<PAGE>
- ------------------
ANNUAL
- ------------------
REPORT
- ------------------
MONEY
- ------------------
MARKET
- ------------------
FUNDS
- ------------------
Treasury
Money Market
Mutual Fund
CLASS E
MARCH 31, 1997
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 1
INVESTMENT ADVISER Q & A
Treasury Money Market Mutual Fund -- Class E 2
PORTFOLIOS OF INVESTMENTS
Treasury Money Market Mutual Fund 3
STAGECOACH TREASURY MONEY MARKET MUTUAL FUND
Statement of Assets and Liabilities 5
Statements of Operations 6
Statements of Changes in Net Assets 7
Financial Highlights 8
Notes to Financial Statements 10
Independent Auditors' Report 17
LIST OF ABBREVIATIONS 18
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:
Welcome to the 1997 Stagecoach Funds Annual Report.
This Report, dated March 31, 1997, comes to you six months after the previous
Annual Report dated September 30, 1996. As we explained in the Shareholder
Letter at that time, for administrative reasons, the Stagecoach Funds have
shifted their financial year-end to March 31. This change does not otherwise
affect the operation, nor does it affect the investment objectives, of the
Funds.
The recently completed reporting period saw market volatility and the long-
expected increase in the federal funds target rate. After months of debate on
the rate of economic growth and the potential for increased rates of inflation,
the Federal Reserve Board acted in March to raise rates by 0.25%. The Fed's
action capped a six month period which showed only modest total return for the
fixed-income market.
The equity market, as measured by the Standard & Poor's 500 Index, fell 7.20% in
March from its January high. While this environment offered some challenges, we
feel that much of the "bad news" has been greatly exaggerated. For example, the
S&P 500 Index still enjoyed a 1997 year-to-date return through March 31 of
2.69%. The positive return for the six-month period ended March 31, 1997 was
11.24%. The news is similar concerning the further market correction that
occurred after the reporting period. As of early May, the market had recouped
much of its March and April losses.
Of course, equity issues do not rise and fall in unison. Large company stocks
have fared well recently as investor dollars sought their greater security and
reduced volatility. Various sectors such as technology and finance stocks have
fluctuated acutely in recent months. Value stocks have outperformed growth
stocks, in contrast to recent years.
It is all too easy to be confused by such a variety of returns and apparently
conflicting information. That's why it is so important to truly understand the
investment philosophies and long-range goals that govern your Fund. We have
always felt that the more you understand your investment, the less likely you
are to be unduly concerned with short-term developments.
The following pages discuss what factors have affected the returns for the
Stagecoach Funds during the reporting period. These commentaries were written
for you -- our shareholders -- as part of the Stagecoach Funds commitment to
education, information and service as we help you meet your financial goals.
STAGECOACH FUNDS
MAY 1997
---------------------
1
<PAGE>
STAGECOACH TREASURY MONEY MARKET MUTUAL FUND -- CLASS E
- --------------------
INVESTMENT ADVISER Q&A
TREASURY MONEY MARKET MUTUAL FUND -- CLASS E
WHAT WAS THE SEVEN-DAY CURRENT YIELD AS OF MARCH 31, 1997?
The seven-day current yield for the Fund for the end of the reporting period was
4.88%.
THE FEDERAL FUNDS TARGET RATE, SET BY THE FEDERAL RESERVE, IS THE GREATEST
INFLUENCE ON MONEY MARKET YIELDS. YET THE RATE REMAINED UNCHANGED THROUGHOUT
MOST OF THE YEAR. WHY DID YIELDS FLUCTUATE?
There are a number of reasons. If the economy is expected to grow rapidly, rates
usually move higher in anticipation of a Fed rate hike. Cash flows into money
market mutual funds is another important factor. The dynamics of supply and
demand as managers invest shareholders' cash can drive yields higher or drag
them lower, particularly for variable rate securities.
WHAT DOES "WEIGHTED AVERAGE MATURITY" TELL US ABOUT THE FUND? HOW HAS IT CHANGED
DURING THE PERIOD?
