<PAGE>
- ---------------------
ANNUAL
- ---------------------
REPORT
- ---------------------
EQUITY
- ---------------------
FUNDS
- ---------------------
Aggressive Growth Fund
Balanced Fund
Corporate Stock Fund
Diversified Income Fund
Equity Value Fund
Growth and Income Fund
Small Cap Fund
MARCH 31, 1997
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 1
INVESTMENT ADVISER Q & A
Aggressive Growth Fund 2
Balanced Fund 6
Corporate Stock Fund 10
Diversified Income Fund 14
Equity Value Fund 18
Growth and Income Fund 22
Small Cap Fund 26
PORTFOLIOS OF INVESTMENTS
Balanced Fund 30
Diversified Income Fund 36
Equity Value Fund 41
Growth and Income Fund 45
STAGECOACH FUNDS
Statement of Assets and Liabilities 52
Statements of Operations 54
Statements of Changes in Net Assets 58
Financial Highlights 64
Notes to Financial Statements 76
Independent Auditors' Report 93
MASTER INVESTMENT TRUST PORTFOLIOS OF INVESTMENTS
Master Investment Trust Capital Appreciation Master Portfolio 94
Master Investment Trust Corporate Stock Master Portfolio 101
Master Investment Trust Small Cap Master Portfolio 116
MASTER INVESTMENT TRUST
Statement of Assets and Liabilities 123
Statements of Operations 124
Statements of Changes in Net Assets 126
Notes to Financial Statements 128
Independent Auditors' Report 132
LIST OF ABBREVIATIONS 133
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>
AGGRESSIVE GROWTH FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WERE THE FUND'S TOTAL RETURNS?
The total return for Class A shares for the six-month period ended March 31,
1997 was -18.97%. The total return for Class B shares for the same period was
- -19.28%. The one-year total returns were -12.37% and -12.97% for Class A and B
shares, respectively. These return figures exclude sales charges. The Aggressive
Growth Fund invests exclusively in the Capital Appreciation Master Portfolio.
WHAT ARE SOME OF THE FACTORS THAT AFFECTED THE FUND'S PERFORMANCE?
This Fund tends to focus on smaller, more volatile stocks that often are
somewhat less liquid than large company stocks. Because many investors have been
concerned about the potential for higher interest rates and slower earnings
growth, the market has shown a preference for large company stocks and other
highly liquid issues. Large company stocks are perceived as "safer" and
generally can be traded in large amounts without a pronounced adverse effect on
the price. When investors' dollars flow towards large stocks, small company
stocks tend to suffer.
HOW DID SECTOR PERFORMANCE AFFECT RETURNS?
Some of the sectors in which the Fund invests did poorly. Datacom/networking did
poorly late in 1996 and early in 1997. Talk of health care reform also depressed
the health care sector. Since January, continued concern over the prospects for
growth in the networking industry caused contraction throughout the technology
sector.
HAS THE DECLINE IN THESE SECTORS CHANGED YOUR FUNDAMENTAL OUTLOOK ON THEM, OR DO
YOU EXPECT THEM TO COME BACK STRONG?
We have not changed our outlook on the technology, healthcare or networking
sectors. In fact, we regarded the correction in these sectors as a buying
opportunity and increased our exposure at what we believe are attractive prices.
DURING A PERIOD OF GENERAL MARKET DECLINE, WHAT ARE SOME OF THE STEPS YOU TAKE
TO CAPTURE VALUE FOR INVESTORS?
The important point is that we do not change our style or investment strategy in
response to short-term market conditions. We focus on issues whose long-term
fundamentals remain attractive within our growth strategy. We attempt to remain
positioned in companies that we believe are solid with favorable long-term
growth rates. We feel that these companies will not fall as far in a decline and
will rebound the most when the market turns. These companies and their
respective stock prices should reflect their fundamentals. Despite some recent
setbacks, we firmly believe that the current trend in performance will not last
and that the additional value in the market today lies in the aggressive growth
sector.
- ---------------------
2
<PAGE>
AGGRESSIVE GROWTH FUND
WHEN DO YOU TYPICALLY SELL A HOLDING?
Our sell discipline is based on company fundamentals. If a company's growth rate
no longer meets our expectations then we generally sell the position. One
indicator is a company's forward price-to-earnings ratio. This means that we
examine the company's expected earnings, compare them to the stock price and
sell if we do not believe the future earnings will justify continued price
growth. The fact that a stock's price is sliding is not necessarily a signal to
sell; in fact, a falling price may be a buying opportunity if the fundamentals
are still sound.
WHAT ARE YOU LOOKING FOR IN A COMPANY'S MANAGEMENT TEAM?
In brief, we are looking for experience, competence and incentives to perform.
We are especially interested in what kind of ownership stake management has in
the company. If, for example, management is compensated with stock options, they
are likely to be very shareholder-driven.
---------------------
3
<PAGE>
AGGRESSIVE GROWTH FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/20/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR INCEPTION
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
With Maximum 5.25% Sales Charge (16.96)% 11.36% 14.94%
- --------------------------------------------------------------------------------------
Without Sales Charge (12.37)% 13.39% 16.41%
- --------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 7/1/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR INCEPTION
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) (17.32)% 11.80% 11.70%
- ---------------------------------------------------------------------------------------
Without Sales Charge (12.97)% 12.59% 12.29%
- ---------------------------------------------------------------------------------------
(1)Assumes redemption on 3/31/97.
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Aggressive Growth Fund is a feeder fund of the Capital Appreciation Master
Portfolio which in turn invests in individual securities. The Capital
Appreciation Master Portfolio was created by the reorganization of the existing
assets of the Overland Express Strategic Growth Fund (the "Predecessor Fund").
Performance figures for the Class A and Class B shares reflect the performance
of the Class A and Class D shares of the Predecessor Fund, respectively, for
periods prior to March 5, 1996 when the Aggressive Growth Fund commenced
operations. References to the investment policy of the Fund are understood to be
references to the Master Portfolio.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
4
<PAGE>
AGGRESSIVE GROWTH FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH AGGRESSIVE
GROWTH CLASS A SHARES S&P 500 INDEX
<S> <C> <C>
Inception 9550 10000
Jan-93 9569.1 10083.6
Feb-83 9788.75 10221.03947
Mar-93 10304.73 10436.7034
Apr-93 10218.61 10184.44828
May-93 11242.39 10456.88227
Jun-93 11355.37 10487.52094
Jul-93 11384.1 10445.3611
Aug-93 12140.48 10841.6581
Sep-93 12918.28 10758.50258
Oct-93 12927.85 10981.096
Nov-93 12506.5 10876.44616
Dec-93 13041.81 11007.94239
Jan-94 13723.54 11382.21243
Feb-94 13743.3 11073.29919
Mar-94 12419.36 10590.50334
Apr-94 12518.16 10726.2736
May-94 12508.28 10902.29175
Jun-94 11609.19 10635.07658
Jul-94 11915.47 10984.33249
Aug-94 13041.81 11434.69012
Sep-94 13002.29 11155.11195
Oct-94 13624.74 11405.76731
Nov-94 13278.93 10990.36927
Dec-94 13592.86 11153.35644
Jan-95 13388.3 11442.39568
Feb-95 14134.94 11887.89391
Mar-95 14840.66 12238.12315
Apr-95 15075.9 12598.2544
May-95 15546.38 13100.77357
Jun-95 17448.77 13404.84253
Jul-95 19054.55 13849.13263
Aug-95 19228.42 13883.81086
Sep-95 19709.13 14469.41612
Oct-95 19085.23 14417.74583
Nov-95 19509.73 15050.03607
Dec-95 19371.53 15339.92987
Jan-96 19682.49 15861.48749
Feb-96 20592.33 16008.99932
Mar-96 20661.43 16162.68571
Apr-96 23367.92 16400.27719
May-96 24323.82 16821.76432
Jun-96 22515.66 16885.68702
Jul-96 19532.77 16139.33965
Aug-96 20719.01 16479.87972
Sep-96 22342.91 17406.04896
Oct-96 21294.86 17886.45591
Nov-96 22078.02 19236.88333
Dec-96 21363.96 18855.99304
Jan-97 22158.63 20032.60701
Feb-97 19786.14 20190.86461
Mar-97 18104.66 19363.03916
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE AGGRESSIVE GROWTH FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Aggressive
Growth Fund Class A shares since the inception of the Predecessor Fund with the
S&P 500 Index. The chart assumes a hypothetical $10,000 initial investment in
Class A shares and reflects all operating expenses and assumes the maximum
initial sales charge of 5.25%. 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, while the Fund is a professionally managed mutual
fund. The index presented here does not incur expenses and is not available
directly for investment. Had this index incurred operating expenses, its
performance would have been lower.
---------------------
5
<PAGE>
BALANCED FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WERE THE FUND'S TOTAL RETURNS?
The total return for Class A shares for the six-month period ended March 31,
1997 was 8.15%. The total return for Class B shares for the same period was
7.84%. The one-year total returns were 12.74% and 12.09%, respectively. These
return figures exclude sales charges.
WHAT DROVE STOCK PERFORMANCE AND HOW DID IT AFFECT THE FUND?
Stock market performance in 1996 was primarily driven by large cap stocks. Two
sectors that performed well for the Fund were finance and technology. In
technology, the Fund benefited by selecting stocks with compelling valuations
after the 1996 mid-year technology correction. We looked for stocks with good
price-to-earnings ratios, a history of earnings growth and solid fundamentals.
As for the financial sector, bank stocks performed particularly well as the
consolidation in that industry continued.
HOW HAS THE RECENT VOLATILITY IN THE STOCK MARKET AFFECTED YOUR OUTLOOK AND YOUR
APPROACH?
We do not change our approach based on short-term market conditions. In fact,
the recent downturn allowed us additional opportunity to practice our discipline
and capture value by purchasing stocks we considered undervalued. In general, we
were concerned that price-to-earnings ratios, which measure expected earnings
against a stock's price, had reached unsustainable levels relative to underlying
earnings growth for some issues. The correction helped bring these ratios back
in line and has provided new market appreciation.
WHAT IS THE "VALUE" DISCIPLINE?
In broad terms, a value strategy is any one of several disciplined methods of
selecting stocks that are under-priced compared to some measure of intrinsic
value. One common method is to examine the price-to-earnings ratio. Another
method might include book-to-price ratios, which examines a company's assets
against liabilities. Whatever the method, the intention is to recognize
"bargain" stocks before the market does. Value strategies are often contrasted
with growth strategies which are based more on expectations of future earnings
growth.
WHAT STRATEGIES DO YOU USE TO MANAGE THE BOND PORTFOLIO?
The bond portion of the Fund's portfolio is actively managed utilizing a "top-
down" approach that attempts to take advantage of the business cycle. The top-
down approach identifies key trends in the general economy, and then select
sectors or industries which are likely to benefit from those trends. The sector
selection is among government, corporate and mortgage-backed bonds. The
portfolio's sensitivity to interest rate changes as measured by its duration is
carefully managed.
- ---------------------
6
<PAGE>
BALANCED FUND
WHAT ARE THE POTENTIAL ADVANTAGES OF THE BALANCED APPROACH?
The balanced approach seeks to provide a shareholder with participation in the
equity market with a reduction in volatility, as well as the stability of income
an investor might expect from the fixed-income portion.
HOW IS THE ALLOCATION DETERMINED?
The allocation is reviewed and set monthly by Wells Fargo Bank's Senior
Investment Strategy Committee in conjunction with the Fund's portfolio managers.
A detailed model which measures the expected returns and risks of stocks, bonds
and cash provides a base in setting the allocation within the Fund's risk
tolerance.
WILL THE ALLOCATION CHANGE IN REACTION TO THE RECENT DECLINE IN THE STOCK
MARKET?
Activity at the Federal Reserve is one of the many economic factors which may
effect an allocation change in the Fund's portfolio. Recent declines in the
stock market seem to be a reaction to the Fed's recent increase in interest
rates. Although the market is dynamic and economic factors can change rapidly,
we presently expect to stay with the current allocation of 55% stocks and 45%
bonds until we feel that the market has accounted for the Federal Reserve's
actions in raising, and possibly continuing to raise, the federal funds target
rate. Once we feel that the interest rate headwind from the Fed is over, we may
gradually increase our equity exposure.
---------------------
7
<PAGE>
BALANCED FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 7/2/90
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
With Maximum 5.25% Sales Charge 6.79% 8.37% 9.79% 10.25%
- -----------------------------------------------------------------------------------------
Without Sales Charge 12.74% 10.33% 10.98% 11.13%
- -----------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 7/2/90
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 7.55% 8.79% 9.95% 10.37%
- -----------------------------------------------------------------------------------------
Without Sales Charge 12.09% 9.58% 10.22% 10.37%
- -----------------------------------------------------------------------------------------
(1)Assumes redemption on 3/31/97.
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach Balanced Fund commenced operations on September 6, 1996 as the
successor to the Pacifica Balanced Fund (7/90 to 9/96). Historical performance
has been calculated using returns produced by this Predecessor Fund for the
applicable period. Class A performance reflects the Pacifica Balanced Fund
Investor Class performance. Class B performance also reflects such performance
but has been adjusted to reflect Class B Share expense levels in effect on
9/6/96.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
8
<PAGE>
BALANCED FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH BALANCED LEHMAN BROS
FUND CLASS A SHARES S&P 500 INDEX GOVT/CORP BOND INDEX
<S> <C> <C> <C>
Inception 9550 10000 10000
Jul-90 9588.2 9967.9 10124
Aug-90 9225.3 9066.901519 9977.202
Sep-90 9072.5 8625.615422 10060.0128
Oct-90 9073.11 8588.8703 10192.8049
Nov-90 9469.7 9144.054877 10415.0081
Dec-90 9688.15 9398.808245 10572.2747
Jan-91 9914.37 9808.126345 10690.6842
Feb-91 10297.97 10509.60354 10782.6241
Mar-91 10475.21 10764.14614 10857.0242
Apr-91 10455.34 10789.65716 10981.88
May-91 10673.98 11255.12297 11032.3966
Jun-91 10385.35 10739.52579 11020.261
Jul-91 10696.71 11240.09509 11158.0142
Aug-91 10937.76 11506.37294 11414.6486
Sep-91 10957.95 11313.87132 11653.2147
Oct-91 11069.56 11465.92975 11756.9283
Nov-91 10724.58 11003.96744 11874.4976
Dec-91 11483.07 12262.4912 12274.6682
Jan-92 11535.08 12034.04099 12093.0031
Feb-92 11701.5 12189.88182 12157.096
Mar-92 11565.53 11952.78862 12090.232
Apr-92 11785.93 12303.72249 12162.7734
May-92 11754.45 12364.01073 12398.7312
Jun-92 11661.24 12180.03425 12579.7526
Jul-92 11989.58 12677.58865 12901.7943
Aug-92 11767.16 12418.07841 13016.6203
Sep-92 11947.88 12563.99083 13194.948
Oct-92 11969.26 12607.3366 12993.0653
Nov-92 12268.49 13036.61641 12981.3715
Dec-92 12492.97 13196.5757 13204.6511
Jan-93 12855.24 13306.89907 13492.5125
Feb-93 13063.83 13488.2721 13773.1568
Mar-93 13404.44 13772.87464 13819.9855
Apr-93 13304.74 13439.98426 13926.3994
May-93 13548.46 13799.50384 13919.4362
Jun-93 13759.12 13839.93639 14235.4074
Jul-93 13870.8 13784.29985 14326.514
Aug-93 14339.86 14307.27618 14656.0238
Sep-93 14317.33 14197.53937 14707.3199
Oct-93 14508.83 14491.28646 14767.6199
Nov-93 14429.98 14353.1845 14600.7458
Dec-93 14830.69 14526.7145 14664.9891
Jan-94 15281.59 15020.6228 14884.9639
Feb-94 15062.23 14612.96309 14560.4717
Mar-94 14495.25 13975.8379 14203.7402
Apr-94 14446.07 14155.00814 14085.8491
May-94 14507.54 14387.29183 14059.086
Jun-94 14335.42 14034.65931 14026.7501
Jul-94 14608.71 14495.55752 14307.2851
Aug-94 14919.27 15089.87538 14313.008
Sep-94 14646.23 14720.92792 14148.4084
Oct-94 14596.03 15051.70717 14132.8452
Nov-94 14232.07 14503.524 14107.4061
Dec-94 14267.12 14718.61126 14200.5149
Jan-95 14213.98 15100.04407 14473.1648
Feb-95 14652.36 15687.94919 14808.9422
Mar-95 14864.61 16150.13186 14908.1622
Apr-95 15066.03 16625.38179 15115.3856
May-95 15509.15 17288.53501 15748.7203
Jun-95 15603.85 17689.80191 15874.71
Jul-95 15902.36 18276.11271 15812.7987
Aug-95 15970.2 18321.87609 16015.2025
Sep-95 16201.9 19094.67451 16178.5576
Oct-95 16065.06 19026.48742 16416.3823
Nov-95 16585.06 19860.89403 16687.2527
Dec-95 16781.92 20243.45457 16932.5553
Jan-96 17003.64 20931.73202 17037.5371
Feb-96 16989.78 21126.39713 16676.3413
Mar-96 17267.18 21329.21054 16536.2601
Apr-96 17462.29 21642.74994 16422.1599
May-96 17727.08 22198.96861 16394.2422
Jun-96 17728.18 22283.32469 16613.925
Jul-96 17194.79 21298.40174 16652.1371
Aug-96 17433.41 21747.79802 16610.5067
Sep-96 18000.51 22970.02427 16906.1737
Oct-96 18644.5 23603.99694 17300.0876
Nov-96 19571.23 25386.09871 17618.4092
Dec-96 19464.54 24883.45395 17422.8449
Jan-97 19834.23 26436.18148 17443.7523
Feb-97 20011.03 26645.02731 17480.3842
Mar-97 19466.96 25552.58119 17272.3676
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE BALANCED FUND WILL VARY FROM THE RESULTS
SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Balanced Fund
Class A shares since the inception of the Predecessor Fund with the S&P 500
Index and the Lehman Brothers Government/Corporate Bond Index. The chart assumes
a hypothetical $10,000 initial investment in the Fund and reflects all operating
expenses and assumes the maximum initial sales charge of 5.25%. 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
Government/Corporate Bond Index is an unmanaged index, while the Fund is a
professionally managed mutual fund. The indexes presented here do not incur
expenses and are not available directly for investment. Had these indexes
incurred operating expenses, their performances would have been lower.
---------------------
9
<PAGE>
CORPORATE STOCK FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WERE THE FUND'S TOTAL RETURN?
The total return for the six-month period ended March 31, 1997 was 10.63%. The
one-year total return was 18.50%. This Fund has no sales charges.
THE STOCK MARKET WAS STRONG OVER THE PAST SIX MONTHS. WHAT DROVE THE
PERFORMANCE?
The rally in the U.S. stock market, which started in 1991, is becoming one of
the longest rallies ever recorded. The continued strong performance was largely
driven by large company stocks as investors sought stability and liquidity. This
directly benefits a Fund that invests in the S&P 500 Index. One key difference
between 1995's rally and 1996 to 1997's returns is that strong corporate
earnings primarily drove the stock market in the earlier period. Recently, there
has been an apparently greater tolerance for high price-to-earnings ratios.
Price-to-earnings ratios measure a stock's price against its dividends. High
ratios indicate that the dividends are relatively low for the price. To us, this
increase in investor tolerance suggests either that they are willing to wait
longer to earn back a return or that investors intend to sell these stocks
before the values drop.
AS THE FUND'S FISCAL PERIOD CLOSED, THE MARKET BEGAN TO SLIDE. WHAT HAPPENED?
WHAT CAN INVESTORS EXPECT?
The expected hike in the federal funds target rate occurred at the end of March.
The general consensus was that the market had already made its adjustment in
anticipation of the hike. The market, however, experienced a delayed reaction
during March and April, dropping close to 10% of its value from its January
high. The consensus in the market now seems to be that 1997 will likely be a
year of modest but steady growth, depending, in part, on the effect of any
further rate changes.
HOW DO CHANGES IN THE FEDERAL FUNDS TARGET RATE AFFECT THE STOCK MARKET?
Historically, market reaction and movements have reacted adversely toward
increases in rates, at least in the short-term. Changes in the federal funds
target rate are one way for the Federal Reserve to control the money supply.
Periodically, rates are adjusted to reflect the Fed's sentiment about current
economic conditions. For example, if economic indicators are pointing toward a
rise in inflation, the rate may be increased in an attempt to tighten money
supply and curb inflation.
- ---------------------
10
<PAGE>
CORPORATE STOCK FUND
DID THE REELECTION OF PRESIDENT CLINTON HAVE AN EFFECT ON THE MARKET?
The market dislikes uncertainty. The elections maintained the status quo and the
market reacted favorably. Generally speaking, revenue, spending and budget
issues influence the market. Certainly many investors credit progress on the new
balanced budget agreement for the market's recent surge.
THE FUND INVESTS IN THE S&P 500 INDEX. HOW MANY COMPANIES HAVE BEEN ADDED OR
DELETED RECENTLY AND WHY?
Standard and Poor's regularly adjusts the Index to reflect not only mergers and
acquisitions, but also to reflect the composition of the economy as a whole. In
1996, there were twenty-one additions and sixteen deletions to the Index, with
five companies "deleted" due to mergers. Additions included Seagate Technology,
Dell Computer and Union Pacific Resources Group. Deletions included Dial Corp.,
Luby's Cafeteria and U.S. Healthcare.
HAVE MANY TECHNOLOGY COMPANIES BEEN ADDED TO THE S&P 500 INDEX IN RECENT YEARS?
The Index is not simply a list of the five hundred largest companies -- it is
intended to be representative of the entire economy. As long as technology
companies play an important role in the economy, they will almost certainly be
represented. In fact, as indicated in the previous answer, technology stocks
have been added.
INDUSTRY SECTOR BREAKDOWN FOR
S&P 500 AS OF MARCH 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Industries 7%
Capital Goods -
Tech 15%
Capital Goods 3%
Consumer Goods 19%
Consumer Cyclical 8%
Consumer Staples 9%
Credit Cyclical 4%
Utilities 10%
Transportation 1%
Finance 14%
Energy 10%
</TABLE>
---------------------
11
<PAGE>
CORPORATE STOCK FUND
- ---------------------
PERFORMANCE AT A GLANCE
PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE
1/25/84
1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Average Annual Total Returns 18.50% 21.00% 15.22% 12.16% 14.58%
- ----------------------------------------------------------------------------------------------
</TABLE>
This Fund has no sales charge. Past performance is not predictive of future
results. The investment return and net asset value of shares of the Fund will
fluctuate with market conditions so that shares of the Fund, when redeemed, may
have a greater or lesser net asset value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Corporate Stock Fund commenced operations on January 1, 1992 as successor to
the Corporate Stock Fund of the Wells Fargo Investment Trust for Retirement
Programs. The Predecessor Fund's date of inception was January 25, 1984. The
performance figures shown include the performance of the Predecessor Fund which
had the same investment objectives and strategies.
