community Development Project 5.60 03/01/00 510,830
305,000 Mountain View CA Shoreline Regional Park
Community Tax Allocation Series A 4.25 08/01/97 302,383
1,000,000 Riverside County CA Asset Leasing Corp Revenue
Riverside County Hospital Project Series A
Prerefunded 7.40 06/01/14 1,119,630
1,000,000 Riverside County CA Transportation Sales Tax
Revenue Series A 6.40 06/01/99 1,072,140
300,000 Sacramento CA Light Rail Transportation Project 6.30 07/01/00 322,119
485,000 Sacramento CA MUD Electric Revenue Series D 4.30 11/15/97 487,391
2,000,000 Sacramento CA MUD Revenue Series D FSA Insured 4.90 11/15/01 2,051,700
2,275,000 San Diego County CA Regional Transportation
Commission Sales Tax Revenue Series A FGIC
Insured 5.25 04/01/02 2,367,706
1,000,000 San Diego County CA Regional Transportation
Commission Sales Tax Revenue Series A FGIC
Insured 6.25 04/01/02 1,094,680
1,000,000 San Diego County CA Regional Transportation
Commission Sales Tax Revenue Series A
Prerefunded 7.38 04/01/06 1,114,290
600,000 San Francisco CA City & County Airport Revenue
Second Series Issue One MBIA Insured 6.35 05/01/98 629,904
</TABLE>
- ------------------------
52
<PAGE> 196
CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 San Francisco CA City & County RDFA Lease
Revenue George R Moscone Center AMBAC Insured 6.20 % 10/01/00 $ 1,088,380
200,000 San Jose CA Airport Revenue MBIA Insured 5.00 03/01/99 204,556
500,000 San Jose CA Financing Authority Revenue
Convention Center Series C 5.75 09/01/97 510,085
2,750,000 San Jose CA RDFA MBIA Insured 4.20 08/01/98 2,758,580
1,100,000 Southern California State Public Power
Authority 6.75 07/01/00 1,210,517
1,155,000 Stanislaus County CA Capital Improvement
Program Series A MBIA Insured 4.90 05/01/05 1,160,348
520,000 Templeton CA USD COP Measure C Capital Projects
Series A Phase III 4.00 03/01/98 512,372
1,245,000 University of California at Los Angeles Central
Chiller - Cogeneration Facilties 10.75 11/01/98 1,448,742
1,000,000 University of California Multiple Projects
Revenue Series A MBIA Insured 6.00 09/01/02 1,088,950
1,000,000 West Basin CA Municipal Water District COP
Prerefunded 7.00 08/01/11 1,131,930
------------
TOTAL CALIFORNIA MUNICIPAL BONDS $ 73,824,660
(Cost $73,091,691)
SHORT-TERM INSTRUMENTS - 7.49%
CALIFORNIA MUNICIPAL VARIABLE RATE SECURITIES + - 7.18%
$ 1,600,000 California State HFFA Catholic Healthcare
Series C V/R 4.85 % 07/01/20 $ 1,600,000
800,000 California Statewide CDA Sutter Health Group
V/R AMBAC Insured 5.90 07/01/15 800,000
3,220,000 Los Angeles CA Department of General Services
Lease Revenue Series A V/R 4.50 05/01/00 3,197,041
------------
$ 5,597,041
</TABLE>
---------------------
53
<PAGE> 197
CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS (CONTINUED)
MONEY MARKET FUNDS - 0.31%
6,000 Arbor Fund CA Tax-Exempt Portfolio $ 6,000
238,000 Dreyfus General CA Municipal Money Market Fund 238,000
------------
$ 244,000
TOTAL SHORT-TERM INSTRUMENTS $ 5,841,041
(Cost $5,845,045)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $78,936,736)* (Notes 1 and 3) 102.18% $ 79,665,701
Other Assets and Liabilities, Net (2.18) (1,700,265)
------ -------------
TOTAL NET ASSETS 100.00% $ 77,965,436
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH
REDUCES THE REMAINING MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 766,675
Gross Unrealized Depreciation (37,710)
------------
NET UNREALIZED APPRECIATION $ 728,965
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
54
<PAGE> 198
CORPORATE STOCK FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 100.01%
56,358 Abbott Laboratories $ 1,019,272 $ 2,352,947
7,387 Advanced Micro Devices+ 154,088 121,886
8,110 Aetna Life & Casualty Co 452,260 561,618
8,323 Ahmanson (H F) & Co 161,858 220,560
7,992 Air Products & Chemicals Inc 210,794 421,578
35,263 Airtouch Communications+ 552,077 996,180
1,984 Alberto-Culver Co Class B 35,915 68,200
18,088 Albertson's Inc 211,803 594,643
16,030 Alcan Aluminium Ltd 301,253 498,934
8,044 Alco Standard Corp 151,411 367,008
3,100 Alexander & Alexander Services 80,993 58,900
4,550 Allergan Inc 119,123 147,875
20,178 Allied Signal Inc 462,851 958,455
31,956 Allstate Corp 676,976 1,314,191
13,490 Alltel Corp 415,986 397,955
12,694 Aluminum Co of America 356,664 671,195
5,903 ALZA Corp+ 161,631 146,099
8,360 Amdahl Corp+ 128,909 71,060
6,653 Amerada Hess Corp 257,068 352,609
12,958 American Brands Inc 385,882 578,251
13,282 American Electric Power Inc 384,577 537,921
34,672 American Express Corp 927,497 1,434,554
14,546 American General Corp 298,219 507,292
5,350 American Greetings Corp Class A 98,940 147,794
22,291 American Home Products Corp 1,141,387 2,162,227
33,845 American International Group Inc 1,071,403 3,130,663
10,540 American Stores Co 180,282 281,945
39,552 Ameritech Corp 1,037,070 2,333,568
19,000 Amgen Inc+ 678,695 1,128,125
35,390 Amoco Corp 1,526,829 2,543,656
15,495 AMP Inc 418,083 594,621
5,448 AMR Corp+ 331,765 404,514
2,760 Andrew Corp+ 15,529 105,570
18,136 Anheuser-Busch Inc 692,334 1,212,845
</TABLE>
- ------------------------
62
<PAGE> 199
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,670 Apple Computer Inc $ 331,781 $ 276,356
12,752 Applied Materials Inc+ 350,210 502,110
37,779 Archer-Daniels-Midland Co 330,454 680,022
7,463 Armco Inc+ 66,438 43,845
2,677 Armstrong World Industries Inc 93,290 165,974
3,037 ASARCO Inc 76,480 97,184
4,550 Ashland Inc 164,508 159,819
113,496 AT & T Corp 4,052,159 7,348,866
11,420 Atlantic Richfield Corp 1,019,258 1,264,765
3,300 Autodesk Inc 65,101 113,025
10,254 Automatic Data Processing 313,790 761,360
3,800 Avery Dennison Corp 82,180 190,475
4,854 Avon Products Inc 183,974 365,870
10,071 Baker Hughes Inc 207,297 245,481
2,191 Ball Corp 71,009 60,253
3,385 Bally Entertainment Corp+ 43,632 47,390
10,485 Baltimore Gas & Electric Co 219,872 298,823
28,081 Banc One Corp 795,966 1,060,058
7,960 Bank of Boston Corp 202,615 368,150
14,287 Bank of New York Inc 490,870 696,491
26,406 BankAmerica Corp 898,775 1,709,789
5,617 Bankers Trust N Y Corp 286,700 373,531
4,012 Bard (C R) Inc 87,964 129,387
6,911 Barnett Banks Inc 256,537 407,749
25,157 Barrick Gold Corp 749,891 663,516
4,068 Bausch & Lomb Inc 121,023 161,195
19,750 Baxter International Inc 452,829 827,031
4,708 Becton Dickinson & Co 150,283 353,100
31,178 Bell Atlantic Corp 1,253,311 2,085,029
70,808 BellSouth Corp 1,574,069 3,080,148
3,744 Bemis Co Inc 45,267 95,940
3,806 Beneficial Corp 111,226 177,455
8,021 Bethlehem Steel Corp+ 126,357 112,294
7,019 Beverly Enterprises+ 87,648 74,577
8,250 Biomet Inc+ 77,285 147,469
6,076 Black & Decker Corp 127,371 214,179
7,494 Block (H & R) Inc 148,496 303,507
</TABLE>
---------------------
63
<PAGE> 200
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
9,253 Boatmen's Bancshares Inc $ 228,787 $ 378,216
24,469 Boeing Co 775,030 1,917,758
3,354 Boise Cascade Corp 123,938 116,132
11,545 Boston Scientific Corp+ 257,895 565,705
2,152 Briggs & Stratton Corp 39,965 93,343
36,149 Bristol-Myers Squibb Co 1,796,725 3,104,295
1,235 Brown Group Inc 43,098 17,599
4,958 Brown-Forman Corp Class B 101,898 180,967
15,158 Browning-Ferris Industries Inc 418,278 447,161
6,869 Brunswick Corp 125,775 164,856
10,108 Burlington Northern Santa Fe 338,327 788,424
9,048 Burlington Resources Inc 411,872 355,134
5,121 Cabletron Systems Inc+ 271,260 414,801
17,814 Campbell Soup Co 406,188 1,068,840
11,000 Capital Cities/ABC Inc 429,991 1,357,125
11,100 Carolina Power & Light Co 255,154 382,950
14,206 Caterpillar Inc 369,517 834,603
1,954 Centex Corp 36,082 67,902
13,642 Central & South West Corp 262,160 380,271
4,696 Ceridian Corp+ 128,311 193,710
6,898 Champion International Corp 229,985 289,716
7,406 Charming Shoppes Inc 93,828 21,292
12,767 Chase Manhattan Corp 416,198 773,999
17,903 Chemical Banking Corp Class A 625,135 1,051,801
46,546 Chevron Corp 1,414,541 2,443,665
27,310 Chrysler Corp 830,677 1,512,291
6,174 Chubb Corp 295,018 597,335
5,449 CIGNA Corp 337,042 562,609
2,392 Cincinnati Milacron Inc 52,931 62,790
11,171 Cinergy Corp 231,638 342,112
6,900 Circuit City Stores Inc 97,524 190,613
19,564 Cisco Systems Inc+ 673,812 1,459,964
30,289 Citicorp 893,266 2,036,935
3,786 Clorox Co 131,897 271,172
7,482 Coastal Corp 182,229 278,705
89,476 Coca-Cola Co 1,708,278 6,643,593
10,373 Colgate-Palmolive Co 364,316 728,703
</TABLE>
- ------------------------
64
<PAGE> 201
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,598 Columbia Gas System Inc+ $ 148,849 $ 157,862
31,700 Columbia HCA Healthcare Corp 1,134,596 1,608,775
17,114 Comcast Corp Class A 379,878 311,261
8,155 Comerica Inc 304,945 327,219
3,150 Community Psychiatric Centers+ 76,507 38,588
18,935 Compaq Computer Corp+ 267,576 908,880
17,209 Computer Associates International Inc 193,044 978,762
4,014 Computer Sciences Corp+ 91,549 281,984
16,945 ConAgra Inc 350,760 698,981
5,550 Conrail Inc 142,809 388,500
16,764 Consolidated Edison Co 407,377 536,448
3,138 Consolidated Freightways 88,140 83,157
6,699 Consolidated Natural Gas Co 265,519 303,967
7,644 Cooper Industries Inc 276,751 280,917
5,950 Cooper Tire & Rubber Co 72,873 146,519
2,759 Coors (Adolph) Co Class B 56,820 61,043
9,965 CoreStates Financial Corp 206,601 377,424
16,372 Corning Inc 386,198 523,904
10,428 CPC International Inc 309,252 715,622
2,144 Crane Co 38,873 79,060
1,836 Cray Research Inc+ 134,420 45,441
6,472 Crown Cork & Seal Co+ 127,430 270,206
14,910 CSX Corp 309,171 680,269
12,746 CUC International Inc+ 338,325 434,957
2,884 Cummins Engine Co Inc 98,104 106,708
6,593 Cyprus Amax Minerals 173,694 172,242
7,200 Dana Corp 146,761 210,600
11,302 Darden Restaurants Inc+ 72,235 134,211
2,740 Data General Corp+ 66,697 37,675
5,114 Dayton-Hudson Corp 280,430 383,550
12,083 Dean Witter Discover & Co 397,840 567,901
18,691 Deere & Co 284,093 658,858
3,684 Delta Air Lines Inc 222,492 272,156
5,896 Deluxe Corp 209,338 170,984
10,452 Detroit Edison Co 229,898 360,594
6,700 Dial Corp 108,225 198,488
10,765 Digital Equipment Corp+ 1,085,356 690,306
</TABLE>
---------------------
65
<PAGE> 202
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,018 Dillard Department Stores Inc Class A $ 179,702 $ 228,513
37,266 Disney (Walt) Co 880,730 2,198,694
12,340 Dominion Resources Inc 389,741 509,025
10,954 Donnelley (R R) & Sons Co 234,445 431,314
8,104 Dover Corp 131,237 298,835
18,632 Dow Chemical Co 983,692 1,311,227
6,895 Dow Jones & Co Inc 269,269 274,938
13,039 Dresser Industries Inc 222,584 317,826
8,182 DSC Communications Corp+ 82,307 301,711
14,646 Duke Power Co 377,226 693,854
12,032 Dun & Bradstreet Corp 652,720 779,072
39,611 DuPont (E I) de Nemours 1,609,310 2,767,819
1,464 Eastern Enterprises 40,702 51,606
5,806 Eastman Chemical Co 235,283 363,601
24,376 Eastman Kodak Co 935,439 1,633,192
5,588 Eaton Corp 183,540 299,657
4,271 Echlin Inc 79,858 155,892
9,000 Echo Bay Mines Ltd 126,691 93,375
4,600 Ecolab Inc 67,006 138,000
3,726 EG & G Inc 70,052 90,356
16,032 Emerson Electric Co 662,939 1,310,616
10,172 Engelhard Corp 83,436 221,241
17,932 Enron Corp 284,041 683,658
4,829 Enserch Corp 97,628 78,471
16,184 Entergy Corp 361,559 473,382
88,536 Exxon Corp 4,121,743 7,093,947
3,978 Federal Express Corp+ 236,356 293,875
12,850 Federal Home Loan Mortgage Corp 591,618 1,072,975
19,500 Federal National Mortgage Assoc 698,584 2,420,438
3,360 Federal Paper Board Co 79,931 174,300
14,353 Federated Department Stores Inc+ 389,766 394,708
9,301 First Bank System Inc 482,553 461,562
22,894 First Chicago NBD Corp 496,485 904,313
15,913 First Data Corp 901,611 1,064,182
5,800 First Fidelity Bancorp 220,301 437,175
5,415 First Interstate Bancorp 282,645 739,148
12,200 First Union Corp 407,490 678,625
</TABLE>
- ------------------------
66
<PAGE> 203
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
17,495 Fleet Financial Group Inc $ 472,581 $ 712,921
3,246 Fleetwood Enterprises Inc 49,764 83,585
2,650 Fleming Co Inc 79,714 54,656
5,926 Fluor Corp 155,829 391,116
2,567 FMC Corp+ 83,844 173,593
76,601 Ford Motor Co 1,644,168 2,221,429
2,832 Foster Wheeler Corp 62,998 120,360
13,137 FPL Group Inc 430,023 609,228
14,519 Freeport McMoRan Copper & Gold Inc Class B 395,517 408,347
5,419 Fruit of the Loom Inc Class A+ 146,408 132,088
9,949 Gannett Co Inc 443,537 610,620
10,292 Gap Inc 197,788 432,264
4,528 General Dynamics Corp 99,320 267,718
119,178 General Electric Co 3,591,586 8,580,816
11,302 General Mills Inc 338,306 652,691
53,332 General Motors Corp 2,192,469 2,819,930
8,527 General Public Utilities 256,591 289,918
5,900 General Re Corp 406,020 914,500
3,368 General Signal Corp 91,071 109,039
8,787 Genuine Parts Co 228,861 360,267
6,535 Georgia-Pacific Corp 314,323 448,464
4,200 Giant Food Inc Class A 93,509 132,300
2,450 Giddings & Lewis Inc 54,550 40,425
31,608 Gillette Co 445,193 1,647,567
4,150 Golden West Financial 103,436 229,288
1,866 Goodrich (B F) Co 88,994 127,121
10,876 Goodyear Tire & Rubber Co 302,350 493,499
6,930 Grace (W R) & Co 232,839 409,736
3,592 Grainger (W W) Inc 111,419 237,970
2,743 Great Atlantic & Pacific Tea Co 98,636 63,089
4,600 Great Lakes Chemical Corp 252,986 331,200
9,688 Great Western Financial Corp 182,775 247,044
69,031 GTE Corp 1,882,283 3,037,364
8,129 Halliburton Co 276,378 411,531
2,479 Handleman Co 34,781 14,254
5,226 Harcourt General Inc 122,772 218,839
2,200 Harland (John H) Co 53,487 45,925
</TABLE>
---------------------
67
<PAGE> 204
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,466 Harnischfeger Industries Inc $ 83,563 $ 115,245
7,312 Harrah's Entertainment Inc+ 48,539 177,316
2,758 Harris Corp 91,518 150,656
6,255 Hasbro Inc 112,513 193,905
26,289 Heinz (H J) Co 489,847 870,823
1,800 Helmerich & Payne Inc 44,183 53,550
7,906 Hercules Inc 140,981 445,701
5,561 Hershey Foods Corp 172,881 361,465
36,546 Hewlett Packard Co 1,057,609 3,060,728
3,402 Hilton Hotels Corp 162,106 209,223
34,040 Home Depot Inc 619,527 1,629,665
9,890 Homestake Mining Co 151,498 154,531
9,004 Honeywell Inc 198,444 437,820
7,000 Household International Inc 185,267 413,875
18,788 Houston Industries Inc 333,674 455,609
11,528 Humana Inc+ 322,811 315,579
8,414 Illinois Tool Works Inc 198,387 496,426
8,481 Inco Ltd 178,238 281,993
7,734 Ingersoll-Rand Co 160,944 271,657
3,500 Inland Steel Industries Inc 96,637 87,938
58,760 Intel Corp 680,095 3,334,630
3,198 Intergraph Corp+ 73,412 50,369
40,613 International Business Machines Corp 5,130,767 3,726,243
7,963 International Flavors & Fragrances 161,463 382,224
18,128 International Paper Co 495,014 686,598
5,600 Interpublic Group Cos Inc 189,770 242,900
8,269 ITT Corp+ 208,454 438,257
8,269 ITT Hartford Group Inc+ 201,780 400,013
8,269 ITT Industries Inc 89,851 198,456
5,908 James River Corp 172,950 142,531
5,103 Jefferson-Pilot Corp 93,862 237,290
46,153 Johnson & Johnson 1,332,990 3,951,851
2,917 Johnson Controls Inc 99,990 200,544
2,800 Jostens Inc 72,725 67,900
32,860 K Mart Corp 636,999 238,235
2,327 Kaufman & Broad Home Corp 29,501 34,614
15,535 Kellogg Co 553,437 1,200,079
</TABLE>
- ------------------------
68
<PAGE> 205
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,683 Kerr-McGee Corp $ 144,363 $ 233,871
16,872 KeyCorp 537,380 611,610
19,894 Kimberly-Clark Corp 594,554 1,646,229
2,600 King World Productions+ 57,536 101,075
3,538 Knight-Ridder Inc 185,887 221,125
8,770 Kroger Co+ 128,075 328,875
20,964 Laidlaw Inc Class B 185,377 214,881
39,374 Lilly (Eli) & Co 1,077,114 2,214,788
25,430 Limited Inc 528,042 441,846
7,380 Lincoln National Corp 230,273 396,675
5,292 Liz Claiborne Inc 158,200 146,853
14,317 Lockheed Martin Corp 471,919 1,131,043
8,426 Loews Corp 466,153 660,388
1,495 Longs Drug Stores Corp 52,580 71,573
12,268 Loral Corp 135,128 433,981
2,353 Louisiana Land & Exploration Co 87,828 100,885
7,712 Louisiana-Pacific Corp 113,173 187,016
11,410 Lowe's Co Inc 124,060 382,235
9,102 LSI Logic Corp+ 331,229 298,091
1,634 Luby's Cafeterias Inc 31,203 36,357
5,454 Mallinckrodt Group Inc 108,953 198,389
4,401 Manor Care Inc 66,875 154,035
8,904 Marriott International 223,705 340,578
5,250 Marsh & McLennan Companies Inc 382,622 465,938
11,486 Masco Corp 343,213 360,373
15,801 Mattel Inc 191,841 485,881
17,810 May Co Department Stores Co 420,711 752,473