Weighted average maturity is a measure of the average length of time before
securities in a portfolio mature on a dollar for dollar basis. It is one of the
measures of a fund's sensitivity to interest rate changes with longer maturities
feeling greater impact. Typically, for a money market mutual fund, managers will
increase maturity to lock in higher rates or shorten maturity if they anticipate
higher rates being available soon. Market forces may also make one range
relatively more attractive than another. For the most part, the weighted average
maturity for this Fund has been fairly steady and in the short-to-intermediate
range.
SINCE THE FEDERAL RESERVE RAISED THE FEDERAL FUNDS TARGET RATE IN MARCH, DO YOU
EXPECT FURTHER ACTION?
The Federal Reserve has rarely effected only a single increase when changing
monetary policy, so additional increases are likely. However, the federal funds
target rate is relatively high compared to the Consumer Price Index (the prime
measure of inflation), so we believe that substantial increases are unlikely.
- ---------------------
2
<PAGE>
TREASURY MONEY MARKET MUTUAL FUND
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 58.94%
U.S. TREASURY BILLS - 33.69%
$215,000,000 U.S. Treasury Bills 4.94 %(F) 04/17/97 $ 214,501,267
195,000,000 U.S. Treasury Bills 4.98 (F) 04/03/97 194,942,419
75,000,000 U.S. Treasury Bills 5.14 (F) 05/01/97 74,685,000
30,000,000 U.S. Treasury Bills 5.18 (F) 05/15/97 29,817,400
100,000,000 U.S. Treasury Bills 5.20 (F) 05/29/97 99,184,778
--------------
$ 613,130,864
U.S. TREASURY NOTES - 25.25%
$ 29,600,000 U.S. Treasury Notes 5.50 % 09/30/97 $ 29,608,025
50,000,000 U.S. Treasury Notes 5.63 06/30/97 49,955,366
183,900,000 U.S. Treasury Notes 5.88 07/31/97 184,193,206
135,000,000 U.S. Treasury Notes 6.50 05/15/97 135,144,139
59,850,000 U.S. Treasury Notes 7.88 01/15/98 60,773,240
--------------
$ 459,673,976
TOTAL U.S. TREASURY SECURITIES $1,072,804,840
(Cost $1,072,804,840)
</TABLE>
---------------------
3
<PAGE>
TREASURY MONEY MARKET MUTUAL FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS - 41.17%
$172,575,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50 % 04/01/97 $ 172,575,000
187,452,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.37 04/01/97 187,452,000
232,766,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.30 04/01/97 232,766,000
156,530,000 Morgan Stanley & Co Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.20 04/01/97 156,530,000
--------------
TOTAL REPURCHASE AGREEMENTS $ 749,323,000
(Cost $749,323,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $1,822,127,840)* (Note 1) 100.11% $1,822,127,840
Other Assets and Liabilities, Net (0.11) (1,936,332)
------ --------------
TOTAL NET ASSETS 100.00% $1,820,191,508
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
- ------------------------
4
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - MARCH 31, 1997
<TABLE>
<CAPTION>
TREASURY
MONEY MARKET
MUTUAL FUND
<S> <C>
- -----------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) (includes repurchase
agreements of $749,323,000) $1,822,127,840
Cash 1,484
Receivables:
Interest 6,944,677
Organization expenses, net of
amortization 114,138
Prepaid expenses 446,262
TOTAL ASSETS 1,829,634,401
LIABILITIES
Payables:
Distribution to shareholders 6,609,856
Due to sponsor and distributor (Note
2) 512,522
Due to adviser (Note 2) 1,919,921
Other 400,594
TOTAL LIABILITIES 9,442,893
TOTAL NET ASSETS $1,820,191,508