The Fund seeks to achieve its investment objective by investing all of its
assets in the Master Investment Trust Corporate Stock Master Portfolio, which
has an identical investment objective as the Fund. Prior to April 28, 1996, the
Fund invested directly in a portfolio of securities and not in the Master
Investment Trust Corporate Stock Master Portfolio. References to the investment
policies of the Fund are understood to be references to the investment policies
of the Master Portfolio.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
12
<PAGE>
CORPORATE STOCK FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH CORPORATE
STOCK FUND S&P 500 INDEX
<S> <C> <C>
Jan-84 10000 10000
Feb-84 10000 9648.12435
Mar-84 10000 9815.21271
Apr-84 10000 9908.32096
May-84 10000 9359.8191
Jun-84 10000 9563.11772
Jul-84 10000 9444.4996
Aug-84 10000 10487.6197
Sep-84 10430 10490.1365
Oct-84 10450 10530.5561
Nov-84 10330 10412.627
Dec-84 10560 10686.9786
Jan-85 11270 11519.6223
Feb-85 11440 11660.7076
Mar-85 11490 11668.4308
Apr-85 11420 11657.4509
May-85 12090 12330.981
Jun-85 12260 12524.1913
Jul-85 12220 12505.9126
Aug-85 12100 12399.142
Sep-85 11080 12011.3196
Oct-85 12200 12566.1043
Nov-85 13020 13428.0297
Dec-85 13640 14077.6124
Jan-86 13680 14156.2359
Feb-86 14680 15214.3774
Mar-86 15410 16063.1965
Apr-86 15200 15882.3258
May-86 16000 16727.2882
Jun-86 16250 17009.9649
Jul-86 15340 16058.5623
Aug-86 16470 17249.4205
Sep-86 15230 15823.392
Oct-86 15970 16735.9117
Nov-86 15960 17142.6826
Dec-86 15930 16705.2078
Jan-87 17910 18954.6888
Feb-87 18590 19703.6646
Mar-87 19040 20272.1729
Apr-87 18820 20092.1766
May-87 18990 20266.3701
Jun-87 19920 21289.8183
Jul-87 20860 22368.3156
Aug-87 21630 23202.9333
Sep-87 21150 22694.2699
Oct-87 16650 17806.7832
Nov-87 15310 16339.3272
Dec-87 16440 17582.3363
Jan-88 17110 18321.8494
Feb-88 17880 19175.8308
Mar-88 17320 18583.4894
Apr-88 17490 18789.0228
May-88 17620 18951.5478
Jun-88 18400 19821.2343
Jul-88 18310 19746.1119
Aug-88 17690 19075.7314
Sep-88 18420 19888.5483
Oct-88 18900 20442.2455
Nov-88 18630 20150.9435
Dec-88 18930 20502.5774
Jan-89 20280 22003.9812
Feb-89 19770 21455.642
Mar-89 20200 21956.2021
Apr-89 21220 23096.1681
May-89 22040 24030.6391
Jun-89 21910 23894.3853
Jul-89 23820 26051.8094
Aug-89 24250 26561.1223
Sep-89 24130 26453.2841
Oct-89 23560 25839.0389
Nov-89 24020 26365.8969
Dec-89 24570 26998.942
Jan-90 22920 25186.2331
Feb-90 23190 25510.6318
Mar-90 23790 26186.6635
Apr-90 23180 25533.3062
May-90 25400 28023.0589
Jun-90 25210 27833.9033
Jul-90 25120 27744.5565
Aug-90 22840 25236.726
Sep-90 21730 24008.4546
Oct-90 21620 23906.1785
Nov-90 22980 25451.4739
Dec-90 23600 26160.552
Jan-91 24590 27299.844
Feb-91 26310 29252.3289
Mar-91 26900 29960.8203
Apr-91 26940 30031.8274
May-91 28040 31327.4004
Jun-91 26760 29892.2922
Jul-91 27970 31285.572
Aug-91 28600 32026.7272
Sep-91 28110 31490.92
Oct-91 28460 31914.158
Nov-91 27310 30628.3366
Dec-91 30380 34131.2994
Jan-92 29790 33495.4333
Feb-92 30150 33929.1992
Mar-92 29548.6 33269.2762
Apr-92 30382.5115 34246.0622
May-92 30503.077 34413.8679
Jun-92 30035.3833 33901.7895
Jul-92 31227.5041 35286.6777
Aug-92 30570.8274 34564.3594
Sep-92 30902.3986 34970.4906
Oct-92 30983.6406 35091.1388
Nov-92 32009.3199 36285.992
Dec-92 32383.1343 36731.2212
Jan-93 32620.3356 37038.2942
Feb-93 33043.1727 37543.1261
Mar-93 33704.3456 38335.2861
Apr-93 32875.72 37408.7222
May-93 33714.7034 38409.4055
Jun-93 33784.5151 38521.9451
Jul-93 33617.9864 38367.0869
Aug-93 34856.5438 39822.7342
Sep-93 34564.8063 39517.2938
Oct-93 35244.3926 40334.9066
Nov-93 34878.4615 39950.5149
Dec-93 35268.1258 40433.5167
Jan-94 36433.0427 41808.2562
Feb-94 35428.4355 40673.5802
Mar-94 33864.9888 38900.2121
Apr-94 34273.0007 39398.9128
May-94 34799.1213 40045.4489
Jun-94 33933.8086 39063.935
Jul-94 35013.1282 40346.7946
Aug-94 36405.4505 42001.0132
Sep-94 35500.9936 40974.0884
Oct-94 36260.0253 41894.7762
Nov-94 34926.2983 40368.9684
Dec-94 35414.9184 40967.6402
Jan-95 36294.09 42029.3166
Feb-95 37680.48 43665.686
Mar-95 38753.66 44952.1208
Apr-95 39851.53 46274.9269
May-95 41402.13 48120.7412
Jun-95 42318.68 49237.6236
Jul-95 43682.7 50869.5554
Aug-95 43762.27 50996.9327
Sep-95 45552.43 53147.9324
Oct-95 45369.9 52958.1411
Nov-95 47297.86 55280.6204
Dec-95 48161.84 56345.4357
Jan-96 49753.68 58261.1805
Feb-96 50183.59 58803.0095
Mar-96 50627.26 59367.5184
Apr-96 51326.53 60240.2209
May-96 52585.22 61788.3946
Jun-96 52746.8 62023.1905
Jul-96 50385.35 59281.7654
Aug-96 51390.72 60532.6107
Sep-96 54232.48 63934.5434
Oct-96 55675.08 65699.1368
Nov-96 59803.5 70659.4216
Dec-96 58593.64 69260.3651
Jan-97 62165.98 73582.2119
Feb-97 62600.45 74163.5113
Mar-97 59995.27 71122.8074
</TABLE>
The accompanying chart compares the performance of the Stagecoach Corporate
Stock Fund since inception of the Predecessor Fund with the S&P 500 Index. The
charts assumes a hypothetical $10,000 initial investment in the Fund and
reflects all operating expenses. 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, while the Fund is a professionally managed mutual
fund. The index presented here does not incur expenses and is not available
directly for investment. Had this index incurred operating expenses, its
performance would have been lower.
---------------------
13
<PAGE>
DIVERSIFIED INCOME FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WERE THE FUND'S TOTAL RETURNS?
The total return for Class A shares for the six-month period ended March 31,
1997 was 5.25%. The total return for Class B shares for the same period was
4.91%. The one-year total returns were 11.40% and 10.68%, respectively. These
return figures exclude sales charges.
WHAT WERE SOME OF THE FACTORS DRIVING THE MARKET'S SOLID PERFORMANCE THROUGHOUT
1996 AND INTO 1997?
Stock price performance in 1996 was primarily driven by continued good earnings
reports, a reasonably stable interest rate and inflation environment, and strong
inflows into the market through mutual funds and other institutional investors.
There has been concern that earnings would not justify the high prices some
stocks were commanding. The good earnings reports allayed many of those fears.
WHAT HAS CAUSED THE DROP OFF IN MARCH-APRIL 1997?
The recent drop in the market was primarily caused by weakness in the bond
market, coupled with fears of further increases in the federal funds target rate
by the Federal Reserve. The market does not react well to rate increases because
it makes borrowing more expensive and can potentially slow business expansion.
The recent correction just brought the stock market nearly to where it was at
the beginning of the year. It did not significantly erode the gains enjoyed over
the last couple of years.
WHEN DO YOU GENERALLY SELL A STOCK?
Several factors might trigger a "sell" decision. Typically, when we buy a stock,
we have a certain target in mind as far as appreciation is concerned. When a
stock reaches its target we may sell or reexamine the stock's fundamentals to
see if a revised target should be set. Other changes may precipitate action,
such as a management change at the company or if there is a significant
departure from the expected business cycle or we may find a more attractive
opportunity elsewhere and we may liquidate assets to take advantage of it.
WHAT IS YOUR GENERAL STRATEGY IN A DECLINING MARKET?
We do not try to time the market or anticipate short-term corrections since we
feel our style offers relatively good downside protection. The Fund can be
classified as a value fund and as such it already tends to be more defensive
than, say, a growth fund. Value funds often perform better in a declining market
than other equity funds. This Fund tends to seek higher yielding issues than the
market in general and this too can offer some downside protection.
- ---------------------
14
<PAGE>
DIVERSIFIED INCOME FUND
THE FUND'S EQUITY INVESTMENTS ARE CONCENTRATED IN LARGE COMPANIES. WHAT MAKES A
PARTICULAR LARGE COMPANY ATTRACTIVE TO YOU?
Large company stocks do offer some advantages for the Fund. For one, larger
companies generally have less volatility by virtue of their sheer size. The
market may over-react to bad news by pricing the stock too low, but the problem
is rarely fatal to a larger company because of the financial resources they have
at their disposal. There also is an element of visibility in larger companies
where their missteps or corporate problems get scrutiny from a wider audience.
Hence, there is an "urgency" to fix problems quickly.
WHAT ARE THE CHARACTERISTICS OF A "STRONG MANAGEMENT TEAM"?
To us, a strong management team has a clear business strategy, the ability to
execute the strategy and use capital effectively, and has its interests aligned
with shareholders.
ARE DIVIDEND YIELDS THE PRIMARY CONSIDERATION WHEN YOU SELECT A STOCK? HOW
IMPORTANT IS APPRECIATION?
Ultimately the Fund considers total return -- dividend income plus price
appreciation -- to be the most important factor. The Fund does seek strong
dividend yields, but every stock in the portfolio is not necessarily going to
have an above-market yield. For example, the Fund invests in technology stocks
even though these companies seldom have significant yields. We also look for
companies that we expect to increase dividends over time. In the current market,
where dividend yields are low compared to prices, appreciation does take on
increased importance.
DID THE PRESIDENTIAL ELECTION AFFECT THE STOCK MARKET?
The market does not like uncertainty, so the news that the balance of power
between a Republican Congress and a Democratic President was going to be
maintained was generally considered good news. The market has done very well the
past two years when the current political balance was reached, so preserving
this balance was greeted positively.
---------------------
15
<PAGE>
DIVERSIFIED INCOME FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 11/18/92
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR INCEPTION
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
With Maximum 5.25% Sales Charge 5.55% 14.67% 12.76%
- --------------------------------------------------------------------------------------
Without Sales Charge 11.40% 16.75% 14.15%
- --------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/1/95
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales Charge(1) 5.70% 19.40%
- --------------------------------------------------------------------------------------
Without Sales Charge 10.68% 20.46%
- --------------------------------------------------------------------------------------
(1)Assumes redemption on 3/31/97.
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
16
<PAGE>
DIVERSIFIED INCOME FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH DIVERSIFIED
INCOME
FUND CLASS A SHARES S&P 500 INDEX
<S> <C> <C>
Inception $9,550 $10,000
Nov-92 $9,636 $10,000
Dec-92 $9,847 $10,123
Jan-93 $9,952 $10,207
Feb-93 $9,962 $10,346
Mar-93 $10,213 $10,565
Apr-93 $10,068 $10,309
May-93 $10,357 $10,585
Jun-93 $10,370 $10,616
Jul-93 $10,419 $10,574
Aug-93 $10,835 $10,975
Sep-93 $10,747 $10,891
Oct-93 $11,089 $11,116
Nov-93 $10,884 $11,010
Dec-93 $11,062 $11,143
Jan-94 $11,421 $11,522
Feb-94 $11,211 $11,209
Mar-94 $10,708 $10,720
Apr-94 $10,849 $10,858
May-94 $11,050 $11,036
Jun-94 $10,862 $10,766
Jul-94 $11,207 $11,119
Aug-94 $11,602 $11,575
Sep-94 $11,392 $11,292
Oct-94 $11,351 $11,546
Nov-94 $10,943 $11,125
Dec-94 $11,070 $11,290
Jan-95 $11,142 $11,583
Feb-95 $11,616 $12,034
Mar-95 $11,960 $12,388
Apr-95 $12,249 $12,753
May-95 $12,570 $13,262
Jun-95 $12,690 $13,569
Jul-95 $12,993 $14,019
Aug-95 $13,087 $14,054
Sep-95 $13,558 $14,647
Oct-95 $13,411 $14,595
Nov-95 $14,115 $15,235
Dec-95 $14,410 $15,528
Jan-96 $14,734 $16,056
Feb-96 $15,015 $16,205
Mar-96 $15,296 $16,361
Apr-96 $15,557 $16,602
May-96 $15,817 $17,028
Jun-96 $15,774 $17,093
Jul-96 $14,932 $16,337
Aug-96 $15,457 $16,682
Sep-96 $16,190 $17,620
Oct-96 $16,311 $18,106
Nov-96 $17,410 $19,473
Dec-96 $17,596 $19,087
Jan-97 $17,585 $20,278
Feb-97 $17,807 $20,439
Mar-97 $17,040 $19,601
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE DIVERSIFIED INCOME FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Diversified
Income Fund Class A shares since inception with the S&P 500 Index. The chart
assumes a hypothetical $10,000 initial investment in Class A shares and reflects
all operating expenses and assumes the maximum initial sales charge of 5.25%.
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,
while the Fund is a professionally managed mutual fund. The index presented here
does not incur expenses and is not available directly for investment. Had this
index incurred operating expenses, its performance would have been lower.
---------------------
17
<PAGE>
EQUITY VALUE FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WERE THE FUND'S TOTAL RETURNS?
The total return for Class A shares for the six-month period ended March 31,
1997 was 15.63%. The total return for Class B shares for the same period was
15.31%. The one-year total returns were 21.43% and 20.74%, respectively. These
return figures exclude sales charges.
WHAT IS "VALUE" INVESTING? HOW DOES IT DIFFER FROM "GROWTH" STRATEGIES?
Value investing is a disciplined, opportunistic approach to buying stocks that
are perceived to be priced inexpensively relative to earnings, book value or
cash flow. Specifically, we look for stocks that are ranked in the lowest
quintile of the market by price-to-earnings ratio. Growth fund managers focus
primarily on the anticipated rate of earnings growth in companies and typically
are prepared to pay a higher price for stocks compared to a value strategy.
WHY HAS THE RECENT PERIOD BEEN SO FAVORABLE FOR VALUE STRATEGIES?
Value strategies benefited from investor concerns over the recent high
valuations on stocks in general. Many investors were, and remain, concerned that
underlying fundamentals do not justify the high prices many issues are enjoying.
Value strategies seek stocks selling for less than their intrinsic value. Many
investors who were nervous about high stock prices found value strategies to be
a relatively attractive way to participate in the equity markets.
WHAT MAKES LARGE COMPANY STOCKS ATTRACTIVE TO THE FUND?
The Fund is allowed to invest in a broad range of company, or "cap," sizes.
There is no strict mandate to favor large cap companies. That being said, there
are some advantages for the Fund in large cap investing. For one, larger cap
companies have a greater margin of safety by virtue of their sheer size. The
market may still over-react to bad news by pricing the stock too low, but the
problem is rarely fatal to the company. There is also a greater element of
visibility in larger companies where their missteps or corporate problems get
scrutiny from a wider audience. Hence, the urgency to fix problems is often
intensified for management.
ACCORDING TO THE FUND'S VALUE STRATEGY, WHEN DO YOU SELL A STOCK?
By definition, a value opportunity exists when a stock is priced cheaply
relative to its intrinsic value or some other measure of valuation. Therefore,
it is time to sell a stock when we believe it has reached its fair or intrinsic
valuation. As a practical matter, when we purchase a stock, we are expecting a
change to occur that will drive valuation up toward fair or intrinsic value.
When that change has occurred, we typically sell the stock. Of course, there is
always the possibility of a
- ---------------------
18
<PAGE>
EQUITY VALUE FUND
negative change occurring; if that happens, we re-evaluate our original
thinking.
HOW DOES A VALUE STRATEGY FUNCTION DURING A MARKET DECLINE? DOES THE FUND ADOPT
A DEFENSIVE POSITION?
A value strategy may act as a buffer in a market decline. Historically, most
value strategies focus on companies with solid fundamentals to find stocks that
are undervalued. Since this approach is by nature somewhat defensive, we
generally do not adopt a defensive position during a market decline.
DESCRIBE SOME OF THE FACTORS THAT CAUSE YOU TO SELECT ONE STOCK OVER ANOTHER?
Once we have identified a pool of stocks that are trading at a low
price-to-earnings ratio, we look for several other factors that make the stock
compelling. These factors can be grouped into two categories: catalysts and
management issues. Stocks are evaluated based on potential for a catalyst to
create a positive event over the next 6-12 months. Events can be from the usual
areas like earnings or sales, or from unusual areas, like settlement of
regulatory or litigation issues. The management factor is critical to our
success: we look for management that can articulate a clear, concise business
strategy and has a plan to implement the strategy. We also want management to
have an ownership stake and an incentive to drive the share price higher.
DO YOU LOOK AT PARTICULAR SECTORS? WHICH SECTORS HAVE DONE WELL? WHICH WERE
DISAPPOINTING?
We do not look at sectors, except to be sure that a portfolio does not have an
imprudently high weight in any single sector relative to the market. The
financial sector has performed very well over the past several years,
particularly in a strong economy with credit recovery and consolidation in the
industry. Basic Industrials have been disappointing as a broad sector, but
specific companies within the sector have performed very well.
HOW HAS THE CHANGE IN INVESTMENT ADVISER TO WELLS FARGO BANK AFFECTED THE FUND?
There has been no significant change to the investment objectives of the Fund.
The Fund is operated under the original value investment style that was used
when the Predecessor Fund was launched in 1990.
---------------------
19
<PAGE>
EQUITY VALUE FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 7/2/90
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
With Maximum 5.25% Sales Charge 15.03% 14.63% 15.19% 13.32%
- -----------------------------------------------------------------------------------------
Without Sales Charge 21.43% 16.70% 16.44% 14.22%
- -----------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 7/2/90
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 16.30% 15.20% 15.44% 13.46%
- -----------------------------------------------------------------------------------------
Without Sales Charge 20.74% 15.94% 15.67% 13.46%
- -----------------------------------------------------------------------------------------
(1)Assumes redemption on 3/31/97.
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
On September 6, 1996, the Fund was reorganized as the successor to the Pacifica
Equity Value Fund (7/90 to 9/96). Historical performance has been calculated
using returns produced by this Predecessor Fund for the applicable period. Class
A performance for the periods prior to September 6, 1996 reflects Pacifica
Equity Value Fund Investor Class shares. Class B performance for periods prior
to Septembernb]6, 1996, the date the Classnb]B shares were first offered, also
reflects such performance but has been adjusted to reflect Class B Share expense
levels in effect on 9/6/96.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
20
<PAGE>
EQUITY VALUE FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH EQUITY VALUE
FUND
CLASS A SHARES S&P 500 INDEX
<S> <C> <C>
Inception $9,550 $10,000
Jul-90 $9,502 $9,968
Aug-90 $8,471 $9,067
Sep-90 $8,098 $8,626
Oct-90 $8,013 $8,589
Nov-90 $8,589 $9,144
Dec-90 $8,887 $9,399
Jan-91 $9,149 $9,808
Feb-91 $9,732 $10,510
Mar-91 $10,013 $10,764
Apr-91 $9,906 $10,790
May-91 $10,218 $11,255
Jun-91 $9,730 $10,740
Jul-91 $10,151 $11,240
Aug-91 $10,396 $11,506
Sep-91 $10,289 $11,314
Oct-91 $10,357 $11,466
Nov-91 $9,727 $11,004
Dec-91 $10,736 $12,262
Jan-92 $10,887 $12,034
Feb-92 $11,089 $12,190
Mar-92 $10,947 $11,953
Apr-92 $11,211 $12,304
May-92 $11,079 $12,364
Jun-92 $10,867 $12,180
Jul-92 $11,193 $12,678
Aug-92 $10,816 $12,418
Sep-92 $10,990 $12,564
Oct-92 $11,123 $12,607
Nov-92 $11,604 $13,037
Dec-92 $11,867 $13,197
Jan-93 $12,310 $13,307
Feb-93 $12,511 $13,488
Mar-93 $12,996 $13,773
Apr-93 $12,784 $13,440
May-93 $13,208 $13,800
Jun-93 $13,367 $13,840
Jul-93 $13,516 $13,784
Aug-93 $14,144 $14,307
Sep-93 $14,091 $14,198
Oct-93 $14,327 $14,491
Nov-93 $14,284 $14,353
Dec-93 $14,931 $14,527
Jan-94 $15,572 $15,021
Feb-94 $15,414 $14,613
Mar-94 $14,743 $13,976
Apr-94 $14,804 $14,155
May-94 $14,950 $14,387
Jun-94 $14,640 $14,035
Jul-94 $14,957 $14,496
Aug-94 $15,433 $15,090
Sep-94 $15,147 $14,721
Oct-94 $15,061 $15,052
Nov-94 $14,522 $14,504
Dec-94 $14,676 $14,719
Jan-95 $14,518 $15,100
Feb-95 $15,082 $15,688
Mar-95 $15,475 $16,150
Apr-95 $15,897 $16,625
May-95 $16,385 $17,289
Jun-95 $16,491 $17,690
Jul-95 $17,167 $18,276
Aug-95 $17,233 $18,322
Sep-95 $17,658 $19,095
Oct-95 $17,272 $19,026
Nov-95 $18,031 $19,861
Dec-95 $18,227 $20,243
Jan-96 $18,561 $20,932
Feb-96 $18,797 $21,126
Mar-96 $19,299 $21,329
Apr-96 $19,689 $21,643
May-96 $19,982 $22,199
Jun-96 $19,815 $22,283
Jul-96 $18,933 $21,298
Aug-96 $19,395 $21,748
Sep-96 $20,178 $22,970
Oct-96 $21,260 $23,604
Nov-96 $22,957 $25,386
Dec-96 $23,050 $24,883
Jan-97 $23,941 $26,436
Feb-97 $24,314 $26,645
Mar-97 $23,435 $25,553
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE EQUITY VALUE FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Equity Value
Fund Class A shares since the inception of the Predecessor Fund with the S&P 500
Index. The chart assumes a hypothetical $10,000 initial investment in the Class
A shares and reflects all operating expenses and assumes the maximum initial
sales charge of 5.25%. 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, while the Fund is a professionally managed mutual
fund. The index presented here does not incur expenses and is not available
directly for investment. Had this index incurred operating expenses, its
performance would have been lower.
---------------------
21
<PAGE>
GROWTH AND INCOME FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WERE THE FUND'S TOTAL RETURNS?
The total return for Class A shares for the six-month period ended March 31,
1997 was 7.86%. The total return for Class B shares for the same period was
7.36%. The one-year total returns were 14.02% and 13.04% for Class A and B
shares, respectively. These return figures exclude sales charges.
HOW HAS THE FUND CAPTURED RETURNS? DID CERTAIN SECTORS DO WELL FOR THE FUND?
The fund has benefited from its positions in both the financial and technology
sectors. In the financial sector there was consolidation among banks and
increased productivity due to investment in technology. The technology sector
also continued to do well despite some short-term setbacks, and we continue to
be optimistic about its long range growth potential.
THE MARKET DECLINED SUBSTANTIALLY IN MARCH AND APRIL 1997. WHAT CAUSED THIS? HOW
HAS THE FUND REACTED?
Much of the market decline in March and April can be attributed to the recent
Federal Reserve increase in the federal funds target rate. The perception that
the economy is growing too fast and that accelerated inflation is on the horizon
contributed to the Fed's decision to act now rather than later. The Fund has
reacted by, among other things, reducing its exposure to stocks in sectors such
as banking which typically underperform in a rising interest rate environment,
and which appear to us to be over-valued according to its price-to-earnings
ratios or other measures. Overall, we believe the recent market slide to be a
relatively short-term phenomenon. We believe the market will adjust to the new
interest rate environment and that high growth sectors will continue to emerge.
WHAT IS THE DIFFERENCE BETWEEN A "VALUE" AND "GROWTH" STRATEGY? IS THIS A PURELY
"GROWTH" FUND?
A growth strategy focuses on stocks that have, or are expected to have, strong
earnings gains. Such stocks tend to have relatively high valuations, as measured
by price-to-book ratios and price-to-earnings ratios. Growth stocks often pay
low or no dividends since growth companies tend to reinvest profits into
expansion and development. While growth stocks have historically outperformed
other categories over time, they present investors with potentially higher risks
and greater volatility. Value strategies, by contrast, try to find stocks that
are selling for less than their intrinsic worth. A commonly used measure of a
value stock is to contrast its price with its earnings performance. Value
strategies believe that a stock will eventually rise to a price appropriate to
its earnings potential. This Fund focuses on stocks with growth characteristics,
but investments in undervalued stocks are made where it has been determined that
expectations meet the Fund's growth and other criteria.
