<PAGE>
- ------------------
SEMI-ANNUAL
- ------------------
REPORT
- ------------------
INTERNATIONAL
- ------------------
EQUITY
- ------------------
FUND
- ------------------
SEPTEMBER 30, 1997
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 1
INVESTMENT ADVISER Q & A
International Equity Fund 3
PORTFOLIO OF INVESTMENTS
International Equity Fund 4
INTERNATIONAL EQUITY FUND
Statement of Assets and Liabilities 9
Statement of Operations 10
Statement of Changes in Net Assets 11
Financial Highlights 12
Notes to Financial Statements 13
LIST OF ABBREVIATIONS 20
STAGECOACH FUNDS:
--------------------------------------------------------------------------
- - ARE NOT FDIC INSURED
- - ARE NOT GUARANTEED BY WELLS FARGO BANK [NO FDIC]
- - ARE NOT DEPOSITS OR OBLIGATIONS OF WELLS FARGO
BANK
- - INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL
---------------------
i
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
ii
<PAGE>
LETTER TO SHAREHOLDERS
- ------------------
TO OUR SHAREHOLDERS:
We are pleased to present you with the Stagecoach Semi-Annual Report for the
six-month period ended September 30, 1997.
On October 27, shortly after the close of the reporting period for this
Semi-Annual Report, the stock market suffered its worst one-day drop since 1987.
As measured by the Dow Jones Industrial Average, the market lost 7.2% of its
value.
By November 5, however, the Dow had recovered, at least temporarily, all that it
had lost during the "crash."
What are the lessons shareholders can glean from these events? The only
certainty is that there are no certainties when it comes to investing. Dramatic
market movements can occur at any time for a variety of reasons -- and the
effects can last for years or be corrected in just a few days. Perhaps the most
significant lessons learned this October are the ones we have all heard before:
- - HAVE A SOLID, LONG-TERM STRATEGIC PLAN. What are your goals? How long before
you will need to spend the money you have invested? How much risk are you
willing to tolerate? Solid planning with the long-term in mind will help you
keep your focus during periods of short-term volatility.
- - IF LONG-TERM GROWTH IS YOUR GOAL, STOCKS ARE HISTORICALLY THE BEST INVESTMENT.
While bonds or cash may have a greater return than stocks during certain
periods, over the long term stocks have outperformed every other investment
class.
- - USE ASSET ALLOCATION TO LIMIT VOLATILITY. The extent to which you should
allocate your assets to less volatile classes depends on your individual
circumstances, including such factors as how close you are to your investment
horizon and to what extent you need to preserve capital. Seek the advice of an
investment professional to help you determine your asset allocation.
During the six-month reporting period ended September 30, 1997 covered by this
report, the equity market continued to post the type of strong gains we have
seen over the last few years, with the S&P 500 showing a 26.26% total return.
The bond market, as measured by the Lehman Brothers Long Government Bond Index,
did better than it has in the recent past with a strong 11.67% return. These
returns should help provide a context for the downturn of October 27; there is
no guarantee, of course, that such robust returns will continue.
The following pages contain discussions of the individual Funds, including
specific commentary on what affected the returns and how the portfolio managers
tried to capture value or prepare for the future.
---------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
There are expected to be some changes during the last quarter of 1997 for the
Stagecoach Funds. Shareholders in the Overland Express Family of Funds have been
asked to approve a merger with Stagecoach. Both Fund groups are advised by Wells
Fargo Bank. If approved by Overland Shareholders, the merger is expected to
occur on December 12, 1997. The merger will allow us to eliminate certain
administrative and management costs, and will result in a single Fund family
with over 30 Funds and approximately $20 billion in assets. In addition, several
Funds are changing their names. The name changes are detailed within the
discussion for the affected Funds.
Thank you for your continued investment with the Stagecoach Funds.
STAGECOACH FUNDS
NOVEMBER 1997
THE S&P 500 INDEX IS AN UNMANAGED INDEX OF 500 WIDELY HELD COMMON STOCKS
REPRESENTING, AMONG OTHERS, INDUSTRIAL, FINANCIAL, UTILITY AND TRANSPORTATION
COMPANIES LISTED OR TRADED ON NATIONAL EXCHANGES OR OVER-THE-COUNTER MARKETS.