NET ASSETS CONSIST OF:
Paid-in capital 1,820,190,491
Undistributed net realized gain on
investments 1,017
TOTAL NET ASSETS $1,820,191,508
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A $ 66,486,164
Shares outstanding - Class A 66,507,745
Net asset value and offering price per
share - Class A $ 1.00
Net assets - Class E $ 820,657,027
Shares outstanding - Class E 820,657,027
Net asset value and offering price per
share - Class E $ 1.00
Net assets - Institutional Class $ 449,647,328
Shares outstanding - Institutional Class 449,775,318
Net asset value and offering price per
share - Institutional Class $ 1.00
Net assets - Service Class $ 483,400,989
Shares outstanding - Service Class 483,415,134
Net asset value and offering price per
share - Service Class $ 1.00
INVESTMENT AT COST $1,822,127,840
- -----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
5
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
TREASURY MONEY
MARKET MUTUAL FUND
----------------------------
FOR THE SIX
MONTHS FOR THE
ENDED YEAR ENDED
MARCH 31, SEPT. 30,
1997 1996
<S> <C> <C>
- -------------------------------------------------------------------------
INVESTMENT INCOME
Interest $48,772,796 $105,450,049
TOTAL INVESTMENT INCOME 48,772,796 105,450,049
EXPENSES (NOTE 2)
Advisory fees 2,270,318 4,516,348
Administration fees 483,198 1,745,759
Custody fees 151,657 252,183
Shareholder servicing fees 1,345,644 4,608,283
Portfolio accounting fees 212,691 0
Transfer agency fees 285,007 82,755
Distribution fees 60,389 13,064
Amortization of organization expenses 12,694 7,954
Legal and audit fees 20,049 47,635
Registration fees 209,163 218,636
Directors' fees 2,560 2,910
Shareholder reports 8,269 12,326
Other 6,682 63,074
TOTAL EXPENSES 5,068,321 11,570,927
Less:
Waived fees and reimbursed expenses (1,401,326) (4,051,564)
Net Expenses 3,666,995 7,519,363
NET INVESTMENT INCOME 45,105,801 97,930,686
REALIZED GAIN ON INVESTMENTS
Net realized gain on sale of
investments 1,017 39,272
NET GAIN ON INVESTMENTS 1,017 39,272
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $45,106,818 $ 97,969,958
- -------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ---------------------
6
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TREASURY MONEY MARKET MUTUAL FUND
--------------------------------------------------------
FOR THE SIX FOR THE FOR THE
MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1997 SEPT. 30, 1996 SEPT. 30, 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 45,105,801 $ 97,930,686 $ 49,027,757
Net realized gain on sale of
investments 1,017 39,272 0
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 45,106,818 97,969,958 49,027,757
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (1,327,300) (2,763,079) 0
CLASS E (905,615) 0 0
INSTITUTIONAL CLASS (12,730,969) (62,003,165) (265,033)
SERVICE CLASS (30,141,918) (33,164,442) (48,762,724)
In excess of net investment income
CLASS A 0 (293) 0
CLASS E 0 0 0
INSTITUTIONAL CLASS 0 (14,701) 0
SERVICE CLASS 0 (4,695) 0
From realized gain on sale of
investments
CLASS A (1,075) 0 0
CLASS E 0 0 0
INSTITUTIONAL CLASS (12,378) 0 0
SERVICE CLASS (25,819) 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 101,803,141 265,329,368 0
Reinvestment of dividends - Class A 117,496 303,969 0
Cost of shares redeemed - Class A (89,139,342) (211,928,115) 0
NET INCREASE(DECREASE) IN NET ASSETS
RESULTING FROM FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 12,781,295 53,705,222 0