- ---------------------
22
<PAGE>
GROWTH AND INCOME FUND
HOW DO YOU DECIDE THAT THE TIME HAS COME TO SELL A HOLDING?
A stock may be sold based on any one or a combination of factors. These factors
include a negative change in a company's fundamentals; significant appreciation
in the stock price relative to that company's expected future growth rate, which
would suggest that the stock has become overvalued; a short-term price gain
significant enough to warrant profit taking; or a more compelling investment
opportunity in another company.
WHAT IS MEANT BY "BOTTOM-UP" INVESTING? WHAT DISTINGUISHES A MANAGEMENT TEAM?
"Bottom-up" investing refers to an investment style where stocks are bought and
sold based on company-specific information and outlook without particular regard
to general economic trends. While the Fund's investments are made almost
entirely using "bottom up" practices, attention is paid to "top down" practices
as prudence dictates. An example of a top down decision would be paring down
financial stocks during a rising interest rate environment. A bottom up decision
might be to buy a particular financial stock regardless of interest rates
because the company's fundamentals make it attractive.
We assess company managements primarily on incentive compensation and management
ownership. Compensation should be based on stock performance by, for example,
granting stock options. Management ownership is also a key factor in ensuring
that management's interests are aligned with shareholders.
WALL STREET TENDS TO VOTE REPUBLICAN, YET THE MARKET RALLIED AFTER PRESIDENT
CLINTON WAS RE-ELECTED. IS THE EFFECT OF PRESIDENTIAL ELECTIONS ON THE STOCK
MARKET OVERSTATED?
Presidential election results have economic and market impact, however, we
believe their direct effect on the economy is muted. The economy, from a policy
perspective, is driven more by Federal Reserve policy, tax policy, and spending
trends, among others, each of which are affected by all three branches of the
Federal government.
---------------------
23
<PAGE>
GROWTH AND INCOME FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 8/2/90
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
With Maximum 5.25% Sales Charge 8.01% 15.28% 12.83% 13.56%
- ---------------------------------------------------------------------------------------
Without Sales Charge 14.02% 17.38% 14.05% 14.47%
- ---------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/1/95
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales Charge(1) 8.04% 20.21%
- --------------------------------------------------------------------------------------
Without Sales Charge 13.04% 21.27%
- --------------------------------------------------------------------------------------
(1)Assumes redemption on 3/31/97.
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gains distributions at net asset value.
The Growth and Income Fund commenced operations on January 1, 1992 as successor
to the Select Stock Fund of the Wells Fargo Investment Trust for Retirement
Programs. The Predecessor Fund's date of inception was August 2, 1990. The
performance figures shown for Class A shares include the performance of the
Predecessor Fund which had the same investment objectives and strategies.
Certain of the investment restrictions of the Stagecoach Growth and Income Fund
differ somewhat from those of the Predecessor Fund.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without these reductions, the Fund's returns would have been lower.
- ---------------------
24
<PAGE>
GROWTH AND INCOME FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH GROWTH AND INCOME
CLASS A SHARES S&P 500 INDEX
<S> <C> <C>
Inception $9,550 $10,000
Aug-90 $9,607 $9,096
Sep-90 $9,626 $8,653
Oct-90 $9,674 $8,617
Nov-90 $9,712 $9,174
Dec-90 $9,827 $9,429
Jan-91 $10,199 $9,840
Feb-91 $10,581 $10,543
Mar-91 $10,706 $10,799
Apr-91 $10,744 $10,824
May-91 $11,183 $11,291
Jun-91 $10,639 $10,774
Jul-91 $11,183 $11,276
Aug-91 $11,460 $11,543
Sep-91 $11,345 $11,350
Oct-91 $11,546 $11,503
Nov-91 $11,049 $11,039
Dec-91 $12,262 $12,302
Jan-92 $12,205 $12,073
Feb-92 $12,434 $12,229
Mar-92 $12,189 $11,991
Apr-92 $12,516 $12,343
May-92 $12,680 $12,404
Jun-92 $12,377 $12,219
Jul-92 $12,966 $12,718
Aug-92 $12,715 $12,458
Sep-92 $12,904 $12,604
Oct-92 $13,146 $12,648
Nov-92 $13,641 $13,079
Dec-92 $13,911 $13,239
Jan-93 $14,262 $13,350
Feb-93 $13,961 $13,532
Mar-93 $14,238 $13,817
Apr-93 $13,896 $13,483
May-93 $14,218 $13,844
Jun-93 $13,952 $13,885
Jul-93 $13,851 $13,829
Aug-93 $14,559 $14,353
Sep-93 $14,555 $14,243
Oct-93 $15,052 $14,538
Nov-93 $14,697 $14,399
Dec-93 $15,086 $14,573
Jan-94 $15,669 $15,069
Feb-94 $15,423 $14,660
Mar-94 $14,540 $14,021
Apr-94 $14,715 $14,201
May-94 $14,705 $14,434
Jun-94 $14,371 $14,080
Jul-94 $14,814 $14,542
Aug-94 $15,288 $15,138
Sep-94 $15,096 $14,768
Oct-94 $15,220 $15,100
Nov-94 $14,755 $14,550
Dec-94 $15,041 $14,766
Jan-95 $15,116 $15,149
Feb-95 $15,841 $15,738
Mar-95 $16,179 $16,202
Apr-95 $16,414 $16,679
May-95 $17,174 $17,344
Jun-95 $17,588 $17,747
Jul-95 $18,103 $18,335
Aug-95 $18,383 $18,381
Sep-95 $19,014 $19,156
Oct-95 $18,421 $19,088
Nov-95 $19,154 $19,925
Dec-95 $19,388 $20,309
Jan-96 $19,815 $20,999
Feb-96 $20,579 $21,194
Mar-96 $20,625 $21,398
Apr-96 $21,356 $21,712
May-96 $21,918 $22,270
Jun-96 $21,442 $22,355
Jul-96 $20,113 $21,367
Aug-96 $20,737 $21,818
Sep-96 $21,803 $23,044
Oct-96 $22,497 $23,680
Nov-96 $23,970 $25,468
Dec-96 $23,600 $24,964
Jan-97 $25,080 $26,521
Feb-97 $24,383 $26,731
Mar-97 $23,516 $25,635
</TABLE>
THE RETURN FOR CLASS B SHARES OF THE GROWTH AND INCOME FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Growth and
Income Fund Class A shares since the inception of the Predecessor Fund with the
S&P 500 Index. The chart assumes a hypothetical $10,000 initial investment in
the Class A shares and reflects all operating expenses and assumes the maximum
initial sales charge of 5.25%. 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, while the Fund is a professionally managed mutual
fund. The index presented here does not incur expenses and is not directly
available for investment. Had this index incurred operating expenses, its
performance would have been lower.
---------------------
25
<PAGE>
SMALL CAP FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WERE THE FUND'S TOTAL RETURNS?
The total return for Class A shares for the six-month period ended March 31,
1997 was -15.46%. The total return for Class B shares for the same period was
- -15.72%. The one-year total returns were -7.94% and -8.43%, respectively. These
return figures exclude sales charges.
THE FUND HAS BEEN EXPERIENCING SOME SETBACKS RECENTLY. WHAT ARE SOME OF THE
FACTORS AFFECTING THE FUND'S PERFORMANCE?
The largest factor affecting the Fund's performance has been the flow of
investment dollars into large company stocks rather than the smaller
capitalization "growth" stocks the Fund invests in. This move to large company
stocks has been fueled, in part, by fears of higher inflation and slower
economic growth. One of the ways in which these concerns have manifested
themselves has been in investor anxiety over earnings reports. To some extent, a
company's earnings and potential future earnings are what justify its high stock
prices. If earnings disappointments occur, prices can drop substantially,
particularly if there has also been a recent high rate of economic growth. Also,
if investors are nervous about general trends, not enough "good news" can be
perceived as "bad news.".
HAS THE DECLINE IN THESE SECTORS CHANGED YOUR FUNDAMENTAL OUTLOOK?
No. We are still very optimistic in our outlook for small cap stocks. In our
opinion, the underlying foundation for the bull market -- low inflation and
solid earnings growth -- remains intact. In fact, in our view the earnings
growth prospects for many smaller companies are especially attractive given
their current reduced valuations. The predicted timing of a turnaround is
difficult, but a catalyst such as lower interest rates, a balanced budget
amendment or strong cash flows into small cap mutual funds could propel the
entire group higher.
WHAT ARE THE SPECIAL PROBLEMS FACED BY A SMALL CAP FUND DURING A GENERAL MARKET
DECLINE? IS THERE A POTENTIAL LIQUIDITY PROBLEM AS MONEY RETREATS TO "SAFER"
INVESTMENTS?
A large part of the recent decline has been due to the lack of liquidity in
small cap stocks. However, small cap stocks are always less liquid then larger
cap issues, even when the market is going up. Due to the relatively small size
of this Fund, liquidity has not been a major problem in selling holdings or
establishing new positions.
- ---------------------
26
<PAGE>
SMALL CAP FUND
THE FUND IS REQUIRED TO SELL A COMPANY'S STOCK WHEN THE COMPANY REACHES TWO
BILLION DOLLARS IN CAPITALIZATION. SHORT OF REACHING THAT FIGURE, WHAT ARE SOME
OTHER FACTORS IN YOUR "SELL DISCIPLINE"?
We continually review our holdings and will sell for a variety of reasons. Some
of the key reasons might include a negative change in a company's fundamentals,
a stock price becomes significantly overvalued relative to its expected growth
rate, a concern about the management team or its effectiveness, or a more
compelling opportunity in another stock presents itself elsewhere.
WHAT ARE YOU LOOKING FOR IN A COMPANY'S MANAGEMENT TEAM?
Management is an important criterion we use when evaluating a company. Due to
the smaller size of the companies we buy, the ability of management is very
instrumental in our decision when buying a stock. We expect management to own a
substantial amount of stock and have their bonuses tied to the earnings of the
company and/or the performance of the stock.
---------------------
27
<PAGE>
SMALL CAP FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 11/1/94
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR INCEPTION
<S> <C> <C>
- -------------------------------------------------------------------------------------
With Maximum 5.25% Sales Charge (12.75)% 26.23%
- -------------------------------------------------------------------------------------
Without Sales Charge (7.94)% 29.05%
- -------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 11/1/94
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR INCEPTION
<S> <C> <C>
- --------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales Charge(1) (13.18)% 27.41%
- --------------------------------------------------------------------------------------
Without Sales Charge (8.43)% 28.29%
- --------------------------------------------------------------------------------------
(1)Assumes redemption on 3/31/97.
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach Small Cap Fund invests in a master portfolio which in turn
invests in individual securities. References to the investment policies of the
Fund are understood to be references to the investment policies of the Master
Portfolio.
The Small Cap Fund commenced operation on 9/16/96 as successor to the Small
Capitalization Growth Fund for Employee Retirement Plans, an unregistered bank
collective investment Fund (the "Predecessor Fund"). Inception date of the
Predecessor Fund was 11/1/94.
Performance figures shown for periods prior to 9/16/96 represent the performance
of the Predecessor Fund which had the same investment objective and strategies
as the Small Cap Fund. Performance figures also reflect expense differences
between the Predecessor Fund and those of the Class A and B shares in effect on
9/16/96.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without these reductions, the Fund's returns would have been lower.
- ---------------------
28
<PAGE>
SMALL CAP FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH SMALL CAP STAGECOACH SMALL CAP
FUND CLASS A SHARES FUND CLASS B SHARES S&P 500 INDEX
<S> <C> <C> <C>
Inception $9,550 $10,000 $10,000
Nov-94 $9,674 $10,120 $9,636
Dec-94 $10,075 $10,540 $9,779
Jan-95 $10,104 $10,560 $10,032
Feb-95 $10,658 $11,130 $10,423
Mar-95 $11,221 $11,720 $10,730
Apr-95 $11,536 $12,040 $11,046
May-95 $11,785 $12,300 $11,486
Jun-95 $13,026 $13,580 $11,753
Jul-95 $14,449 $15,060 $12,142
Aug-95 $14,478 $15,080 $12,173
Sep-95 $15,376 $16,000 $12,686
Oct-95 $14,898 $15,500 $12,641
Nov-95 $16,311 $16,960 $13,195
Dec-95 $17,037 $17,700 $13,449
Jan-96 $17,371 $18,040 $13,907
Feb-96 $18,374 $19,080 $14,036
Mar-96 $19,215 $19,940 $14,171
Apr-96 $21,774 $22,580 $14,379
May-96 $23,455 $24,300 $14,748
Jun-96 $21,688 $22,460 $14,805
Jul-96 $18,508 $19,160 $14,150
Aug-96 $20,485 $21,200 $14,449
Sep-96 $21,386 $21,663 $15,261
Oct-96 $19,947 $20,197 $15,682
Nov-96 $20,414 $20,660 $16,866
Dec-96 $21,052 $21,296 $16,532
Jan-97 $21,367 $20,605 $17,564
Feb-97 $19,442 $19,647 $17,702
Mar-97 $18,080 $17,958 $16,977
</TABLE>
The accompanying chart compares the performance of the Stagecoach Small Cap Fund
Class A and Class B shares since the inception of the Predecessor Fund with the
S&P 500 Index. The chart assumes a hypothetical $10,000 initial investment in
the Fund and reflects all operating expenses. For Class A shares, the chart
assumes the maximum initial sales charge of 5.25%. For Class B shares, the chart
assumes payment of the contingent deferred sale charge that would be applicable
if shares of the Fund were purchased in November 1994 and redeemed on March 31,
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,
while the Fund is a professionally managed mutual fund. The index presented here
does not incur expenses and is not directly available for investment. Had this
index incurred operating expenses, its performance would have been lower.
---------------------
29
<PAGE>
BALANCED FUND
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 55.88%
AEROSPACE - 2.23%
30,000 Rockwell International Corp $ 1,470,664 $ 1,946,250
AUTOMOBILE & RELATED - 2.55%
20,000 Dana Corp $ 611,600 $ 657,500
50,000 Ford Motor Co 1,488,375 1,568,750
------------ --------------
$ 2,099,975 $ 2,226,250
BASIC INDUSTRIES - 1.34%
60,000 Crompton & Knowles Corp $ 806,100 $ 1,170,000
BUILDING MATERIALS & SERVICES - 1.79%
25,000 Willamette Industries Inc $ 1,482,497 $ 1,562,501
CAPITAL GOODS - 3.57%
13,000 Harris Corp $ 1,015,020 $ 999,375
20,386 Kennametal Inc 755,673 738,993
30,000 Lancaster Colony Corp 1,153,749 1,380,000
------------ --------------
$ 2,924,442 $ 3,118,368
COMPUTER SYSTEMS - 1.10%
7,000 International Business Machines Corp $ 741,405 $ 961,625
ELECTRICAL EQUIPMENT - 3.62%
75,000 Lexmark International Group Inc Class A+ $ 1,540,482 $ 1,818,750
30,000 Seagate Technology Inc+ 662,310 1,346,250
------------ --------------
$ 2,202,792 $ 3,165,000
</TABLE>
- ------------------------
30
<PAGE>
BALANCED FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
ENERGY & RELATED - 6.23%
12,000 Atlantic Richfield Corp $ 1,417,555 $ 1,620,000
20,000 Cabot Corp 539,980 480,000
5,000 Mobil Corp 426,878 653,125
6,000 Royal Dutch Petroleum Co ADR (Netherlands) 676,918 1,050,000
15,000 Texaco Inc 1,135,095 1,642,500
------------ --------------
$ 4,196,426 $ 5,445,625
FINANCE & RELATED - 12.57%
24,000 Aetna Inc $ 1,545,404 $ 2,061,000
35,800 American Bankers Insurance Group 831,325 1,745,250
15,000 BankAmerica Corp 696,817 1,511,250
10,400 Chase Manhattan Bank 358,200 973,700
155,975 Mercury Financial Corp 373,265 409,434
30,000 NationsBank 928,277 1,661,250
29,400 Providian Corp 896,770 1,572,900
22,000 Travelers Group Inc 363,350 1,053,250
------------ --------------
$ 5,993,408 $ 10,988,034
FOOD & RELATED - 3.02%
76,000 Archer-Daniels-Midland Co $ 1,401,076 $ 1,358,500
11,200 Philip Morris Co Inc 627,548 1,278,200
------------ --------------
$ 2,028,624 $ 2,636,700
GENERAL BUSINESS & RELATED - 3.87%
51,000 Fremont General Corp $ 959,354 $ 1,434,375
10,000 General Electric Co 490,585 992,500
22,000 Hercules Inc 994,218 929,500
812 NCR Corp 26,986 28,623
------------ --------------
$ 2,471,143 $ 3,384,998
HEALTHCARE - 1.29%
40,000 Health System International Class A+ $ 1,038,824 $ 1,125,000
</TABLE>
---------------------
31
<PAGE>
BALANCED FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
MANUFACTURING PROCESSING - 2.61%
37,600 Unisource Worldwide Inc $ 737,909 $ 578,100
70,000 United Dominion Industries 1,684,599 1,706,250
------------ --------------
$ 2,422,508 $ 2,284,350
PHARMACEUTICALS - 2.38%
26,000 Bristol-Myers Squibb Co $ 766,374 $ 1,534,000
15,000 Pharmacia and Upjohn Inc 397,019 549,375
------------ --------------
$ 1,163,393 $ 2,083,375
RETAIL & RELATED - 3.00%
40,000 Costco Companies Inc+ $ 614,455 $ 1,105,000
36,000 Rite Aid Corp 1,065,539 1,512,000
------------ --------------
$ 1,679,994 $ 2,617,000
TELECOMMUNICATIONS - 1.93%
15,000 AT & T Corp $ 608,440 $ 521,250
25,000 GTE Corp 827,406 1,165,625
------------ --------------
$ 1,435,846 $ 1,686,875
UTILITIES - 2.78%
35,000 Cinergy Corp $ 1,087,820 $ 1,194,375
28,000 Duke Power Co 1,315,937 1,235,500
------------ --------------
$ 2,403,757 $ 2,429,875
TOTAL COMMON STOCKS $ 36,561,798 $ 48,831,826
</TABLE>
- ------------------------
32
<PAGE>
BALANCED FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 11.89%
BANK & FINANCE - 5.66%
$ 1,000,000 Associates Corp of America 6.32 % 02/28/00 $ 983,750
2,000,000 General Motors Acceptance Corp 6.88 07/15/01 1,975,000
1,000,000 Norwest Corp 7.13 04/01/00 1,006,250
1,000,000 Societe Generale 7.40 06/01/06 981,250
--------------
$ 4,946,250
FOREIGN CORPORATE BONDS - 4.38%
$ 1,000,000 Bank of Austria 7.25 % 02/15/17 $ 957,500
1,500,000 Ontario, Province of 7.38 01/27/03 1,515,000
1,500,000 Quebec, Province of 7.13 02/09/24 1,359,375
--------------
$ 3,831,875
INDUSTRIALS - 1.85%
$ 1,500,000 BP America Inc 9.38 % 11/01/00 $ 1,612,500
--------------
TOTAL CORPORATE BONDS & NOTES $ 10,390,625
(Cost $10,532,385)
U.S. GOVERNMENT AGENCY SECURITIES - 14.84%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.75%
$ 157,669 FHLMC # 546103 10.50 % 08/01/19 $ 170,243
119,844 FHLMC #22-0009 8.25 08/01/01 121,790
231,359 FHLMC #291786 8.50 01/01/09 238,240
119,746 FHLMC #303407 8.50 12/01/02 122,076
--------------
$ 652,349
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 8.18%
$ 550,351 FNMA #190526 6.00 % 01/01/01 $ 536,641
513,518 FNMA #190588 6.50 01/01/09 497,609
5,863,960 FNMA #351092 7.50 07/01/26 5,757,177
239,717 FNMA #57843 8.00 06/01/08 244,504
</TABLE>
---------------------
33
<PAGE>
BALANCED FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES (CONTINUED)
$ 8,421 FNMA #75336 9.50 % 02/01/09 $ 9,027
100,181 FNMA #83785 8.00 08/01/18 102,164
--------------
$ 7,147,122
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 5.91%
$ 1,151,052 GNMA #376200 9.00 % 06/15/25 $ 1,206,762
1,549,571 GNMA #403934 9.00 08/15/24 1,628,119
990,398 GNMA #423225 6.50 04/15/26 917,792
1,480,780 GNMA #426993 7.00 05/15/26 1,413,405
--------------
$ 5,166,078
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 12,965,549
(Cost $12,985,658)
U.S. TREASURY SECURITIES - 15.75%
U.S. TREASURY BONDS - 3.24%
$ 1,500,000 U.S. Treasury Bonds 6.25 % 08/15/23 $ 1,329,135
1,500,000 U.S. Treasury Bonds 7.25 05/15/16 1,506,795
--------------
$ 2,835,930
U.S. TREASURY NOTES - 12.51%
$ 4,500,000 U.S. Treasury Notes 6.25 % 02/15/03 $ 4,377,645
5,000,000 U.S. Treasury Notes 6.38 01/15/99 5,000,000
1,500,000 U.S. Treasury Notes 7.50 02/15/05 1,551,795
--------------
$ 10,929,440
TOTAL U.S. TREASURY SECURITIES $ 13,765,370
(Cost $14,039,943)
</TABLE>
- ------------------------
34
<PAGE>
BALANCED FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 2.31%
REPURCHASE AGREEMENTS - 2.31%
$ 887,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50 % 04/01/97 $ 887,000
1,127,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.30 04/01/97 1,127,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 2,014,000
(Cost $2,014,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $76,133,784)* (Notes 1 and 3) 100.67% $ 87,967,370
Other Assets and Liabilities, Net (0.67) (581,952)
------ --------------
TOTAL NET ASSETS 100.00% $ 87,385,418
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</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 $ 12,894,489
Gross Unrealized Depreciation (1,060,903)
------------
NET UNREALIZED APPRECIATION $ 11,833,586
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
35
<PAGE>
DIVERSIFIED INCOME FUND
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 93.88%
AEROSPACE - 2.24%
50,000 Lockheed Martin Corp $ 4,286,472 $ 4,200,000
AUTOMOBILE & RELATED - 7.81%
145,000 Dana Corp $ 4,065,690 $ 4,766,875
165,000 Ford Motor Co 4,931,780 5,176,875
100,000 Genuine Parts Co 4,444,058 4,662,500
------------ --------------
$ 13,441,528 $ 14,606,250
BASIC INDUSTRIES - 4.47%
170,000 Allegheny Teledyne Inc $ 3,921,579 $ 4,781,250
90,000 Olin Corp 3,160,427 3,577,500
------------ --------------