7,668 Maytag Corp 166,796 155,277
10,550 MBNA Corp 138,895 389,031
3,834 McDermott International Inc 91,708 84,348
49,466 McDonald's Corp 771,300 2,232,153
8,063 McDonnell Douglas Corp 193,424 741,796
3,608 McGraw-Hill Inc 231,461 314,347
48,342 MCI Communications 655,037 1,262,935
3,859 Mead Corp 129,578 201,633
16,504 Medtronic Inc 174,523 922,161
10,088 Mellon Bank Corp 326,271 542,230
</TABLE>
---------------------
69
<PAGE> 206
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
7,524 Melville Corp $ 290,217 $ 231,363
2,662 Mercantile Stores Co Inc 109,958 123,118
88,137 Merck & Co Inc 2,291,967 5,795,008
1,996 Meredith Corp 34,497 83,583
12,513 Merrill Lynch & Co Inc 276,545 638,163
14,694 Micron Technology Inc 274,546 582,250
42,255 Microsoft Corp+ 2,345,122 3,707,876
3,200 Millipore Corp 60,361 131,600
29,913 Minnesota Mining & Manufacturing Co 1,103,938 1,981,736
28,240 Mobil Corp 1,484,159 3,162,880
8,178 Monsanto Co 394,209 1,001,805
7,100 Moore Corp Ltd 173,870 132,238
13,428 Morgan (J P) & Co Inc 647,091 1,077,597
5,574 Morgan Stanley Group 553,530 449,404
10,556 Morton International Inc 160,122 378,697
42,072 Motorola Inc 862,897 2,398,104
595 NACCO Industries Inc Class A 22,972 33,023
4,850 Nalco Chemical Co 132,131 146,106
10,437 National City Corp 291,132 345,726
8,801 National Semiconductor+ 114,894 195,822
3,427 National Service Industries Inc 85,887 110,949
19,326 NationsBank 713,060 1,345,573
5,397 Navistar International Corp+ 176,884 56,669
6,953 New York Times Co Class A 216,481 205,983
11,300 Newell Co 176,199 292,388
6,682 Newmont Mining Corp 155,402 302,361
10,267 Niagara Mohawk Power Corp 178,464 98,820
3,600 NICOR Inc 74,500 99,000
10,200 Nike Inc Class B 146,360 710,175
8,800 NorAm Energy Corp 166,878 78,100
5,850 Nordstrom Inc 181,670 236,925
9,355 Norfolk Southern Corp 370,715 742,553
4,833 Northern States Power Co 172,773 237,421
18,087 Northern Telecom Ltd 461,858 777,741
3,520 Northrop Grumman Corp 132,591 225,280
25,158 Norwest Corp 411,900 830,214
26,268 Novell Inc+ 639,937 374,319
</TABLE>
- ------------------------
70
<PAGE> 207
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,226 Nucor Corp $ 107,353 $ 355,660
30,520 NYNEX Corp 1,082,039 1,648,080
22,676 Occidental Petroleum Corp 634,817 484,700
3,450 Ogden Corp 86,269 73,744
10,860 Ohio Edison Co 223,107 255,210
1,960 ONEOK Inc 32,832 44,835
31,000 Oracle Systems Corp+ 237,393 1,313,625
7,472 Oryx Energy Co+ 198,205 99,938
1,429 Outboard Marine Corp 41,404 29,116
3,593 Owens Corning Fiberglass+ 88,704 161,236
2,785 PACCAR Inc 92,334 117,318
5,993 Pacific Enterprises 248,508 169,302
30,248 Pacific Gas & Electric Co 741,154 858,287
30,572 Pacific Telesis Group 611,272 1,027,984
20,250 PacifiCorp 386,685 430,313
8,150 Pall Corp 94,211 219,031
10,712 Panhandle Eastern Corp 251,153 298,597
5,203 Parker Hannifin Corp 111,470 178,203
15,818 PECO Energy Co 349,094 476,517
16,138 Penney (J C) Co Inc 445,029 768,572
3,267 Pennzoil Co 221,042 138,031
2,494 Peoples Energy Corp 57,576 79,185
4,400 Pep Boys-Manny Moe & Jack 73,331 112,750
56,214 Pepsico Inc 1,097,358 3,140,957
2,971 Perkin-Elmer Corp 98,164 112,155
45,260 Pfizer Inc 1,017,588 2,851,380
35,967 Pharmacia and Upjohn Inc+ 1,108,654 1,393,721
4,920 Phelps Dodge Corp 135,192 306,270
59,951 Philip Morris Co Inc 2,229,602 5,425,566
18,619 Phillips Petroleum Co 361,032 635,373
6,028 Pioneer Hi Bred International Inc 224,365 335,308
10,776 Pitney Bowes Inc 258,496 506,472
2,983 Pittston Services Group 41,210 93,592
17,063 Placer Dome Inc 260,343 411,645
16,400 PNC Bank Corp 376,773 528,900
3,209 Polaroid Corp 111,008 152,026
2,071 Potlatch Corp 73,527 82,840
</TABLE>
---------------------
71
<PAGE> 208
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
11,276 PP & L Resources Inc $ 292,194 $ 281,900
13,970 PPG Industries Inc 326,229 639,128
9,929 Praxair Inc 151,743 333,863
4,500 Premark International Inc 87,651 227,813
13,884 Price/Costco Inc+ 269,412 211,731
48,906 Procter & Gamble Co 1,503,274 4,059,198
6,740 Providian Corp 155,865 274,655
17,371 Public Services Enterprise Group 466,516 531,987
1,938 Pulte Corp 31,111 65,165
9,580 Quaker Oats Co 227,504 330,510
7,570 Ralston-Purina Group 279,715 472,179
3,100 Raychem Corp 130,918 176,313
17,376 Raytheon Co 347,831 821,016
5,628 Reebok International Ltd 119,204 158,991
4,036 Republic New York Corp 236,772 250,737
4,520 Reynolds Metals Co 200,689 255,945
5,938 Rite Aid Corp 111,483 203,377
2,744 Roadway Services Inc 129,310 134,113
15,474 Rockwell International Corp 406,766 818,188
4,809 Rohm & Haas Co 200,455 309,579
6,139 Rowan Co Inc+ 50,918 60,623
38,246 Royal Dutch Petroleum Co 2,504,178 5,397,467
11,304 Rubbermaid Inc 213,327 288,252
2,770 Russell Corp 58,324 76,868
3,900 Ryan's Family Steak House+ 34,638 27,300
5,656 Ryder System Inc 150,251 139,986
8,966 SAFECO Corp 156,198 309,327
4,100 Safety-Kleen Corp 106,229 64,063
7,568 Salomon Inc 273,068 268,664
6,411 Santa Fe Energy Resources Inc+ 39,779 61,706
9,383 Santa Fe Pacific Gold Corp 163,023 113,769
34,476 Sara Lee Corp 518,474 1,098,923
43,416 SBC Communication Inc 1,028,984 2,496,420
31,812 SCEcorp 561,119 564,663
26,236 Schering-Plough Corp 456,227 1,436,421
17,231 Schlumberger Ltd 804,656 1,193,247
5,496 Scientific-Atlanta Inc 34,139 82,440
</TABLE>
- ------------------------
72
<PAGE> 209
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
26,624 Seagram Co Ltd $ 540,374 $ 921,856
27,791 Sears Roebuck & Co 550,030 1,083,849
7,451 Service Corp International 149,356 327,844
1,662 Shared Medical System Corp 47,469 90,371
6,086 Sherwin Williams Co 115,074 248,005
3,052 Shoney's Inc+ 26,936 31,283
3,512 Sigma-Aldrich Corp 131,156 173,844
11,442 Silicon Graphics Inc+ 384,914 314,655
2,906 Snap-On Inc 98,931 131,497
6,110 Sonat Inc 115,205 217,669
47,482 Southern Co 662,747 1,169,244
10,274 Southwest Airlines Co 293,429 238,871
1,465 Springs Industries Inc Class A 49,682 60,614
24,850 Sprint Corp 841,051 990,894
4,950 St Jude Medical Inc+ 97,824 212,850
6,006 St Paul Co Inc 166,836 334,084
3,155 Stanley Works 109,910 162,483
6,841 Stone Container Corp+ 153,211 98,339
3,550 Stride Rite Corp 56,185 26,625
5,407 Sun Co Inc 174,247 148,017
13,600 Sun Microsystems Inc+ 182,758 620,500
8,150 SunTrust Banks Inc 213,345 558,275
4,852 Super Value Inc 128,611 152,838
12,942 Sysco Corp 175,154 420,615
8,218 Tandem Computers Inc+ 188,553 87,316
4,659 Tandy Corp 195,182 193,349
2,357 Tektronix Inc 72,956 115,788
46,488 Tele-Communication Inc Class A+ 608,673 923,949
3,965 Teledyne Inc 118,605 101,603
6,264 Tellabs Inc+ 299,921 231,768
3,996 Temple-Inland Inc 134,187 176,324
14,310 Tenet Healthcare Corp+ 218,765 296,933
12,714 Tenneco Inc 589,451 630,932
18,792 Texaco Inc 885,595 1,475,172
13,460 Texas Instruments Inc 365,095 696,555
16,112 Texas Utilities Co 564,019 662,606
6,096 Textron Inc 198,180 411,480
</TABLE>
---------------------
73
<PAGE> 210
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,440 Thomas & Betts Corp $ 82,671 $ 106,200
27,512 Time Warner Inc 678,932 1,042,017
7,952 Times Mirror Co Class A 201,185 269,374
2,188 Timken Co 63,479 83,691
5,160 TJX Companies Inc 103,556 97,395
5,100 Torchmark Corp 157,269 230,775
19,650 Toys R Us Inc+ 430,123 427,388
4,865 Transamerica Corp 197,144 354,537
22,758 Travelers Inc 692,690 1,430,909
4,661 Tribune Co 190,421 284,904
2,074 Trinova Corp 57,925 59,368
4,668 TRW Inc 239,373 361,770
10,846 Tyco International Inc 256,141 386,389
10,777 U.S. Bancorp 250,047 362,377
10,925 U.S. Healthcare Inc 512,354 508,013
2,457 U.S. Life Corp 46,896 73,403
33,532 U.S. West Inc 650,141 1,198,769
33,532 U.S. West Media Group+ 443,928 637,108
15,294 Unicom Corp 520,956 500,879
11,365 Unilever NV 776,417 1,599,624
4,982 Union Camp Corp 204,228 237,268
9,729 Union Carbide Corp 122,759 364,838
7,300 Union Electric Co 247,612 304,775
14,666 Union Pacific Corp 580,828 967,956
12,273 Unisys Corp+ 312,986 69,036
12,465 United Healthcare Corp 576,352 816,458
4,050 United States Surgical 391,308 86,569
8,778 United Technologies Corp 450,724 832,813
17,560 Unocal Corp 368,813 511,435
5,227 UNUM Corp 296,084 287,485
4,510 USAir Group Inc+ 143,605 59,758
7,925 USF & G Corp 235,001 133,734
13,940 UST Inc 181,351 465,248
20,422 USX - Marathon Group 489,709 398,229
5,890 USX - US Steel Group 159,625 181,118
2,871 Varity Corp+ 92,441 106,586
4,566 VF Corp 179,012 240,857
</TABLE>
- ------------------------
74
<PAGE> 211
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
25,711 Viacom Inc Class B+ $ 860,062 $ 1,218,059
12,193 Wachovia Corp 477,362 557,830
163,714 Wal Mart Stores Inc 2,169,075 3,663,101
17,480 Walgreen Co 201,538 522,215
9,668 Warner Lambert Co 449,512 939,005
3,427 Wells Fargo & Co 271,721 740,232
7,259 Wendy's International Inc 80,354 154,254
3,801 Western Atlas Inc+ 109,984 191,951
27,840 Westinghouse Electric Corp 721,158 459,360
7,189 Westvaco Corp 142,656 199,495
14,462 Weyerhaeuser Co 462,341 625,482
5,254 Whirlpool Corp 206,860 279,776
7,438 Whitman Corp 87,012 172,934
3,936 Willamette Industries Inc 269,485 221,400
7,228 Williams Co Inc 144,134 317,129
10,736 Winn-Dixie Stores Inc 167,065 395,890
34,536 WMX Technologies Inc 903,267 1,031,763
9,498 Woolworth Corp 242,314 123,474
6,475 Worthington Industries Inc 74,454 134,761
8,310 Wrigley (Wm) Jr Co 122,921 436,275
7,644 Xerox Corp 551,932 1,047,179
1,985 Yellow Corp 63,459 24,564
------------ ------------
TOTAL COMMON STOCKS $188,182,426 $327,237,612
</TABLE>
---------------------
75
<PAGE> 212
CORPORATE STOCK FUND
<TABLE>
<CAPTION>
YIELD
TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 0.37%
$ 85,000 U.S. Treasury Bills 4.74 % 02/08/96 $ 84,524
28,000 U.S. Treasury Bills 4.81 02/22/96 27,809
1,096,000 U.S. Treasury Bills 5.03 03/07/96 1,086,362
------------
TOTAL SHORT-TERM INSTRUMENTS $ 1,198,695
(Cost $1,198,083)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $189,380,509)* (Notes 1 and 3) 100.38% $ 328,436,307
Other Assets and Liabilities, Net (0.38) (1,228,437)
------ -------------
TOTAL NET ASSETS 100.00% $ 327,207,870
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $146,636,551
Gross Unrealized Depreciation (7,580,753)
------------
NET UNREALIZED APPRECIATION $139,055,798
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
76
<PAGE> 213
DIVERSIFIED INCOME FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 92.76%
AUTOMOBILE & RELATED - 5.42%
72,000 Dana Corp $ 1,864,823 $ 2,106,000
86,777 Ford Motor Co 2,459,974 2,516,533
------------ ------------
$ 4,324,797 $ 4,622,533
BASIC INDUSTRIES - 12.60%
17,000 Dow Chemical Co $ 1,078,205 $ 1,196,375
29,000 Kimberly-Clark Corp 1,430,287 2,399,750
72,000 McDermott International Inc 1,238,324 1,584,000
24,000 Olin Corp 1,613,272 1,782,000
25,000 Tecumseh Products Co Class A 1,270,938 1,293,750
120,000 Worthington Industries Inc 2,252,695 2,497,500
------------ ------------
$ 8,883,721 $ 10,753,375
COMPUTER SYSTEMS - 2.69%
25,000 International Business Machines Corp $ 2,303,175 $ 2,293,750
CONGLOMERATES - 2.45%
29,000 General Electric Co $ 1,411,847 $ 2,088,000
ELECTRICAL EQUIPMENT - 6.11%
55,000 AMP Inc $ 2,015,781 $ 2,110,625
20,000 Motorola Inc 1,140,350 1,140,000
38,000 Texas Instruments Inc 2,099,290 1,966,500
------------ ------------
$ 5,255,421 $ 5,217,125
ENERGY & RELATED - 9.01%
18,000 Atlantic Richfield Corp $ 1,954,333 $ 1,993,500
11,500 Royal Dutch Petroleum Co 1,158,636 1,622,938
60,000 Sonat Inc 1,711,692 2,137,500
75,200 Ultramar Corp 1,891,909 1,936,400
------------ ------------
$ 6,716,570 $ 7,690,338
</TABLE>
- ------------------------
82
<PAGE> 214
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
FINANCE & RELATED - 16.83%
25,000 Advanta Corp+ $ 925,000 $ 959,375
30,000 American Health Properties Inc 627,112 645,000
20,250 Aon Corp 734,916 1,009,969
34,000 Bankers Trust N Y Corp 2,295,658 2,261,000
50,913 Bear Stearns & Co Inc 810,130 1,011,896
54,000 Block (H & R) Inc 2,027,078 2,187,000
60,000 Household International Inc 2,571,385 3,547,500
70,000 Mercury Financial Corp 932,953 927,500
20,000 Post Properties Inc 626,600 637,500
30,000 Smith (Chars E) Residential Realty Inc 757,400 708,750
18,500 Spieker Properties Inc 374,715 464,810
------------ ------------
$ 12,682,947 $ 14,360,300
FOOD & RELATED - 6.37%
10,000 Anheuser-Busch Inc $ 604,938 $ 668,750
64,500 Heinz (H J) Co 1,851,428 2,136,563
15,000 Philip Morris Co Inc 819,010 1,357,500
38,000 UST Inc 1,135,553 1,268,266
------------ ------------
$ 4,410,929 $ 5,431,079
MANUFACTURING PROCESSING - 4.44%
32,000 Eastman Kodak Co $ 1,567,713 $ 2,144,000
35,000 Pitney Bowes Inc 1,149,606 1,645,000
------------ ------------
$ 2,717,319 $ 3,789,000
PHARMACEUTICALS - 4.55%
20,000 American Home Products Corp $ 1,289,524 $ 1,940,000
20,000 Warner Lambert Co 1,806,000 1,942,500
------------ ------------
$ 3,095,524 $ 3,882,500
</TABLE>
---------------------
83
<PAGE> 215
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
PUBLISHING & MEDIA - 4.05%
15,000 McGraw-Hill Inc $ 1,151,504 $ 1,306,875
42,000 Readers Digest Association Class A 1,772,303 2,152,500
------------ ------------
$ 2,923,807 $ 3,459,375
RETAIL & RELATED - 4.45%
25,500 Avon Products Inc $ 1,515,653 $ 1,922,063
20,000 Intimate Brands Inc+ 340,000 300,000
33,000 Penney (J C) Co Inc 1,538,140 1,571,625
------------ ------------
$ 3,393,793 $ 3,793,688
TELECOMMUNICATIONS - 8.14%
80,000 Alltel Corp $ 1,986,089 $ 2,360,000
80,000 Comsat Corp 1,510,074 1,490,000
55,000 GTE Corp 1,736,150 2,420,000
20,000 Pacific Telesis Group 633,950 672,500
------------ ------------
$ 5,866,263 $ 6,942,500
TRANSPORTATION - 2.71%
35,000 Union Pacific Corp $ 2,158,340 $ 2,310,000
UTILITIES - 2.94%
22,000 Duke Power Co $ 885,128 $ 1,042,250
40,400 Royal PTT Nederland ADR+ 1,430,564 1,464,500
------------ ------------
$ 2,315,692 $ 2,506,750
TOTAL COMMON STOCKS $ 68,460,145 $ 79,140,313
</TABLE>
- ------------------------
84
<PAGE> 216
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
PREFERRED STOCKS - 2.62%
CONVERTIBLES - 2.62%
20,000 Atlantic Richfield Co expires 9/15/1997 $ 459,100 $ 470,000
35,000 Browning-Ferris Industries Inc expires 06/30/1998+ 1,279,050 1,098,125
16,000 First Chicago NBD Corp expires 02/15/1997 299,280 288,000
10,000 Sprint Corp expires 03/31/2000 318,750 380,000
------------ ------------
TOTAL PREFERRED STOCKS $ 2,356,180 $ 2,236,125
</TABLE>
---------------------
85
<PAGE> 217
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 5.10%
U.S. TREASURY BILLS - 2.32%
$ 2,000,000 U.S. Treasury Bills 5.06 %(F) 03/14/96 $ 1,980,280
REPURCHASE AGREEMENTS - 2.78%
$ 2,373,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 2,373,000
------------
TOTAL SHORT-TERM INSTRUMENTS $ 4,353,280
(Cost $4,351,704)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $75,168,029)* (Notes 1 and 3) 100.48% $ 85,729,718
Other Assets and Liabilities, Net (0.48) (413,679)
------ -------------
TOTAL NET ASSETS 100.00% $ 85,316,039
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 11,197,586
Gross Unrealized Depreciation (635,897)
------------
NET UNREALIZED APPRECIATION $ 10,561,689
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
86
<PAGE> 218
GINNIE MAE FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST
PRINCIPAL SECURITY NAME RATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 77.51%
$ 5,000,000 Federal National Mortgage Assoc 5.94 % $ 4,995,000
12/12/05
1,450,537 Government National Mortgage Assoc 6.50 1,438,744
05/15/24
5,203,687 Government National Mortgage Assoc 6.75 5,216,643
03/15/22 to 09/15/28
1,609,329 Government National Mortgage Assoc 6.88 1,620,868
01/15/29
11,154,887 Government National Mortgage Assoc 7.00 11,290,718
01/15/29 to 02/15/29
3,322,733 Government National Mortgage Assoc 7.13 3,376,661
01/15/29
4,978,365 Government National Mortgage Assoc 7.50 5,121,493
10/15/25
6,696,093 Government National Mortgage Assoc 8.00 6,978,055
05/15/22 to 11/15/22
4,151,987 Government National Mortgage Assoc 8.43 4,359,587
08/01/27
11,736,423 Government National Mortgage Assoc 8.50 12,329,209
10/15/16 to 04/15/27
4,061,817 Government National Mortgage Assoc 8.75 4,244,598
01/15/28
23,222,790 Government National Mortgage Assoc 9.00 24,777,965
03/15/05 to 01/15/23