Proceeds from shares sold - Class E 892,833,080 0 0
Reinvestment of dividends - Class E 0 0 0
Cost of shares redeemed - Class E (72,176,053) 0 0
NET INCREASE(DECREASE) IN NET ASSETS
RESULTING FROM FROM CAPITAL SHARE
TRANSACTIONS - CLASS E 820,657,027 0 0
Proceeds from shares sold -
Institutional Class 998,327,768 4,920,884,222 120,817,000
Reinvestment of dividends -
Institutional Class 978,929 1,018,863 0
Cost of shares redeemed -
Institutional Class (1,090,336,130) (4,417,665,197) (84,374,000)
NET INCREASE(DECREASE) IN NET ASSETS
RESULTING FROM FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS (91,029,433) 504,237,888 36,443,000
Proceeds from shares sold - Service
Class 2,043,006,993 3,893,787,080 20,388,947,721
Reinvestment of dividends - Service
Class 348,407 227,942 0
Cost of shares redeemed - Service
Class (2,900,254,375) (3,555,407,931) (20,077,871,000)
NET INCREASE(DECREASE) IN NET ASSETS
RESULTING FROM FROM CAPITAL SHARE
TRANSACTIONS - SERVICE CLASS (856,898,975) 338,607,091 311,076,721
INCREASE (DECREASE) IN NET ASSETS (114,528,342) 896,569,784 347,519,721
NET ASSETS:
Beginning net assets 1,934,719,850 1,038,150,066 690,630,345
ENDING NET ASSETS $ 1,820,191,508 $ 1,934,719,850 $ 1,038,150,066
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
7
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
TREASURY MONEY MARKET MUTUAL
FUND (1)
-------------------------------
CLASS A
-------------------- CLASS E
SIX ---------
MONTHS YEAR PERIOD
ENDED ENDED ENDED
MARCH 31, SEPT. 30, MARCH 31,
1997 1996 (2) 1997 (3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02 0.05 0.00
Net realized and unrealized gain (loss) on investments 0.00 0.00 0.00
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.02 0.05 0.00
LESS DISTRIBUTIONS:
Dividends from net investment income (0.02) (0.05) 0.00
Distributions from net realized gain 0.00 0.00 0.00
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.02) (0.05) 0.00
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 2.42% 4.95% 0.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $66,486 $53,706 $820,657
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.55% 0.55% 0.65%
Ratio of net investment income to average net assets 4.81% 4.96% 4.86%
- -----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 0.75% 0.67% 0.88%
Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 4.61% 4.84% 4.63%
- -----------------------------------------------------------------------------------------
</TABLE>
** ANNUALIZED
(1) THE FUND OPERATED AS PORTFOLIO OF PACIFIC AMERICAN FUNDS THROUGH
OCTOBER 1, 1994, WHEN IT WAS REORGANIZED AS THE "PACIFIC AMERICAN U.S.
TREASURY PORTFOLIO," A PORTFOLIO OF PACIFICA FUNDS TRUST. IN JULY
1995, THE FUND WAS RENAMED THE PACIFICA TREASURY MONEY MARKET FUND,
AND ON SEPTEMBER 6, 1996, THE FUND WAS REORGANIZED AS A FUND OF
STAGECOACH FUNDS, INC. PRIOR TO APRIL 1, 1996, FIRST INTERSTATE
CAPITAL MANAGEMENT, INC. ("FICM") SERVED AS THE FUND'S ADVISER. IN
CONNECTION WITH THE MERGER OF FIRST INTERSTATE BANCORP INTO WELLS
FARGO & CO. ON APRIL 1, 1996, FICM WAS RENAMED WELLS FARGO INVESTMENT
MANAGEMENT, INC.
(2) THE CLASS A SHARES COMMENCED OPERATIONS ON OCTOBER 1, 1995.
(3) THE CLASS E SHARES COMMENCED OPERATIONS ON MARCH 24, 1997.
(4) THE INSTITUTIONAL CLASS COMMENCED OPERATIONS ON AUGUST 11, 1995.
(5) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
- ---------------------
8
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
TREASURY MONEY MARKET MUTUAL FUND (1) (CONT.)