THE LEHMAN BROTHERS LONG GOVERNMENT BOND INDEX IS AN UNMANAGED INDEX COMPOSED OF
U.S. GOVERNMENT BONDS WITH 20-YEAR OR LONGER MATURITIES.
- ---------------------
2
<PAGE>
INTERNATIONAL EQUITY FUND
- --------------------
INVESTMENT ADVISER Q&A
THIS FUND IS NEW. PLEASE GIVE US AN OVERVIEW OF THE FUND AS OF SEPTEMBER 30.
The new Stagecoach International Equity Fund was launched on September 23, 1997
with total assets of $36 million. As of September 30, 1997, the net asset value
was $10.09 per share, up 0.9% from the initial launch price. At month end, the
Fund had $39.9 million in assets with 60% of the assets invested in a
diversified portfolio of 47 stocks representing over 12 countries and broadly
spread across industry sectors. Given the short period of only 5 trading days (4
for overseas trades) before quarter end, performance figures for comparison
purposes are not relevant.
CAN YOU TELL US YOUR OUTLOOK FOR THE ASIAN MARKETS?
Most of the world's stock markets experienced significant volatility in the
third quarter. Of particular note were the declines experienced in Asian
markets. Japan's key index fell 13% in the period following a significant
contraction in GDP growth and continued problems in the banking and consumer
sectors. The Fund is not heavily invested in Japan, only 6.85% of assets, but
both Sony and Canon are two of the "top 10" largest positions in the Fund.
Smaller Asian markets faltered considerably in the wake of the currency turmoil
that spread through the region this summer. We have not initiated investments in
the smaller markets, preferring to see stabilization of currencies, declining
interest rates and renewed investor confidence before we do so. The Hong Kong
market is influenced by the prospects for China in the intermediate term. We
believe the Chinese economy is poised for considerable expansion over the next
12 months. Our Hong Kong investments (4.08% of assets) all have exposure to key
growth opportunities including infrastructure and property development,
telecommunications, trade and financial services.
AND WHAT IS YOUR OUTLOOK FOR EUROPE?
European markets enjoyed strong returns in the most recent quarter despite brief
corrections in August in response to fears that interest rates would increase.
Mild currency weakness dampened returns only. In U.S. dollar terms, the
strongest markets included Italy, the UK, Germany and the Nordic block. The Fund
is most heavily weighted toward the UK at this time, with a 13.99% exposure of
assets. Investments in Germany represent approximately 5.06% of the Fund's
portfolio.
WHAT DO YOU EXPECT TO DO OVER THE NEXT FEW MONTHS?
We will continue building positions in existing holdings and adding new ideas.
The autumn is expected to see privatization offerings from France, Portugal,
Italy, Australia and China as governments sell businesses into private hands. We
are reviewing these issues with respect to both value and growth potential.
---------------------
3
<PAGE>
INTERNATIONAL EQUITY FUND (UNAUDITED)
- -----------------------------------------------------
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCK - 61.83%
BRAZIL - 1.51%
14,300 Aracruz Cellulose SA ADR $ 302,795 $ 294,043
2,400 Telecomunicacoes Brasileira ADR 300,888 309,000
------------ --------------
$ 603,683 $ 603,043
CANADA - 1.18%
6,000 Potash Corp of Saskatchewan $ 451,611 $ 470,673
FINLAND - 1.57%
6,700 Nokia Corp ADR $ 598,668 $ 628,543
FRANCE - 2.95%
3,200 SGS - Thomson Microelectronic $ 590,047 $ 584,233
5,200 Total SA Class B 610,828 595,190
------------ --------------
$ 1,200,875 $ 1,179,423
GERMANY - 5.06%
13,200 Dresdner Bank AG $ 602,063 $ 606,866
1,200 SAP AG 319,602 320,690
3,300 SGL Carbon AG 472,356 484,857
9,000 Siemens AG 604,640 608,174
------------ --------------
$ 1,998,661 $ 2,020,587
HONG KONG - 4.08%
70,000 Cheung Kong $ 778,640 $ 786,968
15,200 HSBC Holdings Plc 477,586 508,727
34,000 Hutchison Whampoa 320,479 335,012
------------ --------------
$ 1,576,705 $ 1,630,707
</TABLE>
- ------------------------
4
<PAGE>
INTERNATIONAL EQUITY FUND (UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCK (CONTINUED)
IRELAND - 2.33%
9,100 Elan Corporation + $ 469,566 $ 457,202
82,400 Ryanair Holdings Plc + 461,979 473,717
------------ --------------
$ 931,545 $ 930,919
ISRAEL - 1.78%