4,126,515 Government National Mortgage Assoc 9.50 4,417,708
10/15/09 to 10/15/21
7,211,936 Government National Mortgage Assoc 10.00 7,962,912
11/15/09 to 03/15/21
3,523,306 Government National Mortgage Assoc 10.50 3,941,933
09/15/15 to 08/15/20
13,892,359 Government National Mortgage Assoc II 7.50 14,187,572
11/20/25
</TABLE>
- ------------------------
92
<PAGE> 219
GINNIE MAE FUND
<TABLE>
<CAPTION>
INTEREST
PRINCIPAL SECURITY NAME RATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES (CONTINUED)
$11,043,625 Government National Mortgage Assoc II 8.00 % $ 11,437,544
03/20/23 to 08/20/25
6,781,466 Government National Mortgage Assoc II 10.00 7,379,049
12/20/13 to 06/20/22
2,833,917 Government National Mortgage Assoc II 11.00 3,180,165
08/20/19 to 08/20/20
------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $138,256,424
(Cost $137,231,669)
U.S. TREASURY SECURITIES - 21.88%
$ 2,000,000 U.S. Treasury Bonds 6.88 % $ 2,255,620
08/15/25
7,500,000 U.S. Treasury Bonds 7.25 8,564,028
05/15/16
5,000,000 U.S. Treasury Bonds 7.63 6,114,050
02/15/25
3,000,000 U.S. Treasury Notes 6.50 3,195,930
08/15/05
17,000,000 U.S. Treasury Notes 7.25 18,904,510
08/15/04
------------
TOTAL U.S. TREASURY SECURITIES $ 39,034,138
(Cost $37,619,062)
SHORT-TERM INSTRUMENTS - 0.33%
$ 587,000 Goldman Sachs Pooled Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 5.75 $ 587,000
01/02/96
(Cost $587,000)
</TABLE>
---------------------
93
<PAGE> 220
GINNIE MAE FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $175,437,731)* (Notes 1 and 3) 99.72% $ 177,877,562
Other Assets and Liabilities, Net 0.28 507,085
------ -------------
TOTAL NET ASSETS 100.00% $ 178,384,647
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 2,735,525
Gross Unrealized Depreciation (295,694)
------------
NET UNREALIZED APPRECIATION $ 2,439,831
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
94
<PAGE> 221
GROWTH AND INCOME FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 97.72%
ADVERTISING - 1.93%
94,800 Omnicom Group $ 1,883,897 $ 3,531,300
AUTOMOBILE & RELATED - 4.46%
100,000 Danaher Corp $ 2,926,379 $ 3,175,000
80,981 Ford Motor Co 1,994,402 2,348,449
50,000 General Motors Corp 2,343,075 2,643,750
------------ ------------
$ 7,263,856 $ 8,167,199
BASIC INDUSTRIES - 8.51%
57,000 Grace (W R) & Co $ 3,425,069 $ 3,370,125
43,570 Kimberly-Clark Corp 2,688,459 3,605,418
27,000 Monsanto Co 2,018,925 3,307,500
81,000 United Healthcare Corp 4,058,126 5,305,500
------------ ------------
$ 12,190,579 $ 15,588,543
BIOTECHNOLOGY - 1.36%
40,000 Genzyme Corp - General Division+ $ 2,381,668 $ 2,495,000
COMMERCIAL SERVICES - 3.23%
60,000 CUC International Inc+ $ 1,987,340 $ 2,047,500
88,000 Service Corp International 3,559,502 3,872,000
------------ ------------
$ 5,546,842 $ 5,919,500
COMPUTER SYSTEMS - 10.89%
61,000 Cisco Systems Inc+ $ 2,999,969 $ 4,552,125
68,800 Compaq Computer Corp+ 2,599,978 3,302,400
40,000 Digital Equipment Corp+ 1,717,548 2,565,000
50,000 Hewlett Packard Co 4,306,696 4,187,500
82,000 Komag Inc+ 5,116,832 3,782,250
40,000 Reynolds & Reynolds Co Class A 1,559,619 1,555,000
------------ ------------
$ 18,300,642 $ 19,944,275
</TABLE>
- ------------------------
100
<PAGE> 222
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
CONGLOMERATES - 1.78%
56,000 Harsco Corp $ 2,331,065 $ 3,255,000
ELECTRICAL EQUIPMENT - 5.32%
56,000 AMP Inc $ 1,793,740 $ 2,149,000
40,000 Motorola Inc 2,383,200 2,280,000
67,000 Thermedics Inc+ 1,361,880 1,859,250
25,200 Xerox Corp 2,463,595 3,452,400
------------ ------------
$ 8,002,415 $ 9,740,650
ENERGY & RELATED - 9.45%
30,000 Amoco Corp $ 2,151,150 $ 2,156,250
76,000 Anadarko Petroleum Corp 3,302,052 4,113,500
25,000 Mobil Corp 2,187,350 2,800,000
98,700 Sonat Inc 2,982,761 3,516,188
44,000 Texaco Inc 3,012,028 3,454,000
50,000 Union Pacific Resources Group Inc+ 1,050,000 1,268,750
------------ ------------
$ 14,685,341 $ 17,308,688
FINANCE & RELATED - 12.62%
55,000 BankAmerica Corp $ 2,767,155 $ 3,561,250
43,500 Citicorp 1,788,959 2,925,375
102,500 Household International Inc 3,739,481 6,060,313
114,000 MBNA Corp 4,068,393 4,203,750
240,600 Mercury Financial Corp 2,042,418 3,187,950
36,000 Patriot American Hospitality Inc+ 903,496 927,000
20,000 Post Properties Inc 621,600 637,500
80,000 Schwab (Charles) Corp 1,634,640 1,610,000
------------ ------------
$ 17,566,142 $ 23,113,138
</TABLE>
---------------------
101
<PAGE> 223
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD & RELATED - 5.57%
52,000 Anheuser-Busch Inc $ 3,199,518 $ 3,477,500
90,000 Heinz (H J) Co 2,633,117 2,981,250
41,399 Philip Morris Co Inc 2,674,194 3,746,610
------------ ------------
$ 8,506,829 $ 10,205,360
GENERAL BUSINESS & RELATED - 1.54%
62,000 Alco Standard Corp $ 2,112,700 $ 2,828,750
MANUFACTURING PROCESSING - 4.17%
62,900 Allied Signal Inc $ 2,104,238 $ 2,987,750
38,300 Eastman Kodak Co 1,982,139 2,566,100
40,000 Thermo Electron Corp+ 1,984,140 2,080,000
------------ ------------
$ 6,070,517 $ 7,633,850
MATERIAL MANUFACTURING - 2.47%
127,000 Tyco International Inc $ 2,624,884 $ 4,524,373
PHARMACEUTICALS - 5.16%
90,000 Smithkline Beecham Plc ADR (UK) $ 4,882,086 $ 4,995,000
46,000 Warner Lambert Co 3,690,661 4,467,750
------------ ------------
$ 8,572,747 $ 9,462,750
RETAIL & RELATED - 7.61%
103,400 Lowe's Co Inc $ 3,380,172 $ 3,463,900
170,000 Mattel Inc 4,969,825 5,227,500
153,200 Rite Aid Corp 3,708,593 5,247,100
------------ ------------
$ 12,058,590 $ 13,938,500
SEMICONDUCTORS - 2.79%
90,000 Intel Corp $ 3,444,728 $ 5,107,500
</TABLE>
- ------------------------
102
<PAGE> 224
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS - 6.70%
91,000 Alltel Corp $ 2,086,944 $ 2,684,500
50,000 AT & T Corp 3,191,300 3,237,500
95,000 Comsat Corp 2,050,074 1,769,375
235,000 Ericsson Telefonaktiebolaget L M Class B ADR 4,755,450 4,582,500
------------ ------------
$ 12,083,768 $ 12,273,875
TRANSPORTATION - 2.16%
60,000 Union Pacific Corp $ 3,761,582 $ 3,960,000
------------ ------------
TOTAL COMMON STOCKS $149,388,792 $178,998,251
PREFERRED STOCKS - 0.79%
CONVERTIBLES - 0.79%
80,000 First Chicago NBD Corp expires 02/15/1997 $ 1,535,911 $ 1,440,000
</TABLE>
---------------------
103
<PAGE> 225
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 0.72%
CONVERTIBLE CORPORATE BONDS - 0.72%
$ 1,300,000 Magna International Inc 5.00 % 10/15/02 $ 1,326,000
(Cost $1,300,000)
SHORT-TERM INSTRUMENTS - 1.09%
REPURCHASE AGREEMENTS - 1.09%
$ 1,998,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 1,998,000
(Cost $1,998,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $154,222,703)* (Notes 1 and 3) 100.32% $ 183,762,251
Other Assets and Liabilities, Net (0.32) (592,229)
------ -------------
TOTAL NET ASSETS 100.00% $ 183,170,022
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 32,357,188
Gross Unrealized Depreciation (2,817,640)
------------
NET UNREALIZED APPRECIATION $ 29,539,548
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
104
<PAGE> 226
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 2.58%
$ 1,000,000 Ford Credit Auto Loan Master Trust 6.50 % 08/15/02 $ 1,028,580
(Cost $1,005,925)
U.S. GOVERNMENT AGENCY SECURITIES - 30.95%
ADJUSTABLE RATE MORTGAGES - 13.13%
$ 181,245 FHLMC #390208 (COFI) 6.38 % 07/01/19 $ 182,604
45,186 FHLMC #400177 (CMT) 7.50 12/01/17 46,202
73,489 FHLMC #755102 (CMT) 7.36 06/01/18 74,820
258,376 FHLMC #755163 (CMT) 8.19 10/01/19 267,097
561,928 FHLMC #755188 (CMT) 7.68 09/01/20 578,083
308,732 FNMA #61151 (CMT) 7.84 09/01/26 318,186
141,702 FNMA #70032 (CMT) 7.56 02/01/17 144,447
1,355,982 FNMA #70277 (CMT) 8.05 05/01/19 1,393,272
119,914 FNMA #70381 (COFI) 6.76 08/01/19 120,607
379,394 FNMA #70615 (CMT) 7.48 05/01/19 387,456
103,775 FNMA #70911 (COFI) 6.52 06/01/19 105,202
496,168 FNMA #90031 (CMT) 7.52 01/01/20 506,092
129,885 FNMA #118479 (COFI) 6.39 02/01/19 129,885
958,386 FNMA #190826 (CMT) 7.54 03/01/24 988,930
------------
$ 5,242,883
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.14%
$ 2,000,000 FNMA Global Bond 6.85 % 05/26/00 $ 2,053,440
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.84%
$ 1,018,078 GNMA #356587 8.00 % 06/15/23 $ 1,060,715
980,000 GNMA #395783 8.00 05/15/25 1,021,033
980,000 GNMA #403212 8.00 09/15/24 1,021,033
1,185,651 GNMA II #234031 8.00 08/20/17 1,223,935
------------
$ 4,326,716
</TABLE>
- ------------------------
110
<PAGE> 227
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES (CONTINUED)
REAL ESTATE MORTGAGE INVESTMENT CONDUITS - 1.84%
$ 664,496 FHLMC 1554-LA 5.58 % 08/15/08 $ 649,332
87,203 FNMA 1993-G19 7.50 04/25/23 87,666
------------
$ 736,998
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 12,360,037
(Cost $12,329,796)
U.S. TREASURY SECURITIES - 74.85%
U.S. TREASURY BONDS - 7.77%
$ 3,000,000 U.S. Treasury Bonds 6.25 % 05/31/00 $ 3,100,770
U.S. TREASURY NOTES - 67.08%
$ 5,000,000 U.S. Treasury Notes 5.25 % 12/31/97 $ 5,008,600
5,000,000 U.S. Treasury Notes 5.50 12/31/00 5,025,800
8,000,000 U.S. Treasury Notes 6.38 01/15/00 8,306,240
7,000,000 U.S. Treasury Notes 7.13 09/30/99 7,422,170
1,000,000 U.S. Treasury Notes 7.50 12/31/96 1,021,870
------------
$ 26,784,680
TOTAL U.S. TREASURY SECURITIES $ 29,885,450
(Cost $29,157,322)
SHORT-TERM INSTRUMENTS - 2.80%
REPURCHASE AGREEMENTS - 2.80%
$ 1,119,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 1,119,000
(Cost $1,119,000)
</TABLE>
---------------------
111
<PAGE> 228
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $43,612,043)* (Notes 1 and 3) 111.18% $ 44,393,067
Other Assets and Liabilities, Net (11.18) (4,464,909)
------ -------------
TOTAL NET ASSETS 100.00% $ 39,928,158
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 816,895
Gross Unrealized Depreciation (35,871)
------------
NET UNREALIZED APPRECIATION $ 781,024
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
112
<PAGE> 229
U.S. GOVERNMENT ALLOCATION FUND
- ------------------------------------------
PORTFOLIO OF INVESTMENTS - 12/31/95
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 21.34%
U.S. TREASURY BONDS - 21.34%
$ 1,800,000 U.S. Treasury Bonds 6.88 % 08/15/25 $ 2,030,626
1,300,000 U.S. Treasury Bonds 7.13 02/15/23 1,484,842
3,600,000 U.S. Treasury Bonds 7.25 05/15/16 4,110,750
1,700,000 U.S. Treasury Bonds 7.50 11/15/24 2,042,125
1,600,000 U.S. Treasury Bonds 7.63 11/15/22 1,932,499
2,900,000 U.S. Treasury Bonds 7.88 02/15/21 3,569,714
4,000,000 U.S. Treasury Bonds 8.13 08/15/19 5,030,000
900,000 U.S. Treasury Bonds 8.13 08/15/21 1,140,188
900,000 U.S. Treasury Bonds 8.75 05/15/17 1,190,530
3,200,000 U.S. Treasury Bonds 8.75 08/15/20 4,292,995
800,000 U.S. Treasury Bonds 9.00 11/15/18 1,090,249
1,300,000 U.S. Treasury Bonds 9.88 11/15/15 1,882,156
------------
TOTAL U.S. TREASURY SECURITIES $ 29,796,674
(Cost $27,206,366)
</TABLE>
- ------------------------
120
<PAGE> 230
U.S. GOVERNMENT ALLOCATION FUND
<TABLE>
<CAPTION>
YIELD
TO MATURITY
PRINCIPAL SECURITY NAME MATURITY DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 78.78%
U.S. TREASURY BILLS - 78.78%
$27,029,000 U.S. Treasury Bills 4.06 % 01/11/96 $ 26,986,019
13,619,000 U.S. Treasury Bills 4.54 01/18/96 13,584,153
8,731,000 U.S. Treasury Bills 4.74 02/08/96 8,682,139
52,000 U.S. Treasury Bills 4.78 02/29/96 51,601
12,585,000 U.S. Treasury Bills 4.81 02/22/96 12,499,196
48,439,000 U.S. Treasury Bills 5.03 03/07/96 48,013,027
203,000 U.S. Treasury Bills 5.06 03/14/96 200,998
------------
TOTAL SHORT-TERM INSTRUMENTS $110,017,133
(Cost $109,968,334)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $137,174,700)* (Notes 1 and 3) 100.12% $ 139,813,807
Other Assets and Liabilities, Net (0.12) (160,115)
------ -------------
TOTAL NET ASSETS 100.00% $ 139,653,692
------ -------------
------ -------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 2,643,148
Gross Unrealized Depreciation (4,041)
------------
NET UNREALIZED APPRECIATION $ 2,639,107
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
121
<PAGE> 231
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALIFORNIA
ASSET CALIFORNIA TAX-FREE
ALLOCATION TAX-FREE INCOME
FUND BOND FUND FUND
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market
value (see cost below) $1,109,497,612 $ 323,383,970 $ 79,665,701
Cash 0 571 422
Receivables:
Dividends and interest 4,876,208 5,062,746 846,240
Fund shares sold 173,027 187,000 0
Investment securities sold 0 201,947 0
Organization expenses, net
of amortization 7,097 5,743 15,380
Prepaid expenses 214,726 4,423 1,748
TOTAL ASSETS 1,114,768,670 328,846,400 80,529,491
LIABILITIES
Cash overdraft due to
custodian (Note 2) 236,705 0 0
Payables:
Investment securities
purchased 0 3,563,763 2,231,926
Distribution to
shareholders 8,703,822 1,322,674 234,694
Fund shares redeemed 10,000 0 0
Due to sponsor and
distributor (Note 2) 200,264 295,317 18,625
Due to adviser (Note 2) 1,377,646 284,572 54,519
Other 34,350 47,120 24,291
TOTAL LIABILITIES 10,562,787 5,513,446 2,564,055
TOTAL NET ASSETS
$1,104,205,883 $ 323,332,954 $ 77,965,436
NET ASSETS CONSIST OF:
Paid-in capital - Class
A(1) 913,317,550 289,034,395 77,408,542
Paid-in capital - Class B 24,750,019 25,836,476 N/A
Undistributed
(overdistributed) net
investment income (loss) 0 0 0
Undistributed net realized
gain (loss) on
investments 1,614,110 (5,451,052) (172,071)
Net unrealized
appreciation
(depreciation) of
investments 164,524,204 13,913,135 728,965
TOTAL NET ASSETS $1,104,205,883 $ 323,332,954 $ 77,965,436
COMPUTATION OF NET ASSET
VALUE AND OFFERING PRICE
Net assets - Class A(1) $1,077,935,119 $ 296,416,508 $ 77,965,436
Shares outstanding - Class
A(1) 51,962,323 26,827,384 7,536,445
Net asset value per share -
Class A(1) $ 20.74 $ 11.05 $ 10.35
Maximum offering price per
share - Class A(1) $ 21.72(2) $ 11.57(2) $ 10.67(3)
Net assets - Class B $ 26,270,764 $ 26,916,446 N/A
Shares outstanding - Class B 2,100,948 2,389,620 N/A
Net asset value and offering
price per share - Class B $ 12.50 $ 11.26 N/A
INVESTMENTS AT COST (NOTE 3) $ 944,973,408 $ 309,470,835 $ 78,936,736
- --------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
---------------------
123
<PAGE> 232
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
CORPORATE DIVERSIFIED GINNIE
STOCK INCOME MAE
FUND FUND FUND
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market
value (see cost below) $ 328,436,307 $ 85,729,718 $ 177,877,562
Cash 0 1,827 1,556
Receivables:
Dividends and interest 612,535 331,665 1,711,177
Fund shares sold 0 72,263 90,000
Investment securities sold 0 1,136,550 0
Organization expenses, net
of amortization 0 35,858 11,598
Prepaid expenses 45,315 20,552 16,281
TOTAL ASSETS 329,094,157 87,328,433 179,708,174
LIABILITIES
Cash overdraft due to
custodian (Note 2) 131,065 0 0
Payables:
Investment securities
purchased 0 1,321,798 0
Distribution to
shareholders 1,135,314 560,970 978,199
Fund shares redeemed 0 0 0
Due to sponsor and
distributor (Note 2) 198,200 9,423 137,291
Due to adviser (Note 2) 399,256 90,324 193,228
Other 22,452 29,879 14,809
TOTAL LIABILITIES 1,886,287 2,012,394 1,323,527
TOTAL NET ASSETS
$ 327,207,870 $ 85,316,039 $ 178,384,647
NET ASSETS CONSIST OF:
Paid-in capital - Class
A(1) 187,037,545 68,252,787 180,185,663
Paid-in capital - Class B N/A 4,956,012 11,914,521
Undistributed
(overdistributed) net
investment income (loss) 0 0 0
Undistributed net realized
gain (loss) on
investments 1,114,527 1,545,551 (16,155,368)
Net unrealized
appreciation
(depreciation) of
investments 139,055,798 10,561,689 2,439,831
TOTAL NET ASSETS $ 327,207,870 $ 85,316,039 $ 178,384,647
COMPUTATION OF NET ASSET
VALUE AND OFFERING PRICE
Net assets - Class A(1) $ 327,207,870 $ 79,977,088 $ 166,157,490
Shares outstanding - Class
A(1) 7,893,164 5,994,404 14,904,153
Net asset value per share -
Class A(1) $ 41.45 $ 13.34 $ 11.15
Maximum offering price per
share - Class A(1) $ 41.45 $ 13.97(2) $ 11.68(2)
Net assets - Class B N/A $ 5,338,951 $ 12,227,157
Shares outstanding - Class B N/A 427,515 1,114,541
Net asset value and offering
price per share - Class B N/A $ 12.49 $ 10.97
INVESTMENTS AT COST (NOTE 3) $ 189,380,509 $ 75,168,029 $ 175,437,731
- ------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
- ------------------------
124
<PAGE> 233
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHORT-
INTERMEDIATE
U.S. U.S.