-------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SERVICE CLASS
------------------------------- ----------------------------------------------------------------
SIX SIX SIX
MONTHS YEAR PERIOD MONTHS YEAR YEAR MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, SEPT. 30, SEPT. 30, MARCH 31, SEPT. 30, SEPT. 30, SEPT. 30, MARCH 31, MARCH 31,
1997 1996 1995 (4) 1997 1996 1995 1994 (5) 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------- --------- --------- --------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.03 0.05 0.01 0.02 0.05 0.05 0.02 0.03 0.03
Net realized and
unrealized gain (loss)
on investments 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 0.03 0.05 0.01 0.02 0.05 0.05 0.02 0.03 0.03
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.03) (0.05) (0.01) (0.02) (0.05) (0.05) (0.02) (0.03) (0.03)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.03) (0.05) (0.01) (0.02) (0.05) (0.05) (0.02) (0.03) (0.03)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) 2.58% 5.26% 5.51%** 2.47% 5.03% 5.42% 3.75%** 2.81% 3.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $449,647 $540,689 $36,443 $483,401 $1,340,325 $1,001,707 $690,630 $654,950 $614,237
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.25% 0.25% 0.26% 0.45% 0.45% 0.42% 0.43% 0.43% 0.43%
Ratio of net investment
income to average net
assets 5.11% 5.21% 5.42% 4.91% 4.98% 5.32% 3.72% 2.77% 3.04%
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 0.39% 0.59% 0.69% 0.61% 0.60% 0.66% 0.90% 0.90% 0.91%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 4.97% 4.87% 4.99% 4.75% 4.83% 5.08% 3.25% 2.30% 2.56%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** ANNUALIZED
(1) THE FUND OPERATED AS PORTFOLIO OF PACIFIC AMERICAN FUNDS THROUGH
OCTOBER 1, 1994, WHEN IT WAS REORGANIZED AS THE "PACIFIC AMERICAN U.S.
TREASURY PORTFOLIO," A PORTFOLIO OF PACIFICA FUNDS TRUST. IN JULY
1995, THE FUND WAS RENAMED THE PACIFICA TREASURY MONEY MARKET FUND,
AND ON SEPTEMBER 6, 1996, THE FUND WAS REORGANIZED AS A FUND OF
STAGECOACH FUNDS, INC. PRIOR TO APRIL 1, 1996, FIRST INTERSTATE
CAPITAL MANAGEMENT, INC. ("FICM") SERVED AS THE FUND'S ADVISER. IN
CONNECTION WITH THE MERGER OF FIRST INTERSTATE BANCORP INTO WELLS
FARGO & CO. ON APRIL 1, 1996, FICM WAS RENAMED WELLS FARGO INVESTMENT
MANAGEMENT, INC.
(2) THE CLASS A SHARES COMMENCED OPERATIONS ON OCTOBER 1, 1995.
(3) THE CLASS E SHARES COMMENCED OPERATIONS ON MARCH 24, 1997.
(4) THE INSTITUTIONAL CLASS COMMENCED OPERATIONS ON AUGUST 11, 1995.
(5) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO SEPTEMBER 30.
The accompanying notes are an integral part of these financial statements.
---------------------
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------
NOTES TO 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
management investment company. The Company commenced operations on January 1,
1992, and currently offers the following nineteen separate diversified funds:
the Aggressive Growth, Asset Allocation, Balanced, Corporate Stock, Diversified
Income, Equity Value, Ginnie Mae, Growth and Income, Government Money Market
Mutual, Intermediate Bond, Money Market Mutual, Money Market Trust, National
Tax-Free, National Tax-Free Money Market Mutual, Prime Money Market Mutual,
Short-Intermediate U.S. Government Income, Small Cap, Treasury Money Market
Mutual, and U.S. Government Allocation Funds; and five non-diversified funds:
the Arizona Tax-Free, California Tax-Free Bond, California Tax-Free Income,
California Tax-Free Money Market Mutual, and Oregon Tax-Free Funds. These
financial statements represent the Treasury Money Market Mutual Fund (the
"Fund").
The Company changed its fiscal year-end from September 30 to March 31.
At a special shareholders meeting on July 16, 1996, the Shareholders of Pacifica
Funds Trust ("Pacifica") approved a plan of reorganization providing for the
transfer of the assets and liabilities of each Pacifica portfolio to a
corresponding fund of the Company in exchange for shares of designated classes
of the corresponding Stagecoach Fund. As a result of this reorganization,
effective September 6, 1996, the Stagecoach Treasury Money Market Mutual Fund
was established to acquire all of the assets and assume all of the liabilities
of the Pacifica Treasury Money Market Fund (the "Predecessor Fund"). This
acquisition was accomplished in a tax-free exchange for shares of the Fund. All
performance and financial data for the Treasury Money Market Mutual Fund prior
to September 6, 1996 refers to the Predecessor Fund.