15,000 Koor Industries Ltd ADR $ 305,587 $ 309,375
20,000 Tefron Ltd + 370,412 400,000
------------ --------------
$ 675,999 $ 709,375
ITALY - 1.86%
118,000 ENI SPA $ 748,368 $ 743,282
JAPAN - 6.85%
25,000 Canon Inc $ 737,862 $ 730,967
8,000 Honda Motor Co Ltd 287,664 278,968
40 Nippon Telegraph & Telephone Corp 370,064 367,762
5,000 Secom Co Ltd 331,129 337,529
7,600 Seven Eleven Japan Ltd 305,849 300,173
7,600 Sony Corp 716,486 717,633
------------ --------------
$ 2,749,054 $ 2,733,032
MEXICO - 2.29%
11,900 Panamerican Beverages Inc Class A $ 454,363 $ 464,843
20,000 TV Azteca SA + 453,700 450,000
------------ --------------
$ 908,063 $ 914,843
NETHERLANDS - 4.38%
9,600 Philips Electronics NV ADR $ 766,827 $ 806,400
8,500 Royal Dutch Petroleum 458,914 471,750
2,200 Unilever NV 469,153 469,766
------------ --------------
$ 1,694,894 $ 1,747,916
</TABLE>
---------------------
5
<PAGE>
INTERNATIONAL EQUITY FUND (UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCK (CONTINUED)
NEW ZEALAND - 1.13%
81,900 Tranz Rail Holdings Ltd $ 456,062 $ 450,802
NORWAY - 1.61%
9,500 Petroleum Geo-Services $ 605,060 $ 642,398
PORTUGAL - 0.76%
17,600 Electricidade De Portugal SA $ 303,517 $ 302,334
SPAIN - 3.42%
19,000 Banco Santander $ 600,220 $ 622,844
23,600 Telefonica De Espana 752,992 741,998
------------ --------------
$ 1,353,212 $ 1,364,842
SWEDEN - 1.89%
15,700 Ericsson (LM) Tel ADR $ 749,892 $ 752,618
SWITZERLAND - 3.19%
350 Nestle $ 491,329 $ 488,269
300 Novartis AG 467,315 460,657
1,200 Schweizerische Bankverein 323,177 324,732
------------ --------------
$ 1,281,821 $ 1,273,658
UNITED KINGDOM - 13.99%
116,500 Amvescap Plc $ 766,240 $ 780,060
32,900 Bass Plc 447,884 444,304
43,100 Boots Co Plc 613,287 611,295
30,600 British Petroleum Co Plc 457,858 462,427
10,200 Glaxo Wellcome Plc ADR 451,314 458,362
67,000 Reuters Holdings Plc 757,457 795,497
65,000 Select Appointments Plc 625,911 624,754
16,500 Smithkline Beecham Plc ADR 761,479 806,456
112,000 Vodafone Group Plc 606,140 600,667
------------ --------------
$ 5,487,570 $ 5,583,822
TOTAL COMMON STOCK $ 24,375,260 $ 24,682,817
</TABLE>
- ------------------------
6
<PAGE>
INTERNATIONAL EQUITY FUND (UNAUDITED)
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $24,375,260)* (Notes 1 and 3) 61.83% $ 24,682,817
Other Assets and Liabilities, Net 38.17 15,239,918
------ --------------
TOTAL NET ASSETS 100.00% $ 39,922,735
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</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 $ 425,250
Gross Unrealized Depreciation (117,693)
------------
NET UNREALIZED APPRECIATION $ 307,557
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
7
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ------------------------
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) - SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY FUND
<S> <C>
- --------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $24,682,817
Cash 23,536,745
Cash denominated in foreign currencies
(cost $6,887,535) 6,889,695
Receivables:
Interest 24,761
Fund shares sold 1,420,636
Organization expenses, net of
amortization 63,650
TOTAL ASSETS 56,618,304
LIABILITIES
Payables:
Investment securities purchased 16,613,745
Due to sponsor and distributor (Note
2) 67,072
Due to WFB (Note 2) 6,803
Loss on foreign currency forward
contracts 4,949
Other 3,000
TOTAL LIABILITIES 16,695,569
TOTAL NET ASSETS $39,922,735
NET ASSETS CONSIST OF:
Paid-in capital $39,579,698
Undistributed net investment income 11,536
Undistributed net realized gain (loss)
on investments and foreign currency
transactions (3,374)
Net unrealized appreciation on
investments and translation of
assets and liabilities in foreign
currencies 334,875
TOTAL NET ASSETS $39,922,735
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A $18,211,273
Shares outstanding - Class A 1,805,226
Net asset value per share - Class A $10.09
Maximum offering price per share - Class
A $10.65(1)
Net assets - Class B $21,711,462
Shares outstanding - Class B 2,152,485
Net asset value and offering price per
share - Class B $10.09
INVESTMENT AT COST (NOTE 3) $24,375,260
- --------------------------------------------------------
</TABLE>
(1) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/94.75 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.