$ 7,082,006 $ 8,358,750
CAPITAL GOODS - 5.62%
50,000 Harris Corp $ 3,787,246 $ 3,843,750
70,000 Kennametal Inc 2,671,126 2,537,500
90,000 Lancaster Colony Corp 3,346,400 4,140,000
------------ --------------
$ 9,804,772 $ 10,521,250
COMPUTER SYSTEMS - 1.69%
23,000 International Business Machines Corp $ 2,242,400 $ 3,159,625
CONGLOMERATES - 1.86%
35,000 General Electric Co $ 1,884,452 $ 3,473,750
CONSUMER - BASIC - 2.35%
120,000 Pharmacia and Upjohn Inc $ 4,367,420 $ 4,395,000
</TABLE>
- ------------------------
36
<PAGE>
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT - 5.61%
120,000 AMP Inc $ 4,454,378 $ 4,125,000
185,000 Lexmark International Group Inc Class A+ 3,450,870 4,486,250
33,000 Tecumseh Products Co Class A 1,748,875 1,881,000
------------ --------------
$ 9,654,123 $ 10,492,250
ENERGY & RELATED - 8.58%
40,000 Atlantic Richfield Corp $ 4,630,918 $ 5,400,000
45,000 El Paso Natural Gas Co 1,518,182 2,548,125
11,500 Royal Dutch Petroleum Co 1,158,636 2,012,500
45,000 Sonat Inc 1,485,226 2,452,500
115,000 Ultramar Diamond Shamrock CP 3,137,693 3,651,250
------------ --------------
$ 11,930,655 $ 16,064,375
FINANCE & RELATED - 12.81%
45,000 Aetna Inc $ 3,038,475 $ 3,864,375
58,000 Bankers Trust N Y Corp 4,059,118 4,756,000
45,000 Chase Manhattan Bank 4,535,475 4,213,125
85,000 Household International Inc 4,567,935 7,299,375
34,000 Kilroy Realty Corp+ 782,000 905,250
599,200 Mercury Financial Corp 4,625,236 1,572,900
65,000 Security Capital Industrial Trust 1,132,180 1,356,875
------------ --------------
$ 22,740,419 $ 23,967,900
FOOD & RELATED - 2.32%
38,000 Philip Morris Co Inc $ 2,835,475 $ 4,336,750
GENERAL BUSINESS & RELATED - 10.35%
200,000 Fremont General Corp $ 5,993,711 $ 5,625,000
140,000 Goodrich (B F) Co 5,442,872 5,127,500
120,000 Hercules Inc 5,525,248 5,070,000
40,000 Loews Corp 3,186,324 3,555,000
------------ --------------
$ 20,148,155 $ 19,377,500
</TABLE>
---------------------
37
<PAGE>
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
MANUFACTURING PROCESSING - 3.39%
175,000 Unisource Worldwide Inc $ 3,509,728 $ 2,690,625
150,000 United Dominion Industries 3,349,726 3,656,250
------------ --------------
$ 6,859,454 $ 6,346,875
MEDICAL EQUIPMENT & SUPPLIES - 2.30%
100,000 Baxter International Inc $ 3,946,720 $ 4,312,500
PHARMACEUTICALS - 1.28%
40,000 American Home Products Corp $ 1,289,524 $ 2,400,000
PUBLISHING & MEDIA - 1.00%
65,000 Readers Digest Association Class A $ 2,640,421 $ 1,868,750
REAL ESTATE INVESTMENT TRUSTS - 2.90%
50,000 American Health Properties Inc $ 1,061,212 $ 1,231,250
35,000 Evans Withycombe Residential Inc 736,343 721,875
20,000 Post Properties Inc 626,600 762,500
45,000 Smith (Chars E) Residential Realty Inc 1,107,350 1,220,625
38,000 Spieker Properties Inc 865,065 1,482,000
------------ --------------
$ 4,396,570 $ 5,418,250
RETAIL & RELATED - 3.02%
134,500 Rite Aid Corp $ 4,260,500 $ 5,649,000
SEMICONDUCTORS - 1.87%
58,000 Motorola Inc $ 2,720,742 $ 3,501,750
TELECOMMUNICATIONS - 5.05%
152,000 Alltel Corp $ 4,226,665 $ 4,940,000
130,000 AT & T Corp 5,107,751 4,517,500
------------ --------------
$ 9,334,416 $ 9,457,500
TRANSPORTATION - 2.88%
95,000 Union Pacific Corp $ 4,683,573 $ 5,391,250
</TABLE>
- ------------------------
38
<PAGE>
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
UTILITIES - 4.48%
120,000 Duke Power Co $ 5,508,613 $ 5,295,000
135,000 Illinova Corp 3,587,300 3,088,125
------------ --------------
$ 9,095,913 $ 8,383,125
TOTAL COMMON STOCKS $159,645,710 $ 175,682,400
PREFERRED STOCKS - 0.88%
CONVERTIBLES - 0.88%
55,000 Browning-Ferris Industries Inc $ 1,896,080 $ 1,643,125
</TABLE>
---------------------
39
<PAGE>
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 1.31%
CONVERTIBLE CORPORATE BONDS - 1.31%
$ 2,450,000 U.S. Filter Corp 4.50% 12/15/01 $ 2,446,937
(Cost $2,449,997)
SHORT-TERM INSTRUMENTS - 4.46%
REPURCHASE AGREEMENTS - 4.46%
$ 4,715,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50% 04/01/97 $ 4,715,000
3,638,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.30 04/01/97 3,638,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 8,353,000
(Cost $8,353,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $172,344,787)* (Notes 1 and 3) 100.53% $ 188,125,462
Other Assets and Liabilities, Net (0.53) (992,112)
------ --------------
TOTAL NET ASSETS 100.00% $ 187,133,350
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</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 $ 24,356,028
Gross Unrealized Depreciation (8,575,353)
------------
NET UNREALIZED APPRECIATION $ 15,780,675
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
40
<PAGE>
EQUITY VALUE FUND
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 96.29%
AUTOMOBILE & RELATED - 4.04%
75,000 Dana Corp $ 2,227,625 $ 2,465,625
200,000 Ford Motor Co 5,957,750 6,275,000
------------ --------------
$ 8,185,375 $ 8,740,625
BASIC INDUSTRIES - 1.08%
120,000 Crompton & Knowles Corp $ 1,689,000 $ 2,340,000
BUILDING MATERIALS & SERVICES - 2.31%
80,000 Willamette Industries Inc $ 4,660,420 $ 4,999,998
CAPITAL GOODS - 5.73%
33,000 Harris Corp $ 2,576,588 $ 2,536,875
81,737 Kennametal Inc 3,024,606 2,962,966
150,000 Lancaster Colony Corp 5,636,866 6,900,000
------------ --------------
$ 11,238,060 $ 12,399,841
COMPUTER SYSTEMS - 2.22%
35,000 International Business Machines Corp $ 3,669,090 $ 4,808,125
ELECTRICAL EQUIPMENT - 7.52%
270,000 Lexmark International Group Inc Class A+ $ 5,411,711 $ 6,547,500
150,000 Seagate Technology Inc+ 2,401,265 6,731,250
160,000 Technitrol Inc 1,672,138 3,000,000
------------ --------------
$ 9,485,114 $ 16,278,750
ENERGY & RELATED - 10.58%
25,000 Atlantic Richfield Corp $ 2,953,240 $ 3,375,000
93,000 Cabot Corp 2,510,907 2,232,000
60,000 Exxon Corp 4,121,284 6,465,000
30,000 Mobil Corp 2,118,677 3,918,750
</TABLE>
---------------------
41
<PAGE>
EQUITY VALUE FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
24,000 Royal Dutch Petroleum Co ADR (Netherlands) $ 2,517,208 $ 4,200,000
24,890 Texaco Inc 1,571,829 2,725,455
------------ --------------
$ 15,793,145 $ 22,916,205
FINANCE & RELATED - 21.50%
90,000 Aetna Inc $ 6,017,961 $ 7,728,750
90,300 American Bankers Insurance Group 2,146,794 4,402,125
55,000 BankAmerica Corp 2,392,460 5,541,250
27,040 Chase Manhattan Bank 930,320 2,531,620
150,000 Edwards A G & Sons Inc 3,872,426 4,612,500
40,000 First Union Corp 1,969,173 3,245,000
692,861 Mercury Financial Corp 1,658,090 1,818,760
120,000 NationsBank 3,354,162 6,645,000
68,000 Providian Corp 2,058,634 3,638,000
41,900 Republic New York Corp 1,744,592 3,692,438
56,400 Travelers Group Inc 607,005 2,700,150
------------ --------------
$ 26,751,617 $ 46,555,593
FOOD & RELATED - 4.52%
300,000 Archer-Daniels-Midland Co $ 5,545,536 $ 5,362,500
38,700 Philip Morris Co Inc 2,113,537 4,416,638
------------ --------------
$ 7,659,073 $ 9,779,138
GENERAL BUSINESS & RELATED - 6.64%
202,550 Fremont General Corp $ 4,586,181 $ 5,696,719
45,000 General Electric Co 1,872,602 4,466,250
94,000 Hercules Inc 4,248,021 3,971,500
6,687 NCR Corp 216,644 235,717
------------ --------------
$ 10,923,448 $ 14,370,186
HEALTHCARE - 2.21%
170,000 Health System International Class A+ $ 4,428,165 $ 4,781,250
</TABLE>
- ------------------------
42
<PAGE>
EQUITY VALUE FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
MANUFACTURING PROCESSING - 6.55%
40,000 Johnson Controls Inc $ 2,360,389 $ 3,220,000
197,300 Owens-Illinois Inc+ 1,951,269 4,858,513
144,000 Unisource Worldwide Inc 2,854,995 2,214,000
160,000 United Dominion Industries 3,560,866 3,900,000
------------ --------------
$ 10,727,519 $ 14,192,513
PHARMACEUTICALS - 3.19%
80,000 Bristol-Myers Squibb Co $ 2,389,411 $ 4,720,000
60,000 Pharmacia and Upjohn Inc 1,588,076 2,197,500
------------ --------------
$ 3,977,487 $ 6,917,500
RETAIL & RELATED - 9.55%
250,000 Costco Companies Inc+ $ 3,676,250 $ 6,906,250
220,000 Rite Aid Corp 6,553,900 9,240,000
90,000 Sears Roebuck & Co 3,257,400 4,522,500
------------ --------------
$ 13,487,550 $ 20,668,750
TELECOMMUNICATIONS - 2.47%
60,000 AT & T Corp $ 2,471,839 $ 2,085,000
70,000 GTE Corp 2,314,373 3,263,750
------------ --------------
$ 4,786,212 $ 5,348,750
TRANSPORTATION - 2.28%
43,694 Conrail Inc $ 3,128,228 $ 4,926,499
UTILITIES - 3.90%
100,000 Cinergy Corp $ 2,838,307 $ 3,412,500
114,000 Duke Power Co 5,357,745 5,030,250
------------ --------------
$ 8,196,052 $ 8,442,750
TOTAL COMMON STOCKS $148,785,555 $ 208,466,473
</TABLE>
---------------------
43
<PAGE>
EQUITY VALUE FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 4.20%
REPURCHASE AGREEMENTS - 4.20%
$ 9,087,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50% 04/01/97 $ 9,087,000
(Cost $9,087,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $157,872,555)* (Notes 1 and 3) 100.49% $ 217,553,473
Other Assets and Liabilities, Net (0.49) (1,052,911)
------ --------------
TOTAL NET ASSETS 100.00% $ 216,500,562
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</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 $ 62,103,108
Gross Unrealized Depreciation (2,422,190)
------------
NET UNREALIZED APPRECIATION $ 59,680,918
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
44
<PAGE>
GROWTH & INCOME FUND
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 96.40%
ADVERTISING - 1.94%
126,600 Omnicom Group $ 3,398,779 $ 6,314,175
APPLIANCES AND FURNITURE - 3.09%
335,800 Sunbeam-Oster Co Inc $ 9,192,707 $ 10,074,000
AUTOMOBILE & RELATED - 2.99%
223,500 Danaher Corp $ 7,472,945 $ 9,303,188
1,400 General Motors Corp 78,576 77,525
6,800 General Motors Corp Class H 249,048 368,900
------------ --------------
$ 7,800,569 $ 9,749,613
BASIC INDUSTRIES - 8.49%
82,300 Aluminum Co of America $ 4,979,342 $ 5,596,400
51,800 Colgate-Palmolive Co 4,434,722 5,160,575
272,600 Monsanto Co 7,026,822 10,426,950
105,100 Nike Inc Class B 6,303,188 6,516,200
------------ --------------
$ 22,744,074 $ 27,700,125
COMMERCIAL SERVICES - 2.54%
278,400 Service Corp International $ 6,855,324 $ 8,282,400
COMPUTER SOFTWARE - 3.12%
200,400 First Data Corp $ 7,108,711 $ 6,788,550
88,100 Oracle Systems Corp+ 3,074,118 3,397,356
------------ --------------
$ 10,182,829 $ 10,185,906
</TABLE>
---------------------
45
<PAGE>
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
COMPUTER SYSTEMS - 4.57%
77,100 Cisco Systems Inc+ $ 2,740,191 $ 3,710,438
45,000 Compaq Computer Corp+ 3,548,801 3,448,125
1,620 Lucent Technologies Inc 72,062 85,455
320,508 Reynolds & Reynolds Co Class A 7,362,715 7,652,129
------------ --------------
$ 13,723,769 $ 14,896,147
ELECTRICAL EQUIPMENT - 2.04%
114,400 Nokia Corp ADR Class A $ 7,053,686 $ 6,663,800
ENERGY & RELATED - 9.22%
4,000 Amoco Corp $ 238,775 $ 346,500
100,900 Anadarko Petroleum Corp 4,952,184 5,663,013
31,800 Mobil Corp 2,959,758 4,153,875
160,500 Reading & Bates Corp+ 3,222,520 3,631,313
5,600 Schlumberger Ltd 391,467 600,600
112,800 Sonat Inc 3,522,823 6,147,600
27,600 Texaco Inc 1,914,586 3,022,200
13,500 Tosco Corp 139,638 384,750
61,000 Transocean Offshore Inc 3,863,955 3,423,625
87,090 U.S. Filter Corp 2,760,059 2,688,904
------------ --------------
$ 23,965,765 $ 30,062,380
FINANCE & RELATED - 18.11%
99,100 Aetna Inc $ 6,900,742 $ 8,510,213
72,500 American International Group Inc 7,502,279 8,509,688
14,000 Bank of New York Inc 221,138 514,500
56,700 Cali Realty Corp 1,514,324 1,814,400
35,000 Chase Manhattan Bank 3,389,942 3,276,875
57,300 Citicorp 2,859,800 6,202,725
259,600 Federal Home Loan Mortgage Corp 5,520,651 7,074,100
5,600 Federal National Mortgage Assoc 107,503 202,300
95,600 Household International Inc 4,472,204 8,209,650
280,700 MBNA Corp 5,588,545 7,824,513
5,800 Mellon Bank Corp 201,183 421,950
</TABLE>
- ------------------------
46
<PAGE>
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
155,800 Schwab (Charles) Corp $ 3,587,770 $ 4,966,125
74,300 Security Capital Industrial Trust 1,515,312 1,551,013
------------ --------------
$ 43,381,393 $ 59,078,052
FOOD & RELATED - 1.85%
8,000 Albertson's Inc $ 244,280 $ 272,000
6,000 CPC International Inc 410,885 492,000
7,500 McDonald's Corp 225,889 354,375
43,099 Philip Morris Co Inc 3,378,447 4,918,673
------------ --------------
$ 4,259,501 $ 6,037,048
GENERAL BUSINESS & RELATED - 3.95%
198,400 Corning Inc $ 7,292,529 $ 8,804,000
154,100 Corrections Corp of America+ 4,910,883 3,736,925
312 NCR Corp 8,621 10,998
8,000 Tribune Co 243,338 324,000
------------ --------------
$ 12,455,371 $ 12,875,923
HEALTHCARE - 1.99%
37,500 Conseco Inc $ 1,477,856 $ 1,335,938
208,900 Tenet Healthcare Corp+ 4,398,678 5,144,163
------------ --------------
$ 5,876,534 $ 6,480,101
MANUFACTURING PROCESSING - 4.53%
84,100 Allied Signal Inc $ 3,446,740 $ 5,992,125
84,400 Harsco Corp 2,396,829 3,070,050
75,200 Potash Corp of Saskatchewan Inc 5,293,543 5,715,200
------------ --------------
$ 11,137,112 $ 14,777,375
MEDICAL EQUIPMENT & SUPPLIES - 2.31%
6,900 Abbott Laboratories $ 233,541 $ 387,263
165,800 Baxter International Inc 6,841,360 7,150,125
------------ --------------
$ 7,074,901 $ 7,537,388
</TABLE>
---------------------
47
<PAGE>
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS - 2.87%
6,500 Merck & Co Inc $ 247,132 $ 547,625
46,000 Rhone-Poulenc Rorer Inc 3,396,997 3,404,000
77,100 Smithkline Beecham Plc 3,980,499 5,397,000
------------ --------------
$ 7,624,628 $ 9,348,625
REAL ESTATE INVESTMENT TRUSTS - 4.75%
112,100 Amli Residential Properties $ 2,438,175 $ 2,578,300
59,400 Equity Residential Properties Trust 2,450,250 2,635,875
148,600 Patriot American Hospitality Inc 3,177,426 3,603,550
100,000 Spieker Properties Inc 2,929,145 3,900,000
71,400 Starwood Lodging Trust 3,213,000 2,784,600
------------ --------------
$ 14,207,996 $ 15,502,325
RETAIL & RELATED - 4.40%
584,200 Corporate Express Inc+ $ 9,994,560 $ 5,988,050
23,000 Costco Companies Inc+ 390,500 635,375
86,200 Gillette Co 4,699,326 6,260,275
6,000 Home Depot Inc 264,475 321,000
7,000 May Department Stores Co 295,624 318,500
6,000 Medtronic Inc 316,741 373,500
11,000 Walgreen Co 327,267 460,619
------------ --------------
$ 16,288,493 $ 14,357,319
SEMICONDUCTORS - 4.00%
46,800 Intel Corp $ 2,474,427 $ 6,511,050
87,000 Micron Technology Inc 3,411,895 3,523,500
50,000 Motorola Inc 3,109,932 3,018,750
------------ --------------
$ 8,996,254 $ 13,053,300
</TABLE>
- ------------------------
48
<PAGE>
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS - 9.51%
182,700 Alltel Corp $ 4,668,120 $ 5,937,750
5,000 AT & T Corp 174,782 173,750
490,500 Ericson Telefonaktiebolaget L M Class B ADR 10,341,438 16,585,031
170,000 NEXTEL Communications Class A+ 3,056,134 2,273,750
5,500 SBC Communication Inc 232,000 289,438
170,000 U.S. West Inc 5,087,740 5,780,000
------------ --------------
$ 23,560,214 $ 31,039,719
UTILITIES - 0.13%
11,000 NIPSCO Industries Inc $ 333,508 $ 431,750
------------ --------------
TOTAL COMMON STOCKS $260,113,407 $ 314,447,471
</TABLE>
---------------------
49
<PAGE>
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 0.55%
CONVERTIBLE CORPORATE BONDS - 0.55%
$ 1,790,000 U.S. Filter Corp 4.50% 12/15/01 $ 1,787,763
(Cost $1,790,000)
SHORT-TERM INSTRUMENTS - 3.37%
REPURCHASE AGREEMENTS - 3.37%
$ 3,206,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50% 04/01/97 $ 3,206,000
7,792,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.30 04/01/97 7,792,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 10,998,000
(Cost $10,998,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $272,901,407)* (Notes 1 and 3) 100.32% $ 327,233,234
Other Assets and Liabilities, Net (0.32) (1,036,454)
------ --------------
TOTAL NET ASSETS 100.00% $ 326,196,780
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</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 $ 63,840,533
Gross Unrealized Depreciation (9,508,706)
------------
NET UNREALIZED APPRECIATION $ 54,331,827
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
50
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
---------------------
51
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - MARCH 31, 1997
<TABLE>
<CAPTION>
AGGRESSIVE
GROWTH BALANCED
FUND FUND
<S> <C> <C>
- ------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $43,746,480(3) $87,967,370
Cash 0 1,432
Receivables:
Dividends and Interest 0 518,912
Fund shares sold 114,332 0
Investment securities sold 0 26,479
Due from administrator 0 0
Organization expenses, net of
amortization 69,645 0
Prepaid expenses 601 29,123
TOTAL ASSETS 43,931,058 88,543,316
LIABILITIES
Payables:
Investment securities purchased 0 21,158
Distribution to shareholders 0 751,418
Fund shares redeemed 2,816 51,838
Due to sponsor and distributor (Note
2) 127,295 34,540
Due to WFB (Note 2) 26,850 260,304
Other 142,821 38,640
TOTAL LIABILITIES 299,782 1,157,898
TOTAL NET ASSETS $43,631,276 $87,385,418
NET ASSETS CONSIST OF:
Paid-in capital $52,736,520 $70,769,648
Undistributed net investment income
(loss) (223,309) 168,768
Undistributed net realized gain (loss)
on investments (5,331,807) 4,613,416
Net unrealized appreciation
(depreciation) of investments (3,550,128) 11,833,586
TOTAL NET ASSETS $43,631,276 $87,385,418
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A (1) $29,122,360 $31,632,136
Shares outstanding - Class A (1) 1,852,955 2,633,218
Net asset value per share - Class A (1) $ 15.72 $ 12.01
Maximum offering price per share - Class
A (1) $ 16.59(2) $ 12.68(2)
Net assets - Class B $14,508,916 $ 297,078
Shares outstanding - Class B 753,356 27,524
Net asset value and offering price per
share - Class B $ 19.26 $ 10.79
Net assets - Institutional Class N/A $55,456,204
Shares outstanding - Institutional Class N/A 4,622,245
Net asset value and offering price per
share - Institutional Class N/A $ 12.00
INVESTMENT AT COST (NOTE 3) N/A $76,133,784
- ------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) 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.
(3) INVESTMENT IN MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
- ------------------------
52
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - MARCH 31, 1997
<TABLE>
<CAPTION>
CORPORATE DIVERSIFIED EQUITY GROWTH AND
STOCK INCOME VALUE INCOME SMALL CAP
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $407,003,184(3) $188,125,462 $217,553,473 $327,233,234 $34,149,838(3)
Cash 0 1,236 1,242 1,243 0
Receivables:
Dividends and Interest 1,500,089 511,083 221,538 584,629 18,938
Fund shares sold 9,500 401,106 162,684 237,962 35,767
Investment securities sold 0 692,177 0 0 0
Due from administrator 0 0 0 0 38,379
Organization expenses, net of
amortization 0 17,169 0 8,296 39,654
Prepaid expenses 11,563 2,007 32,996 0 16,614
TOTAL ASSETS 408,524,336 189,750,240 217,971,933 328,065,364 34,299,190
LIABILITIES
Payables:
Investment securities purchased 0 918,624 93,984 0 0
Distribution to shareholders 913,292 763,249 630,800 351,554 0
Fund shares redeemed 0 176,765 19,717 30,096 0
Due to sponsor and distributor (Note
2) 209,026 133,271 69,728 176,586 50,032
Due to WFB (Note 2) 529,360 532,992 613,503 1,192,047 0
Other 134,042 91,989 43,639 118,301 37,448
TOTAL LIABILITIES 1,785,720 2,616,890 1,471,371 1,868,584 87,480
TOTAL NET ASSETS $406,738,616 $187,133,350 $216,500,562 $326,196,780 $34,211,710
NET ASSETS CONSIST OF:
Paid-in capital $200,975,144 $167,764,213 $143,398,773 $262,984,188 $38,945,360
Undistributed net investment income
(loss) 0 0 137,418 (1,392) 3,886
Undistributed net realized gain (loss)
on investments 3,624,202 3,588,462 13,283,453 8,882,157 (1,395,606)
Net unrealized appreciation
(depreciation) of investments 202,139,270 15,780,675 59,680,918 54,331,827 (3,341,930)
TOTAL NET ASSETS $406,738,616 $187,133,350 $216,500,562 $326,196,780 $34,211,710
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A (1) $406,738,616 $154,501,752 $ 20,798,101 $283,467,600 $ 3,106,767
Shares outstanding - Class A (1) 8,200,240 10,641,455 1,441,712 14,763,678 163,685
Net asset value per share - Class A (1) $ 49.60 $ 14.52 $ 14.43 $ 19.20 $ 18.98
Maximum offering price per share - Class
A (1) $ 49.60 $ 15.32(2) $ 15.23(2) $ 20.26(2) $ 20.03(2)
Net assets - Class B N/A $ 32,631,598 $ 2,541,657 $ 23,009,754 $ 1,904,921
Shares outstanding - Class B N/A 2,399,405 215,124 1,686,380 100,620
Net asset value and offering price per
share - Class B N/A $ 13.60 $ 11.81 $ 13.64 $ 18.93
Net assets - Institutional Class N/A N/A $193,160,804 $ 19,719,426 $29,200,022
Shares outstanding - Institutional Class N/A N/A 13,387,315 875,571 1,535,669
Net asset value and offering price per
share - Institutional Class N/A N/A $ 14.43 $ 22.52 $ 19.01
INVESTMENT AT COST (NOTE 3) N/A $172,344,787 $157,872,555 $272,901,407 N/A
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) 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.