The Treasury Money Market Mutual Fund (the "Fund") offers Class A, Class E,
Institutional Class, and Service Class shares. The Fund commenced offering Class
E shares on March 24, 1997. The four classes of shares differ principally in the
applicable distribution, transfer agency and shareholder servicing 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
- ---------------------
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, transfer agency
and shareholder servicing 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 assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
The Fund invests in securities with remaining maturities not exceeding 397 days
(thirteen months), including obligations of the U.S. government, bankers
acceptances, commercial paper and certain floating- and variable-rate
instruments. Certain of these floating- and variable-rate instruments may carry
a demand feature that would permit the holder to tender them back to the issuer
at par value prior to maturity.
The Fund uses the amortized cost method to value its portfolio securities and
seeks to maintain a constant net asset value of $1.00 per share; however, there
can be no assurance that the Fund will meet this goal. The amortized cost method
involves valuing a security at its cost plus accretion of discount or minus
amortization of premium over the period until maturity, which approximates
market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are recorded no later than one business day after trade
date. Interest income is accrued daily. Realized gains or losses are reported on
the basis of identified cost of securities delivered. Bond discounts and
premiums are accreted or amortized as required by the Internal Revenue Code.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell such
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 agreement 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
responsi-
---------------------
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
bility 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 at March 31, 1997 were
collateralized by U.S. government obligations.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from the Fund's net investment income are declared daily and
distributed monthly. Any distributions to shareholders from net realized capital
gains are declared and distributed annually.
FEDERAL INCOME TAXES
Each Fund of the Company 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 Internal Revenue 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. Accordingly, no provision for federal income taxes was required at
December 31, 1996.
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, if any, 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. 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 generally accepted
accounting principles. 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. Such
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 furnish to the Fund investment
guidance and policy direction in connection with daily portfolio
- ---------------------
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
management. Under such contract, WFB is entitled to be paid monthly advisory
fees at the annual rate of 0.25% of the average daily net assets of the Fund.
For the period from October 1, 1995 to March 31, 1996, the Fund was advised by
First Interstate Capital Management ("FICM"). Pursuant to the advisory contract,
the Fund paid an advisory fee at an annual rate of 0.30% of the first $500
million of the Fund's average daily net assets, 0.25% of the next $500 million,
and 0.20% of average daily net assets in excess of $1 billion. On April 1, 1996,
First Interstate Bancorp ("FIB") was merged with and into Wells Fargo & Company
("Wells Fargo"); and FICM and First Interstate Bank of California ("FICAL")
became indirect wholly-owned subsidiaries of Wells Fargo. In connection with
this merger, FICM changed its name to Wells Fargo Investment Management, Inc
("WFIM"). For the period from April 1, 1996 to September 5, 1996, such advisory
fees were paid to WFIM.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB is responsible for providing custody and portfolio accounting services for
the Fund. For providing custody services, WFB is entitled to be compensated at
an annual rate of 0.0167% of the average daily net assets of the Fund. For
portfolio accounting services, WFB is entitled to a monthly base fee of $2,000
plus 0.07% 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 average daily net assets in
excess of $100 million.
For the period from October 1, 1995 to March 31, 1996, FICAL served as the
custodian for the Fund. Pursuant to the contract, the Fund paid a custodian fee
based on net assets and certain transaction charges. For the period from April
1, 1996 to September 5, 1996, such custodian fees were paid to WFB.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB has agreed to act as transfer agent for the Fund. Under the transfer agency
contract, WFB is entitled to receive transfer agency fees at an annual rate of
0.10% of the average daily net assets of the Class A shares of the Fund, and
0.02% of the average daily net assets of the Class E, Institutional Class and
Service Class shares of the Fund. Prior to February 1, 1997, under the contract
with the Fund, WFB was entitled to be paid transfer agency fees at an annual
rate of 0.07% of average daily net assets attributable to the Class A shares,
and 0.02% and 0.04% of average daily net assets attributable to Institutional
Class and Service Class shares, respectively.