GROWTH GOVERNMENT GOVERNMENT
AND INCOME INCOME ALLOCATION
FUND FUND FUND
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market
value (see cost below) $ 183,762,251 $ 44,393,067 $ 139,813,807
Cash 1,670 227,089 4,858
Receivables:
Dividends and interest 360,409 485,454 526,086
Fund shares sold 29,888 0 0
Investment securities sold 0 10,120,572 0
Organization expenses, net
of amortization 11,761 24,215 11,606
Prepaid expenses 46,403 8,496 32,761
TOTAL ASSETS 184,212,382 55,258,893 140,389,118
LIABILITIES
Cash overdraft due to
custodian (Note 2) 0 0 0
Payables:
Investment securities
purchased 0 15,010,547 0
Distribution to
shareholders 353,748 182,806 537,022
Fund shares redeemed 315,000 0 0
Due to sponsor and
distributor (Note 2) 48,656 3,183 26,895
Due to adviser (Note 2) 294,446 36,170 150,634
Other 30,510 98,029 20,875
TOTAL LIABILITIES 1,042,360 15,330,735 735,426
TOTAL NET ASSETS
$ 183,170,022 $ 39,928,158 $ 139,653,692
NET ASSETS CONSIST OF:
Paid-in capital - Class
A(1) 146,911,257 41,365,185 156,338,838
Paid-in capital - Class B 4,496,076 N/A 3,955,125
Undistributed
(overdistributed) net
investment income (loss) 0 0 0
Undistributed net realized
gain (loss) on
investments 2,223,141 (2,218,051) (23,279,378)
Net unrealized
appreciation
(depreciation) of
investments 29,539,548 781,024 2,639,107
TOTAL NET ASSETS $ 183,170,022 $ 39,928,158 $ 139,653,692
COMPUTATION OF NET ASSET
VALUE AND OFFERING PRICE
Net assets - Class A(1) $ 178,488,454 $ 39,928,158 $ 135,576,602
Shares outstanding - Class
A(1) 10,343,439 3,994,452 9,047,560
Net asset value per share -
Class A(1) $ 17.26 $ 10.00 $ 14.98
Maximum offering price per
share - Class A(1) $ 18.07(2) $ 10.31(3) $ 15.69(2)
Net assets - Class B $ 4,681,568 N/A $ 4,077,090
Shares outstanding - Class B 380,930 N/A 373,862
Net asset value and offering
price per share - Class B $ 12.29 N/A $ 10.91
INVESTMENTS AT COST (NOTE 3) $ 154,222,703 $ 43,612,043 $ 137,174,700
- --------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
---------------------
125
<PAGE> 234
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALIFORNIA
ASSET CALIFORNIA TAX-FREE
ALLOCATION TAX-FREE INCOME
FUND BOND FUND FUND
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 12,448,964 $ 0 $ 0
Interest 35,237,803 18,157,370 2,414,748
TOTAL INVESTMENT INCOME 47,686,767 18,157,370 2,414,748
EXPENSES (NOTE 2)
Advisory fees 3,814,364 1,542,893 267,645
Administration fees 306,436 93,013 16,793
Custody fees 0 55,013 10,407
Shareholder servicing fees 3,064,364 930,128 166,349
Portfolio accounting fees 0 123,508 61,353
Transfer agency fees 490,624 183,849 45,280
Distribution fees 566,001 231,192 27,725
Amortization of
organization expenses 9,403 5,872 8,399
Legal and audit fees 103,410 56,475 22,521
Registration fees 138,028 43,357 19,998
Directors' fees 5,000 5,000 5,000
Shareholder reports 144,343 59,999 14,015
Other 49,595 77,451 9,501
TOTAL EXPENSES 8,691,568 3,407,750 674,986
Less:
Waived fees (Note 2) (19,706) (1,232,856) (314,402)
Net Expenses 8,671,862 2,174,894 360,584
NET INVESTMENT INCOME 39,014,905 15,982,476 2,054,164
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss)
on sale of investments 4,576,913 591,815 (43,204)
Net change in unrealized
appreciation
(depreciation) of
investments 215,304,208 35,434,462 2,645,684
NET GAIN (LOSS) ON
INVESTMENTS 219,881,121 36,026,277 2,602,480
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 258,896,026 $ 52,008,753 $ 4,656,644
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
126
<PAGE> 235
STATEMENT OF OPERATIONS- FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHORT-
INTERMEDIATE
U.S.
CORPORATE DIVERSIFIED GINNIE GROWTH GOVERNMENT
STOCK INCOME MAE AND INCOME INCOME
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 7,225,361 $ 2,254,175 $ 0 $ 3,116,428 $ 0
Interest 110,982 319,781 13,291,508 513,058 1,323,136
TOTAL INVESTMENT INCOME 7,336,343 2,573,956 13,291,508 3,629,486 1,323,136
EXPENSES (NOTE 2)
Advisory fees 1,398,439 312,512 840,112 754,149 116,628
Administration fees 92,555 18,751 50,407 45,249 6,998
Custody fees 0 15,053 74,444 34,105 7,673
Shareholder servicing fees 861,478 187,508 504,067 452,488 70,914
Portfolio accounting fees 0 64,466 95,105 91,666 44,207
Transfer agency fees 152,625 54,528 156,422 160,168 16,846
Distribution fees 137,173 58,167 111,269 87,549 8,986
Amortization of
organization expenses 0 14,838 1,902 1,739 8,244
Legal and audit fees 38,305 29,184 36,553 30,527 26,620
Registration fees 51,775 36,323 46,185 46,748 29,743
Directors' fees 5,000 5,000 5,000 2,813 5,935
Shareholder reports 121,465 27,946 45,205 61,164 5,000
Other 8,938 25,031 15,375 43,866 0
TOTAL EXPENSES 2,867,753 849,307 1,982,046 1,812,231 347,794
Less:
Waived fees (Note 2) (108,638) (146,911) (574,978) (18,527) (199,881)
Net Expenses 2,759,115 702,396 1,407,068 1,793,704 147,913
NET INVESTMENT INCOME 4,577,228 1,871,560 11,884,440 1,835,782 1,175,223
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss)
on sale of investments 6,005,161 3,545,900 1,935,107 9,354,459 (1,740,504)
Net change in unrealized
appreciation
(depreciation) of
investments 76,552,587 10,976,829 13,236,756 25,841,652 1,047,532
NET GAIN (LOSS) ON
INVESTMENTS 82,557,748 14,522,729 15,171,863 35,196,111 (692,972)
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 87,134,976 $ 16,394,289 $ 27,056,303 $ 37,031,893 $ 482,251
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
127
<PAGE> 236
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
ALLOCATION
FUND
<S> <C>
- --------------------------------------------
INVESTMENT INCOME
Dividends $ 0
Interest 8,814,682
TOTAL INVESTMENT INCOME 8,814,682
EXPENSES (NOTE 2)
Advisory fees 680,049
Administration fees 40,803
Custody fees 0
Shareholder servicing fees 408,029
Portfolio accounting fees 0
Transfer agency fees 126,816
Distribution fees 80,511
Amortization of
organization expenses 1,894
Legal and audit fees 26,905
Registration fees 31,212
Directors' fees 4,987
Shareholder reports 49,857
Other 5,616
TOTAL EXPENSES 1,456,679
Less:
Waived fees (Note 2) (31,101)
Net Expenses 1,425,578
NET INVESTMENT INCOME 7,389,104
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss)
on sale of investments 380,148
Net change in unrealized
appreciation
(depreciation) of
investments 11,177,439
NET GAIN (LOSS) ON
INVESTMENTS 11,557,587
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 18,946,691
- --------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
128
<PAGE> 237
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 39,014,905 $ 44,227,670
Net realized gain (loss)
on sale of investments 4,576,913 40,999,918
Net change in unrealized
appreciation
(depreciation) of
investments 215,304,208 (119,837,699)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 258,896,026 (34,610,111)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (38,781,909) (44,227,697)
CLASS B (232,996) 0
From net realized gain on
sales of investments
CLASS A(1) (2,902,594) (40,796,983)
CLASS B (60,209) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 112,740,980 254,121,721
Reinvestment of dividends
- Class A(1) 84,335,697 31,759,403
Cost of shares redeemed -
Class A(1) (231,482,165) (317,969,973)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) (34,405,488) (32,088,849)
Proceeds from shares sold
- Class B 25,023,646 0
Reinvestment of dividends
- Class B 159,719 0
Cost of shares redeemed -
Class B (433,346) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 24,750,019 0
INCREASE (DECREASE) IN NET
ASSETS 207,262,849 (151,723,640)
NET ASSETS:
Beginning net assets 896,943,034 1,048,666,674
ENDING NET ASSETS $1,104,205,883 $ 896,943,034
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 5,898,807 13,807,751
Shares issued in
reinvestment of
dividends - Class A(1) 4,807,125 1,809,851
Shares redeemed - Class
A(1) (12,361,894) (17,788,892)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) (1,655,962) (2,171,290)
Shares sold - Class B 2,123,672 0
Shares issued in
reinvestment of
dividends - Class B 13,259 0
Shares redeemed - Class B (35,983) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 2,100,948 0
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
---------------------
129
<PAGE> 238
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 15,982,476 $ 22,512,196
Net realized gain (loss)
on sale of investments 591,815 (6,042,867)
Net change in unrealized
appreciation
(depreciation) of
investments 35,434,462 (52,684,575)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 52,008,753 (36,215,246)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (15,472,726) (22,512,196)
CLASS B (509,750) 0
From net realized gain on
sales of investments
CLASS A(1) 0 0
CLASS B 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 33,207,626 54,574,028
Reinvestment of dividends
- Class A(1) 10,558,616 17,945,317
Cost of shares redeemed -
Class A(1) (88,142,779) (240,793,430)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) (44,376,537) (168,274,085)
Proceeds from shares sold
- Class B 26,079,671 0
Reinvestment of dividends
- Class B 313,904 0
Cost of shares redeemed -
Class B (557,099) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 25,836,476 0
INCREASE (DECREASE) IN NET
ASSETS 17,486,216 (227,001,527)
NET ASSETS:
Beginning net assets 305,846,738 532,848,265
ENDING NET ASSETS $ 323,332,954 $ 305,846,738
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 3,122,899 5,123,672
Shares issued in
reinvestment of
dividends - Class A(1) 1,007,045 1,700,768
Shares redeemed - Class
A(1) (8,380,512) (23,326,239)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) (4,250,568) (16,501,799)
Shares sold - Class B 2,411,791 0
Shares issued in
reinvestment of
dividends - Class B 28,834 0
Shares redeemed - Class B (51,005) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 2,389,620 0
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
- ---------------------
130
<PAGE> 239
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME
FUND CORPORATE STOCK FUND
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 2,054,164 $ 2,293,335 $ 4,577,228 $ 4,803,450
Net realized gain (loss)
on sale of investments (43,204) (128,868) 6,005,161 8,380,262
Net change in unrealized
appreciation
(depreciation) of
investments 2,645,684 (2,827,879) 76,552,587 (12,258,997)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 4,656,644 (663,412) 87,134,976 924,715
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (2,054,164) (2,293,335) (4,577,228) (4,801,337)
CLASS B N/A N/A N/A N/A
From net realized gain on
sales of investments
CLASS A(1) 0 0 (4,890,634) (8,103,675)
CLASS B N/A N/A N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 51,648,405 31,971,989 42,931,593 40,412,415
Reinvestment of dividends
- Class A(1) 1,618,516 1,875,590 17,597,071 3,563,379
Cost of shares redeemed -
Class A(1) (26,901,737) (34,766,280) (47,253,329) (54,056,667)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) 26,365,184 (918,701) 13,275,335 (10,080,873)
Proceeds from shares sold
- Class B N/A N/A N/A N/A
Reinvestment of dividends
- Class B N/A N/A N/A N/A
Cost of shares redeemed -
Class B N/A N/A N/A N/A
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) N/A N/A N/A N/A
INCREASE (DECREASE) IN NET
ASSETS 28,967,664 (3,875,448) 90,942,449 (22,061,170)
NET ASSETS:
Beginning net assets 48,997,772 52,873,220 236,265,421 258,326,591
ENDING NET ASSETS $ 77,965,436 $ 48,997,772 $ 327,207,870 $ 236,265,421
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 5,048,517 3,151,634 1,167,520 1,236,832
Shares issued in
reinvestment of
dividends - Class A(1) 159,491 186,105 505,005 111,768
Shares redeemed - Class
A(1) (2,650,715) (3,463,657) (1,299,326) (1,655,852)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) 2,557,293 (125,918) 373,199 (307,252)
Shares sold - Class B N/A N/A N/A N/A
Shares issued in
reinvestment of
dividends - Class B N/A N/A N/A N/A
Shares redeemed - Class B N/A N/A N/A N/A
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
---------------------
131
<PAGE> 240
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DIVERSIFIED INCOME FUND
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 1,871,560 $ 1,214,151
Net realized gain (loss)
on sale of investments 3,545,900 (273,760)
Net change in unrealized
appreciation
(depreciation) of
investments 10,976,829 (1,076,102)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 16,394,289 (135,711)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (1,819,692) (1,214,150)
CLASS B (51,868) 0
From net realized gain on
sales of investments
CLASS A(1) (1,621,942) 0
CLASS B (104,647) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 36,625,693 32,526,614
Reinvestment of dividends
- Class A(1) 3,084,339 1,367,156
Cost of shares redeemed -
Class A(1) (17,324,191) (14,069,676)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) 22,385,841 19,824,094
Proceeds from shares sold
- Class B 5,158,139 0
Reinvestment of dividends
- Class B 122,225 0
Cost of shares redeemed -
Class B (324,353) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 4,956,011 0
INCREASE (DECREASE) IN NET
ASSETS 40,137,992 18,474,233
NET ASSETS:
Beginning net assets 45,178,047 26,703,814
ENDING NET ASSETS $ 85,316,039 $ 45,178,047
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 2,981,021 2,942,632
Shares issued in
reinvestment of
dividends - Class A(1) 244,288 124,853
Shares redeemed - Class
A(1) (1,429,340) (1,279,735)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) 1,795,969 1,787,750
Shares sold - Class B 446,270 0
Shares issued in
reinvestment of
dividends - Class B 9,860 0
Shares redeemed - Class B (28,616) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 427,514 0
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
- ---------------------
132
<PAGE> 241
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GINNIE MAE FUND GROWTH AND INCOME FUND
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 11,884,440 $ 17,212,338 $ 1,835,782 $ 1,780,057
Net realized gain (loss)
on sale of investments 1,935,107 (12,854,822) 9,354,459 3,087,861
Net change in unrealized
appreciation
(depreciation) of
investments 13,236,756 (14,085,918) 25,841,652 (5,394,205)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 27,056,303 (9,728,402) 37,031,893 (526,287)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (11,629,261) (17,212,338) (1,827,656) (1,780,057)
CLASS B (255,179) 0 (8,126) 0
From net realized gain on
sales of investments
CLASS A(1) 0 0 (6,952,008) (3,087,861)
CLASS B 0 0 (179,310) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 24,703,217 36,339,249 61,077,854 41,116,188
Reinvestment of dividends
- Class A(1) 6,911,844 10,397,568 11,706,310 2,095,312
Cost of shares redeemed -
Class A(1) (51,605,131) (152,037,792) (35,699,783) (36,528,266)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) (19,990,070) (105,300,975) 37,084,381 6,683,234
Proceeds from shares sold
- Class B 12,424,092 0 4,557,982 0
Reinvestment of dividends
- Class B 69,456 0 184,612 0
Cost of shares redeemed -
Class B (579,027) 0 (246,518) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 11,914,521 0 4,496,076 0
INCREASE (DECREASE) IN NET
ASSETS 7,096,314 (132,241,715) 69,645,250 1,289,029
NET ASSETS:
Beginning net assets 171,288,333 303,530,048 113,524,772 112,235,743
ENDING NET ASSETS $ 178,384,647 $ 171,288,333 $ 183,170,022 $ 113,524,772
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 2,279,437 3,335,882 3,775,466 2,805,058
Shares issued in
reinvestment of
dividends - Class A(1) 646,128 970,355 726,595 145,120
Shares redeemed - Class
A(1) (4,839,906) (14,322,410) (2,208,631) (2,509,634)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) (1,914,341) (10,016,173) 2,293,430 440,544
Shares sold - Class B 1,161,521 0 386,746 0
Shares issued in
reinvestment of
dividends - Class B 6,474 0 14,982 0
Shares redeemed - Class B (53,454) 0 (20,798) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 1,114,541 0 380,930 0
- --------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
---------------------
133
<PAGE> 242
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE U.S.
GOVERNMENT INCOME FUND
------------------------------
FOR THE
YEAR ENDED FOR THE
DEC. 31, YEAR ENDED
1995(2) DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 1,175,223 $ 557,955
Net realized gain (loss)
on sale of investments (1,740,504) (477,511)
Net change in unrealized
appreciation
(depreciation) of
investments 1,047,532 (260,085)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 482,251 (179,641)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (1,175,223) (557,955)
CLASS B N/A N/A
From net realized gain on
sales of investments
CLASS A(1) 0 0
CLASS B N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 38,655,106 15,266,240
Reinvestment of dividends
- Class A(1) 931,554 457,026
Cost of shares redeemed -
Class A(1) (10,567,251) (11,941,036)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) 29,019,409 3,782,230
Proceeds from shares sold
- Class B N/A N/A
Reinvestment of dividends
- Class B N/A N/A
Cost of shares redeemed -
Class B N/A N/A
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) N/A N/A
INCREASE (DECREASE) IN NET
ASSETS 28,326,437 3,044,634
NET ASSETS:
Beginning net assets 11,601,721 8,557,087
ENDING NET ASSETS $ 39,928,158 $ 11,601,721
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 3,742,963 1,559,723
Shares issued in
reinvestment of
dividends - Class A(1) 95,287 47,074
Shares redeemed - Class
A(1) (1,079,388) (1,227,993)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) 2,758,862 378,804
Shares sold - Class B N/A N/A
Shares issued in
reinvestment of
dividends - Class B N/A N/A
Shares redeemed - Class B N/A N/A
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B N/A N/A
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) "PROCEEDS FROM SHARES SOLD" AND "SHARES SOLD" INCLUDE $15,832,186 AND
1,612,905, RESPECTIVELY, AS A RESULT OF THE MERGER OF THE VARIABLE RATE
GOVERNMENT FUND. SEE NOTE 6.
The accompanying notes are an integral part of these financial statements.
- ---------------------
134
<PAGE> 243
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION
FUND
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
<S> <C> <C>
- ------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 7,389,104 $ 12,431,161
Net realized gain (loss)
on sale of investments 380,148 (23,621,944)
Net change in unrealized
appreciation
(depreciation) of
investments 11,177,439 (6,365,346)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 18,946,691 (17,556,129)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income
CLASS A(1) (7,305,279) (12,431,161)
CLASS B (83,825) 0
From net realized gain on
sales of investments
CLASS A(1) 0 0
CLASS B 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
- Class A(1) 24,249,760 34,301,793
Reinvestment of dividends
- Class A(1) 6,172,643 7,265,846
Cost of shares redeemed -
Class A(1) (46,347,301) (154,720,634)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS A (NOTE 4)(1) (15,924,898) (113,152,995)
Proceeds from shares sold
- Class B 4,453,188 0
Reinvestment of dividends
- Class B 43,367 0
Cost of shares redeemed -
Class B (541,430) 0
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
- CLASS B (NOTE 4) 3,955,125 0
INCREASE (DECREASE) IN NET
ASSETS (412,186) (143,140,285)
NET ASSETS:
Beginning net assets 140,065,878 283,206,163
ENDING NET ASSETS $ 139,653,692 $ 140,065,878
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 1,653,710 2,282,827
Shares issued in
reinvestment of
dividends - Class A(1) 428,154 508,903
Shares redeemed - Class
A(1) (3,211,044) (10,646,426)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
A(1) (1,129,180) (7,854,696)
Shares sold - Class B 420,344 0
Shares issued in
reinvestment of
dividends - Class B 4,057 0
Shares redeemed - Class B (50,540) 0
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING - CLASS
B 373,861 0
- ------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) "PROCEEDS FROM SHARES SOLD" AND "SHARES SOLD" INCLUDE $15,832,186 AND
1,612,905, RESPECTIVELY, AS A RESULT OF THE MERGER OF THE VARIABLE RATE
GOVERNMENT FUND. SEE NOTE 6.