(3) INVESTMENT IN MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
---------------------
53
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
----------------------------------
FOR THE SIX
MONTHS FROM MARCH 5, 1996
ENDED (COMMENCEMENT OF
MARCH 31, OPERATIONS) TO
1997 SEPT. 30, 1996
<S> <C> <C>
- -------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 5)
Dividends $ 22,986 $ 14,025
Interest 45,720 44,025
Expenses allocated from Master
Portfolio (137,104) (72,743)
TOTAL INVESTMENT INCOME (LOSS) (68,398) (14,693)
EXPENSES (NOTE 2)
Advisory fees 0 0
Administration fees 9,270 3,829
Custody fees 0 0
Shareholder servicing fees 58,516 31,915
Portfolio accounting fees 0 0
Transfer agency fees 10,482 0
Distribution fees 75,158 40,854
Amortization of organization expenses 7,814 0
Legal and audit fees 16,929 19,508
Registration fees 19,916 22,951
Directors' fees 2,490 2,869
Shareholder reports 37,344 43,033
Other 619 521
TOTAL EXPENSES 238,538 165,480
Less:
Waived fees and reimbursed expenses (27,618) (48,942)
Net Expenses 210,920 116,538
NET INVESTMENT INCOME (LOSS) (279,318) (131,231)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments (2,330,009)(1) (3,001,798)(1)
Net change in unrealized appreciation
(depreciation) of investments (7,301,392)(1) 3,751,264(1)
NET GAIN (LOSS) ON INVESTMENTS (9,631,401) 749,466
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(9,910,719) $ 618,235
- -------------------------------------------------------------------------------
</TABLE>
(1) ALLOCATED FROM THE MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
- ---------------------
54
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CORPORATE STOCK FUND
BALANCED FUND ----------------------------
------------------------------ FOR THE NINE
FOR THE SIX FOR THE FOR THE SIX MONTHS ENDED
MONTHS ENDED YEAR ENDED MONTHS ENDED SEPT. 30,
MARCH 31, 1997 SEPT. 30, 1996 MARCH 31, 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 5)
Dividends $ 572,621 $ 1,695,289 $ 3,948,941 $ 5,960,380
Interest 1,493,191 3,615,714 68,577 94,378
Expenses allocated from Master
Portfolio N/A N/A (943,703) (738,290)
TOTAL INVESTMENT INCOME (LOSS) 2,065,812 5,311,003 3,073,815 5,316,468
EXPENSES (NOTE 2)
Advisory fees 291,534 754,931 0 538,107
Administration fees 25,743 182,083 80,775 79,533
Custody fees 8,115 25,343 0 0
Shareholder servicing fees 121,506 88,471 606,930 793,396
Portfolio accounting fees 40,088 38,371 0 0
Transfer agency fees 36,991 131,243 248,521 339,133
Distribution fees 16,862 82,632 101,155 132,039
Amortization of organization expenses 0 4,329 0 0
Legal and audit fees 16,800 27,484 27,596 27,525
Registration fees 10,823 19,213 37,342 47,031
Directors' fees 2,300 6,640 2,489 3,743
Shareholder reports 16,647 63,759 89,580 149,729
Other 8,738 99,377 18,661 8,573
TOTAL EXPENSES 596,147 1,523,876 1,213,049 2,118,809
Less:
Waived fees and reimbursed expenses (115,650) (209,580) (194,840) (185,544)
Net Expenses 480,497 1,314,296 1,018,209 1,933,265
NET INVESTMENT INCOME (LOSS) 1,585,315 3,996,707 2,055,606 3,383,203
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 5,673,146 11,895,904 4,668,147(1) 7,781,779(1)
Net change in unrealized appreciation
(depreciation) of investments 957,295 3,445,959 32,614,123(1) 30,469,349(1)
NET GAIN (LOSS) ON INVESTMENTS 6,630,441 15,341,863 37,282,270 38,251,128
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 8,215,756 $ 19,338,570 $ 39,337,876 $ 41,634,331
- ------------------------------------------------------------------------------------------------------
<CAPTION>
DIVERSIFIED INCOME FUND
----------------------------
FOR THE SIX MONTHS ENDED
MONTHS ENDED SEPT. 30,
MARCH 31, 1997 1996
<S> <C> <C>
- ------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 5)
Dividends $ 2,410,296 $ 2,795,209
Interest 262,035 274,618
Expenses allocated from Master
Portfolio N/A N/A
TOTAL INVESTMENT INCOME (LOSS) 2,672,331 3,069,827
EXPENSES (NOTE 2)
Advisory fees 443,468 415,025
Administration fees 36,085 24,902
Custody fees 17,350 17,679
Shareholder servicing fees 266,081 249,015
Portfolio accounting fees 48,577 63,818
Transfer agency fees 85,896 93,582
Distribution fees 128,287 87,741
Amortization of organization expenses 7,229 10,843
Legal and audit fees 17,077 26,620
Registration fees 22,244 33,691
Directors' fees 2,489 3,743
Shareholder reports 37,330 56,149
Other 17,942 27,436
TOTAL EXPENSES 1,130,055 1,110,244
Less:
Waived fees and reimbursed expenses (68,985) (148,222)
Net Expenses 1,061,070 962,022
NET INVESTMENT INCOME (LOSS) 1,611,261 2,107,805
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 3,721,967 7,772,450
Net change in unrealized appreciation
(depreciation) of investments 2,318,759 2,900,227
NET GAIN (LOSS) ON INVESTMENTS 6,040,726 10,672,677
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 7,651,987 $ 12,780,482
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) ALLOCATED FROM THE MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
---------------------
55
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
EQUITY VALUE FUND
---------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPT. 30, 1996
<S> <C> <C>
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 5)
Dividends $ 2,261,031 $ 5,487,475
Interest 185,093 555,570
Expenses allocated from Master
Portfolio N/A N/A
TOTAL INVESTMENT INCOME (LOSS) 2,446,124 6,043,045
EXPENSES (NOTE 2)
Advisory fees 557,096 1,378,145
Administration fees 59,479 334,341
Custody fees 18,607 48,252
Shareholder servicing fees 278,548 67,531
Portfolio accounting fees 52,974 38,482
Transfer agency fees 77,309 90,763
Distribution fees 12,053 58,241
Amortization of organization expenses 0 0
Legal and audit fees 16,801 38,837
Registration fees 22,134 24,182
Directors' fees 2,300 6,638
Shareholder reports 12,401 38,489
Other 10,498 78,096
TOTAL EXPENSES 1,120,200 2,201,997
Less:
Waived fees and reimbursed expenses (54,206) (102,285)
Net Expenses 1,065,994 2,099,712
NET INVESTMENT INCOME (LOSS) 1,380,130 3,943,333
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 15,163,623 27,944,178
Net change in unrealized appreciation
(depreciation) of investments 15,837,356 17,614,459
NET GAIN (LOSS) ON INVESTMENTS 31,000,979 45,558,637
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 32,381,109 $ 49,501,970
- ------------------------------------------------------------------------------
</TABLE>
(1) ALLOCATED FROM THE MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
- ---------------------
56
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SMALL CAP FUND
GROWTH AND INCOME FUND ------------------------------------
---------------------------- FROM SEPT. 16,
FOR THE NINE 1996
FOR THE SIX MONTHS ENDED FOR THE SIX (COMMENCEMENT OF
MONTHS ENDED SEPT. 30, MONTHS ENDED OPERATIONS) TO
MARCH 31, 1997 1996 MARCH 31, 1997 SEPT. 30, 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 5)
Dividends $ 2,444,201 $ 2,354,260 $ 28,313 $ 374
Interest 423,928 571,670 107,875 4,319
Expenses allocated from Master
Portfolio N/A N/A (110,341) (9,948)
TOTAL INVESTMENT INCOME (LOSS) 2,868,129 2,925,930 25,847 (5,255)
EXPENSES (NOTE 2)
Advisory fees 782,529 799,899 0 0
Administration fees 64,992 51,193 8,027 492
Custody fees 31,291 33,248 0 0
Shareholder servicing fees 478,131 457,088 37,310 2,460
Portfolio accounting fees 62,871 76,649 0 0
Transfer agency fees 175,860 217,737 10,523 689
Distribution fees 134,535 116,855 4,168 2
Amortization of organization expenses 1,327 1,960 5,377 348
Legal and audit fees 13,100 19,966 26,893 2,664
Registration fees 26,146 36,888 17,455 1,230
Directors' fees 2,490 3,630 2,490 205
Shareholder reports 74,683 108,869 10,958 820
Other 28,983 110,106 5,024 286
TOTAL EXPENSES 1,876,938 2,034,088 128,225 9,196
Less:
Waived fees and reimbursed expenses (2,415) (15,737) (118,900) (1,815)
Net Expenses 1,874,523 2,018,351 9,325 7,381
NET INVESTMENT INCOME (LOSS) 993,606 907,579 16,522 (12,636)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 10,102,690 14,694,253 (1,454,225)(1) 58,619(1)
Net change in unrealized appreciation
(depreciation) of investments 11,068,414 10,252,699 (3,802,835)(1) 460,905(1)
NET GAIN (LOSS) ON INVESTMENTS 21,171,104 24,946,952 (5,257,060) 519,524
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 22,164,710 $ 25,854,531 $ (5,240,538) $ 506,888
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ALLOCATED FROM THE MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
---------------------
57
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
----------------------------------
FROM MARCH 5, 1996
FOR THE SIX (COMMENCEMENT OF
MONTHS ENDED OPERATIONS) TO
MARCH 31, 1997 SEPT. 30, 1996
<S> <C> <C>
- ----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ (279,318) $ (131,231)
Net realized gain (loss) on sale of
investments (2,330,009) (3,001,798)
Net change in unrealized appreciation
(depreciation) of investments (7,301,392) 3,751,264
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (9,910,719) 618,235
NET EQUALIZATION CREDITS (DEBITS) 0 0
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A 0 0
CLASS B 0 0
INSTITUTIONAL CLASS N/A N/A
In excess of net investment income
CLASS A 0 0
CLASS B 0 0
INSTITUTIONAL CLASS N/A N/A
From net realized gain on sale of
investments
CLASS A 0 0
CLASS B 0 0
INSTITUTIONAL CLASS N/A N/A
In excess of net realized gain on sale
of investments
CLASS A 0 0
CLASS B 0 0
INSTITUTIONAL CLASS N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 15,714,662 30,688,418
Reinvestment of dividends - Class A 0 0
Cost of shares redeemed - Class A (6,971,041) (4,299,728)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 8,743,621 26,388,690
Proceeds from shares sold - Class B 6,379,072 15,306,682
Reinvestment of dividends - Class B 0 0
Cost of shares redeemed - Class B (3,026,344) (867,961)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 3,352,728 14,438,721
Proceeds from shares sold -
Institutional Class N/A N/A
Reinvestment of dividends -
Institutional Class N/A N/A
Cost of shares redeemed -
Institutional Class N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS N/A N/A
INCREASE (DECREASE) IN NET ASSETS 2,185,630 41,445,646
NET ASSETS:
Beginning net assets 41,445,646 0
ENDING NET ASSETS $ 43,631,276 $ 41,445,646
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ---------------------
58
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED FUND
------------------------------------------
FOR THE FOR THE
FOR THE SIX YEAR ENDED YEAR ENDED
MONTHS ENDED SEPT. 30, SEPT. 30,
MARCH 31, 1997 1996 1995
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 1,585,315 $ 3,996,707 $ 3,914,845
Net realized gain (loss) on sale of
investments 5,673,146 11,895,904 38,123
Net change in unrealized appreciation
(depreciation) of investments 957,295 3,445,959 5,217,447
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 8,215,756 19,338,570 9,170,415
NET EQUALIZATION CREDITS (DEBITS) 0 0 (110,805)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (524,249) (1,030,389) (3,890,856)
CLASS B (785) 0 0
INSTITUTIONAL CLASS (1,028,637) (2,871,649) 0
In excess of net investment income
CLASS A 0 0 0
CLASS B 0 0 0
INSTITUTIONAL CLASS 0 (23,043) 0
From net realized gain on sale of
investments
CLASS A (505,037) (3,380,108) (4,373,450)
CLASS B (331) 0 0
INSTITUTIONAL CLASS (1,013,783) (8,265,228) 0
In excess of net realized gain on sale
of investments
CLASS A 0 0 0
CLASS B 0 0 0
INSTITUTIONAL CLASS 0 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 1,158,984 15,479,177 12,865,491
Reinvestment of dividends - Class A 812,743 4,242,084 7,817,760
Cost of shares redeemed - Class A (4,580,742) (76,589,659) (40,734,756)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (2,609,015) (56,868,398) (20,051,505)
Proceeds from shares sold - Class B 304,255 1,549 0
Reinvestment of dividends - Class B 452 0 0
Cost of shares redeemed - Class B (1,579) 0 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 303,128 1,549 0
Proceeds from shares sold -
Institutional Class 3,125,636 115,568,034 0
Reinvestment of dividends -
Institutional Class 1,651,464 10,566,690 0
Cost of shares redeemed -
Institutional Class (25,197,171) (57,101,263) 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS (20,420,071) 69,033,461 0
INCREASE (DECREASE) IN NET ASSETS (17,583,024) 15,934,765 (19,256,201)
NET ASSETS:
Beginning net assets 104,968,442 89,033,677 108,289,878
ENDING NET ASSETS $ 87,385,418 $104,968,442 $ 89,033,677
- ------------------------------------------------------------------------------------
<CAPTION>
CORPORATE STOCK FUND
------------------------------------------
FOR THE NINE FOR THE
FOR THE SIX MONTHS ENDED YEAR ENDED
MONTHS ENDED SEPT. 30, DEC. 31,
MARCH 31, 1997 1996 1995
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 2,055,606 $ 3,383,203 $ 4,577,228
Net realized gain (loss) on sale of
investments 4,668,147 7,781,779 6,005,161
Net change in unrealized appreciation
(depreciation) of investments 32,614,123 30,469,349 76,552,587
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 39,337,876 41,634,331 87,134,976
NET EQUALIZATION CREDITS (DEBITS) 0 0 0
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (2,055,606) (3,383,203) (4,577,228)
CLASS B N/A N/A N/A
INSTITUTIONAL CLASS N/A N/A N/A
In excess of net investment income
CLASS A 0 0 0
CLASS B N/A N/A N/A
INSTITUTIONAL CLASS N/A N/A N/A
From net realized gain on sale of
investments
CLASS A (9,940,251) 0 (4,890,634)
CLASS B N/A N/A N/A
INSTITUTIONAL CLASS N/A N/A N/A
In excess of net realized gain on sale
of investments
CLASS A 0 0 0
CLASS B N/A N/A N/A
INSTITUTIONAL CLASS N/A N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 29,911,449 50,105,623 42,931,593
Reinvestment of dividends - Class A 12,250,397 3,297,986 17,597,071
Cost of shares redeemed - Class A (33,204,510) (48,423,346) (47,253,329)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 8,957,336 4,980,263 13,275,335
Proceeds from shares sold - Class B N/A N/A N/A
Reinvestment of dividends - Class B N/A N/A N/A
Cost of shares redeemed - Class B N/A N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B N/A N/A N/A
Proceeds from shares sold -
Institutional Class N/A N/A N/A
Reinvestment of dividends -
Institutional Class N/A N/A N/A
Cost of shares redeemed -
Institutional Class N/A N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS N/A N/A N/A
INCREASE (DECREASE) IN NET ASSETS 36,299,355 43,231,391 90,942,449
NET ASSETS:
Beginning net assets 370,439,261 327,207,870 236,265,421
ENDING NET ASSETS $ 406,738,616 $370,439,261 $327,207,870
- ------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
59
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DIVERSIFIED INCOME FUND
------------------------------------------
FOR THE NINE FOR THE
FOR THE SIX MONTHS ENDED YEAR ENDED
MONTHS ENDED SEPT. 30, DEC. 31,
MARCH 31, 1997 1996 1995
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 1,611,261 $ 2,107,805 $ 1,871,560
Net realized gain (loss) on sale of
investments 3,721,967 7,772,450 3,545,900
Net change in unrealized appreciation
(depreciation) of investments 2,318,759 2,900,227 10,976,829
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 7,651,987 12,780,482 16,394,289
NET EQUALIZATION CREDITS (DEBITS) 0 0 0
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (1,444,267) (1,963,354) (1,819,692)
CLASS B (166,994) (144,451) (51,868)
INSTITUTIONAL CLASS N/A N/A N/A
In excess of net investment income
CLASS A 0 0 0
CLASS B 0 0 0
INSTITUTIONAL CLASS N/A N/A N/A
From net realized gain on sale of
investments
CLASS A (8,166,226) 0 (1,621,942)
CLASS B (1,285,280) 0 (104,647)
INSTITUTIONAL CLASS N/A N/A N/A
In excess of net realized gain on sale
of investments
CLASS A 0 0 0
CLASS B 0 0 0
INSTITUTIONAL CLASS N/A N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 35,798,695 67,375,546 36,625,693
Reinvestment of dividends - Class A 9,310,171 1,611,353 3,084,339
Cost of shares redeemed - Class A (22,697,752) (24,014,045) (17,324,191)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 22,411,114 44,972,854 22,385,841
Proceeds from shares sold - Class B 17,492,675 11,955,056 5,158,139
Reinvestment of dividends - Class B 1,383,252 90,711 122,225
Cost of shares redeemed - Class B (2,435,546) (1,314,702) (324,353)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 16,440,381 10,731,065 4,956,011
Proceeds from shares sold -
Institutional Class N/A N/A N/A
Reinvestment of dividends -
Institutional Class N/A N/A N/A
Cost of shares redeemed -
Institutional Class N/A N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS N/A N/A N/A
INCREASE (DECREASE) IN NET ASSETS 35,440,715 66,376,596 40,137,992
NET ASSETS:
Beginning net assets 151,692,635 85,316,039 45,178,047
ENDING NET ASSETS $ 187,133,350 $151,692,635 $ 85,316,039
- ------------------------------------------------------------------------------------
</TABLE>
(1) "PROCEEDS FROM SHARES SOLD" INCLUDES $628,555 FOR CLASS A AND $17,334,017
FOR THE INSTITUTIONAL CLASS, AS A RESULT OF THE MERGER OF THE PACIFICA
GROWTH FUND. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
- ---------------------
60
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
EQUITY VALUE FUND
-------------------------------------------
FOR THE FOR THE
FOR THE SIX YEAR ENDED YEAR ENDED
MONTHS ENDED SEPT. 30, SEPT. 30,
MARCH 31, 1997 1996 1995
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 1,380,130 $ 3,943,333 $ 3,267,649
Net realized gain (loss) on sale of
investments 15,163,623 27,944,178 8,515,659
Net change in unrealized appreciation
(depreciation) of investments 15,837,356 17,614,459 13,330,878
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 32,381,109 49,501,970 25,114,186
NET EQUALIZATION CREDITS (DEBITS) 0 0 (68,961)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (111,000) (271,396) 0
CLASS B (1,028) 0 0
INSTITUTIONAL CLASS (1,113,606) (3,536,140) (3,267,649)
In excess of net investment income
CLASS A 0 0 0
CLASS B 0 0 0
INSTITUTIONAL CLASS 0 (152,875) (118,088)
From net realized gain on sale of
investments
CLASS A (165,769) (3,065,374) 0
CLASS B (864) 0 0
INSTITUTIONAL CLASS (1,716,939) (33,389,091) (8,515,659)
In excess of net realized gain on sale
of investments
CLASS A 0 0 0
CLASS B 0 0 0
INSTITUTIONAL CLASS 0 0 (1,098,738)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 3,128,244 65,541,864 0
Reinvestment of dividends - Class A 222,206 3,103,800 0
Cost of shares redeemed - Class A (3,807,382) (184,207,991) 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (456,932) (115,562,327) 0
Proceeds from shares sold - Class B 2,636,307 26 0
Reinvestment of dividends - Class B 973 0 0
Cost of shares redeemed - Class B (10,349) 0 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 2,626,931 26 0
Proceeds from shares sold -
Institutional Class 13,701,832 190,586,130 98,056,766
Reinvestment of dividends -
Institutional Class 1,877,441 32,111,369 10,889,321
Cost of shares redeemed -
Institutional Class (55,593,181) (61,556,058) (119,436,631)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS (40,013,908) 161,141,441 (10,490,544)
INCREASE (DECREASE) IN NET ASSETS (8,572,006) 54,666,234 1,554,547
NET ASSETS:
Beginning net assets 225,072,568 170,406,334 168,851,787
ENDING NET ASSETS $ 216,500,562 $225,072,568 $ 170,406,334
- -------------------------------------------------------------------------------------
<CAPTION>
GROWTH AND INCOME FUND
-----------------------------------------------
FOR THE
FOR THE SIX FOR THE NINE YEAR ENDED
MONTHS ENDED MONTHS ENDED DEC. 31,
MARCH 31, 1997 SEPT. 30, 1996(1) 1995
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 993,606 $ 907,579 $ 1,835,782
Net realized gain (loss) on sale of
investments 10,102,690 14,694,253 9,354,459
Net change in unrealized appreciation
(depreciation) of investments 11,068,414 10,252,699 25,841,652
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 22,164,710 25,854,531 37,031,893
NET EQUALIZATION CREDITS (DEBITS) 0 0 0
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (921,552) (902,578) (1,827,656)
CLASS B 0 0 (8,126)
INSTITUTIONAL CLASS (77,222) (11,005) 0
In excess of net investment income
CLASS A 0 0 0
CLASS B 0 0 0
INSTITUTIONAL CLASS 0 0 0
From net realized gain on sale of
investments
CLASS A (769,667) (14,220,794) (6,952,008)
CLASS B (47,154) (490,320) (179,310)
INSTITUTIONAL CLASS (54,088) 0 0
In excess of net realized gain on sale
of investments
CLASS A 0 (2,238,898) 0
CLASS B 0 (358,700) 0
INSTITUTIONAL CLASS 0 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 44,283,158 92,986,116 61,077,854
Reinvestment of dividends - Class A 1,571,703 17,197,210 11,706,310
Cost of shares redeemed - Class A (35,197,194) (40,873,885) (35,699,783)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 10,657,667 69,309,441 37,084,381
Proceeds from shares sold - Class B 11,003,396 8,483,020 4,557,982
Reinvestment of dividends - Class B 47,228 848,356 184,612
Cost of shares redeemed - Class B (1,557,385) (1,258,949) (246,518)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 9,493,239 8,072,427 4,496,076
Proceeds from shares sold -
Institutional Class 4,135,758 17,995,025 0
Reinvestment of dividends -
Institutional Class 66,661 0 0
Cost of shares redeemed -
Institutional Class (4,289,351) (341,372) 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS (86,932) 17,653,653 0
INCREASE (DECREASE) IN NET ASSETS 40,359,001 102,667,757 69,645,250
NET ASSETS:
Beginning net assets 285,837,779 183,170,022 113,524,772
ENDING NET ASSETS $ 326,196,780 $ 285,837,779 $183,170,022
- -------------------------------------------------------------------------------------
</TABLE>
(1) "PROCEEDS FROM SHARES SOLD" INCLUDES $628,555 FOR CLASS A AND $17,334,017
FOR THE INSTITUTIONAL CLASS, AS A RESULT OF THE MERGER OF THE PACIFICA
GROWTH FUND. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
---------------------
61
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL CAP FUND
-----------------------------------
FROM SEPT. 16,
1996
FOR THE SIX (COMMENCEMENT OF
MONTHS ENDED OPERATIONS) TO
MARCH 31, 1997 SEPT. 30, 1996
<S> <C> <C>
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 16,522 $ (12,636)
Net realized gain (loss) on sale of
investments (1,454,225) 58,619
Net change in unrealized appreciation
(depreciation) of investments (3,802,835) 460,905
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (5,240,538) 506,888
NET EQUALIZATION CREDITS (DEBITS) 0 0
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A 0 0
CLASS B 0 0
INSTITUTIONAL CLASS 0 0
In excess of net investment income
CLASS A 0 0
CLASS B 0 0
INSTITUTIONAL CLASS 0 0
From net realized gain on sale of
investments
CLASS A 0 0
CLASS B 0 0
INSTITUTIONAL CLASS 0 0
In excess of net realized gain on sale
of investments
CLASS A 0 0
CLASS B 0 0
INSTITUTIONAL CLASS 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 3,967,857 94,136
Reinvestment of dividends - Class A 0 0
Cost of shares redeemed - Class A (556,553) 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 3,411,304 94,136
Proceeds from shares sold - Class B 2,296,961 25
Reinvestment of dividends - Class B 0 0
Cost of shares redeemed - Class B (163,976) 0
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 2,132,985 25
Proceeds from shares sold -
Institutional Class 12,246,405 24,103,344
Reinvestment of dividends -
Institutional Class 0 0
Cost of shares redeemed -
Institutional Class (2,987,916) (54,923)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS 9,258,489 24,048,421
INCREASE (DECREASE) IN NET ASSETS 9,562,240 24,649,470
NET ASSETS:
Beginning net assets 24,649,470 0
ENDING NET ASSETS $ 34,211,710 $ 24,649,470
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ---------------------
62
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
---------------------
63
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND (2)
------------------------------------------------------
CLASS A CLASS B
------------------------ ------------------------
SIX SIX
MONTHS PERIOD MONTHS PERIOD
ENDED ENDED ENDED ENDED
MARCH 31, SEPT. 30, MARCH 31, SEPT. 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $19.40 $17.75 $23.86 $21.90
--------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) (0.07) (0.05) (0.15) (0.10)
Net realized and unrealized
gain (loss) on investments (3.61) 1.70 (4.45) 2.06
--------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS (3.68) 1.65 (4.60) 1.96
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 $15.72 $19.40 $19.26 $23.86
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) (18.97)% 9.85% (19.28)% 9.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $29,122 $26,902 $14,509 $14,544
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average
net assets 1.26%(3) 1.23%(3) 1.94%(3) 1.91%(3)
Ratio of net investment income
(loss) to average net assets (0.97)%(3) (0.79)%(3) (1.65)%(3) (1.45)%(3)
Portfolio turnover N/A N/A N/A N/A
Average commission rate paid (1) N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net
assets prior to waived fees
and reimbursed expenses 1.38%(3) 1.60%(3) 2.04%(3) 2.29%(3)
Ratio of net investment income
(loss) to average net assets
prior to waived fees and
reimbursed expenses (1.09)%(3) (1.16)%(3) (1.75)%(3) (1.83)%(3)
- ----------------------------------------------------------------------------------------
</TABLE>
* PER SHARE DATA BASED UPON AVERAGE MONTHLY SHARES OUTSTANDING.