---------------------
9
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY FUND
-------------
FROM SEPT.
24, 1997
(COMMENCEMENT
OF
OPERATIONS)
TO SEPT. 30,
1997
<S> <C>
- ----------------------------------------------------------
INVESTMENT INCOME
Interest $ 24,761
TOTAL INVESTMENT INCOME 24,761
EXPENSES (NOTE 2)
Advisory fees 6,292
Administration fees 624
Custody fees 912
Shareholder servicing fees 1,573
Portfolio accounting fees 764
Transfer agency fees 881
Distribution fees 2,844
Amortization of organization expenses 329
Legal and audit fees 674
Registration fees 658
Directors' fees 76
Shareholder reports 493
Other 187
TOTAL EXPENSES 16,307
Less:
Waived fees and reimbursed expenses (3,082)
Net Expenses 13,225
NET INVESTMENT INCOME 11,536
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investments 0
Foreign currency transactions (3,374)
Net change in unrealized appreciation
of:
Investments 307,557
Translation of assets and
liabilities in foreign currencies 27,318
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES 331,501
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 343,037
- ----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ---------------------
10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY FUND
-------------
FROM SEPT.
24, 1997
(COMMENCEMENT
OF
OPERATIONS)
TO SEPT. 30,
1997
<S> <C>
- ----------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 11,536
Net realized gain (loss) from
investments and foreign currency
transactions (3,374)
Net change in unrealized appreciation
of investments and translation of
assets and liabilities in foreign
currencies 334,875
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 343,037
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A 0
CLASS B 0
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold - Class A 18,053,077
Reinvestment of dividends - Class A 0
Cost of shares redeemed - Class A 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 18,053,077
Proceeds from shares sold - Class B 21,526,621
Reinvestment of dividends - Class B 0
Cost of shares redeemed - Class B 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 21,526,621
INCREASE IN NET ASSETS 39,922,735
NET ASSETS:
Beginning net assets 0
ENDING NET ASSETS $ 39,922,735
- ----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
11
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY FUND (1)
----------------------
CLASS A CLASS B
---------- ----------
PERIOD PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1997 1997
<S> <C> <C>
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.00 0.00
Net realized and unrealized gain of investments and foreign
currencies 0.09 0.09
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.09 0.09
LESS DISTRIBUTIONS:
Dividends from net investment income 0.00 0.00
Distributions from net realized gain of investments and foreign
currencies 0.00 0.00
---------- ----------
TOTAL FROM DISTRIBUTIONS 0.00 0.00
---------- ----------
NET ASSET VALUE, END OF PERIOD $10.09 $10.09
---------- ----------
---------- ----------
TOTAL RETURN (NOT ANNUALIZED) 0.90% 0.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $18,211 $21,711
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.73% 2.12%
Ratio of net investment income to average net assets 2.13% 1.54%
Portfolio Turnover 0.00% 0.00%
Average Commission Rate Paid $0.0880 $0.0880
- ------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 2.60% 2.27%
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses 1.26% 1.39%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 24, 1997.
The accompanying notes are an integral part of these financial statements.
- ---------------------
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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
management investment company. The Company commenced operations on January 1,
1992, and currently offers twenty-seven separate series. These financial
statements represent the International Equity Fund (the "Fund"), a diversified
series of the Company.
On September 24, 1997, the Fund commenced offering Class A and Class B shares.
The two classes of shares differ principally in the applicable sales charges 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 determined separately for each class based on income and expenses allocable
to 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 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 ("GAAP") for investment
companies. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, 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. These estimates and
assumptions should not be considered an indication of actual or expected
figures; actual results may differ.