The accompanying notes are an integral part of these financial statements.
---------------------
135
<PAGE> 244
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
136
<PAGE> 245
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
-------------------------------
CLASS A
-------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $16.73 $18.80 $17.89
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.74 0.77 0.77
Net realized and unrealized gain (loss) on investments 4.07 (1.31) 1.88
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 4.81 (0.54) 2.65
LESS DISTRIBUTIONS:
Dividends from net investment income (0.74) (0.77) (0.77)
Distributions from net realized gain (0.06) (0.76) (0.97)
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.80) (1.53) (1.74)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $20.74 $16.73 $18.80
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED)(3) 29.18% (2.82)% 15.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $1,077,935 $896,943 $1,048,667
Number of shares outstanding, end of period (000) 51,962 53,618 55,790
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.84% 0.84% 0.86%
Ratio of net investment income to average net
assets(2) 3.81% 4.30% 4.20%
Portfolio turnover 15% 49% 40%
- -----------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses N/A N/A 0.86%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses N/A N/A 4.20%
- -----------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
---------------------
137
<PAGE> 246
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.)
-------------------------------
CLASS A (CONT.) CLASS B
-------------------- ---------
YEAR YEAR YEAR
ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1992 1991 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $17.65 $14.45 $10.00
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.87 0.92 0.22
Net realized and unrealized gain (loss) on investments 0.31 2.28 2.53
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.18 3.20 2.75
LESS DISTRIBUTIONS:
Dividends from net investment income (0.87) 0.00 (0.22)
Distributions from net realized gain (0.07) 0.00 (0.03)
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.94) 0.00 (0.25)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $17.89 $17.65 $12.50
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED)(3) 7.00% 22.13% 27.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $542,226 $367,251 $26,271
Number of shares outstanding, end of period (000) 30,303 20,811 2,101
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.95% 0.95% 1.53%
Ratio of net investment income to average net
assets(2) 5.22% 5.88% 2.71%
Portfolio turnover 5% 25% 15%
- -----------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 0.97% N/A 1.76%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 5.20% N/A 2.48%
- -----------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
- ---------------------
138
<PAGE> 247
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
-----------------------------------------------------
CLASS A CLASS B
------------------------------------------ ---------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $9.84 $11.20 $10.41 $10.00 $10.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.55 0.56 0.56 0.53 0.48
Net realized and
unrealized gain (loss)
on investments 1.21 (1.36) 0.84 0.41 1.26
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.76 (0.80) 1.40 0.94 1.74
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.55) (0.56) (0.56) (0.53) (0.48)
Distributions from net
realized gain 0.00 0.00 (0.05) 0.00 0.00
--------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.55) (0.56) (0.61) (0.53) (0.48)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $11.05 $9.84 $11.20 $10.41 $11.26
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 18.24% (7.27)% 13.82% 10.35% 17.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $296,417 $305,847 $532,848 $242,409 $26,916
Number of shares
outstanding, end of
period (000) 26,827 31,078 47,580 23,298 2,390
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.68% 0.65% 0.64% 0.19% 1.32%
Ratio of net investment
income to average net
assets(2) 5.18% 5.35% 5.05% 5.67% 4.31%
Portfolio turnover 9% 3% 7% 18% 9%
- -----------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.07% 1.06% 1.01% 1.07% 1.72%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 4.79% 4.94% 4.68% 4.79% 3.91%
- -----------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
---------------------
139
<PAGE> 248
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME FUND
------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(4)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $9.84 $10.36 $10.05 $10.00
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.38 0.40 0.39 0.02
Net realized and unrealized gain (loss) on
investments 0.51 (0.52) 0.31 0.05
--------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.89 (0.12) 0.70 0.07
LESS DISTRIBUTIONS:
Dividends from net investment income (0.38) (0.40) (0.39) (0.02)
Distributions from net realized gain 0.00 0.00 0.00 0.00
--------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.38) (0.40) (0.39) (0.02)
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $10.35 $9.84 $10.36 $10.05
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED)(3) 9.14% (1.10)% 7.10% 0.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $77,965 $48,998 $52,873 $7,821
Number of shares outstanding, end of period
(000) 7,536 4,979 5,105 778
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1) 0.65% 0.16% 0.34% 0.00%
Ratio of net investment income to average
net assets(2) 3.70% 4.03% 3.74% 3.56%
Portfolio turnover 31% 33% 11% 0%
- ------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets
prior to waived fees and reimbursed expenses 1.22% 1.21% 1.23% 1.55%
(2) Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses 3.13% 2.98% 2.85% 2.01%
- ------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
The accompanying notes are an integral part of these financial statements.
- ---------------------
140
<PAGE> 249
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CORPORATE STOCK FUND
-----------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $31.42 $33.00 $31.40 $30.38 $23.60
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.59 0.63 0.59 0.62 0.62
Net realized and
unrealized gain (loss)
on investments 10.65 (0.50) 2.19 1.35 6.16
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 11.24 0.13 2.78 1.97 6.78
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.59) (0.63) (0.59) (0.62) 0.00
Distributions from net
realized gain (0.62) (1.08) (0.59) (0.33) 0.00
--------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (1.21) (1.71) (1.18) (0.95) 0.00
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $41.45 $31.42 $33.00 $31.40 $30.38
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 35.99% 0.42% 8.91% 6.59% 28.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $327,208 $236,265 $258,327 $230,457 $204,926
Number of shares
outstanding, end of
period (000) 7,893 7,520 7,827 7,340 6,745
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.96% 0.97% 0.97% 0.93% 0.97%
Ratio of net investment
income to average net
assets(2) 1.59% 1.92% 1.81% 2.05% 2.30%
Portfolio turnover 6% 7% 5% 4% 4%
- -----------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.00% 1.00% 0.99% 1.00% N/A
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 1.55% 1.89% 1.79% 1.98% N/A
- -----------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
The accompanying notes are an integral part of these financial statements.
---------------------
141
<PAGE> 250
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
DIVERSIFIED INCOME FUND
-----------------------------------------------------
CLASS A CLASS B
------------------------------------------ ---------
YEAR YEAR YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(4) 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.76 $11.08 $10.29 $10.00 $10.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.35 0.33 0.30 0.02 0.20
Net realized and unrealized gain
(loss) on investments 2.86 (0.32) 0.96 0.29 2.75
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 3.21 0.01 1.26 0.31 2.95
LESS DISTRIBUTIONS:
Dividends from net investment income (0.35) (0.33) (0.30) (0.02) (0.20)
Distributions from net realized gain (0.28) 0.00 (0.17) 0.00 (0.26)
--------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.63) (0.33) (0.47) (0.02) (0.46)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $13.34 $10.76 $11.08 $10.29 $12.49
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED)(3) 30.17% 0.08% 12.33% 3.10% 29.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $79,977 $45,178 $26,704 $1,379 $5,339
Number of shares outstanding, end of
period (000) 5,994 4,198 2,411 134 428
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 1.10% 1.06% 0.46% 0.00% 1.73%
Ratio of net investment income to
average net assets(2) 3.02% 3.16% 3.51% 4.09% 2.40%
Portfolio turnover 70% 62% 46% 1% 70%
- ---------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.31% 1.34% 1.66% 3.49% 2.57%
(2) Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 2.81% 2.88% 2.31% 0.60% 1.57%
- ---------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
(5) THE FUND COMMENCED OPERATIONS ON JANUARY 3, 1991.
The accompanying notes are an integral part of these financial statements.
- ---------------------
142
<PAGE> 251
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
GINNIE MAE FUND
----------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- ---------
YEAR YEAR YEAR YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991(5) 1995
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.18 $11.31 $11.34 $11.42 $10.00 $10.00
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.76 0.77 0.83 0.83 0.83 0.66
Net realized and
unrealized gain (loss)
on investments 0.97 (1.13) (0.03) (0.08) 0.59 0.97
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.73 (0.36) 0.80 0.75 1.42 1.63
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.76) (0.77) (0.83) (0.83) 0.00 (0.66)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.76) (0.77) (0.83) (0.83) 0.00 (0.66)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $11.15 $10.18 $11.31 $11.34 $11.42 $10.97
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 17.53% (3.23)% 7.19% 6.86% 14.30% 16.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $166,157 $171,288 $303,530 $184,692 $4,870 $12,227
Number of shares
outstanding, end of
period (000) 14,904 16,618 26,835 16,289 3,053 1,115
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.82% 0.73% 0.46% 0.46% 1.04% 1.47%
Ratio of net investment
income to average net
assets(2) 7.09% 7.20% 7.19% 7.93% 7.66% 6.01%
Portfolio turnover 118% 69% 121% 73% 241% 118%
- ----------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.15% 1.07% 1.02% 1.26% 1.05% 2.12%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 6.76% 6.86% 6.63% 7.13% 7.65% 5.36%
- ----------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
(5) THE FUND COMMENCED OPERATIONS ON JANUARY 3, 1991.
---------------------
143
<PAGE> 252
FINANCIAL HIGHLIGHTS
<TABLE>
<C> <S>
The accompanying notes are an integral part of these financial statements.
</TABLE>
- ---------------------
144
<PAGE> 253
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
----------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- ---------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991 1995
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $14.10 $14.75 $13.88 $12.84 $10.29 $10.00
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.19 0.22 0.23 0.27 0.41 0.05
Net realized and
unrealized gain (loss)
on investments 3.87 (0.27) 0.93 1.44 2.14 2.79
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 4.06 (0.05) 1.16 1.71 2.55 2.84
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.19) (0.22) (0.23) (0.27) 0.00 (0.05)
Distributions from net
realized gain (0.71) (0.38) (0.06) (0.40) 0.00 (0.50)
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.90) (0.60) (0.29) (0.67) 0.00 (0.55)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $17.26 $14.10 $14.75 $13.88 $12.84 $12.29
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 28.90% (0.29)% 8.44% 13.45% 24.77% 28.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $178,488 $113,525 $112,236 $44,883 $10,323 $4,682
Number of shares
outstanding, end of
period (000) 10,343 8,050 7,609 3,233 804 381
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.18% 1.11% 0.93% 0.42% 0.05% 1.87%
Ratio of net investment
income to average net
assets(2) 1.23% 1.51% 1.72% 2.31% 3.50% 0.43%
Portfolio turnover 100% 71% 55% 80% 13% 100%
- ----------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.21% 1.15% 1.11% 1.10% 1.16% 2.21%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 1.20% 1.47% 1.54% 1.63% 2.39% 0.09%
- ----------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
---------------------
145
<PAGE> 254
FINANCIAL HIGHLIGHTS
<TABLE>
<C> <S>
The accompanying notes are an integral part of these financial statements.
</TABLE>
- ---------------------
146
<PAGE> 255
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
SHORT-INTERMEDIATE U.S. -------------------------------
GOVERNMENT INCOME FUND CLASS A
------------------------------- -------------------------------
YEAR YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993(4) 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $9.39 $9.99 $10.00 $13.76 $15.71 $15.41
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.55 0.46 0.06 0.79 0.87 0.96
Net realized and
unrealized gain (loss)
on investments 0.61 (0.60) (0.01) 1.22 (1.95) 1.69
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.16 (0.14) 0.05 2.01 (1.08) 2.65
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.55) (0.46) (0.06) (0.79) (0.87) (0.96)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00 (1.39)
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.55) (0.46) (0.06) (0.79) (0.87) (2.35)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $10.00 $9.39 $9.99 $14.98 $13.76 $15.71
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 12.67% (1.42)% 0.40% 14.91% (6.99)% 17.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $39,928 $11,602 $8,557 $135,577 $140,066 $283,206
Number of shares
outstanding, end of
period (000) 3,994 1,236 857 9,048 10,177 18,031
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.71% 0.25% 0.00% 1.04% 1.01% 0.99%
Ratio of net investment
income to average net
assets(2) 5.64% 4.75% 3.49% 5.41% 5.94% 5.92%
Portfolio turnover 472% 288% N/A 292% 112% 150%
- ----------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.67% 2.28% 2.45% 1.07% 1.08% 1.02%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 4.68% 2.72% 1.04% 5.38% 5.87% 5.89%
- ----------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
(4) THE FUND COMMENCED OPERATIONS ON OCTOBER 27, 1993.
---------------------
147
<PAGE> 256
FINANCIAL HIGHLIGHTS
<TABLE>
<C> <S>
The accompanying notes are an integral part of these financial statements.
</TABLE>
- ---------------------
148
<PAGE> 257
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
(CONT.)
-------------------------------
CLASS A (CONT.) CLASS B
-------------------- ---------
YEAR YEAR YEAR
ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1992 1991 1995
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $15.41 $13.14 $10.00
--------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.87 0.94 0.49
Net realized and
unrealized gain (loss)
on investments 0.04 1.33 0.91
--------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 0.91 2.27 1.40
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.87) 0.00 (0.49)
Distributions from net
realized gain (0.04) 0.00 0.00
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.91) 0.00 (0.49)
--------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $15.41 $15.41 $10.91
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED)(3) 6.30% 17.21% 14.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $127,504 $30,098 $4,077
Number of shares
outstanding, end of
period (000) 8,272 1,954 374
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.00% 1.01% 1.65%
Ratio of net investment
income to average net
assets(2) 6.06% 6.77% 4.31%
Portfolio turnover 33% 147% 292%
- ----------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 1.08% N/A 2.36%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 5.98% N/A 3.60%
- ----------------------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
---------------------
149
<PAGE> 258
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)
Net realized and unrealized gain (loss) on
investments
TOTAL FROM INVESTMENT OPERATIONS
LESS DISTRIBUTIONS:
Dividends from net investment income
Distributions from net realized gain
TOTAL FROM DISTRIBUTIONS
NET ASSET VALUE, END OF PERIOD
TOTAL RETURN (NOT ANNUALIZED)(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)
Number of shares outstanding, end of period
(000)
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets(1)
Ratio of net investment income to average
net assets(2)
Portfolio turnover
- ------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses
(2) Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses
- ------------------------------------------------------------------------------
</TABLE>
(3) TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
- ---------------------
150
<PAGE> 259
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Stagecoach Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
investment company. The Company commenced operations on January 1, 1992, at
which time the merger described in Note 5 was consummated, and consists of eight
separate diversified Funds: the Asset Allocation, Corporate Stock, Diversified
Income, Ginnie Mae, Growth and Income, Money Market Mutual, Short-Intermediate
U.S. Government Income and U.S. Government Allocation Funds; and three
non-diversified funds: the California Tax-Free Bond, California Tax-Free Income
and California Tax-Free Money Market Mutual Funds. The financial statements of
the California Tax-Free Money Market Mutual and Money Market Mutual Funds are
presented separately from these financial statements.
These Funds invest in a range of securities, generally including money market
instruments, equities and U.S. government securities.
Each of the funds presented in this book (the "Funds"), with the exception of
the California Tax-Free Income, Corporate Stock, and Short- Intermediate U.S.
Government Income Funds, commenced offering Class B shares on January 1, 1995.
The two classes of shares differ principally in the applicable sales charges,
shareholder servicing fees and distribution fees. Shareholders of each class
also bear certain expenses that pertain to that particular class. All
shareholders bear the common expenses of the Fund and earn income from the
portfolio pro rata based on the average daily net assets of each class, without
distinction between share classes. Dividends are declared separately for each
class. Gains are allocated to each class pro rata based upon net assets of each
class on the date of distribution. No class has preferential dividend rights.
Differences in per share dividend rates generally result from the relative
weightings of pro rata income and gain allocations and from differences in
separate class expenses, including distribution and service fees.
The following significant accounting policies are consistently followed by the
Company in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect the reported amounts of asssets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
- ---------------------
148
<PAGE> 260
NOTES TO FINANCIAL STATEMENTS
SECURITY VALUATION
Investments in securities for which the primary market is a national securities
exchange or the Nasdaq National Market System are valued at the last reported
sales price on the day of valuation. U.S. Government obligations are valued in a
range between the last reported bid and ask prices. In the absence of any sale
of such securities on the valuation date and in the case of other securities,
excluding debt securities maturing in 60 days or less, the valuations are based
on latest quoted bid prices. Debt securities maturing in 60 days or less are
valued at amortized cost. Securities for which quotations are not readily
available are valued at fair value as determined by procedures set by the Fund's
Board of Directors.
Cash equivalents relating to firm commitment purchase agreements are segregated
by the custodian and may not be sold while the current commitment is
outstanding.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are accounted for on the date the securities are
purchased or sold (trade date). Dividend income is recognized on the ex-dividend
date, and interest income is recognized on a daily accrual basis. Realized gains
or losses are reported on the basis of identified cost of securities delivered.
Bond discounts are accredited and premiums are amortized as required by the
Internal Revenue Code.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
("repurchase agreements") are treated as collateralized financing transactions
and are recorded at their contracted resale amounts. These repurchase
agreements, if any, are detailed in each Fund's Portfolio of Investments. The
adviser to the Funds pools the Fund's cash and invests in repurchase agreements
entered into by the Funds. The repurchase agreements must be fully
collateralized based on values that are marked to market daily. The collateral
may be held by an agent bank under a tri-party agreement. It is the adviser's
responsibility to value collateral daily and to obtain additional collateral as
necessary to maintain market value equal to or greater than the resale price.
The repurchase agreements held in the Funds at December 31, 1995, are
collateralized by U.S. Government obligations. The repurchase agreements were
entered into on December 29, 1995.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Asset Allocation,
Corporate Stock, Diversified Income, and Growth and Income Funds are declared
and distributed quarterly. Dividends to shareholders from net investment income
of the California Tax-Free Bond, California Tax-Free Income, Ginnie Mae,
Short-Intermediate U.S. Government Income and U.S. Government Allocation Funds
are declared daily and distributed monthly. Any dividends to
---------------------
149
<PAGE> 261
NOTES TO FINANCIAL STATEMENTS
shareholders from net realized capital gains are declared and distributed
annually.
FEDERAL INCOME TAXES
The Company's policy with respect to each Fund is to comply with the
requirements of the Internal Revenue Code that are applicable to regulated
investment companies and to distribute substantially all of the Fund's net
investment income and any net realized capital gain to its shareholders.
Therefore, no federal or state income tax provision is required. As of December
31, 1995, the California Tax-Free Income Fund has capital loss carryforwards of
$128,868 which will expire in the year 2002 and $43,203 which will expire in
2003. The California Tax-Free Bond Fund has a capital loss carryforward of
$5,451,042 which will expire in the year 2002. The U.S. Government Allocation
Fund has a capital loss carryforward of $23,204,215 which will expire in the
year 2002. The Short-Intermediate U.S. Government Income Fund has capital loss
carryforwards of $127,148, $200,718, $1,798,834, and $84,610 which will expire
in 2000, 2001, 2002, and 2003, respectively. Certain of these loss carryforwards
resulted from transactions entered into by the Variable Rate Government Fund
prior to the merger with the Short-Intermediate U.S. Government Income Fund. The
utilization of these loss carryforwards from the Variable Rate Government Fund
may be subject to limitations as a result of rules in the Internal Revenue Code
applicable to corporate changes of ownership. The Ginnie Mae Fund has capital
loss carryforwards of $3,300,546 which will expire in the year 2001 and
$12,854,823 which will expire in the year 2002.
The Board intends to offset net capital gains with each capital loss
carryforward until each carryforward has been fully utilized or expires. In
addition, no capital gain distributions shall be made until the capital loss
carryforward has been fully utilized or expires.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) were recorded by
the Fund. The differences between the income and gains distributed on a book
versus tax basis are shown as excess distributions of net investment income and
net realized gain on the sale of investments in the accompanying Statements of
Changes in Net Assets.
As a result of permanent book-to-tax differences due to the treatment of
equalization accounting, used in 1993, tax returns of capital existed for the
Ginnie Mae Fund. However, reclassification adjustments for equalization and tax
returns of capital offset each other. The per share effect of the tax return of
capital in 1993 was less than one cent per share for Asset Allocation Fund and
U.S. Government Allocation Fund and $0.02 for the Ginnie Mae Fund.