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND COMMENCED OPERATIONS ON MARCH 5, 1996.
(3) THIS RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(4) THE FUND OPERATED AS A SERIES OF PACIFICA FUNDS TRUST FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND. PRIOR TO APRIL 1, 1996, THE FUND WAS ADVISED BY
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM). 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.
The accompanying notes are an integral part of these financial statements.
- ---------------------
64
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
BALANCED FUND (4)
----------------------------------------------------------------
CLASS A
----------------------------------------------------------------
SIX
MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $11.46 $11.84 $11.67 $12.71 $11.18 $10.80
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.19 0.36 0.46* 0.43* 0.44* 0.42*
Net realized and
unrealized gain (loss)
on investments 0.74 0.89 0.68* (0.13)* 1.72* 0.53*
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 0.93 1.25 1.14 0.30 2.16 0.95
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.19) (0.35) (0.47) (0.46) (0.43) (0.43)
Distributions from net
realized gain (0.19) (1.28) (0.50) (0.88) (0.20) (0.14)
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.38) (1.63) (0.97) (1.34) (0.63) (0.57)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $12.01 $11.46 $11.84 $11.67 $12.71 $11.18
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) 8.15% 10.51% 10.62% 2.30% 19.83% 9.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $31,632 $32,640 $89,034 $108,290 $104,434 $65,226
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.05% 1.31% 1.03% 1.09% 1.01% 1.02%
Ratio of net investment
income (loss) to average
net assets 3.20% 2.98% 4.05% 3.55% 3.62% 3.76%
Portfolio turnover 43% 131% 90% 35% 60% 49%
Average commission rate paid
(1) $0.0802 $0.0603 N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.30% 1.48% 1.05% 1.11% 1.06% 1.10%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 2.95% 2.81% 4.03% 3.53% 3.57% 3.68%
- ----------------------------------------------------------------------------------------------
</TABLE>
* PER SHARE DATA BASED UPON AVERAGE MONTHLY SHARES OUTSTANDING.
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND COMMENCED OPERATIONS ON MARCH 5, 1996.
(3) THIS RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(4) THE FUND OPERATED AS A SERIES OF PACIFICA FUNDS TRUST FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND. PRIOR TO APRIL 1, 1996, THE FUND WAS ADVISED BY
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM). 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.
The accompanying notes are an integral part of these financial statements.
---------------------
65
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
BALANCED FUND (4) (CONT.)
------------------------------------------
CLASS B INSTITUTIONAL CLASS
-------------------- --------------------
SIX SIX
MONTHS PERIOD MONTHS YEAR
ENDED ENDED ENDED ENDED
MARCH 31, SEPT. 30, MARCH 31, SEPT. 30,
1997 1996 (2) 1997 1996 (3)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.24 $10.00 $11.45 $11.84
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.08 0.00 0.21 0.40
Net realized and unrealized gain (loss) on
investments 0.72 0.24 0.74 0.89
--------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.80 0.24 0.95 1.29
LESS DISTRIBUTIONS:
Dividends from net investment income (0.08) 0.00 (0.21) (0.40)
Distributions from net realized gain (0.17) 0.00 (0.19) (1.28)
--------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.25) 0.00 (0.40) (1.68)
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $10.79 $10.24 $12.00 $11.45
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 7.84% 2.40% 8.27% 10.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $297 $2 $55,456 $72,327
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.70% 0.00% 0.95% 0.94%
Ratio of net investment income (loss) to
average net assets 2.48% 3.09% 3.30% 3.29%
Portfolio turnover 43% 131% 43% 131%
Average commission rate paid (1) $0.0802 $0.0603 $0.0802 $0.0603
- ------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses 7.85% 0.66% 1.18% 1.11%
Ratio of net investment income (loss) to
average net assets prior to waived fees and
reimbursed expenses (3.67)% 2.43% 3.07% 3.12%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(3) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON OCTOBER 1,
1995.
(4) THE FUND OPERATED AS A SERIES OF PACIFICA FUNDS TRUST FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND. PRIOR TO APRIL 1, 1996, THE FUND WAS ADVISED BY
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM). 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.
(5) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(6) THIS RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(7) PORTFOLIO ACTIVITY REFLECTS ACTIVITY FOR STAND-ALONE PERIOD ONLY. SEE
NOTE 6.
The accompanying notes are an integral part of these financial statements.
- ---------------------
66
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CORPORATE STOCK FUND
------------------------------------------------------------------------------------
SIX NINE
MONTHS MONTHS YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, SEPT. 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 (5) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $46.24 $41.45 $31.42 $33.00 $31.40 $30.38
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.25 0.42 0.59 0.63 0.59 0.62
Net realized and
unrealized gain (loss)
on investments 4.61 4.79 10.65 (0.50) 2.19 1.35
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 4.86 5.21 11.24 0.13 2.78 1.97
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.25) (0.42) (0.59) (0.63) (0.59) (0.62)
Distributions from net
realized gain (1.25) 0.00 (0.62) (1.08) (0.59) (0.33)
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (1.50) (0.42) (1.21) (1.71) (1.18) (0.95)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $49.60 $46.24 $41.45 $31.42 $33.00 $31.40
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) 10.63% 12.60% 35.99% 0.42% 8.91% 6.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $406,739 $370,439 $327,208 $236,265 $258,327 $230,457
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.97%(6) 1.01%(6) 0.96% 0.97% 0.97% 0.93%
Ratio of net investment
income (loss) to average
net assets 1.02%(6) 1.28%(6) 1.59% 1.92% 1.81% 2.05%
Portfolio turnover N/A 1%(7) 6% 7% 5% 4%
Average commission rate paid
(1) N/A $0.0248(7) N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.07%(6) 1.08%(6) 1.00% 1.00% 0.99% 1.00%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 0.92%(6) 1.21%(6) 1.55% 1.89% 1.79% 1.98%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(3) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON OCTOBER 1,
1995.
(4) THE FUND OPERATED AS A SERIES OF PACIFICA FUNDS TRUST FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND. PRIOR TO APRIL 1, 1996, THE FUND WAS ADVISED BY
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM). 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.
(5) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(6) THIS RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(7) PORTFOLIO ACTIVITY REFLECTS ACTIVITY FOR STAND-ALONE PERIOD ONLY. SEE
NOTE 6.
The accompanying notes are an integral part of these financial statements.
---------------------
67
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
DIVERSIFIED INCOME FUND
-------------------------------
CLASS A
-------------------------------
SIX NINE
MONTHS MONTHS YEAR
ENDED ENDED ENDED
MARCH 31, SEPT. 30, DEC. 31,
1997 1996 (2) 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $14.73 $13.34 $10.76
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.14 0.25 0.35
Net realized and unrealized gain (loss) on investments 0.64 1.39 2.86
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.78 1.64 3.21
LESS DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.25) (0.35)
Distributions from net realized gain (0.85) 0.00 (0.28)
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.99) (0.25) (0.63)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $14.52 $14.73 $13.34
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 5.25% 12.35% 30.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $154,502 $134,648 $79,977
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.10% 1.10% 1.10%
Ratio of net investment income (loss) to average net
assets 1.91% 2.57% 3.02%
Portfolio turnover 33% 43% 70%
Average commission rate paid (1) $0.0780 $0.0793 N/A
- -----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.17% 1.26% 1.31%
Ratio of net investment income (loss) to average net
assets prior to waived fees and reimbursed expenses 1.84% 2.41% 2.81%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(3) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
(4) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
The accompanying notes are an integral part of these financial statements.
- ---------------------
68
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
DIVERSIFIED INCOME FUND (CONT.)
----------------------------------------------------------------
CLASS B
CLASS A (CONT.) -------------------------------
------------------------------- SIX NINE
YEAR YEAR PERIOD MONTHS MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, MARCH 31, SEPT. 30, DEC. 31,
1994 1993 1992 (3) 1997 1996 (2) 1995 (4)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $11.08 $10.29 $10.00 $13.79 $12.49 $10.00
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.33 0.30 0.02 0.08 0.17 0.20
Net realized and
unrealized gain (loss)
on investments (0.32) 0.96 0.29 0.60 1.30 2.75
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 0.01 1.26 0.31 0.68 1.47 2.95
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.33) (0.30) (0.02) (0.08) (0.17) (0.20)
Distributions from net
realized gain 0.00 (0.17) 0.00 (0.79) 0.00 (0.26)
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.33) (0.47) (0.02) (0.87) (0.17) (0.46)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $10.76 $11.08 $10.29 $13.60 $13.79 $12.49
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) 0.08% 12.33% 3.10% 4.91% 11.76% 29.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $45,178 $26,704 $1,379 $32,632 $17,045 $5,339
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.06% 0.46% 0.00% 1.74% 1.74% 1.73%
Ratio of net investment
income (loss) to average
net assets 3.16% 3.51% 4.09% 1.29% 2.01% 2.40%
Portfolio turnover 62% 46% 1% 33% 43% 70%
Average commission rate paid
(1) N/A N/A N/A $0.0780 $0.0793 N/A
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.34% 1.66% 3.49% 1.87% 2.08% 2.57%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 2.88% 2.31% 0.60% 1.16% 1.67% 1.56%
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(3) THE FUND COMMENCED OPERATIONS ON NOVEMBER 18, 1992.
(4) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
The accompanying notes are an integral part of these financial statements.
---------------------
69
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
EQUITY VALUE FUND (2)
------------------------------------------
CLASS A
------------------------------------------
SIX
MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, SEPT. 30, SEPT. 30, SEPT. 30,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.66 $13.27 $12.36 $13.17
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.08 0.20 0.24* 0.20*
Net realized and unrealized gain (loss) on
investments 1.89 1.60 1.63* 0.74*
--------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.97 1.80 1.87 0.94
LESS DISTRIBUTIONS:
Dividends from net investment income (0.08) (0.19) (0.25) (0.21)
Distributions from net realized gain (0.12) (2.22) (0.71) (1.54)
--------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.20) (2.41) (0.96) (1.75)
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $14.43 $12.66 $13.27 $12.36
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 15.63% 14.27% 16.58% 7.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $20,798 $18,453 $170,406 $168,852
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.05% 1.18% 0.96% 0.99%
Ratio of net investment income (loss) to
average net assets 1.14% 1.73% 1.97% 1.60%
Portfolio turnover 45% 91% 75% 41%
Average commission rate paid (1) $0.0800 $0.0558 N/A N/A
- ------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses 1.12% 1.22% 0.98% 1.01%
Ratio of net investment income (loss) to
average net assets prior to waived fees and
reimbursed expenses 1.07% 1.69% 1.95% 1.58%
- ------------------------------------------------------------------------------------------
</TABLE>
* PER SHARE DATA BASED UPON AVERAGE MONTHLY SHARES OUTSTANDING.
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND OPERATED AS A SERIES OF PACIFICA FUNDS TRUST FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND. PRIOR TO APRIL 1, 1996, THE FUND WAS ADVISED BY
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM). 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.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(4) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON OCTOBER 1,
1995.
The accompanying notes are an integral part of these financial statements.
- ---------------------
70
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
EQUITY VALUE FUND (2) (CONT.)
----------------------------------------------------------------
CLASS B INSTITUTIONAL CLASS
CLASS A (CONT.) -------------------- --------------------
-------------------- SIX SIX
YEAR YEAR MONTHS PERIOD MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, MARCH 31, SEPT. 30, MARCH 31, SEPT. 30,
1993 1992 1997 1996 (3) 1997 1996 (4)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.73 $10.45 $10.34 $10.00 $12.65 $13.27
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.21* 0.20* 0.01 0.00 0.09 0.22
Net realized and
unrealized gain (loss)
on investments 2.75* 0.49* 1.57 0.34 1.89 1.61
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 2.96 0.69 1.58 0.34 1.98 1.83
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.23) (0.22) (0.01) 0.00 (0.08) (0.23)
Distributions from net
realized gain (0.29) (0.19) (0.10) 0.00 (0.12) (2.22)
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.52) (0.41) (0.11) 0.00 (0.20) (2.45)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $13.17 $10.73 $11.81 $10.34 $14.43 $12.65
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) 28.22% 6.81% 15.31% 3.40% 15.73% 14.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $140,551 $92,915 $2,542 $0 $193,161 $206,620
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.98% 1.02% 1.70% 0.00% 0.95% 0.87%
Ratio of net investment
income (loss) to average
net assets 1.73% 1.86% 0.34% 1.83% 1.25% 1.69%
Portfolio turnover 82% 78% 45% 91% 45% 91%
Average commission rate paid
(1) N/A N/A $0.0800 $0.0558 $0.0800 $0.0558
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 0.99% N/A 2.19% N/A 0.99% 0.92%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 1.72% N/A (0.15)% N/A 1.21% 1.64%
- ----------------------------------------------------------------------------------------------
</TABLE>
* PER SHARE DATA BASED UPON AVERAGE MONTHLY SHARES OUTSTANDING.
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND OPERATED AS A SERIES OF PACIFICA FUNDS TRUST FROM ITS
COMMENCEMENT OF OPERATIONS UNTIL IT WAS REORGANIZED AS A SERIES OF
STAGECOACH FUNDS, INC. ON SEPTEMBER 6, 1996. IN CONJUNCTION WITH THE
REORGANIZATION, EXISTING INVESTOR SHARES WERE CONVERTED INTO CLASS A
SHARES OF THE FUND. PRIOR TO APRIL 1, 1996, THE FUND WAS ADVISED BY
FIRST INTERSTATE CAPITAL MANAGEMENT, INC. (FICM). 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.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 6, 1996.
(4) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON OCTOBER 1,
1995.
The accompanying notes are an integral part of these financial statements.
---------------------
71
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
-------------------------------
CLASS A
-------------------------------
SIX NINE
MONTHS MONTHS YEAR
ENDED ENDED ENDED
MARCH 31, SEPT. 30, DEC. 31,
1997 1996 (2) 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $17.91 $17.26 $14.10
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.06 0.07 0.19
Net realized and unrealized gain (loss) on investments 1.34 2.00 3.87
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.40 2.07 4.06
LESS DISTRIBUTIONS:
Dividends from net investment income (0.06) (0.07) (0.19)
Distributions from net realized gain (0.05) (1.35) (0.71)
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.11) (1.42) (0.90)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $19.20 $17.91 $17.26
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 7.86% 12.45% 28.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $283,468 $254,498 $178,488
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.14% 1.18% 1.18%
Ratio of net investment income (loss) to average net
assets 0.65% 0.56% 1.23%
Portfolio turnover 40% 83% 100%
Average commission rate paid (1) $0.0799 $0.0702 N/A
- -----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses N/A 1.19% 1.21%
Ratio of net investment income (loss) to average net
assets prior to waived fees and reimbursed expenses N/A 0.55% 1.20%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
The accompanying notes are an integral part of these financial statements.
- ---------------------
72
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND (CONT.)
----------------------------------------------------------------
CLASS B
CLASS A (CONT.) -------------------------------
------------------------------- SIX NINE
YEAR YEAR YEAR MONTHS MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, MARCH 31, SEPT. 30, DEC. 31,
1994 1993 1992 1997 1996 (2) 1995 (3)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $14.75 $13.88 $12.84 $12.74 $12.29 $10.00
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.22 0.23 0.27 0.00 (0.01) 0.05
Net realized and
unrealized gain (loss)
on investments (0.27) 0.93 1.44 0.94 1.42 2.79
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS (0.05) 1.16 1.71 0.94 1.41 2.84
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.22) (0.23) (0.27) 0.00 0.00 (0.05)
Distributions from net
realized gain (0.38) (0.06) (0.40) (0.04) (0.96) (0.50)
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.60) (0.29) (0.67) (0.04) (0.96) (0.55)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $14.10 $14.75 $13.88 $13.64 $12.74 $12.29
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) (0.29)% 8.44% 13.45% 7.36% 11.89% 28.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $113,525 $112,236 $44,883 $23,010 $12,832 $4,682
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.11% 0.93% 0.42% 1.86% 1.93% 1.87%
Ratio of net investment
income (loss) to average
net assets 1.51% 1.72% 2.31% (0.06)% (0.12)% 0.43%
Portfolio turnover 71% 55% 80% 40% 83% 100%
Average commission rate paid
(1) N/A N/A N/A $0.0799 $0.0702 N/A
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.15% 1.11% 1.10% 1.89% 2.03% 2.21%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses 1.47% 1.54% 1.63% (0.09)% (0.22)% 0.09%
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
The accompanying notes are an integral part of these financial statements.
---------------------
73
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
GROWTH AND INCOME
FUND (CONT.)
--------------------
INSTITUTIONAL CLASS
--------------------
SIX
MONTHS PERIOD
ENDED ENDED
MARCH 31, SEPT. 30,
1997 1996 (2)
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $21.01 $20.03
--------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.09 0.02
Net realized and unrealized gain (loss) on investments 1.57 0.97
--------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.66 0.99
LESS DISTRIBUTIONS:
Dividends from net investment income (0.09) (0.01)
Distributions from net realized gain (0.06) 0.00
--------- ---------
TOTAL FROM DISTRIBUTIONS (0.15) (0.01)
--------- ---------
NET ASSET VALUE, END OF PERIOD $22.52 $21.01
--------- ---------
--------- ---------
TOTAL RETURN (NOT ANNUALIZED) 7.92% 3.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $19,719 $18,508
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.01% 0.96%
Ratio of net investment income (loss) to average net assets 0.78% 1.27%
Portfolio turnover 40% 83%
Average commission rate paid (1) $0.0799 $0.0702
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses N/A N/A
Ratio of net investment income (loss) to average net assets prior
to waived fees and reimbursed expenses N/A N/A
- ----------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON SEPTEMBER 6,
1996.
(3) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 16, 1996.
(4) THIS RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
- ---------------------
74
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
SMALL CAP FUND (3)
------------------------------------------------------------------------------------
CLASS A CLASS B INSTITUTIONAL CLASS
------------------------ ------------------------ ------------------------
SIX SIX SIX
MONTHS PERIOD MONTHS PERIOD MONTHS PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, SEPT. 30, MARCH 31, SEPT. 30, MARCH 31, SEPT. 30,
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $22.45 $22.01 $22.46 $22.02 $22.45 $22.01
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) (0.01) 0.00 (0.04) 0.00 0.02 0.00
Net realized and
unrealized gain (loss)
on investments (3.46) 0.44 (3.49) 0.44 (3.46) 0.44
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS (3.47) 0.44 (3.53) 0.44 (3.44) 0.44
LESS DISTRIBUTIONS:
Dividends from net
investment income 0.00 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 0.00
--------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS 0.00 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $18.98 $22.45 $18.93 $22.46 $19.01 $22.45
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) (15.46)% 2.00% (15.72)% 2.00% (15.32)% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $3,107 $96 $1,905 $0 $29,200 $24,553
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.10%(4) 1.03%(4) 1.75%(4) 0.00% 0.75%(4) 1.60%(4)
Ratio of net investment
income (loss) to average
net assets (0.23)%(4) (0.59)%(4) (0.85)%(4) 0.00% 0.16%(4) (1.15)%(4)
Portfolio turnover N/A N/A N/A N/A N/A N/A
Average commission rate paid
(1) N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 2.80%(4) 38.54%(4) 3.55%(4) 0.00% 1.65%(4) 1.63%(4)
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses (1.93)%(4) (38.10)%(4) (2.65)%(4) 0.00% (0.74)%(4) (1.18)%(4)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON SEPTEMBER 6,
1996.
(3) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 16, 1996.
(4) THIS RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
---------------------
75
<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 Aggressive Growth, Balanced, Corporate Stock,
Diversified Income, Equity Value, Growth and Income, and Small Cap Funds (the
"Funds").
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 Balanced and Equity Value Funds were
established to acquire all of the assets and assume all of the liabilities of
the Pacifica Balanced and Equity Value Funds, respectively. Additionally, the
Stagecoach Growth and Income Fund acquired all of the assets and assumed all of
the liabilities of the Pacifica Growth Fund. These acquisitions were
accomplished in separate tax-free exchanges for shares of the respective Fund.
All performance and financial data presented in this annual report for the
Balanced and Equity Value Funds for periods prior to September 6, 1996, refers
to the Predecessor Funds.
Each of the Funds presented in this book, with the exception of the Aggressive
Growth, Corporate Stock, and Diversified Income Funds, offers Class A, Class B,
and Institutional Class shares. The Aggressive Growth and Diversified Income
Funds offer Class A and Class B shares, and the Corporate Stock Fund offers only
one class of shares. The three classes of shares differ principally in the
applicable sales charges, shareholder servicing fees, transfer agency fees and
distribution fees. Shareholders of each class also bear certain expenses that
- ---------------------
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, shareholder servicing and
transfer agency 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 Funds invest in a range of securities, generally including money market
instruments, equities, and U.S. Government securities.
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 at
the reported bid 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 approved by the Company's Board of
Directors.
The Aggressive Growth, Corporate Stock, and the Small Cap Funds invest only in
interests of the Capital Appreciation, Corporate Stock, and Small Cap Master
Portfolios (the "Master Portfolios"), respectively, of Master Investment Trust
("MIT"). Each Master Portfolio has the same investment objective as the Fund
that invests in such Master Portfolio. The value of each Fund's investment in
its corresponding Master Portfolio reflects that Fund's interest in the net
assets of that Master Portfolio (22.30%, 99.99%, and 89.26%) for the Aggressive
Growth, Corporate Stock, and Small Cap
---------------------
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Funds, respectively, at March 31, 1997. Each Master Portfolio's investments
include equities, fixed-, variable- and floating-rate instruments. 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 at the reported bid
prices. Securities not listed on an exchange or national securities market, or
securities in which there were no transactions, excluding debt securities
maturing in 60 days or less, are valued at the most recent bid prices, or if
such prices are not readily available, at fair value as determined in accordance
with procedures approved by the Board of Trustees. Debt securities maturing in
60 days or less are valued at amortized cost, which approximates market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are recorded no later than one business day after trade
date. Dividend income is recognized on the ex-dividend date, and interest income
is accrued daily. 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.
The Balanced and Equity Value Funds had permanent book/tax differences primarily
attributable to equalization credits. To reflect reclassifications arising from
permanent book/tax differences for the year ended September 30, 1995,
accumulated undistributed net investment income was credited $152,314,
accumulated undistributed net realized gains was charged $41,509 and paid-in-
capital was charged $110,805 for the Balanced Fund. For the Equity Value Fund,
accumulated net investment income was credited $187,049, accumulated
undistributed net realized gains was charged $118,088 and paid-in-capital was
charged $68,961. Effective October 1, 1996, the Funds no longer use equalization
accounting.
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 each Fund's and Master
Portfolio's (in this paragraph, the "Funds") Portfolio of Investments. The Funds
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
- ---------------------
78
<PAGE>
NOTES TO FINANCIAL STATEMENTS
agreements held in the Funds at March 31, 1997, are collateralized by U.S.