INVESTMENT POLICY AND SECURITY VALUATION
Securities that are listed on U.S. or recognized foreign stock exchanges or the
National Association of Securities Dealers Automated Quotation ("NASDAQ") system
are valued at the last reported sales price on the day of valuation. The market
values of securities denominated in foreign currencies are translated into U.S.
dollars using the closing rates of exchange in effect on the day of valuation.
U.S. Government obligations are valued at the reported bid price. In the absence
of any sale of such securities on the valuation date and in the case of other
securities, excluding debt instruments maturing in 60 days or
---------------------
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
less, the valuations are based on latest quoted bid prices. Debt instruments
maturing in 60 days or less are valued at amortized cost. The amortized cost
method involves valuing a security at its cost plus accretion of discount or
minus amortization of premium until maturity, which approximates market value.
Securities for which quotations are not readily available are valued at fair
value as determined by policies set by the Company's Board of Directors.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. Assets,
including investment securities, and liabilities denominated in foreign currency
are translated into U.S. dollars at the prevailing rate of exchange at the date
of valuation. Purchase and sales of securities, income and expenses are
translated at the prevailing rate of exchange on the respective dates of such
transactions. Reported net realized foreign exchange gains or losses arise from
sales of foreign currencies, currency gains or losses realized between the trade
and settlement dates on securities transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually paid or
received. Net unrealized foreign exchange gains and losses arise from changes in
the fair value of assets and liabilities other than investments in securities,
at fiscal period-end, resulting from changes in exchange rates.
The changes in net assets arising from changes in exchange rates and the changes
in net assets resulting from changes in market prices of securities at fiscal
period-end are not separately presented. Such changes are recorded with net
realized and unrealized gain from investments. However, gains and losses from
certain foreign currency transactions are treated as ordinary income for U.S.
Federal income tax purposes.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are recorded no later than one business day after trade
date. Interest income is accrued daily. Dividend income and other distributions
from portfolio securities are recorded on the ex-dividend date, except, if the
ex-dividend date has passed, certain dividends from foreign securities are
recorded as soon as the Fund is informed of the ex-dividend date. Dividend
income is recorded net of foreign taxes withheld where recovery of such taxes is
not assured. Withholding taxes on foreign dividends have been provided for in
accordance with the Fund's understanding of the applicable countries' tax rules
and rates. Realized gains or losses are reported on the basis of identified cost
of securities delivered. Bond discounts are accreted and premiums are amortized
as required by the Internal Revenue Code of 1986, as amended (the "Code").
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell such
- ---------------------
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
securities ("repurchase agreements") are treated as collateralized financing
transactions and are recorded at their contracted resale amounts. These
repurchase agreements, if any, are detailed in the Fund's Portfolio of
Investments. The Fund may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank, N.A. ("WFB"). 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 custodian's responsibility to value collateral
daily and to take action to obtain additional collateral as necessary to
maintain market value equal to or greater than the resale price. The repurchase
agreements held in the Fund, if any, are collateralized by instruments such as
U.S. Treasury or federal agency obligations.
FOREIGN CURRENCY FORWARD CONTRACTS
A foreign currency forward contract ("Forward") is an obligation to purchase or
sell a specific currency for an agreed price at a future date. A Forward
generally has no deposit requirement and is traded at a net price without
commission. The Fund currently enters into a Forward for the purchase or sale of
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of the security. The value of the Forward fluctuates with changes
in currency exchange rates. The Forward is marked-to-market daily and the change
in value is recorded by the Fund as an unrealized gain or loss. When the Forward
is closed, the Fund records a realized gain or loss equal to the difference
between the value at the time the contract was opened and the value at the time
the contract was closed. Forwards do not eliminate fluctuations in the prices of
the Fund's portfolio securities or in foreign exchange rates, or prevent loss if
the prices of these securities should decline. On September 30, 1997 the Fund
held the following open foreign currency forward contracts:
<TABLE>
<CAPTION>
U.S. DOLLAR
FOREIGN U.S. NET
CURRENCY U.S. DOLLAR UNREALIZED
SETTLEMENT UNITS DOLLAR VALUE AT APPRECIATION/
CURRENCY DATE PURCHASED PROCEEDS 9/30/97 (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
PURCHASE CONTRACTS
French Franc 10/31/97 7,136,801 1,208,705 1,207,316 $ (1,389)
British Pound 10/02/97 2,242,697 3,605,583 3,613,349 7,766
Irish Punt 10/02/97 635,130 929,703 921,980 (7,724)
Italian Lira 10/02/97 1,292,188,972 749,617 748,833 (784)
New Zealand Dollar 10/02/97 710,544 456,809 455,156 (1,653)
Portuguese Escudo 10/01/97 54,617,940 304,702 303,537 (1,165)
------
$ (4,949)
------
------
</TABLE>
---------------------
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income and net realized
capital gains, if any, are declared and distributed at least annually.