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Funds' administrator, sponsor and distributor,
- ---------------------
150
<PAGE> 262
NOTES TO FINANCIAL STATEMENTS
has charged the Funds for expenses incurred in connection with the organization
and initial registration of the Fund and/or Class. These expenses are being
amortized by the Funds on a straightline basis over 60 months from the date each
Fund and/or Class commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into separate advisory contracts on behalf of the Funds
with Wells Fargo Bank, N.A. ("WFB"). Pursuant to the contracts, WFB furnishes to
the Funds investment guidance and policy direction in connection with daily
portfolio management. Under the contracts with the California Tax-Free Bond,
California Tax-Free Income, Diversified Income and Short-Intermediate U.S.
Government Income Funds, WFB is entitled to be paid a monthly advisory fee at an
annual rate of 0.50% of the average daily net assets of the respective Fund.
Under the contracts with the Asset Allocation, Corporate Stock, Ginnie Mae,
Growth and Income, and U.S. Government Allocation Funds. WFB is entitled to be
paid a monthly advisory fee at an annual rate of 0.50% of average daily net
assets up to $250 million, 0.40% of average daily net assets of the next $250
million, and 0.30% in excess of $500 million.
In connection with the Asset Allocation, Corporate Stock and U.S. Government
Allocation Funds, the Company has entered into subadvisory contracts with Wells
Fargo Nikko Investment Advisors ("WFNIA"). WFNIA is an affiliate of Wells Fargo
& Company. Pursuant to such agreements, WFB has agreed to pay WFNIA a
subadvisory fee. In addition, Wells Fargo Institutional Trust Company N.A.
("WFITC"), a subsidiary of WFNIA, acts as custodian for these Funds. Custody and
portfolio accounting fees are paid to WFITC from the sub-advisory fee paid to
WFNIA.
Effective January 1, 1996, BZW Barclays Global Fund Advisors ("BGFA") replaced
WFNIA as investment sub-adviser to the Asset Allocation, Corporate Stock and
U.S. Government Allocation Funds. BGFA was created by the reorganization of
WFNIA with and into an affiliate of WFITC.
Pursuant to a sub-advisory contract with each Fund and subject to the overall
supervision of WFB, the investment adviser to each Fund, BGFA is responsible for
day-to-day portfolio management of each Fund. BGFA will continue to employ
substantially the same personnel and will continue to use the computer-based
investment model developed and previously used by WFNIA to determine the
recommended mix of assets in each Fund's portfolio. BGFA is entitled to receive
from WFB as compensation for its sub-advisory services monthly fees at the
annual rate of 0.20%, 015% and 0.08% of the average daily net assets of the
Asset Allocation, U.S. Government Allocation and Corporate Stock Funds,
respectively. BGFA is also entitled to receive from WFB annual fees of $40,000
each for its services to the U.S. Government Allocation and Corporate Stock
Funds.
BGFA is an indirect subsidiary of Barclays Bank PLC and is located at 45 Fremont
---------------------
151
<PAGE> 263
NOTES TO FINANCIAL STATEMENTS
Street, San Francisco, CA 94105. As of January 1, 1996 BGFA and its affiliates
provide investment advisory services for over $220 billion of assets under
management. As of January 1, 1996, WFB provides investment advisory services for
approximately $33 billion of assets.
Effective January 1, 1996, WFITC, due to a change in control of its outstanding
voting securities, became a wholly owned subsidiary of BZW Barclays Global
Investors Holdings Inc. (formerly, The Nikko Building U.S.A., Inc.) and WFITC
was renamed BZW Barclays Global Investors, N.A. ("BGI"). BGI currently acts as
the Asset Allocation, Corporate Stock and U.S. Government Allocation Funds'
custodian. BGFA is a subsidiary of BGI. BGI will not be entitled to receive
compensation for its services to the Funds so long as BGFA is entitled to
receive fees for providing investment advisory services to the Funds. The
principal business address of BGI is 45 Fremont Street, San Francisco,
California 94105.
The Company has entered into contracts with WFB on behalf of all of the Funds
except the Asset Allocation, Corporate Stock and U.S. Government Allocation
Funds, whereby WFB is responsible for providing custody and portfolio accounting
services for the Funds. WFB is entitled to certain transaction charges plus an
annual fee for custody services at an annual rate of 0.0167% of the average
daily net assets of the respective Funds.
For portfolio accounting services, WFB is entitled to a monthly base fee from
each Fund of $2,000 plus an annual fee of 0.07% of the first $50 million of
average daily net assets, 0.045% of the next $50 million, and 0.02% of the
average daily net assets over $100 million.
The Company has entered into a contract on behalf of the Funds with WFB, whereby
WFB has agreed to act as transfer agent for the Funds. Under the contract, WFB
is paid a per account fee plus other related costs with a minimum monthly fee of
$3,000 per Fund, unless net assets of the respective Fund are under $20 million.
For as long as the assets remain under $20 million a Fund will not be charged
any transfer agent fees by WFB.
The Company has entered into a contract on behalf of the Funds with WFB, whereby
WFB has agreed to provide shareholder servicing. Pursuant to the contract, WFB
is entitled to an annual fee for providing shareholder servicing of 0.30% of the
respective Fund's average daily net assets.
The Company has entered into administration and distribution agreements on
behalf of the Funds with Stephens. Under the agreements, Stephens has agreed to
provide supervisory, administrative and distribution services to the Funds. For
providing supervisory and administrative services, each Fund pays Stephens a
monthly fee at the annual rate of 0.03% of such Fund's average daily net assets.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the
1940 Act for the following non multi-class funds: the California Tax-Free
Income, Corporate Stock, and Short-
- ---------------------
152
<PAGE> 264
NOTES TO FINANCIAL STATEMENTS
Intermediate U.S. Government Income Funds. The Company has also adopted,
pursuant to Rule 12b-1 of the 1940 Act, separate Distribution Plans for Class A
and Class B shares of the multi-class funds.
The Distribution Plan for the non multi-class funds and the separate
Distribution Plan for each of the Class A shares of the multi-class funds
provides that each Fund may defray all or part of the cost of preparing,
printing and distributing prospectuses and other promotional materials by paying
on an annual basis 0.05% of the Class A's or non multi-class Fund's average
daily net assets for costs incurred. Each of these funds may participate in
joint distribution activities with other Funds, in which event, expenses
reimbursed out of the assets of one of the Funds may be attributable, in part,
to the distribution-related activities of another Fund. Generally, the expenses
attributable to joint distribution activities will be allocated among the Funds
in proportion to their relative net asset sizes.
The separate Class B Distribution Plan for the multi-class funds provides that
the Funds may pay, as compensation for distribution-related services, a monthly
fee at an annual rate of 0.70% of each such Fund's average daily net assets
attributable to Class B shares.
<TABLE>
<CAPTION>
DISTRIBUTION DISTRIBUTION
FEES FEES
FUND CLASS A CLASS B
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
Asset Allocation Fund $ 506,479 $ 59,522
California Tax-Free Bond Fund 149,164 82,028
Diversified Income Fund 43,182 14,985
Ginnie Mae Fund 81,915 29,354
Growth and Income Fund 74,482 13,067
U.S. Government Allocation Fund 67,043 13,468
</TABLE>
WAIVED FEES
The following amounts of fees and expenses have been waived by WFB for the year
ended December 31, 1995:
<TABLE>
<CAPTION>
FEES WAIVED
FUND BY WFB
<S> <C> <C>
- -----------------------------------------------------------------------------------
Asset Allocation Fund $ 19,706
California Tax-Free Bond Fund 1,232,856
California Tax-Free Income Fund 314,402
Corporate Stock Fund 108,638
Diversified Income Fund 146,911
Ginnie Mae Fund 574,978
Growth and Income Fund 18,527
Short-Intermediate U.S. Government Income Fund 199,881
U.S. Government Allocation Fund 31,101
</TABLE>
---------------------
153
<PAGE> 265
NOTES TO FINANCIAL STATEMENTS
Waived fees and reimbursed expenses continue at the discretion of WFB and
Stephens, respectively.
Certain officers and directors of the Company are also officers of Stephens. As
of December 31, 1995, Stephens owned 6,311shares of the California Tax-Free Bond
Fund, 11,228 shares of the California Tax-Free Income Fund and 11,339 shares of
the Diversified Income Fund.
Stephens has retained $1,184,736 as sales charges from the proceeds of Class A
capital shares sold and $66,575 from the proceeds of Class B capital shares
redeemed by the Company for the year ended December 31, 1995. Wells Fargo
Securities Inc., a subsidiary of WFB, received $333,234 as sales charges from
the proceeds of Class A capital shares sold by the Company for the year ended
December 31, 1995.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for each
Fund for the year ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
AGGREGATE ASSET CALIFORNIA CALIFORNIA
PURCHASES ALLOCATION TAX-FREE TAX-FREE CORPORATE DIVERSIFIED
AND SALES OF: FUND BOND FUND INCOME FUND STOCK FUND INCOME FUND
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT
OBLIGATIONS:
Purchases at cost $ 3,210,000 $ 0 $ 0 $ 0 $ 0
Sales proceeds 422,194,531 0 0 0 0
OTHER SECURITIES:
Purchases at cost 119,731,930 27,057,332 39,393,662 16,072,363 64,777,860
Sales proceeds 53,149,119 40,202,450 15,296,421 16,077,985 40,584,769
</TABLE>
<TABLE>
<CAPTION>
SHORT-
INTERMEDIATE U.S.
U.S. GOVERNMENT
AGGREGATE PURCHASES GINNIE MAE GROWTH AND GOVERNMENT ALLOCATION
AND SALES OF: FUND INCOME FUND INCOME FUND FUND
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
OBLIGATIONS:
Purchases at cost $155,156,563 $ 0 $82,621,249 $ 214,955,269
Sales proceeds 135,966,523 0 59,925,207 332,625,095
OTHER SECURITIES:
Purchases at cost 46,377,956 117,111,717 23,199,819 0
Sales proceeds 57,025,032 142,979,376 16,571,316 0
- --------------------------------------------------------------------------------
</TABLE>
- ---------------------
154
<PAGE> 266
NOTES TO FINANCIAL STATEMENTS
4. CAPITAL SHARES TRANSACTIONS
As of December 31, 1995, there were 10 billion shares of $0.001 par value
capital stock authorized by the Company. At December 31, 1995, each Fund was
authorized to issue 100 million shares of $0.001 par value capital stock for
each class of shares, except that the California Tax-Free Money Market Mutual
Fund was authorized to issue 3 billion, each class of the Ginnie Mae Fund was
authorized to issue 3 hundred million shares, the Money Market Mutual Fund was
authorized to issue 8 billion and each class of the U.S. Government Allocation
Fund was authorized to issue 3 hundred million shares. Transactions in capital
shares are disclosed in detail in the Statements of Changes in Net Assets.
5. REORGANIZATION OF WELLS FARGO INVESTMENT TRUST FOR RETIREMENT PROGRAMS
At special meetings held on December 31, 1991, unitholders owning a majority of
the outstanding units of each of the Wells Fargo Investment Trust for Retirement
Programs Funds (the "Trust") as of the close of business on November 8, 1991,
approved an Agreement and Plan of Reorganization (the "Agreement") among the
Trust, for itself and on behalf of each of the six funds comprising the Trust
(each a "Predecessor Fund"); the Stagecoach Funds, Inc., a Maryland corporation
("Stagecoach"); Stephens Inc., a Delaware corporation ("Stephens"); and Wells
Fargo in its capacity as the Trustee of the Trust, and in its individual
capacity. The Agreement provided, among other things, for the transfer of the
assets of each Predecessor Fund to a corresponding series of Stagecoach (each a
"Stagecoach Fund"). The Agreement provided that in consideration therefore, each
Stagecoach Fund would assume certain identified liabilities of the corresponding
Predecessor Fund and would deliver to the corresponding Predecessor Fund the
number of full and fractional shares of common stock of the Stagecoach Fund
having an aggregate net asset value equivalent to the aggregate net asset value
of the assets transferred to the Stagecoach Fund by the corresponding
Predecessor Fund (collectively, the "Reorganization").
On January 1, 1992, the Reorganizations closed, and each Predecessor Fund made a
pro rata liquidating distribution to its unitholders of the shares of the
corresponding Stagecoach Fund it had received.
All of the expenses connected with the Reorganizations were paid by Wells Fargo
or Stephens.
All information contained in this Semi-Annual Report which reflects financial
data on the Stagecoach Funds for periods prior to 1992 refers to the
corresponding Predecessor Funds.
6. SHAREHOLDER MEETINGS
A. MERGER OF FUNDS TO COMBINE VARIABLE RATE GOVERNMENT FUND INTO SHORT-
INTERMEDIATE U.S. GOVERNMENT INCOME FUND
At a special meeting of the shareholders of the Variable Rate Government Fund on
August 7, 1995, an Agreement and
---------------------
155
<PAGE> 267
NOTES TO FINANCIAL STATEMENTS
Plan of Reorganization was approved to combine the Variable Rate Government Fund
into the Short-Intermediate U.S. Government Income Fund. This reorganization was
completed on August 28, 1995.
B. ASSET ALLOCATION, CORPORATE STOCK, AND U.S. GOVERNMENT ALLOCATION FUNDS
APPROVAL OF REORGANIZATION TO MASTER/FEEDER STRUCTURE, NEW SUB-ADVISORY
CONTRACTS AND THE USE OF CERTAIN FUTURES CONTRACTS AND RELATED TRANSACTIONS
On behalf of its Asset Allocation, Corporate Stock and U.S. Government
Allocation Funds, the Company requested shareholder approval of a proposal to
reorganize each Fund into a master/feeder structure. The Company also requested
shareholder approval of new sub-advisory contracts for each Fund and proposed
new corresponding master portfolio with WFB, as adviser, and BGFA (the successor
entity to WFNIA), as sub-adviser. This action was necessary because of the
purchase by a subsidiary of Barclays Bank PLC of WFNIA. Finally the Company
requested shareholder approval of an investment policy to permit each Fund to
engage in the purchase and sale of certain futures contracts and related
transactions. Engaging in these transactions would permit each Fund to maintain
liquid assets while investing pursuant to its investment strategy.
At a special meeting of shareholders scheduled for December 5, 1995, as
adjourned to December 12, 1995 for the U.S. Government Allocation Fund and to
December 19, 1995 for the Asset Allocation and Corporate Stock Funds,
shareholders voted on the proposals listed elsewhere in this annual report. The
proposals received the required majority of votes and were adopted for each
Fund.
- ---------------------
156
<PAGE> 268
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
STAGECOACH FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Asset Allocation Fund, California Tax-Free
Bond Fund, California Tax-Free Income Fund, Corporate Stock Fund, Diversified
Income Fund, Ginnie Mae Fund, Growth and Income Fund, Short-Intermediate U.S.
Government Income Fund, and U.S. Government Allocation Fund (nine of the funds
comprising Stagecoach Funds, Inc.) as of December 31, 1995, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and financial
highlights for the periods indicated herein. These financial statements and
financial highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. For Asset Allocation Fund, Corporate
Stock Fund, Ginnie Mae Fund, Growth and Income Fund and U.S. Government
Allocation Fund, all periods indicated in the accompanying financial highlights
ending prior to January 1, 1992 were audited by other auditors whose report
dated February 19, 1992, expressed an unqualified opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1995, by examination and other appropriate audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds of Stagecoach Funds, Inc. as of December 31, 1995,
the results of their operations, the changes in their net assets and their
financial highlights for the periods indicated herein, except as noted above, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1996
---------------------
157
<PAGE> 269
STAGECOACH FUNDS, INC.
SEC REGISTRATION NOS. 33-42927; 811-6419
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
The following audited financial statements for the Company's
Asset Allocation, California Tax-Free Bond, California Tax-Free Income,
Corporate Stock, Diversified Income, Ginnie Mae, Growth and Income,
Short-Intermediate U.S. Government Income and U.S. Government Allocation Funds
are included in Part B, Item 23:
Portfolio of Investments - December 31, 1995
Statement of Assets and Liabilities - December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for the year ended December
31, 1995 Financial Highlights for the year ended December 31,
1995 Notes to Financial Statements - December 31, 1995
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
----- -----------
<S> <C>
1 - Amended and Restated Articles of Incorporation dated November 22, 1995, incorporated
by reference to Post-Effective Amendment No. 17 to the Registration Statement, filed
November 29, 1995.
2 - By-Laws, incorporated by reference to the Initial Registration Statement, filed
September 30, 1991.
3 - Not Applicable
4 - Not Applicable
5(a)(i)(A) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Asset Allocation
Fund, incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(i)(B) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors on behalf of the Asset
Allocation Fund, filed herewith.
</TABLE>
C-1
<PAGE> 270
<TABLE>
<S> <C>
(ii)(A) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the U.S. Government
Allocation Fund, incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(ii)(B) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors on behalf of the U.S.
Government Allocation Fund, filed herewith.
(iii) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the California Tax-Free
Money Market Mutual Fund, incorporated by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed April 17, 1992.
(iv) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the California Tax-Free
Bond Fund, incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(v) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Ginnie Mae Fund,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(vi) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Growth and Income
Fund, incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(vii)(A) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Corporate Stock Fund,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(vii)(B) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors on behalf of the
Corporate Stock Fund, filed herewith.
(viii) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Money Market Mutual
Fund, incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement, filed May 1, 1992.
(ix) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the California Tax-Free
Income Fund, incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement, filed September 10, 1992.
(x) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Diversified Income
Fund, incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
5(b)(i) - Administration Agreement with Stephens Inc. on behalf of the Asset Allocation Fund,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(ii) - Administration Agreement with Stephens Inc. on behalf of the U.S. Government
Allocation Fund, incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(b)(iii) - Administration Agreement with Stephens Inc. on behalf of the California Tax-Free
Bond Fund, incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
</TABLE>
C-2
<PAGE> 271
<TABLE>
<S> <C>
(b)(iv) - Administration Agreement with Stephens Inc. on behalf of the California Tax-Free
Money Market Mutual Fund, incorporated by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed April 17, 1992.
(b)(v) - Administration Agreement with Stephens Inc. on behalf of the Ginnie Mae Fund,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(vi) - Administration Agreement with Stephens Inc. on behalf of the Growth and Income Fund,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(vii) - Administration Agreement with Stephens Inc. on behalf of the Corporate Stock Fund,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(viii) - Administration Agreement with Stephens Inc. on behalf of the Money Market Mutual
Fund, incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement, filed May 1, 1992.
(b)(ix) - Form of Administration Agreement with Stephens Inc. on behalf of the California Tax-
Free Income Fund, incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement, filed September 10, 1992.
(b)(x) - Form of Administration Agreement with Stephens Inc. on behalf of the Diversified
Income Fund, incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement, filed September 10, 1992.
(b)(xi) - Administration Agreement with Stephens Inc. on behalf of the Short-Intermediate U.S.
Government Income Fund, incorporated by reference to Post-Effective Amendment No. 8
to the Registration Statement, filed February 10, 1994.
(b)(xii) - Administration Agreement with Stephens Inc. on behalf of the National Tax-Free Money
Market Mutual Fund, incorporated by reference to Post-Effective Amendment No. 19 to
the Registration Statement, filed December 18, 1995.
(b)(xiii) - Administration Agreement with Stephens Inc. on behalf of the Aggressive Growth Fund,
incorporated by reference to Post-Effective Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
6(a) - Amended Distribution Agreement with Stephens Inc., incorporated by reference to
Post-Effective Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(i) - Selling Agreement with Marketing One Securities, Inc. on behalf of the Funds,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(b)(ii) - Selling Agreement with Wells Fargo Bank, N.A. on behalf of the Funds, incorporated
by reference to Post-Effective Amendment No. 2 to the Registration Statement, filed
April 17, 1992.
7 - Not Applicable
</TABLE>
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<TABLE>
<S> <C>
8(a) - Custody Agreement with Wells Fargo Institutional Trust Company, N.A. on behalf of
the Asset Allocation Fund, incorporated by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed April 17, 1992.
(b) - Custody Agreement with Wells Fargo Institutional Trust Company, N.A. on behalf of
the U.S. Government Allocation Fund, incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement, filed April 17, 1992.
(c) - Custody Agreement with Wells Fargo Institutional Trust Company, N.A. on behalf of
the Corporate Stock Fund, incorporated by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed April 17, 1992.
(d) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the California Tax-Free
Money Market Mutual Fund, incorporated by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed April 17, 1992.