For the six months ended March 31, 1997, the Fund paid transfer agency fees of
$22,176, $3,729, $49,802 and $209,300 for Class A, Class E, Institutional Class
and Service Class shares, respectively.
---------------------
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the period from October 1, 1995 to September 5, 1996, the Fund retained
Furman Selz LLC ("Furman Selz") to perform transfer agency services.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB has agreed to provide shareholder services for the Fund. WFB is entitled to
be compensated for these services based on an annual rate not to exceed 0.25% of
average daily net assets attributable to Class A and Class E shares of the Fund
and 0.20% of the average daily net assets attributable to the Service Class
shares of the Fund.
For the six months ended March 31, 1997, the Fund paid service fees of $68,907,
$46,608 and $1,230,129 for Class A, Class E and Service Class shares,
respectively. For the year ended September 30, 1996, the Fund paid shareholder
servicing fees of $153,899, $1,432,124 and $3,022,260 for the Class A,
Institutional Class and Service Class shares, respectively.
For the period from October 1, 1995 to September 5, 1996, various banks, trust
companies, broker-dealers or other financial organizations (collectively,
"Service Organizations") also provided administrative services for the Fund,
such as maintaining shareholder accounts and records. The Fund paid fees to
Service Organizations in amounts up to an annual rate of 0.25% of the average
daily net assets of the Fund shares owned by shareholders with whom the Service
Organization had a servicing relationship.
Subject to the overall supervision of the Company's Board of Directors, WFB as
administrator and Stephens Inc. ("Stephens") as co-administrator provide the
Fund with supervisory, administrative and distribution services. For these
administrative services, WFB and Stephens are entitled to receive monthly fees
at the annual rates of 0.04% and 0.02%, respectively, of the Fund's average
daily net assets. Prior to February 1, 1997, Stephens provided substantially the
same services as sole administrator to the Fund. Under the previous agreement,
Stephens was entitled to receive a monthly fee at the annual rate of 0.05% of
the average daily net assets of the Fund.
For the period from April 15, 1996 to September 5, 1996, Furman Selz provided
administrative services for the operation of the Fund. As compensation for such
services, the Fund paid Furman Selz an annual fee, payable monthly, of up to
0.15% of the average daily net assets of the Fund. For the period from October
1, 1995 to April 15, 1996, The Dreyfus Corporation ("Dreyfus") provided
administrative services for the operation of the Fund. As compensation for such
services, the Fund paid Dreyfus an annual fee, payable monthly, of up to 0.10%
of the average daily net assets of the Fund.
The Company has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940
Act for Class A and Class E shares of the Fund. The Distribution Plan for the
Class A shares of the Fund provides that the Fund may defray all or part of the
cost of preparing, printing and distributing
- ---------------------
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
prospectuses and other promotional materials by paying on an annual basis up to
0.05% of the average daily net assets attributable to the Class A shares of the
Fund. The Fund may participate in joint distribution activities with any of the
other funds, in which event, expenses reimbursed out of the assets of one fund
may be attributable, in part, to the distribution-related activities of another
fund. Generally, the expenses attributable to joint distribution activities are
allocated among all of the funds in proportion to their relative net asset
sizes.
The separate Class E Distribution Plan for the Fund provides that the Fund may
pay, as compensation for distribution-related services, a monthly fee at an
annual rate of up to 0.25% of the Fund's average daily net assets attributable
to Class E shares. For the six months ended March 31, 1997, the Fund paid
distribution fees of $13,781 and $46,608 for the Class A and Class E shares,
respectively.
For the period from October 1, 1995 to September 5, 1996, the Fund had adopted a
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act. The Plan provided
for payments by the Fund of up to 0.05% of the average daily net assets of the
Class A shares of the Fund.