Government obligations.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Funds, with the
exception of the Aggressive Growth and Small Cap Funds, are declared and
distributed quarterly. Dividends to shareholders from net investment income of
the Aggressive Growth and Small Cap Funds are declared and distributed annually.
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.
The Aggressive Growth Fund had capital loss carryforwards at December 31, 1996
of $3,168,815 that will expire in the year 2004. The Small Cap Fund had capital
loss carryforwards at December 31, 1996 of $1,316,991 that will expire in the
year 2004. The Board of Directors intends to offset net capital gains with each
capital loss carryforward until each carryforward has been fully utilized or
expires. No capital gain distribution shall be made until the capital loss
carryforward has been fully utilized or has expired.
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. 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 Funds have been charged for expenses incurred in connection with
---------------------
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS
the organization and initial registration of the Funds and/or classes of shares.
These expenses are being amortized by the Funds on a straight-line 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
(other than the Aggressive Growth, Corporate Stock, and Small Cap Funds) with
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 Diversified Income and Equity Value Funds, WFB is entitled to
be paid by each Fund a monthly advisory fee at an annual rate of 0.50% of such
Fund's average daily net assets. Under the contract with the Balanced Fund, WFB
is entitled to be paid by the Fund a monthly advisory fee at an annual rate of
0.60% of such Fund's average daily net assets. Under the contract with the
Growth and Income Fund, WFB is entitled to be paid by the Fund a monthly
advisory fee at an annual rate of 0.50% of such Fund's average daily net assets
up to $250 million, 0.40% of the next $250 million, and 0.30% of the average
daily net assets in excess of $500 million.
For the period from October 1, 1995 to March 31, 1996, the Balanced and Equity
Value Funds were advised by First Interstate Capital Management ("FICM").
Pursuant to the advisory contracts, the Funds paid an advisory fee at an annual
rate of 0.60% of average daily net assets. 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 Aggressive Growth, Corporate Stock, and Small Cap Funds do not directly
retain an investment adviser because each such Fund invests all of its assets in
a Master Portfolio of MIT which, in turn, retains WFB as investment adviser.
Prior to April 28, 1996, and its conversion to a "feeder" fund in a
master/feeder structure, the Corporate Stock Fund retained WFB as investment
adviser. For these services, WFB was entitled to be paid by the Fund a monthly
advisory fee at the annual rate of 0.50% of such Fund's average daily net assets
up to $250 million, 0.40% of the next $250 million and 0.30% of the average
daily net assets in excess of $500 million.
For the period from January 1, 1996 to April 28, 1996, the Corporate Stock Fund
retained Barclays Global Fund Advisors ("BGFA") as sub-adviser. Pursuant to a
sub-advisory contract with the Corporate Stock Fund and subject to the overall
supervision of WFB, the investment adviser, BGFA was responsible for day-to-day
portfolio management of the Fund.
- ---------------------
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BGFA was entitled to receive from WFB as compensation for its sub-advisory
services monthly fees at the annual rate of 0.08% of the average daily net
assets of the Corporate Stock Fund. BGFA was also entitled to receive from WFB
annual fees of $40,000 for its services for the Corporate Stock Fund.
BGFA currently acts as sub-adviser to the Master Portfolio in which the
Corporate Stock Fund invests. BGFA is an indirect subsidiary of Barclays Bank
PLC. BGFA was formed by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo.
The Company has entered into contracts with WFB on behalf of the Funds (other
than the Corporate Stock Fund, for which Barclays Global Investors, N.A. ("BGI")
serves as custodian) 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 each Fund. 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 in excess of
$100 million. WFB will not be entitled to compensation for its custodial
services to the Aggressive Growth and Small Cap Funds so long as it is entitled
to compensation for providing advisory services to the Master Portfolios.
BGI currently acts as custodian to the Corporate Stock Fund. BGI is an affiliate
of BGFA. BGI will not be entitled to compensation for its custodial services to
the Fund so long as BGFA is entitled to receive compensaiton for providing sub-
advisory services to the Master Portfolio in which the Fund invests.
For the period from October 1, 1995 to March 31, 1996, FICAL served as the
custodian for the Balanced and Equity Value Funds. Pursuant to the contracts,
the Funds 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 Funds with WFB, whereby
WFB has agreed to act as transfer agent for the Funds. 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 B shares of the Funds
and 0.06% of the average daily net assets of the Institutional Class shares of
the Balanced, Equity Value, Growth and Income and Small Cap Funds. Prior to
February 1, 1997, under the contracts with the Aggressive Growth, Corporate
Stock, Diversified Income, Growth and Income, and Small Cap Funds, WFB was
entitled to be 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 were
under $20 million. For as long as the net assets remained under $20 million, a
Fund would not be charged any transfer
---------------------
81
<PAGE>
NOTES TO FINANCIAL STATEMENTS
agency fees by WFB. Prior to February 1, 1997, under the contracts with the
Balanced and Equity Value Funds, WFB was entitled to be paid a fee at the annual
rate of 0.07% of the average daily net assets of each Fund.
For the period from October 1, 1995 to September 5, 1996, the Balanced and
Equity Value Funds retained Furman Selz LLC ("Furman Selz") to provide personnel
and facilities to perform shareholder servicing, transfer agency related
services and portfolio accounting.
The transfer agency fees for the Funds for the six months ended March 31, 1997
were as follows:
<TABLE>
<CAPTION>
TRANSFER TRANSFER TRANSFER
AGENCY FEES AGENCY FEES AGENCY FEES
FUND CLASS A CLASS B INSTITUTIONAL CLASS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Aggressive Growth Fund $ 6,968 $ 3,514 N/A
Balanced Fund 15,434 42 $21,515
Diversified Income Fund 72,995 12,901 N/A
Equity Value Fund 9,208 376 67,725
Growth and Income Fund 157,259 10,322 8,279
Small Cap Fund 944 489 9,090
</TABLE>
The Company has entered into contracts on behalf of the Funds with WFB, whereby
WFB has agreed to provide shareholder services to the Funds. Pursuant to the
contracts, WFB is entitled to an annual fee for providing shareholder servicing
of 0.30% of the average daily net assets of the Corporate Stock Fund, 0.30% of
the average daily net assets attributable to the Class A and Class B shares of
the Diversified Income and Growth and Income Funds, 0.25% of the average daily
net assets attributable to the Class A and Class B shares of the Aggressive
Growth, Balanced, Equity Value, and Small Cap Funds, and 0.25% of the average
daily net assets attributable to the Institutional Class shares of the Balanced,
Equity Value, Growth and Income, and Small Cap Funds.
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 Balanced
and Equity Value Funds, such as maintaining shareholder accounts and records.
The Funds paid fees to Service Organizations in amounts up to an annual rate of
0.25% of the average daily net assets of the Fund's shares owned by shareholders
with whom the Service Organization had a servicing relationship. During that
period, FIB was the only service organization to receive payments.
- ---------------------
82
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The shareholder servicing fees of the Funds for the six months ended March 31,
1997 were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SHAREHOLDER SHAREHOLDER
SERVICING FEES SERVICING FEES SERVICING FEES
FUND CLASS A CLASS B INSTITUTIONAL CLASS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Aggressive Growth Fund $ 38,632 $19,884 N/A
Balanced Fund 41,580 79 $79,847
Diversified Income Fund 227,203 38,878 N/A
Equity Value Fund 24,608 736 253,204
Growth and Income Fund 426,074 27,329 24,728
Small Cap Fund 2,182 1,088 34,040
</TABLE>
The shareholder servicing fees of the Funds for the periods ended September 30,
1996 were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SHAREHOLDER SHAREHOLDER
SERVICING FEES SERVICING FEES SERVICING FEES
FUND CLASS A CLASS B INSTITUTIONAL CLASS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Aggressive Growth Fund*** $ 21,053 $10,862 N/A
Balanced Fund* 76,743 0 $11,728
Diversified Income Fund** 227,209 21,806 N/A
Equity Value Fund* 36,350 0 31,181
Growth and Income Fund** 436,443 19,150 1,495
Small Cap Fund**** 0 0 2,460
</TABLE>
* INFORMATION PRESENTED IS FOR THE YEAR ENDED SEPTEMBER 30, 1996.
** INFORMATION PRESENTED IS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996.
*** INFORMATION PRESENTED IS FOR THE PERIOD FROM MARCH 5, 1996 (COMMENCEMENT OF
OPERATIONS) TO SEPTEMBER 30, 1996.
**** INFORMATION PRESENTED IS FOR THE PERIOD FROM SEPTEMBER 16, 1996
(COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1996.
Subject to the overall supervision of the Company's Board of Directors, WFB as
administrator and Stephens Inc. ("Stephens") as co-administrator provide each
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 each Fund's average
daily net assets. Prior to February 1, 1997, Stephens provided substantially the
same services as sole administrator to the Funds. Under the previous agreements,
Stephens was entitled to receive a monthly fee at the annual rate of 0.03% of
the average daily net assets of the Aggressive Growth, Corporate Stock,
Diversified Income, and Growth and Income Funds, and 0.05% of the average daily
net assets of the Balanced, Equity Value, and Small Cap Funds.
---------------------
83
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the period from October 1, 1995 to September 5, 1996, Furman Selz provided
administrative services for the operation of the Balanced and Equity Value
Funds. As compensation for such services, each Fund paid Furman Selz an annual
fee, payable monthly, of up to 0.15% of its average daily net assets.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the
1940 Act for the Corporate Stock Fund. The Company has also adopted separate
Distribution Plans, pursuant to Rule 12b-1, for Class A and Class B shares of
the multi-class funds.
The Distribution Plan for the Corporate Stock Fund and the Distribution Plan for
the Class A shares of each multi-class Fund provide that each Fund may defray
all or part of the cost of preparing, printing and distributing prospectuses and
other promotional materials by paying for costs incurred on an annual basis up
to 0.05% of the average daily net assets attributable to the shares of the
Corporate Stock Fund and the Class A shares of the Diversified Income and Growth
and Income Funds, and up to 0.10% of the average daily net assets attributable
to the Class A shares of the Aggressive Growth, Balanced, Equity Value and Small
Cap Funds. 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.
For the period from October 1, 1995 to September 5, 1996, the Balanced and
Equity Value Funds had adopted a non-compensatory Distribution Plan and
Agreement (the "Plan") for the Class A shares. The Plan provided for payments by
each Fund for actual expenses incurred, not to exceed 0.50% of the average daily
net assets attributable to Class A shares of each Fund. Pacifica Funds
Distributor Inc., an affiliate of Furman Selz, acted as Distributor during such
period.
The Class B Distribution Plans provide that the Funds pay for distribution
related services, a monthly fee at an annual rate of up to 0.70% of the average
daily net assets attributable to the Class B shares of the Diversified Income
and Growth and Income Funds, and up to 0.75% of the average daily net assets
attributable to Class B shares of the Aggressive Growth, Balanced, Equity Value
and Small Cap Funds.
- ---------------------
84
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Distribution Plan expenses for Class A and Class B shares of the Funds for
the six months ended March 31, 1997 were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES DISTRIBUTION FEES
FUND CLASS A CLASS B
<S> <C> <C>
- ------------------------------------------------------------------------------
Aggressive Growth Fund $15,493 $59,665
Balanced Fund 16,633 229
Diversified Income Fund 37,890 90,397
Equity Value Fund 9,842 2,211
Growth and Income Fund 70,768 63,767
Small Cap Fund 883 3,285
</TABLE>
The Distribution Plan expenses for Class A and Class B shares of the Funds for
the periods ended September 30, 1996 were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES DISTRIBUTION FEES
FUND CLASS A CLASS B
<S> <C> <C>
- ------------------------------------------------------------------------------
Aggressive Growth Fund*** $ 8,442 $32,412
Balanced Fund* 82,632 0
Diversified Income Fund** 37,946 49,795
Equity Value Fund* 58,241 0
Growth and Income Fund** 73,360 43,495
Small Cap Fund**** 2 0
</TABLE>
* INFORMATION PRESENTED IS FOR THE YEAR ENDED SEPTEMBER 30, 1996.
** INFORMATION PRESENTED IS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996.
*** INFORMATION PRESENTED IS FOR THE PERIOD FROM MARCH 5, 1996 (COMMENCEMENT OF
OPERATIONS) TO SEPTEMBER 30, 1996.
**** INFORMATION PRESENTED IS FOR THE PERIOD FROM SEPTEMBER 16, 1996
(COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1996.
FEES WAIVED AND EXPENSES REIMBURSED
The following amounts of fees and expenses were waived or reimbursed for the six
months ended March 31, 1997:
<TABLE>
<CAPTION>
EXPENSES REIMBURSED FEES WAIVED
FUND BY STEPHENS BY WFB
<S> <C> <C>
- ---------------------------------------------------------------------------
Aggressive Growth Fund $ 0 $ 27,618
Balanced Fund 0 115,650
Corporate Stock Fund 0 194,840
Diversified Income Fund 0 68,985
Equity Value Fund 0 54,206
Growth and Income Fund 0 2,415
Small Cap Fund 33,001 85,899
</TABLE>
---------------------
85
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The following amounts of fees were waived for the periods ended September 30,
1996:
<TABLE>
<CAPTION>
FEES WAIVED BY FEES WAIVED BY FEES WAIVED BY
FUND FURMAN SELZ FICM WFB
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Aggressive Growth Fund*** N/A N/A $ 22,403
Balanced Fund* $ 51,374 $ 4,608 153,598
Corporate Stock Fund** N/A N/A 185,544
Diversified Income Fund** N/A N/A 148,222
Equity Value Fund* 94,068 0 8,217
Growth and Income Fund** N/A N/A 15,737
Small Cap Fund**** N/A N/A 1,815
</TABLE>
* INFORMATION PRESENTED IS FOR THE YEAR ENDED SEPTEMBER 30, 1996.
** INFORMATION PRESENTED IS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996.
*** INFORMATION PRESENTED IS FOR THE PERIOD FROM MARCH 5, 1996 (COMMENCEMENT OF
OPERATIONS) TO SEPTEMBER 30, 1996.
**** INFORMATION PRESENTED IS FOR THE PERIOD FROM SEPTEMBER 16, 1996
(COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1996.
For the period from March 5, 1996 (commencement of operations) to September 30,
1996, Stephens reimbursed $26,539 in expenses for the Aggressive Growth Fund.
Waived fees and reimbursed expenses continue at the discretion of WFB and
Stephens. WFB and Stephens have agreed to waive or reimburse all or a portion of
their respective fees charged to, or expenses paid by, each Fund to ensure that
the total fund operating expenses do not exceed, on an annual basis, 1.13% of
the average daily net assets of the Institutional Class shares of the Growth and
Income Fund and 1.05%, 1.70%, and 0.95% of the average daily net assets of the
Class A, Class B, and Institutional Class shares, respectively, of the Balanced
and Equity Value Funds, through August 31, 1997.
Certain officers and directors of the Company are also officers of Stephens. As
of March 31, 1997, Stephens owned 5 shares of the Aggressive Growth, 7 shares of
the Balanced, 12,400 shares of the Diversified Income, 7 shares of the Equity
Value, 114 shares of the Growth and Income and 3 shares of the Small Cap Funds.
Stephens has retained $1,960,806 as sales charges from the proceeds of Class A
shares sold and $335,437 from the proceeds of Class B shares redeemed by the
Company for the six months ended March 31, 1997. Wells Fargo Securities Inc., a
subsidiary of WFB, received $1,938,506 as sales charges from the proceeds of
Class A shares sold and $335,437 from the proceeds of Class B shares redeemed by
the Company for the six months ended March 31, 1997.
- ---------------------
86
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for each
Fund for the six months ended March 31, 1997, were as follows:
<TABLE>
<CAPTION>
AGGREGATE PURCHASES DIVERSIFIED EQUITY GROWTH AND
AND SALES BALANCED FUND INCOME FUND VALUE FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total purchases at cost $ 102,354,983 $ 89,009,628 $ 202,493,616 $ 133,724,795
Total sales proceeds 40,134,721 54,684,769 95,723,425 121,731,930
</TABLE>
4. CAPITAL SHARE TRANSACTIONS
As of March 31, 1997, there were 91 billion shares of $0.001 par value capital
stock authorized by the Company. At March 31, 1997, each Fund (with the
exception of the Aggressive Growth Fund) was authorized to issue 100 million
shares of $0.001 par value capital stock for each class of shares. The
Aggressive Growth Fund was authorized to issue 150 million shares of $0.001 par
value capital stock for each class of shares. Capital share transactions for the
Funds were as follows:
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
-----------------------------------
FROM MARCH 5, 1996
FOR THE SIX (COMMENCEMENT OF
MONTHS ENDED OPERATIONS)
MARCH 31, 1997 TO SEPT. 30, 1996
<S> <C> <C>
- -----------------------------------------------------------------------------
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 843,540 1,615,653
Shares issued in reinvestment of
dividends - Class A 0 0
Shares redeemed - Class A (377,083) (229,155)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A 466,457 1,386,498
Shares sold - Class B 278,394 648,214
Shares issued in reinvestment of
dividends - Class B 0 0
Shares redeemed - Class B (134,671) (38,581)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS B 143,723 609,633
</TABLE>
---------------------
87
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BALANCED 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 94,369 1,412,249 1,142,667
Shares issued in reinvestment of
dividends - Class A 67,767 371,899 717,293
Shares redeemed - Class A (376,563) (6,456,262) (3,620,385)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (214,427) (4,672,114) (1,760,425)
Shares sold - Class B 27,480 151 N/A
Shares issued in reinvestment of
dividends - Class B 42 0 N/A
Shares redeemed - Class B (149) 0 N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS B 27,373 151 N/A
Shares sold - Institutional Class 255,508 10,145,092 N/A
Shares issued in reinvestment of
dividends - Institutional Class 137,837 925,429 N/A
Shares redeemed - Institutional Class (2,085,655) (4,755,966) N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - INSTITUTIONAL CLASS (1,692,310) 6,314,555 N/A
</TABLE>
<TABLE>
<CAPTION>
CORPORATE STOCK FUND
-------------------------------------------------
FOR THE SIX FOR THE NINE FOR THE
MONTHS ENDED MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPT. 30, 1996 DEC. 31, 1995
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 595,967 1,149,288 1,167,520
Shares issued in reinvestment of
dividends - Class A 256,416 76,212 505,005
Shares redeemed - Class A (663,522) (1,107,285) (1,299,326)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A 188,861 118,215 373,199
</TABLE>
- ---------------------
88
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DIVERSIFIED INCOME FUND
----------------------------------------------
FOR THE SIX FOR THE NINE FOR THE
MONTHS ENDED MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPT. 30, 1996 DEC. 31, 1995
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 2,361,971 4,715,975 2,981,021
Shares issued in reinvestment of
dividends - Class A 632,053 115,316 244,288
Shares redeemed - Class A (1,492,299) (1,685,966) (1,429,340)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A 1,501,725 3,145,325 1,795,969
Shares sold - Class B 1,234,345 901,549 446,270
Shares issued in reinvestment of
dividends - Class B 100,491 6,895 9,860
Shares redeemed - Class B (171,202) (100,188) (28,616)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS B 1,163,634 808,256 427,514
</TABLE>
<TABLE>
<CAPTION>
EQUITY VALUE 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 239,630 2,375,877 N/A
Shares issued in reinvestment of
dividends - Class A 16,068 248,462 N/A
Shares redeemed - Class A (272,081) (14,009,327) N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (16,383) (11,384,988) N/A
Shares sold - Class B 215,907 3 N/A
Shares issued in reinvestment of
dividends - Class B 85 0 N/A
Shares redeemed - Class B (871) 0 N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS B 215,121 3 N/A
Shares sold - Institutional Class 919,441 18,333,654 8,141,771
Shares issued in reinvestment of
dividends - Institutional Class 136,028 2,574,515 969,487
Shares redeemed - Institutional Class (3,998,514) (4,577,809) (9,924,924)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - INSTITUTIONAL CLASS (2,943,045) 16,330,360 (813,666)
</TABLE>
---------------------
89
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
-------------------------------------------------
FOR THE SIX FOR THE NINE FOR THE
MONTHS ENDED MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPT. 30, 1996(1) DEC. 31, 1995
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 2,263,021 5,108,374 3,775,466
Shares issued in reinvestment of
dividends - Class A 83,226 1,005,634 726,595
Shares redeemed - Class A (1,793,908) (2,246,108) (2,208,631)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A 552,339 3,867,900 2,293,430
Shares sold - Class B 788,072 653,910 386,746
Shares issued in reinvestment of
dividends - Class B 3,523 69,929 14,982
Shares redeemed - Class B (112,577) (97,407) (20,798)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS B 679,018 626,432 380,930
Shares sold - Institutional Class 180,805 897,195 N/A
Shares issued in reinvestment of
dividends - Institutional Class 3,005 0 N/A
Shares redeemed - Institutional Class (189,127) (16,307) N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - INSTITUTIONAL CLASS (5,317) 880,888 N/A
</TABLE>
(1) "SHARES SOLD" INCLUDES 36,809 FOR CLASS A AND 865,446 FOR THE INSTITUTIONAL
CLASS, AS A RESULT OF THE MERGER OF THE PACIFICA GROWTH FUND.
- ---------------------
90
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SMALL CAP FUND
-------------------------------------------------
FOR THE SIX FROM SEPT. 16, 1996
MONTHS ENDED (COMMENCEMENT OF OPERATIONS)
MARCH 31, 1997 TO SEPT. 30, 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold - Class A 185,292 4,273
Shares issued in reinvestment of dividends -
Class A 0 0
Shares redeemed - Class A (25,880) 0
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -
CLASS A 159,412 4,273
Shares sold - Class B 108,204 1
Shares issued in reinvestment of dividends -
Class B 0 0
Shares redeemed - Class B (7,585) 0
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -
CLASS B 100,619 1
Shares sold - Institutional Class 579,679 1,096,256
Shares issued in reinvestment of dividends -
Institutional Class 0 0
Shares redeemed - Institutional Class (137,779) (2,487)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -
INSTITUTIONAL CLASS 441,900 1,093,769
</TABLE>
5. INCOME AND EXPENSE ALLOCATIONS
For the period from April 28, 1996 (commencement of operations as a feeder fund)
to September 30, 1996, the Corporate Stock Fund received allocations of income
and expenses from its corresponding Master Portfolio. The detail of allocated
income and expenses for the stand-alone period of the Fund (January 1, 1996 to
April 27, 1996) and the feeder period of the Fund (April 28, 1996 to September
30, 1996) is as follows:
<TABLE>
<CAPTION>
STAND-ALONE PERIOD FEEDER PERIOD
--------------------- -------------------------------
FUND INTEREST DIVIDENDS INTEREST DIVIDENDS EXPENSES
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate Stock $47,196 $2,248,983 $47,182 $3,711,397 $738,290
</TABLE>
The detail of allocated income and expenses for the six month period ended March
31, 1997 is presented in the Statements of Operations.
---------------------
91
<PAGE>
NOTES TO FINANCIAL STATEMENTS
6. REORGANIZATION OF THE CORPORATE STOCK FUND INTO A MASTER/FEEDER STRUCTURE
At special meetings of shareholders held between December 5, 1995 and December
19, 1995, shareholders of the Corporate Stock Fund approved a reorganization of
the Fund into a "master-feeder" structure, pursuant to which the Fund invests
all of its assets in the Corporate Stock Master Portfolio of MIT. On the
conversion date the Fund transferred its investments to the Master Portfolio in
exchange for interests in the Master Portfolio. The Fund then became a "feeder"
fund. This reorganization was effected on April 28, 1996.
7. REORGANIZATION OF SMALL CAP FUND
The Small Cap Master Portfolio is the successor to certain assets of the Small
Capitalization Growth Fund for Employee Retirement Plans, a collective
investment fund (the "Collective Investment Fund"). The Collective Investment
Fund was a private, non-registered investment fund previously managed by WFB.
Immediately prior to the commencement of the Small Cap Fund's operations, the
assets of the Collective Investment Fund were purchased by the Small Cap Master
Portfolio and the Collective Investment Fund redeemed all of its outstanding
interests and ceased operating as a trust. The Small Cap Master Portfolio
manages its investments in a manner identical in all material respects to the
operation of the Collective Investment Fund.