(e) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the California Tax-Free
Bond Fund, incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(f) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Growth and Income
Fund, incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
(g) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Ginnie Mae Fund,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(h) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Money Market Fund,
incorporated by reference to Post-Effective Amendment No. 3 to the Registration
Statement, filed May 1, 1992.
(i) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the California Tax-Free
Income Fund, incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
(j) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Diversified Income
Fund, incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
(k) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Short-Intermediate
U.S. Government Income Fund, incorporated by reference to Post-Effective Amendment
No. 8 to the Registration Statement, filed February 10, 1994.
(l) - Form of Custody Agreement with Wells Fargo Bank, N.A. on behalf of the National Tax-
Free Money Market Mutual Fund, incorporated by reference to Post-Effective Amendment
No. 17 to the Registration Statement, filed November 29, 1995.
(m) - Form of Custody Agreement with Wells Fargo Bank, N.A. on behalf of the Aggressive
Growth Fund, incorporated by reference to Post-Effective Amendment No. 19 to the
Registration Statement, filed December 18, 1995.
</TABLE>
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<TABLE>
<S> <C>
9(a)(i) - Agency Agreement with Wells Fargo Bank, N.A. on behalf of the Funds, incorporated by
reference to Post-Effective Amendment No. 2 to the Registration Statement, filed
April 17, 1992.
9(a)(ii) - Form of Agency Agreement with Wells Fargo Bank, N.A. on behalf of the National Tax-
Free Money Market Mutual Fund, incorporated by reference to Post-Effective Amendment
No. 17 to the Registration Statement, filed November 29, 1995.
9(a)(iii) - Form of Agency Agreement with Wells Fargo Bank, N.A. on behalf of the Aggressive
Growth Fund, incorporated by reference to Post-Effective Amendment No. 19 to the
Registration Statement, filed December 18, 1995.
9(b)(i) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
California Tax-Free Money Market Mutual Fund, incorporated by reference to Post-
Effective Amendment No. 2 to the Registration Statement, filed April 17, 1992.
(b)(ii) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
Corporate Stock Fund, incorporated by reference to Post-Effective Amendment No. 2 to
the Registration Statement, filed April 17, 1992.
(b)(iii) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the Money
Market Mutual Fund, incorporated by reference to Post-Effective Amendment No. 3 to
the Registration Statement, filed May 1, 1992.
(b)(iv) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
California Tax-Free Income Fund, incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement, filed November 29, 1995.
(b)(v) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the Short-
Intermediate U.S. Government Income Fund, incorporated by reference to Post-
Effective Amendment No. 8 to the Registration Statement, filed February 10, 1994.
(b)(vi) - Form of Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
National Tax-Free Money Market Mutual Fund, incorporated by reference to Post-
Effective Amendment No. 17 to the Registration Statement, filed November 29, 1995.
(b)(vii) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the Class B
Shares of the Asset Allocation Fund, incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(viii) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the Class B
Shares of the California Tax-Free Bond Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(ix) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the Class B
Shares of the Diversified Income Fund, incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement, filed May 1, 1995.
</TABLE>
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<TABLE>
<S> <C>
(b)(x) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the Class B
Shares of the Ginnie Mae Fund, incorporated by reference to Post-Effective Amendment
No. 15 to the Registration Statement, filed May 1, 1995.
(b)(xi) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the Class B
Shares of the Growth and Income Fund, incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(xii) - Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the Class B
Shares of the U.S. Government Allocation Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(xiii) - Form of Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
Class B Shares of the Aggressive Growth Fund, incorporated by reference to Post-
Effective Amendment No. 19 to the Registration Statement, filed December 18, 1995.
(b)(xiv) - Amended Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
Class A Shares of the Asset Allocation Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(xv) - Amended Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
Class A Shares of the California Tax-Free Bond Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(xvi) - Amended Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
Class A Shares of the Diversified Income Fund, incorporated by reference to Post-
effective Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(xvii) - Amended Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
Class A Shares of the Ginnie Mae Fund, incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(xviii) - Amended Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
Class A Shares of the Growth and Income Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(xix) - Amended Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
Class A Shares of the U.S. Government Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration Statement, filed May 1, 1995.
(b)(xx) - Form of Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of the
Class A Shares of the Aggressive Growth Fund, incorporated by reference to Post-
Effective Amendment No. 19 to the Registration Statement, filed December 18, 1995.
</TABLE>
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<TABLE>
<S> <C>
(c) - Cross Indemnification Agreement, incorporated by reference to Post-Effective
Amendment No. 11 to the Registration Statement of Stagecoach Inc., filed July 27,
1994.
(d)(i) - Servicing Plan on behalf of the National Tax-Free Money Market Mutual Fund,
incorporated by reference to Post-Effective Amendment No. 17 to the Registration
Statement, filed November 29, 1995.
(d)(ii) - Servicing Plan on behalf of the Class B Shares of the Asset Allocation Fund,
incorporated by reference to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(d)(iii) - Servicing Plan on behalf of the Class B Shares of the California Tax-Free Bond Fund,
incorporated by reference to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(d)(iv) - Servicing Plan on behalf of the Class B Shares of the Diversified Income Fund,
incorporated by reference to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(d)(v) - Servicing Plan on behalf of the Class B Shares of the Ginnie Mae Fund, incorporated
by reference to Post-Effective Amendment No. 15 to the Registration Statement, filed
May 1, 1995.
(d)(vi) - Servicing Plan on behalf of the Class B Shares of the Growth and Income Fund,
incorporated by reference to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(d)(vii) - Servicing Plan on behalf of the Class B Shares of the U.S. Government Allocation
Fund, incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(d)(viii) - Servicing Plan on behalf of the Class B Shares of the Aggressive Growth Fund,
incorporated by reference to Post-Effective Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
(d)(ix) - Servicing Plan on behalf of the Class A Shares of the Aggressive Growth Fund,
incorporated by reference to Post-Effective Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
10 - Opinion and Consent of Counsel, filed herewith.
11 - Consent of Auditors -- KPMG Peat Marwick LLP, filed herewith.
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
</TABLE>
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<TABLE>
<S> <C>
15(a)(i) - Distribution Plan on behalf of the California Tax-Free Money Market Mutual Fund,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
(a)(ii) - Distribution Plan on behalf of the Corporate Stock Fund, incorporated by reference
to Post-Effective Amendment No. 2 to the Registration Statement, filed April 17,
1992.
(a)(iii) - Distribution Plan on behalf of the Money Market Mutual Fund, incorporated by
reference to Post-Effective Amendment No. 3 to the Registration Statement, filed May
1, 1992.
(a)(iv) - Distribution Plan on behalf of the California Tax-Free Income Fund, incorporated by
reference to Post-Effective Amendment No. 4 to the Registration Statement, filed
September 10, 1992.
(a)(v) - Distribution Plan on behalf of the Short-Intermediate U.S. Government Income Fund,
incorporated by reference to Post-Effective Amendment No. 8 to the Registration
Statement, filed February 10, 1994.
(a)(vi) - Distribution Plan on behalf of the National Tax-Free Money Market Mutual Fund,
incorporated by reference to Post-Effective Amendment No. 17 to the Registration
Statement, filed November 29, 1995.
(b)(i) - Distribution Plan on behalf of the Class B Shares of the Asset Allocation Fund,
incorporated by reference to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(ii) - Distribution Plan on behalf of the Class B Shares of the California Tax-Free Bond
Fund, incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(b)(iii) - Distribution Plan on behalf of the Class B Shares of the Diversified Income Fund,
incorporated by reference to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(iv) - Distribution Plan on behalf of the Class B Shares of the Ginnie Mae Fund,
incorporated by reference to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(v) - Distribution Plan on behalf of the Class B Shares of the Growth and Income Fund,
incorporated by reference to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(b)(vi) - Distribution Plan on behalf of the Class B Shares of the U.S. Government Allocation
Fund, incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(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.
</TABLE>
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<TABLE>
<S> <C>
(c)(i) - Amended Distribution Plan on behalf of the Class A Shares of the Asset Allocation
Fund, incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(c)(ii) - Amended Distribution Plan on behalf of the Class A Shares of the California Tax-Free
Bond Fund, incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(c)(iii) - Amended Distribution Plan on behalf of the Class A Shares of the Diversified Income
Fund, incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(c)(iv) - Amended Distribution Plan on behalf of the Class A Shares of the Ginnie Mae Fund,
incorporated by reference to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
(c)(v) - Amended Distribution Plan on behalf of the Class A Shares of the Growth and Income
Fund, incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(c)(vi) - Amended Distribution Plan on behalf of the Class A Shares of the U.S. Government
Allocation Fund, incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
(c)(vii) - Distribution Plan on behalf of the Class A Shares of the Aggressive Growth Fund,
incorporated by reference to Post-Effective Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
16(a) - Schedules for Computation of Performance Data, incorporated by reference to Post-
Effective Amendment No. 2, filed April 17, 1992.
16(b) - Schedules for Computation of Performance Data, incorporated by reference to Post-
Effective Amendment No. 15, filed May 1, 1995.
17 - Powers of Attorney, incorporated by reference to Initial Registration Statement,
filed September 30, 1991.
18(a) - Rule 18f-3 Multi-Class Plan, incorporated by reference to Post-Effective Amendment
No. 14 to the Registration Statement, filed April 14, 1995.
18(b) - Amended Rule 18f-3 Multi-Class Plan, incorporated by reference to Post-Effective
Amendment No. 19 to the Registration Statement, filed December 18, 1995.
27(1) - Financial Data Schedule for the Corporate Stock Fund, filed herewith.
27(2)(A) - Financial Data Schedule for the Class A Shares of the Asset Allocation Fund, filed
herewith.
27(2)(B) - Financial Data Schedule for the Class B Shares of the Asset Allocation Fund, filed
herewith.
27(3)(A) - Financial Data Schedule for the Class A Shares of the U.S. Government Allocation
Fund, filed herewith.
</TABLE>
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<TABLE>
<S> <C>
27(3)(B) - Financial Data Schedule for the Class B Shares of the U.S. Government Allocation
Fund, filed herewith.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant
No person is controlled by or under common control with Registrant.
Item 26. Number of Holders of Securities
As of December 31, 1995, the number of record holders of each class
of Securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
Class A* Class B
-------- -------
<S> <C> <C>
Aggressive Growth Fund N/A N/A
Asset Allocation Fund 68,157 1,390
U.S. Government Allocation Fund 13,687 146
California Tax-Free Money Market Mutual Fund 30,571 N/A
California Tax-Free Bond Fund 9,182 641
Growth and Income Fund 20,734 411
Ginnie Mae Fund 13,105 325
Corporate Stock Fund 28,407 N/A
Money Market Mutual Fund 141,756 4,389**
California Tax-Free Income Fund 2,599 N/A
Diversified Income Fund 9,304 273
Short-Intermediate U.S. Government 4,114 N/A
Income Fund
National Tax-Free Money Market 1 N/A
Mutual Fund
</TABLE>
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* For purposes of this chart, shares of single class Funds are included
under the designation "Class A".
** Designates the number of Class S Shares outstanding.
Item 27. Indemnification
The following paragraphs of Article VIII of the Registrant's
Articles of Incorporation provide:
(h) The Corporation shall indemnify (1) its Directors and
officers, whether serving the Corporation or at its request any other
entity, to the full extent required or permitted by the General Laws of the
State of Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the full extent permitted by law, and
(2) its other employees and agents to such extent as shall be authorized by
the Board of Directors or the Corporation's By-Laws and be permitted by
law. The foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such By-Laws, resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be
permitted by law. No amendment of these Articles of Incorporation of the
Corporation shall limit or eliminate the right to indemnification provided
hereunder with respect to acts or omissions occurring prior to such
amendment or repeal. Nothing contained herein shall be construed to
authorize the Corporation to indemnify any Director or officer of the
Corporation against any liability to the Corporation or to any holders of
securities of the Corporation to which he is subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office. Any indemnification by the
Corporation shall be consistent with the requirements of law, including the
1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director or
officer of the Corporation shall be personally liable to the Corporation or
its stockholders for money damages; provided, however, that nothing herein
shall be construed to protect any Director or officer of the Corporation
against any liability to which such Director or officer would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office. No
amendment, modification or repeal of this Article VIII shall adversely
affect any right or protection of a Director or officer that exists at the
time of such amendment, modification or repeal.
Item 28. Business and Other Connections of Investment Adviser.
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned
subsidiary of Wells Fargo & Company, currently serves as investment adviser to
several of the Registrant's investment
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<PAGE> 280
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
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. No. 203
Los Angeles, CA 90041
</TABLE>
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<TABLE>
<S> <C>
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
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
</TABLE>
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<TABLE>
<S> <C>
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
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
</TABLE>
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<TABLE>
<S> <C>
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
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
</TABLE>
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<TABLE>
<S> <C>
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>
BZW Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary
of BZW Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo
Institutional Trust Company), serves as the sub-adviser to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds of the Company
and to certain other open-end management investment companies. As of May 1,
1996, BGFA will no longer serve as sub-adviser to the Asset Allocation,
Corporate Stock and U.S. Government Allocation Funds. As of this date, BGFA
will serve as sub-adviser to the corresponding Asset Allocation, U.S.
Government Allocation and Corporate Stock Master Portfolios of MIT in which
such funds invest substantially all of their assets.
The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management
business of the former sub-adviser to the Registrant, Wells Fargo Nikko
Investment Advisors ("WFNIA") and, in some cases, the service business of BGI.
With the exception of Irving Cohen, each of the directors and executive
officers of BGFA will also have substantial responsibilities as directors
and/or officers of BGI. To the knowledge of the Registrant, except as set
forth below, none of the directors or executive officers of BGFA is or has been
at any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ------- -------------------------------
<S> <C>
Frederick L.A. Grauer Chairman and Director of WFNIA and WFITC+
Chairman, Director
</TABLE>
C-16
<PAGE> 285
<TABLE>
<S> <C>
Donald L. Luskin Chief Executive Officer of WFNIA's Defined Contribution Group+
Vice Chairman & Director
Irving Cohen Chief Financial Officer and Chief Operating Officer of Barclays Bank PLC,
Director New York Branch and Chief Operating Officer of Barclays Group, Inc. (USA)*:
previously Chief Financial Officer of Barclays de Zoete Wedd Securities Inc.
(1994)*
Andrea M. Zolberti Chief Financial Officer of WFNIA and WFITC+
Chief Financial Officer
Vincent J. Bencivenga Previously Vice President at State Street Bank & Trust Company++
Chief Fiduciary Officer
</TABLE>
* 222 Broadway, New York, New York, 10038.
+ 45 Fremont Street, San Francisco, California 94105.
++ One Financial Center, Boston, Massachusetts 02111.
Prior to January 1, 1996 Wells Fargo Nikko Investment Advisors
("WFNIA") served as the sub-adviser to the Asset Allocation, Corporate Stock
and U.S. Government Allocation Funds of the Company and as adviser or
sub-adviser to various other open-end management investment companies. For
additional information, see "The Funds and Management" in the Prospectus and
"Management of the Company" in the Statement of Additional Information of such
Funds. For information as to the business, profession, vocation or employment
of a substantial nature of each of the officers and management committees of
WFNIA, reference is made to WFNIA's Form ADV and Schedules A and D filed under
the Investment Advisers Act of 1940, File No. 801-36479, incorporated herein by
reference.
Item 29. Principal Underwriters.
(a) Stephens Inc., distributor for the Registrant, does not
presently act as investment adviser for any other registered investment
companies, but does act as principal underwriter for Overland Express Funds,
Inc., Stagecoach Inc. and Stagecoach Trust; and is the exclusive placement
agent for Master Investment Trust, Managed Series Investment Trust, Life &
Annuity Trust and Master Investment Portfolio, which are registered open-end
management investment companies, and has acted as principal underwriter for the
Liberty Term Trust, Inc., Nations Government Income Term Trust 2003, Inc., and
Nations Government Income Term Trust 2004, Inc., and Managed Balanced Target
Maturity Fund, Inc., which are closed-end management investment companies and
Nations Fund Trust, Nations Funds, Inc., Nations Fund Portfolios, Inc. and The
Capitol Mutual Funds, which are open-end management investment companies.
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D filed by Stephens Inc. with the
C-17
<PAGE> 286
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 maintains all Records relating to its services as
sub-adviser for the period beginning January 1, 1996 at 45 Fremont Street, San
Francisco, California 94105.
(e) Stephens maintains all Records relating to its services as
sponsor, administrator and distributor at 111 Center Street, Little Rock,
Arkansas 72201.
Item 31. Management Services.
Other than as set forth under the captions "The Fund, the Master
Portfolio and Management" and "Management and Servicing Fees" in the Prospectus
constituting Part A of this Registration Statement and "Management" in the
Statement of Additional Information constituting Part B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
provisions set forth above in response to Item 27, or
otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification
is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim
C-18
<PAGE> 287
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) Registrant undertakes to hold a special meeting of its
shareholders for the purpose of voting on the question of
removal of a director or directors if requested in writing by
the holders of at least 10W of the Company's outstanding
voting securities, and to assist in communicating with other
shareholders as required by Section 16(c) of the Investment
Company Act of 1940.
(e) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its most current annual
report to shareholders, upon request and without charge.
C-19
<PAGE> 288
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 28th day of February, 1996.
STAGECOACH FUNDS, INC.
By /s/ Richard H. Blank, Jr.
-------------------------------
(Richard H. Blank, Jr.)
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title
---------- -----
<S> <C>
/s/R. Greg Feltus Director, Chairman and
--------------------------- President (Principal Executive Officer)
(R. Greg Feltus)
/s/Richard H. Blank, Jr. Chief Operating Officer,
--------------------------- Secretary and Treasurer
(Richard H. Blank, Jr.)
/s/Jack S. Euphrat Director
---------------------------
(Jack S. Euphrat)
/s/Thomas S. Goho Director
---------------------------
(Thomas S. Goho)
/s/Zoe Ann Hines Director
---------------------------
(Zoe Ann Hines)
/s/W. Rodney Hughes Director
---------------------------
(W. Rodney Hughes)
/s/Robert M. Joses Director
---------------------------
(Robert M. Joses)
/s/J. Tucker Morse Director
---------------------------
(J. Tucker Morse)
*By: /s/Richard H. Blank, Jr.
---------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
</TABLE>
<PAGE> 289
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to the Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Little Rock, State of
Arkansas on the 28th day of February, 1996.
MASTER INVESTMENT TRUST
By /s/ Richard H. Blank, Jr.
-----------------------------------
(Richard H. Blank, Jr., Secretary)
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ R. Greg Feltus Trustee, Chairman and President
--------------------------- (Principal Executive Officer)
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Secretary and Treasurer (Chief
--------------------------- Operating Officer)
(Richard H. Blank, Jr.)
/s/Jack S. Euphrat Trustee
---------------------------
(Jack S. Euphrat)
/s/ Thomas S. Goho Trustee
---------------------------
(Thomas S. Goho)
/s/ Zoe Ann Hines Trustee
---------------------------
(Zoe Ann Hines)
/s/ W. Rodney Hughes Trustee
---------------------------
(W. Rodney Hughes)
/s/ Robert M. Joses Trustee
---------------------------
(Robert M. Joses
/s/ J. Tucker Morse Trustee
---------------------------
(J. Tucker Morse
*By: /s/Richard H. Blank, Jr.
---------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
</TABLE>
<PAGE> 290
STAGECOACH FUNDS, INC.
FILE NOS. 33-42927; 811-6419
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
EX-99.B5(a)(i)(B) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors on
behalf of the Asset Allocation Fund
EX-99.B5(a)(ii)(B) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors on
behalf of the U.S. Government Allocation Fund
EX-99.B5(a)(vii)(B) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors on
behalf of the Corporate Stock Fund
EX-99.B10 - Opinion and Consent of Counsel
EX-99.B11 - Consent of Auditors -- KPMG Peat Marwick LLP
EX-27.1 - Financial Data Schedule - Corporate Stock Fund
EX-27.2(A) - Financial Data Schedule - Asset Allocation Fund Class A
EX-27.2(B) - Financial Data Schedule - Asset Allocation Fund Class B
EX-27.3(A) - Financial Data Schedule - U.S. Government Allocation Fund Class A
EX-27.3(B) - Financial Data Schedule - U.S. Government Allocation Fund Class B
</TABLE>
<PAGE> 1
EX-99.B5(a)(i)(B)
SUB-ADVISORY CONTRACT
Asset Allocation Fund
a portfolio of
STAGECOACH FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
January 1, 1996
BZW Barclays Global Fund Advisors
45 Fremont Street
San Francisco, California 94105
Dear Sirs:
This will confirm the agreement by and among Wells Fargo Bank, N.A. (the
"Adviser"), Stagecoach Funds, Inc. (the "Company"), on behalf of the Asset
Allocation Fund (the "Fund"), and BZW Barclays Global Fund Advisors (the
"Sub-Adviser") as follows:
1. The Company is a registered open-end management investment company
currently consisting of thirteen investment portfolios, but which may from time
to time consist of a greater or lesser number of investment portfolios. 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
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 Registration Statement
have been furnished to the Sub-Adviser. Any amendments to the Registration
Statement shall be furnished to the Sub-Adviser promptly.