FEDERAL INCOME TAXES
The Fund is treated as a separate entity for federal income tax purposes. It is
the policy of each Fund of the Company to continue to qualify as a regulated
investment company by complying with the provisions applicable to regulated
investment companies, as defined in the Code, and to make distributions of
substantially all of its investment company taxable income and any net realized
capital gains (after reduction for capital loss carryforwards) sufficient to
relieve it from all, or substantially all, federal income taxes.
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) are recorded by
the Fund. The amount of distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations, which may differ from GAAP. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent that these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassifications.
ORGANIZATION EXPENSES
The Fund has been charged for expenses incurred in connection with the
organization and initial registration of the Fund and/or class of shares. These
expenses are being amortized by the Fund on a straight-line basis over 60 months
from the date the Fund and/or class commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into an advisory contract on behalf of the Fund with
WFB. Pursuant to the contract, WFB has agreed to provide the Fund with daily
portfolio management. Under the contract, WFB is entitled to be paid a monthly
advisory fee at an annual rate of 1.00% of the Fund's average daily net assets.
Investors Bank & Trust Company ("IBT") has been retained to act as custodian for
the Fund. For domestic and global custody services, IBT is entitled to a fee
based upon security holdings and transaction charges.
The Company has entered into a portfolio accounting contract on behalf of the
Fund with WFB. For portfolio accounting services, WFB is entitled to a monthly
base fee of $2,000 plus an annual fee of 0.07% of the first $50 million of the
Fund's average daily net assets, 0.045% of the next $50 million, and 0.02% of
the Fund's average daily net assets in excess
- ---------------------
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
of $100 million. WFB has engaged IBT to perform certain sub-accounting services
for the Fund. For providing such services, IBT is entitled to fees and
reimbursement of expenses from WFB, which are payable out of the fees received
by WFB for portfolio accounting services.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB provides transfer agency services for the Fund. Under the transfer agency
contract, WFB is entitled to receive transfer agency fees at an annual rate of
0.14% of the average daily net assets of the Class A and Class B shares of the
Fund.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB has agreed to provide shareholder services for the Fund. Pursuant to the
contract, WFB is entitled to receive shareholder servicing fees at an annual
rate of 0.25% of the average daily net assets of the Class A and Class B shares
of the Fund.
The Company has entered into agreements on behalf of the Fund whereby WFB as
administrator and Stephens Inc. ("Stephens") as co-administrator provide the
Fund with administration services. For these services, WFB and Stephens are
entitled to receive monthly fees at the annual rates of 0.06% and 0.04%,
respectively, of the Fund's average daily net assets. WFB has engaged IBT to
perform certain sub-administration services for the Fund. For providing such
services, IBT is entitled to fees from WFB, which are payable out of the fees
received by WFB for administration services.
The Company has adopted separate Distribution Plans for Class A and Class B
shares of the Fund pursuant to Rule 12b-1 under the 1940 Act (each, a "Plan").
The Plans provide that the Fund may pay, as compensation for
distribution-related services or as reimbursement for distribution-related
expenses, a monthly fee at an annual rate of up to 0.10% of the average daily
net assets attributable to its Class A shares and up to 0.75% of the average
daily net assets attributable to its Class B shares.
The Fund 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 of joint distribution activities are allocated among the
Funds in proportion to their relative net asset sizes.
Distribution fees paid on behalf of the Fund for the period from September 24,
1997 to September 30, 1997 were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION DISTRIBUTION
FUND FEES CLASS A FEES CLASS B
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
International Equity Fund $ 289 $ 2,555
</TABLE>
---------------------
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WAIVED FEES AND REIMBURSED EXPENSES
The amount shown as waived fees and reimbursed expenses on the Statement of
Operations for the period ended September 30, 1997 was waived by WFB. Waived
fees and reimbursed expenses continue at the discretion of WFB and Stephens.