FEES WAIVED
The amount shown as waived fees and reimbursed expenses on the Statements of
Operations for the six months ended March 31, 1997 was waived by WFB. The
following amounts of fees and expenses were waived or reimbursed for the year
ended September 30, 1996:
<TABLE>
<CAPTION>
FEES WAIVED BY FEES WAIVED BY
FUND FIB WFB
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
Treasury Money Market Mutual Fund $ 2,173,591 $ 1,877,973
</TABLE>
Waived fees and reimbursed expenses continue at the discretion of WFB and
Stephens. WFB and Stephens have each agreed to waive or reimburse all or a
portion of their respective fees charged to, or expenses paid by, the Fund to
ensure that the total fund operating expenses do not exceed, on an annual basis,
0.55%, 0.25% and 0.45% of the average daily net assets attributable to the Class
A, Institutional Class, and Service Class shares, respectively, through August
31, 1997.
Certain officers and directors of the Company are also officers of Stephens. At
March 31, 1997, Stephens owned 76 shares of the Fund.
---------------------
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS
As of March 31, 1997, there were 91 billion shares of $.001 par value capital
stock authorized by the Company. At March 31, 1997, the Fund was authorized to
issue 5 billion of each class of shares of $.001 par value capital stock.
Capital share transactions for the Fund were as follows:
<TABLE>
<CAPTION>
TREASURY MONEY MARKET MUTUAL FUND
---------------------------------------------------
FOR THE SIX FOR THE FOR THE
MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1997 SEPT. 30, 1996 SEPT. 30, 1995
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 101,803,385 265,329,368 N/A
Shares issued in reinvestment of
dividends - Class A 117,496 303,969 N/A
Shares redeemed - Class A (89,139,342) (211,928,115) N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A 12,781,539 53,705,222 N/A
Shares sold - Class E 892,833,080 N/A N/A
Shares issued in reinvestment of
dividends - Class E 0 N/A N/A
Shares redeemed - Class E (72,176,053) N/A N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS E 820,657,027 N/A N/A
Shares sold - Institutional Class 998,327,613 4,920,884,222 120,817,000
Shares issued in reinvestment of
dividends - Institutional Class 978,929 1,018,863 0
Shares redeemed - Institutional Class (1,090,336,130) (4,417,665,197) (84,374,000)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - INSTITUTIONAL CLASS (91,029,588) 504,237,888 36,443,000
Shares sold - Service Class 2,043,006,904 3,893,787,080 20,388,947,721
Shares issued in reinvestment of
dividends - Service Class 348,407 227,942 0
Shares redeemed - Service Class (2,900,254,375) (3,555,407,931) (20,077,871,000)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - SERVICE CLASS (856,899,064) 338,607,091 311,076,721
- ---------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
16
<PAGE>
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 Treasury Money Market Mutual Fund (one of
the funds comprising Stagecoach Funds, Inc.) as of March 31, 1997, and the
related statements of operations and changes in net assets, and financial
highlights for the six months ended March 31, 1997, and the year ended September
30, 1996. 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. All years or periods indicated in the accompanying financial statements
and financial highlights ending prior to October 1, 1995, were audited by other
auditors whose reports dated November 15, 1995, and May 4, 1994, expressed
unqualified opinions 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 confirmation of securities owned as of March
31, 1997, by correspondence with the custodian and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Treasury Money Market Mutual Fund of Stagecoach Funds, Inc. as of March 31,
1997, the results of its operations, the changes in its net assets and its
financial highlights for the periods indicated herein, except as noted above, in
conformity with generally accepted accounting principles.
[SIG]
[KPMG Peat Marwick LLP]
SAN FRANCISCO, CALIFORNIA
MAY 9, 1997
---------------------
17
<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>
- ---------------------
18
<PAGE>
Wells Fargo provides investment advisory services, shareholder services, and
certain other services for the Stagecoach Funds. The Funds are sponsored and
distributed by STEPHENS INC., Member NYSE/SIPC. Wells Fargo is not affiliated
with Stephens Inc.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Stagecoach Funds. 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.
SCF 087 (5/97)
<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