2. The Company has engaged the Adviser to manage the investing and
reinvesting of the assets of the Fund and to provide the advisory services
specified elsewhere in the Advisory Contract between the Company and the
Adviser, dated as of January 2, 1992, subject to the overall supervision of the
Board of Directors of the Company. Pursuant to an administration agreement
between the Company, on behalf of the Fund, and an administrator (the
"Administrator"), the Company has engaged the Administrator to provide the
administrative services specified therein.
3. (a) The Adviser hereby employs the Sub-Adviser to perform for the Fund
certain advisory services and the Sub-Adviser hereby accepts such employment.
The Adviser shall retain the authority to establish and modify, from time to
time, the investment strategies and approaches to be followed by the
Sub-Adviser, subject, in all respects, to the supervision and direction of the
Company's Board of Directors and subject to compliance with the investment
objectives, policies and restrictions set forth in the Registration Statement.
(b) Subject to the overall supervision and control of the Adviser and
the Company, the Sub-Adviser shall be responsible for investing and reinvesting
the Fund's assets in a manner consistent with the investment strategies and
approaches referenced in subparagraph (a), above. In this regard, the
Sub-Adviser, in accordance with the investment objectives, policies and
restrictions set forth in the Registration Statement, the Act and the
provisions of the Internal Revenue Code of 1986 relating to investment
companies, shall be responsible for implementing and monitoring the performance
of the investment model employed with respect to the Fund and shall furnish to
the Adviser periodic reports on the investment activity and performance of the
Fund. The Sub-Adviser shall also furnish such additional reports and
information as the Adviser and the Company's Board of Directors and officers
shall reasonably request.
<PAGE> 2
(c) The Sub-Adviser shall, at its expense, employ or associate with
itself such persons as the Sub-Adviser believes appropriate to assist it in
performing its obligations under this contract.
4. The Adviser shall be responsible for the Sub-Adviser's fees for its
services hereunder. The Sub-Adviser agrees that it shall have no claim against
the Company or the Fund respecting compensation under this contract. In
consideration of the services to be rendered by the Sub-Adviser under this
contract, the Adviser shall pay the Sub-Adviser a monthly fee on the first
business day of each calendar month, at the annual rate of 0.20% 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 Registration Statement for determining net
asset value per share) of the Fund's net assets during the preceding month. If
the monthly fee payable to the Sub-Adviser pursuant to this Paragraph 4 begins
to accrue on a day after the first day 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 the month or from the beginning of that month to
the termination date, shall be prorated according to the proportion that such
period bears to the full month in which the effectiveness or termination
occurs. For purposes of calculating the monthly fee, the value of the Fund's
net assets shall be computed in the manner specified in the Registration
Statement and the Company's Articles of Incorporation, each as amended from
time to time, 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.
5. The Sub-Adviser shall give the Company the benefit of the
Sub-Adviser's best judgment and efforts in rendering services under this
contract. As consideration and as an inducement to the Sub-Adviser's
undertaking to render these services, the Company and the Adviser agree that
the Sub-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 Sub-Adviser against any liability to the Adviser, the Company or
its shareholders to which the Sub-Adviser would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties under this contract or by reason of reckless disregard of
its obligations and duties hereunder.
6. This contract shall become effective as of 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 specifically for the purpose of continuing this
Sub-Advisory Contract, 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, upon 60 days' written notice to
the Sub-Adviser, 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. The
Sub-Adviser may terminate this contract on 60 days' written notice to the
Adviser and the Company. This contract shall terminate automatically in the
event of its assignment (as defined in the Act).
7. Except to the extent necessary to perform the Sub-Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Sub-Adviser, or any affiliate of the Sub-Adviser, or
any employee of the Sub-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.
8. The Sub-Adviser and the Company each agree that the word "Stagecoach",
which comprises a component of the Company's name, is a property right of the
parent of the Adviser. The Company and the Sub-Adviser agree and consent that
the use of such word is subject to the provisions set forth in the Advisory
Contract between the Adviser and the Company.
9. This contract shall be governed by and construed in accordance with
the laws of the State of California.
2
<PAGE> 3
If the foregoing correctly sets forth the agreement between the Company,
the Adviser and the Sub-Adviser, please so indicate by signing and returning to
the Company the enclosed copy hereof.
Very truly yours,
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
----------------------------------
Name: Elizabeth A. Gottfried
--------------------------------
Title: Vice President
-------------------------------
By: /s/ MJ NIEDERMEYER
----------------------------------
Name: Michael J. Niedermeyer
--------------------------------
Title: Executive Vice President
-------------------------------
ACCEPTED as of the date
set forth above:
STAGECOACH FUNDS, INC.
on behalf of the Asset Allocation Fund
By: /s/ R.H. BLANK, JR.
---------------------------------------
Name: Richard H. Blank, Jr.
-------------------------------------
Title: Chief Operating Officer
------------------------------------
BZW BARCLAYS GLOBAL FUND ADVISORS
Name: /s/ Andrea M. Zolberti
-------------------------------------
By: Andrea M. Zolberti
---------------------------------------
Title: Chief Financial Officer
-------------------------------------
By: /s/ JUDITH M. NOLTE
---------------------------------------
Name: Judith M. Nolte
--------------------------------------
Title: Senior Counsel, Assistant Secretary
-------------------------------------
3
<PAGE> 1
EX-99.B5(a)(ii)(B)
SUB-ADVISORY CONTRACT
U.S. Government Allocation Fund
a portfolio of
STAGECOACH FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
January 1, 1996
BZW Barclays Global Fund Advisors
45 Fremont Street
San Francisco, California 94105
Dear Sirs:
This will confirm the agreement by and among Wells Fargo Bank, N.A. (the
"Adviser"), Stagecoach Funds, Inc. (the "Company"), on behalf of the U.S.
Government Allocation Fund (the "Fund"), and BZW Barclays Global Fund Advisors
(the "Sub-Adviser") as follows:
1. The Company is a registered open-end management investment company
currently consisting of thirteen investment portfolios, but which may from time
to time consist of a greater or lesser number of investment portfolios. 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
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 Registration Statement
have been furnished to the Sub-Adviser. Any amendments to the Registration
Statement shall be furnished to the Sub-Adviser promptly.
2. The Company has engaged the Adviser to manage the investing and
reinvesting of the assets of the Fund and to provide the advisory services
specified elsewhere in the Advisory Contract between the Company and the
Adviser, dated as of January 2, 1992, subject to the overall supervision of the
Board of Directors of the Company. Pursuant to an administration agreement
between the Company, on behalf of the Fund, and an administrator (the
"Administrator"), the Company has engaged the Administrator to provide the
administrative services specified therein.
3. (a) The Adviser hereby employs the Sub-Adviser to perform for the Fund
certain advisory services and the Sub-Adviser hereby accepts such employment.
The Adviser shall retain the authority to establish and modify, from time to
time, the investment strategies and approaches to be followed by the
Sub-Adviser, subject, in all respects, to the supervision and direction of the
Company's Board of Directors and subject to compliance with the investment
objectives, policies and restrictions set forth in the Registration Statement.
(b) Subject to the overall supervision and control of the Adviser and
the Company, the Sub-Adviser shall be responsible for investing and reinvesting
the Fund's assets in a manner consistent with the investment strategies and
approaches referenced in subparagraph (a), above. In this regard, the
Sub-Adviser, in accordance with the investment objectives, policies and
restrictions set forth in the Registration Statement, the Act and the
provisions of the Internal Revenue Code of 1986 relating to investment
companies, shall be responsible for implementing and monitoring the performance
of the investment model employed with respect to the Fund and shall furnish to
the Adviser periodic reports on the investment activity and performance of the
Fund. The Sub-Adviser shall also furnish such additional reports and
information as the Adviser and the Company's Board of Directors and officers
shall reasonably request.
<PAGE> 2
(c) The Sub-Adviser shall, at its expense, employ or associate with
itself such persons as the Sub-Adviser believes appropriate to assist it in
performing its obligations under this contract.
4. The Adviser shall be responsible for the Sub-Adviser's fees for its
services hereunder. The Sub-Adviser agrees that it shall have no claim against
the Company or the Fund respecting compensation under this contract. In
consideration of the services to be rendered by the Sub-Adviser under this
contract, the Adviser shall pay the Sub-Adviser a monthly fee on the first
business day of each calendar month, at the annual rate of 0.15% 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 Registration Statement for determining net
asset value per share) of the Fund's net assets during the preceding month.
The Sub-Adviser will also receive an annual amount of $40,000 payable in
monthly installments. If the monthly fee payable to the Sub-Adviser pursuant to
this Paragraph 4 begins to accrue on a day after the first day 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 the month or from the beginning of that
month to the termination date, shall be prorated according to the proportion
that such period bears to the full month in which the effectiveness or
termination occurs. For purposes of calculating the monthly fee, the value of
the Fund's net assets shall be computed in the manner specified in the
Registration Statement and the Company's Articles of Incorporation, each as
amended from time to time, 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.
5. The Sub-Adviser shall give the Company the benefit of the
Sub-Adviser's best judgment and efforts in rendering services under this
contract. As consideration and as an inducement to the Sub-Adviser's
undertaking to render these services, the Company and the Adviser agree that
the Sub-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 Sub-Adviser against any liability to the Adviser, the Company or
its shareholders to which the Sub-Adviser would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties under this contract or by reason of reckless disregard of
its obligations and duties hereunder.
6. This contract shall become effective as of 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 specifically for the purpose of continuing this
Sub-Advisory Contract, 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, upon 60 days' written notice to
the Sub-Adviser, 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. The
Sub-Adviser may terminate this contract on 60 days' written notice to the
Adviser and the Company. This contract shall terminate automatically in the
event of its assignment (as defined in the Act).
7. Except to the extent necessary to perform the Sub-Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Sub-Adviser, or any affiliate of the Sub-Adviser, or
any employee of the Sub-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.
8. The Sub-Adviser and the Company each agree that the word "Stagecoach",
which comprises a component of the Company's name, is a property right of the
parent of the Adviser. The Company and the Sub-Adviser agree and consent that
the use of such word is subject to the provisions set forth in the Advisory
Contract between the Adviser and the Company.
9. This contract shall be governed by and construed in accordance with
the laws of the State of California.
2
<PAGE> 3
If the foregoing correctly sets forth the agreement between the Company,
the Adviser and the Sub-Adviser, please so indicate by signing and returning to
the Company the enclosed copy hereof.
Very truly yours,
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
----------------------------------
Name: Elizabeth A. Gottfried
--------------------------------
Title: Vice President
-------------------------------
By: /s/ MJ NIEDERMEYER
----------------------------------
Name: Michael J. Niedermeyer
--------------------------------
Title: Executive Vice President
-------------------------------
ACCEPTED as of the date
set forth above:
STAGECOACH FUNDS, INC.
on behalf of the U.S. Government Allocation Fund
By: /s/ R.H. BLANK, JR.
---------------------------------------
Name: Richard H. Blank, Jr.
-------------------------------------
Title: Chief Operating Officer
------------------------------------
BZW BARCLAYS GLOBAL FUND ADVISORS
Name: /s/ Andrea M. Zolberti
-------------------------------------
By: Andrea M. Zolberti
---------------------------------------
Title: Chief Financial Officer
-------------------------------------
By: /s/ JUDITH M. NOLTE
---------------------------------------
Name: Judith M. Nolte
--------------------------------------
Title: Senior Counsel, Assistant Secretary
-------------------------------------
3
<PAGE> 1
EX-99.B(5)(a)(vii)(B)
SUB-ADVISORY CONTRACT
Corporate Stock Fund
a portfolio of
STAGECOACH FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
January 1, 1996
BZW Barclays Global Fund Advisors
45 Fremont Street
San Francisco, California 94105
Dear Sirs:
This will confirm the agreement by and among Wells Fargo Bank, N.A. (the
"Adviser"), Stagecoach Funds, Inc. (the "Company"), on behalf of the Corporate
Stock Fund (the "Fund"), and BZW Barclays Global Fund Advisors (the
"Sub-Adviser") as follows:
1. The Company is a registered open-end management investment company
currently consisting of thirteen investment portfolios, but which may from time
to time consist of a greater or lesser number of investment portfolios. 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
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 Registration Statement
have been furnished to the Sub-Adviser. Any amendments to the Registration
Statement shall be furnished to the Sub-Adviser promptly.
2. The Company has engaged the Adviser to manage the investing and
reinvesting of the assets of the Fund and to provide the advisory services
specified elsewhere in the Advisory Contract between the Company and the
Adviser, dated as of January 2, 1992, subject to the overall supervision of the
Board of Directors of the Company. Pursuant to an administration agreement
between the Company, on behalf of the Fund, and an administrator (the
"Administrator"), the Company has engaged the Administrator to provide the
administrative services specified therein.
3. (a) The Adviser hereby employs the Sub-Adviser to perform for the Fund
certain advisory services and the Sub-Adviser hereby accepts such employment.
The Adviser shall retain the authority to establish and modify, from time to
time, the investment strategies and approaches to be followed by the
Sub-Adviser, subject, in all respects, to the supervision and direction of the
Company's Board of Directors and subject to compliance with the investment
objectives, policies and restrictions set forth in the Registration Statement.
(b) Subject to the overall supervision and control of the Adviser and
the Company, the Sub-Adviser shall be responsible for investing and reinvesting
the Fund's assets in a manner consistent with the investment strategies and
approaches referenced in subparagraph (a), above. In this regard, the
Sub-Adviser, in accordance with the investment objectives, policies and
restrictions set forth in the Registration Statement, the Act and the
provisions of the Internal Revenue Code of 1986 relating to investment
companies, shall be responsible for implementing and monitoring the performance
of the investment model employed with respect to the Fund and shall furnish to
the Adviser periodic reports on the investment activity and performance of the
Fund. The Sub-Adviser shall also furnish such additional reports and
information as the Adviser and the Company's Board of Directors and officers
shall reasonably request.
<PAGE> 2
(c) The Sub-Adviser shall, at its expense, employ or associate with
itself such persons as the Sub-Adviser believes appropriate to assist it in
performing its obligations under this contract.
4. The Adviser shall be responsible for the Sub-Adviser's fees for its
services hereunder. The Sub-Adviser agrees that it shall have no claim against
the Company or the Fund respecting compensation under this contract. In
consideration of the services to be rendered by the Sub-Adviser under this
contract, the Adviser shall pay the Sub-Adviser a monthly fee on the first
business day of each calendar month, at the annual rate of 0.08% 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 Registration Statement for determining net
asset value per share) of the Fund's net assets during the preceding month.
The Sub-Adviser will also receive an annual amount of $40,000 payable in
monthly installments. If the monthly fee payable to the Sub-Adviser pursuant to
this Paragraph 4 begins to accrue on a day after the first day 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 the month or from the beginning of that
month to the termination date, shall be prorated according to the proportion
that such period bears to the full month in which the effectiveness or
termination occurs. For purposes of calculating the monthly fee, the value of
the Fund's net assets shall be computed in the manner specified in the
Registration Statement and the Company's Articles of Incorporation, each as
amended from time to time, 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.
5. The Sub-Adviser shall give the Company the benefit of the
Sub-Adviser's best judgment and efforts in rendering services under this
contract. As consideration and as an inducement to the Sub-Adviser's
undertaking to render these services, the Company and the Adviser agree that
the Sub-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 Sub-Adviser against any liability to the Adviser, the Company or
its shareholders to which the Sub-Adviser would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties under this contract or by reason of reckless disregard of
its obligations and duties hereunder.
6. This contract shall become effective as of 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 specifically for the purpose of continuing this
Sub-Advisory Contract, 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, upon 60 days' written notice to
the Sub-Adviser, 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. The
Sub-Adviser may terminate this contract on 60 days' written notice to the
Adviser and the Company. This contract shall terminate automatically in the
event of its assignment (as defined in the Act).
7. Except to the extent necessary to perform the Sub-Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Sub-Adviser, or any affiliate of the Sub-Adviser, or
any employee of the Sub-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.
8. The Sub-Adviser and the Company each agree that the word "Stagecoach",
which comprises a component of the Company's name, is a property right of the
parent of the Adviser. The Company and the Sub-Adviser agree and consent that
the use of such word is subject to the provisions set forth in the Advisory
Contract between the Adviser and the Company.
9. This contract shall be governed by and construed in accordance with
the laws of the State of California.
2
<PAGE> 3
If the foregoing correctly sets forth the agreement between the Company,
the Adviser and the Sub-Adviser, please so indicate by signing and returning to
the Company the enclosed copy hereof.
Very truly yours,
WELLS FARGO BANK, N.A.
By: /s/ ELIZABETH A. GOTTFRIED
----------------------------------
Name: Elizabeth A. Gottfried
--------------------------------
Title: Vice President
-------------------------------
By: /s/ MJ NIEDERMEYER
----------------------------------
Name: Michael J. Niedermeyer
--------------------------------
Title: Executive Vice President
-------------------------------
ACCEPTED as of the date
set forth above:
STAGECOACH FUNDS, INC.
on behalf of the Corporate Stock Fund
By: /s/ R.H. BLANK, JR.
---------------------------------------
Name: Richard H. Blank, Jr.
-------------------------------------
Title: Chief Operating Officer
------------------------------------
BZW BARCLAYS GLOBAL FUND ADVISORS
Name: /s/ Andrea M. Zolberti
-------------------------------------
By: Andrea M. Zolberti
---------------------------------------
Title: Chief Financial Officer
-------------------------------------
By: /s/ JUDITH M. NOLTE
---------------------------------------
Name: Judith M. Nolte
--------------------------------------
Title: Senior Counsel, Assistant Secretary
-------------------------------------
3
<PAGE> 1
EX-99.B10
February 29, 1996
(202) 887-1500
Stagecoach Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Common Stock of
Stagecoach Funds, Inc.
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 21 and Amendment No. 22 to
the Registration Statement on Form N-1A (SEC File Nos. 33-42927 and 811-6419)
(the "Registration Statement") of Stagecoach Funds, Inc. (the "Company")
relating to the registration of an indefinite number of shares of common stock
of the Asset Allocation, Corporate Stock and U.S. Government Allocation Funds
of the Company (collectively, the "Shares").
We have been requested by the Company to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined documents relating to the organization of the
Company and its series and the authorization and issuance of shares of its
series. We have also verified with the Company's transfer agent the maximum
number of shares issued by the Company during fiscal year 1995.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance of the Shares by the Company has been duly and validly
authorized by all appropriate corporate action and, assuming delivery by sale
or in accord with the Fund's dividend reinvestment plan in accordance with the
description set forth in the Funds' current prospectuses, the Shares will be
legally issued, fully paid and nonassessable by the Company.
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" in the Prospectus and
the description of advice rendered by our firm under the heading "Management"
in the Statement of Additional Information, both of which are included as part
of the Registration Statement.
Very truly yours,
/s/ Morrison & Foerster LLP
--------------------------------
MORRISON & FOERSTER LLP
<PAGE> 1
EX-99.B11
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders
Stagecoach Funds, Inc.:
We consent to the inclusion in the Stagecoach Funds, Inc. Post-Effective
Amendment No. 21 to the Registration Statement Number 33-42927 on Form N-1A
under the Securities Act of 1933 and Amendment No. 22 to the Registration
Statement Number 811-6419 on Form N-1A under the Investment Company Act of 1940
of our report dated February 14, 1996, on the financial statements and
financial highlights of the Asset Allocation Fund, California Tax-Free Bond
Fund, California Tax-Free Income Fund, Corporate Stock Fund, Diversified Income
Fund, Ginnie Mae Fund, Growth and Income Fund, Short-Intermediate U.S.
Government Income Fund and U.S. Government Allocation Fund (nine of the funds
comprising Stagecoach Funds, Inc.) for the year ended December 31, 1995, which
report has been included in the Statement of Additional Information.
We also consent to the reference to our firm under the heading "Financial
Highlights" in each prospectus and "Independent Auditors" in the Statement of
Additional Information.
/s/ KPMG Peat Marwick LLP
San Francisco, California
February 29, 1996
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