Certain officers and one director of the Company are also officers of Stephens.
As of September 30, 1997, Stephens owned 2 shares of the Fund.
Stephens has retained $2,566,666 as sales charges from the proceeds of Class A
shares sold and $419,434 from the proceeds of Class B shares redeemed by the
Company for the six months ended September 30, 1997. Wells Fargo Securities
Inc., a subsidiary of WFB, received $2,556,342 as sales charges from the
proceeds of Class A shares sold and $419,434 from the proceeds of Class B shares
redeemed by the Company for the six months ended September 30, 1997.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities
(securities with maturities of one year or less at purchase date), for the Fund
for the period from September 24, 1997 to September 30, 1997, were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL
AGGREGATE PURCHASES AND SALES EQUITY FUND
<S> <C>
- ------------------------------------------------------------------
Total purchases at cost $ 24,375,260
Total sales proceeds N/A
</TABLE>
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18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
As of September 30, 1997, there were over 106 billion shares of $0.001 par value
capital stock authorized by the Company. As of September 30, 1997, the Fund was
authorized to issue 100 million Class A shares and 100 million Class B shares of
$0.001 par value capital stock. Capital share transactions for the Fund were as
follows:
<TABLE>
<CAPTION>
FROM SEPT. 24,
1997
(COMMENCEMENT
OF OPERATIONS)
TO
SEPT. 30, 1997
<S> <C>
- ------------------------------------------------------------------------------------------------
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 1,805,226
Shares issued in reinvestment of dividends -- Class A 0
Shares redeemed -- Class A 0
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS A 1,805,226
Shares sold -- Class B 2,152,485
Shares issued in reinvestment of dividends -- Class B 0
Shares redeemed -- Class B 0
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS B 2,152,485
</TABLE>
---------------------
19
<PAGE>
LIST OF ABBREVIATIONS
The following is a list of common abbreviations for terms and entities which may
have appeared in this report.
<TABLE>
<S> <C> <C>
ABAG -- Association of Bay Area Governments
ADR -- American Depository Receipts
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
ARM -- Adjustable Rate Mortgages
BART -- Bay Area Rapid Transit
CDA -- Community Development Authority
CDSC -- Contingent Deferred Sales Charge
CGIC -- Capital Guaranty Insurance Company
CGY -- Capital Guaranty Corporation
CMT -- Constant Maturity Treasury
COFI -- Cost of Funds Index
CONNIE LEE -- Connie Lee Insurance Company
COP -- Certificate of Participation
CP -- Commercial Paper
DW&P -- Department of Water & Power
DWR -- Department of Water Resources
EDFA -- Education Finance Authority
FGIC -- Financial Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance, Inc
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
HFFA -- Health Facilities Financing Authority
IDA -- Industrial Development Authority
LIBOR -- London Interbank Offered Rate
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
MFHR -- Multi-Family Housing Revenue
MUD -- Municipal Utility District
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Public School Fund Guaranty
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Authority
RDFA -- Redevelopment Finance Authority
R&D -- Research & Development
SFMR -- Single Family Mortgage Revenue
TBA -- To Be Announced
TRAN -- Tax Revenue Anticipation Notes
USD -- Unified School District
V/R -- Variable Rate
</TABLE>
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20
<PAGE>
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21
<PAGE>
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<PAGE>
Wells Fargo Bank provides investment advisory services, shareholder services,
and certain other services for the Stagecoach Funds. The Funds are sponsored and
distributed by STEPHENS INC., Member NYSE/SIPC. Wells Fargo Bank is not
affiliated with Stephens Inc.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Stagecoach Funds. If this report
is used for promotional purposes, distribution of the report must be accompanied
or preceded by a current prospectus. For a prospectus containing more complete
information, including charges and expenses, call 1-800-260-5969. Read the
prospectus carefully before you invest or send money.
SC ILR AR (11/97)
<TABLE>
<S> <C>
STAGECOACH
FUNDS-REGISTERED TRADEMARK-
P.O. Box 7066
San Francisco, CA 94120-7066
DATED MATERIAL
PLEASE EXPEDITE
</TABLE>
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-C- 1997 Stagecoach Funds