- ---------------------
92
<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 Balanced Fund, Diversified Income Fund,
Equity Value Fund, and Growth and Income Fund, and the statement of assets and
liabilities of the Aggressive Growth Fund, Corporate Stock Fund, and Small Cap
Fund (seven of the funds comprising Stagecoach Funds, Inc.) as of March 31,
1997, and the related statements of operations of each of the funds for the six
months ended March 31, 1997, the Balanced Fund and Equity Value Fund for the
year ended September 30, 1996, the Corporate Stock Fund, Diversified Income Fund
and Growth and Income Fund for the nine months ended September 30, 1996, the
Aggressive Growth Fund for the period from March 5, 1996 (commencement of
operations) to September 30, 1996, and the Small Cap Fund for the period from
September 16, 1996 (commencement of operations) to September 30, 1996, the
statements of changes in net assets for the six months ended March 31, 1997, of
the Balanced Fund and Equity Value Fund and for the year ended September 30,
1996, the Corporate Stock Fund, Diversified Income Fund and Growth and Income
Fund for the nine months ended September 30, 1996, and the year ended December
31, 1995, the Aggressive Growth Fund for the period from March 5, 1996
(commencement of operations) to September 30, 1996, and the Small Cap Fund for
the period from September 16, 1996 (commencement of operations) to September 30,
1996, 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 the Balanced Fund
and Equity Value Fund, 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
November 22, 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 each
of the aforementioned funds of Stagecoach Funds, Inc. as of March 31, 1997, 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.
[SIG]
[KPMG Peat Marwick LLP]
SAN FRANCISCO, CALIFORNIA
MAY 9, 1997
---------------------
93
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 92.83%
ADVERTISING - 0.97%
125,000 HA-LO Industries Inc+ $ 1,745,813 $ 1,906,250
BASIC INDUSTRIES - 0.29%
7,000 Nike Inc Class B $ 480,262 $ 434,000
180,000 Quadrax Corp+ 249,239 123,750
------------ --------------
$ 729,501 $ 557,750
BIOTECHNOLOGY - 2.15%
87,500 Cardiovascular Dynamics Inc+ $ 1,178,510 $ 875,000
135,000 General Surgical Innovations Inc+ 1,826,250 911,250
61,000 Liposome Co Inc+ 1,054,353 1,242,875
100,000 Neurex Corp+ 1,660,250 1,187,500
------------ --------------
$ 5,719,363 $ 4,216,625
CAPITAL GOODS - 4.43%
49,600 3-D Labs Inc+ $ 833,585 $ 1,165,600
28,000 Amati Communications Corp+ 598,072 269,500
85,000 Ascend Communication Inc+ 5,397,343 3,463,750
70,000 Bitstream Inc+ 404,420 306,250
44,500 Integrated Circuit Systems+ 622,504 634,125
59,000 Integrated Process Equipment Corp+ 1,447,560 988,250
20,000 Medic Computer Systems Inc+ 616,877 320,000
39,000 Overland Data Inc+ 422,110 195,000
100,000 Radiant Systems Inc+ 1,122,163 900,000
10,000 Sanmina Corp+ 464,625 447,500
------------ --------------
$ 11,929,259 $ 8,689,975
COMMERCIAL SERVICES - 1.84%
180,000 AccuStaff Inc+ $ 3,694,984 $ 3,015,000
75,000 Stericycle Inc+ 693,542 600,000
------------ --------------
$ 4,388,526 $ 3,615,000
</TABLE>
- ------------------------
94
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE - 9.61%
67,000 IKOS Systems Inc+ $ 1,182,104 $ 1,147,375
80,000 Imnet Systems Inc+ 2,029,375 1,200,000
175,000 Inference Corp Class A+ 3,187,250 984,375
79,500 Integrated Systems Inc+ 2,200,090 1,073,250
35,000 Microsoft Corp+ 1,971,688 3,209,063
45,000 Oracle Systems Corp+ 1,537,580 1,735,313
108,115 Pure Atria Corp+ 3,249,367 1,844,712
120,000 Veritas Software Corp+ 5,120,130 3,555,000
54,875 Viasoft Inc+ 2,249,673 1,783,438
5,000 Visio Corp 208,396 195,000
110,000 Xylan Corp+ 4,235,960 2,117,495
------------ --------------
$ 27,171,613 $ 18,845,021
COMPUTER SYSTEMS - 6.36%
130,000 Adaptec Inc+ $ 4,921,373 $ 4,647,500
42,500 Cisco Systems Inc+ 2,746,250 2,045,313
51,000 Clarify Inc+ 1,414,251 1,230,375
150,000 Komag Inc+ 3,757,801 4,556,250
------------ --------------
$ 12,839,675 $ 12,479,438
CONSUMER - BASIC - 2.74%
31,800 Algos Pharmaceuticals Corp+ $ 597,767 $ 532,650
34,500 Quintiles Transnational Corp+ 2,150,701 1,858,688
78,500 Suiza Foods Corp+ 1,939,238 2,099,875
126,844 Uroquest Medical Corp+ 797,074 872,053
------------ --------------
$ 5,484,780 $ 5,363,266
CONSUMER-DISCRETIONARY - 1.60%
100,000 Homegate Hospitality Inc+ $ 988,438 $ 693,750
135,000 North Cranberries Inc 3,128,638 2,446,875
------------ --------------
$ 4,117,076 $ 3,140,625
</TABLE>
---------------------
95
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT - 1.85%
65,000 Interlink Electronics Inc+ $ 344,375 $ 373,750
56,000 Nokia Corp ADR Class A 2,556,769 3,262,000
------------ --------------
$ 2,901,144 $ 3,635,750
ENERGY & RELATED - 7.96%
60,000 Comstock Resources Inc+ $ 738,527 $ 517,500
23,000 Edge Petroleum Corp+ 405,125 368,000
105,000 Ensco International Inc+ 3,595,599 5,171,250
120,000 Global Industries Ltd+ 1,311,788 2,565,000
80,000 Parker Drilling Co+ 756,000 670,000
85,000 Pride Petroleum Services Inc+ 1,760,313 1,763,750
75,000 Reading & Bates Corp+ 1,841,000 1,696,875
50,000 Smedvig ASA - Sponsored ADR Class B+ 1,061,191 1,181,250
85,000 Veritas Digicon Inc+ 1,320,391 1,678,750
------------ --------------
$ 12,789,934 $ 15,612,375
ENTERTAINMENT & LEISURE - 3.78%
102,500 Family Golf Centers Inc+ $ 1,856,213 $ 2,005,156
30,000 HFS Inc+ 1,928,768 1,766,250
135,000 Regal Cinemas Inc+ 3,914,163 3,645,000
------------ --------------
$ 7,699,144 $ 7,416,406
FINANCE & RELATED - 6.91%
125,000 Capital One Financial Corp $ 3,604,657 $ 4,656,250
213,500 Envoy Corp (New)+ 7,652,980 4,990,563
49,500 Firstplus Financial Group+ 1,382,278 1,491,188
115,000 Money Store Inc 2,734,484 2,415,000
------------ --------------
$ 15,374,399 $ 13,553,001
FOOD & RELATED - 0.74%
118,000 NuCo2 Inc+ $ 1,924,024 $ 1,445,500
</TABLE>
- ------------------------
96
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
GENERAL BUSINESS & RELATED - 9.32%
115,000 America Online Inc+ $ 4,583,672 $ 4,873,125
22,000 Anchor Gaming+ 1,035,897 613,250
45,000 Cambridge Tech Partners Inc+ 1,084,019 1,040,625
80,000 HBO & Co 4,664,148 3,800,000
30,000 Physician Computer Network+ 280,630 213,750
185,000 Proxim Inc+ 4,172,637 3,098,750
135,000 Quadramed Corp+ 1,687,847 1,434,375
60,000 Snyder Communications Inc+ 1,410,924 1,410,000
55,000 Staffmark Inc+ 823,970 721,875
55,000 Vail Resorts+ 1,180,684 1,072,500
------------ --------------
$ 20,924,428 $ 18,278,250
HEALTHCARE - 7.03%
180,000 Genesis Health Ventures Inc+ $ 4,369,722 $ 5,625,000
280,000 Healthsouth Corp+ 4,186,404 5,355,000
125,000 Renal Treatment Centers+ 2,199,750 2,812,500
------------ --------------
$ 10,755,876 $ 13,792,500
MANUFACTURING PROCESSING - 9.00%
60,000 Biochem Pharma Inc+ $ 3,148,051 $ 2,580,000
62,000 Closure Medical Corp+ 742,875 914,500
145,000 Cognos Inc+ 4,590,824 3,770,000
115,000 Eagle Hardware & Garden+ 2,573,184 2,070,000
65,000 Newpark Resources Inc+ 2,728,001 2,843,750
100,000 Tetra Technologies Inc+ 2,462,522 2,200,000
35,000 United Meridian Corp+ 1,549,138 1,054,375
34,783 Vertex Pharmaceuticals Inc+ 1,628,740 1,400,016
110,000 Vidamed Inc+ 1,434,063 825,000
------------ --------------
$ 20,857,398 $ 17,657,641
MATERIAL MANUFACTURING - 0.12%
44,500 Landec Corp+ $ 616,963 $ 233,625
</TABLE>
---------------------
97
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT & SUPPLIES - 2.09%
115,000 Endosonics Corp+ $ 1,415,547 $ 1,092,500
115,000 Life Med Sciences Inc+ 727,344 416,875
180,000 Ultrafem Inc+ 3,138,115 2,587,500
------------ --------------
$ 5,281,006 $ 4,096,875
MISCELLANEOUS STOCKS - 0.74%
57,000 Watsco Inc $ 1,657,605 $ 1,453,500
PHARMACEUTICALS - 0.92%
100,000 Anesta Corp+ $ 1,392,104 $ 1,725,000
80,000 Seragen Inc+ 444,940 80,000
------------ --------------
$ 1,837,044 $ 1,805,000
RETAIL & RELATED - 2.13%
265,000 Corporate Express Inc+ $ 5,073,187 $ 2,716,250
46,000 Galoob (Lewis) Toys Inc+ 788,970 851,000
30,000 PetSmart Inc+ 720,000 607,500
------------ --------------
$ 6,582,157 $ 4,174,750
SEMICONDUCTORS - 2.99%
99,999 Analog Devices Inc+ $ 2,555,201 $ 2,249,978
7,500 Intel Corp 949,688 1,043,438
70,000 LSI Logic Corp+ 2,396,871 2,432,500
5,000 OnTrak Systems Inc+ 93,282 133,750
------------ --------------
$ 5,995,042 $ 5,859,666
TELECOMMUNICATIONS - 4.14%
225,000 LCI International Inc+ $ 4,071,782 $ 3,768,750
200,000 NEXTEL Communications Class A+ 3,348,062 2,675,000
205,000 Paging Network Inc+ 3,817,562 1,665,625
------------ --------------
$ 11,237,406 $ 8,109,375
</TABLE>
- ------------------------
98
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
TRANSPORTATION - 3.12%
76,000 Atlas Air Inc+ $ 3,489,319 $ 1,995,000
93,000 Mesa Air Group+ 952,687 568,172
75,000 Trico Marine Services Inc+ 2,552,675 3,562,500
------------ --------------
$ 6,994,681 $ 6,125,672
TOTAL COMMON STOCKS $207,553,857 $ 182,063,836
WARRANTS - 2.78%
55,000 Intel Corp expires 3/14/1998+ $ 5,451,875
(Cost $2,973,392)
</TABLE>
---------------------
99
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 0.19%
CONVERTIBLE CORPORATE BONDS - 0.19%
$ 240,000 First Financial Management Corp 5.00 % 12/15/99 $ 381,600
(Cost $240,000)
SHORT-TERM INSTRUMENTS - 3.93%
REPURCHASE AGREEMENTS - 3.93%
$ 7,699,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50 % 04/01/97 $ 7,699,000
(Cost $7,699,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $218,466,249)* (Notes 1 and 3) 99.73% $ 195,596,311
Other Assets and Liabilities, Net 0.27 536,566
------ --------------
TOTAL NET ASSETS 100.00% $ 196,132,877
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED DEPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 18,683,712
Gross Unrealized Depreciation (41,553,650)
------------
NET UNREALIZED DEPRECIATION $(22,869,938)
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
100
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 99.70%
12,323 3Com Corp+ $ 580,561 $ 403,578
54,358 Abbott Laboratories 1,031,668 3,050,843
9,534 Advanced Micro Devices+ 197,756 395,661
10,586 Aetna Inc 840,280 909,073
7,423 Ahmanson (H F) & Co 147,061 270,940
7,792 Air Products & Chemicals Inc 212,559 528,882
35,063 Airtouch Communications+ 562,510 806,449
3,968 Alberto-Culver Co Class B 35,915 103,664
17,588 Albertson's Inc 217,934 597,992
15,830 Alcan Aluminium Ltd 303,165 536,241
12,198 Allegheny Teledyne Inc 214,932 343,069
4,550 Allergan Inc 120,600 132,519
19,778 Allied Signal Inc 476,310 1,409,183
31,156 Allstate Corp 687,721 1,849,888
13,290 Alltel Corp 410,651 431,925
12,094 Aluminum Co of America 352,003 822,392
5,903 ALZA Corp+ 161,760 162,333
8,560 Amdahl Corp+ 131,063 80,250
6,553 Amerada Hess Corp 257,262 347,309
11,858 American Brands Inc 360,966 600,311
13,082 American Electric Power Inc 383,277 539,633
33,172 American Express Corp 903,065 1,986,174
14,246 American General Corp 299,370 580,525
5,250 American Greetings Corp Class A 98,004 167,672
44,682 American Home Products Corp 1,203,402 2,680,920
32,845 American International Group Inc 1,100,120 3,855,182
10,240 American Stores Co 180,934 455,680
38,452 Ameritech Corp 1,046,091 2,364,798
18,500 Amgen Inc+ 670,732 1,033,688
34,790 Amoco Corp 1,534,299 3,013,684
15,395 AMP Inc 423,515 529,203
6,399 AMR Corp+ 430,208 527,918
6,360 Andrew Corp+ 19,606 229,755
34,972 Anheuser-Busch Inc 677,903 1,473,196
</TABLE>
---------------------
101
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
7,544 Aon Corp $ 410,062 $ 462,070
8,670 Apple Computer Inc+ 330,483 158,228
12,652 Applied Materials Inc+ 352,214 586,737
38,032 Archer-Daniels-Midland Co 330,375 679,822
7,563 Armco Inc+ 67,028 30,252
2,877 Armstrong World Industries Inc 115,653 186,286
3,037 ASARCO Inc 76,480 85,416
4,550 Ashland Inc 164,936 183,138
113,428 AT & T Corp 2,861,931 3,941,623
11,320 Atlantic Richfield Corp 1,024,712 1,528,200
3,200 Autodesk Inc 64,362 99,200
20,408 Automatic Data Processing 332,742 854,585
10,543 AutoZone Inc+ 287,810 237,218
7,300 Avery Dennison Corp 79,038 281,050
9,308 Avon Products Inc 176,928 488,670
10,071 Baker Hughes Inc 209,516 386,475
2,191 Ball Corp 71,009 58,062
10,285 Baltimore Gas & Electric Co 217,179 275,124
29,858 Banc One Corp 818,209 1,186,856
10,725 Bank of Boston Corp 365,622 718,575
27,474 Bank of New York Inc 484,399 1,009,670
25,106 BankAmerica Corp 911,467 2,529,430
5,717 Bankers Trust N Y Corp 295,265 468,794
4,012 Bard (C R) Inc 90,804 114,342
13,622 Barnett Banks Inc 262,471 633,423
24,957 Barrick Gold Corp 743,665 592,729
15,708 Battle Mountain Gold Co 133,881 104,066
3,868 Bausch & Lomb Inc 115,883 152,786
19,050 Baxter International Inc 412,094 821,531
13,814 Bay Networks Inc+ 645,155 246,925
8,716 Becton Dickinson & Co 146,479 392,220
30,678 Bell Atlantic Corp 1,256,930 1,867,523
69,508 BellSouth Corp 1,580,816 2,936,713
3,644 Bemis Co Inc 46,385 145,760
3,806 Beneficial Corp 115,777 245,963
7,921 Bethlehem Steel Corp+ 124,749 65,348
7,019 Beverly Enterprises+ 87,648 100,021
</TABLE>
- ------------------------
102
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,050 Biomet Inc+ $ 76,638 $ 135,844
6,576 Black & Decker Corp 146,228 211,254
7,294 Block (H & R) Inc 149,586 214,261
25,118 Boeing Co 853,096 2,477,263
3,354 Boise Cascade Corp 123,572 102,297
12,463 Boston Scientific Corp+ 309,817 769,590
2,052 Briggs & Stratton Corp 38,349 92,084
70,098 Bristol-Myers Squibb Co 1,791,038 4,135,782
4,858 Brown-Forman Corp Class B 104,589 231,970
14,858 Browning-Ferris Industries Inc 410,787 429,025
6,869 Brunswick Corp 126,150 184,604
10,736 Burlington Northern Santa Fe 402,417 794,464
8,748 Burlington Resources Inc 397,301 373,977
10,942 Cabletron Systems Inc+ 300,805 320,054
2,744 Caliber System Inc 111,791 72,716
32,728 Campbell Soup Co 398,141 1,517,761
10,600 Carolina Power & Light Co 248,454 384,250
5,154 Case Corp 228,221 261,566
13,406 Caterpillar Inc 361,387 1,075,832
1,954 Centex Corp 37,882 68,879
14,742 Central & South West Corp 292,833 315,110
4,796 Ceridian Corp+ 132,938 172,057
6,698 Champion International Corp 224,240 304,759
7,406 Charming Shoppes Inc+ 93,828 39,807
30,680 Chase Manhattan Bank 1,060,641 2,872,415
45,646 Chevron Corp 1,422,168 3,178,103
49,191 Chrysler Corp 788,617 1,475,730
12,148 Chubb Corp 302,519 654,474
5,249 CIGNA Corp 336,284 767,010
2,792 Cincinnati Milacron Inc 62,425 52,350
11,071 Cinergy Corp 236,765 377,798
6,900 Circuit City Stores Inc 103,272 230,288
46,042 Cisco Systems Inc+ 1,125,148 2,215,771
32,432 Citicorp 1,210,612 3,510,764
3,586 Clorox Co 130,548 402,080
7,382 Coastal Corp 181,356 354,336
174,152 Coca-Cola Co 1,846,242 9,730,743
</TABLE>
---------------------
103
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
11,932 Cognizant Corp $ 352,002 $ 347,520
10,273 Colgate-Palmolive Co 376,511 1,023,448
3,898 Columbia Gas System Inc 162,585 225,597
47,000 Columbia HCA Healthcare Corp 1,155,579 1,580,375
22,863 Comcast Corp Class A 472,279 385,813
7,555 Comerica Inc 285,496 425,913
18,935 Compaq Computer Corp+ 280,566 1,450,894
25,513 Computer Associates International Inc 218,239 991,818
5,286 Computer Sciences Corp+ 189,180 326,411
16,845 ConAgra Inc 368,829 913,841
5,603 Conrail Inc 328,832 631,738
11,859 Conseco Inc 428,052 422,477
16,464 Consolidated Edison Co 405,086 493,920
6,599 Consolidated Natural Gas Co 262,932 332,425
7,544 Cooper Industries Inc 274,807 327,221
5,750 Cooper Tire & Rubber Co 72,448 106,375
2,659 Coors (Adolph) Co Class B 54,512 56,504
15,599 CoreStates Financial Corp 455,802 740,953
16,072 Corning Inc 323,539 713,195
14,684 Costco Companies Inc+ 291,444 405,646
10,028 CPC International Inc 311,953 822,296
3,216 Crane Co 38,873 100,902
8,951 Crown Cork & Seal Co 248,955 462,095
15,210 CSX Corp 337,488 707,265
27,792 CUC International Inc+ 552,116 625,320
2,784 Cummins Engine Co Inc 94,909 142,680
7,424 CVS Corp 248,060 342,432
6,493 Cyprus Amax Minerals 170,409 154,209
7,100 Dana Corp 147,622 233,413
11,002 Darden Restaurants Inc 71,472 86,641
2,740 Data General Corp+ 65,481 46,580
15,142 Dayton-Hudson Corp 281,290 632,179
22,466 Dean Witter Discover & Co 383,667 783,502
18,091 Deere & Co 289,791 786,959
12,294 Dell Computer Corp+ 415,866 831,382
5,184 Delta Air Lines Inc 357,330 436,104
5,796 Deluxe Corp 205,906 187,646
</TABLE>
- ------------------------
104
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
10,865 Digital Equipment Corp+ $ 1,071,270 $ 297,429
7,918 Dillard Department Stores Inc Class A 180,564 249,417
47,494 Disney (Walt) Co 1,581,863 3,467,062
12,640 Dominion Resources Inc 403,836 459,780
10,554 Donnelley (R R) & Sons Co 233,054 368,071
7,904 Dover Corp 137,562 414,960
16,989 Dow Chemical Co 911,794 1,359,120
6,795 Dow Jones & Co Inc 264,919 276,047
12,339 Dresser Industries Inc 216,981 373,255
8,182 DSC Communications Corp+ 87,435 171,311
10,152 DTE Energy Co 226,778 272,835
14,146 Duke Power Co 375,038 624,192
11,932 Dun & Bradstreet Corp 241,532 302,775
39,411 DuPont (E I) de Nemours 1,667,286 4,177,566
1,464 Eastern Enterprises 40,702 45,201
5,406 Eastman Chemical Co 221,839 290,573
23,275 Eastman Kodak Co 922,832 1,765,991
5,388 Eaton Corp 184,321 381,875
4,371 Echlin Inc 83,323 148,614
9,700 Echo Bay Mines Ltd 132,550 64,263
4,500 Ecolab Inc 65,639 171,000
30,312 Edison International 536,682 682,020
3,326 EG & G Inc 62,929 69,430
16,283 EMC Corp+ 355,516 578,047
31,464 Emerson Electric Co 676,909 1,415,880
10,072 Engelhard Corp 85,878 211,512
17,832 Enron Corp 295,762 677,616
4,829 Enserch Corp 97,159 98,995
16,184 Entergy Corp 366,514 396,508
86,936 Exxon Corp 4,147,874 9,367,354
7,956 Federal Express Corp+ 237,823 414,707
50,000 Federal Home Loan Mortgage Corp 591,061 1,362,500
76,400 Federal National Mortgage Assoc 742,818 2,759,950
14,553 Federated Department Stores Inc+ 396,592 478,430
7,387 Fifth Third Bancorp 430,623 572,493
9,448 First Bank System Inc 496,807 689,704
22,294 First Chicago NBD Corp 500,710 1,206,663
</TABLE>
---------------------
105
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
31,326 First Data Corp $ 898,891 $ 1,061,168
19,866 First Union Corp 688,950 1,611,629
18,404 Fleet Financial Group Inc 527,074 1,053,629
2,446 Fleetwood Enterprises Inc 40,942 61,150
2,650 Fleming Co Inc 79,714 46,375
5,826 Fluor Corp 157,863 305,865
2,567 FMC Corp+ 92,149 157,229
82,936 Ford Motor Co 1,912,562 2,602,117
2,832 Foster Wheeler Corp 65,292 100,182
12,837 FPL Group Inc 425,808 566,433
13,519 Freeport McMoRan Copper & Gold Inc Class B 370,503 410,640
11,494 Frontier Corp 260,316 205,455
5,419 Fruit of the Loom Inc Class A+ 147,879 224,889
9,849 Gannett Co Inc 443,402 845,783
19,884 Gap Inc 203,869 666,114
4,428 General Dynamics Corp 101,324 298,337
115,278 General Electric Co 3,653,917 11,441,342
9,589 General Instrument Corp+ 260,295 219,348
11,302 General Mills Inc 363,405 702,137
52,932 General Motors Corp 2,203,245 2,931,110
5,763 General Re Corp 438,892 910,554
3,468 General Signal Corp 95,658 135,686
8,387 Genuine Parts Co 225,746 391,044
6,435 Georgia-Pacific Corp 316,591 466,538
4,200 Giant Food Inc Class A 95,526 134,400
2,350 Giddings & Lewis Inc 52,450 34,956
38,793 Gillette Co 1,069,553 2,817,342
4,050 Golden West Financial 108,267 254,138
3,732 Goodrich (B F) Co 90,611 136,685
10,876 Goodyear Tire & Rubber Co 306,998 568,271
8,427 GPU Inc 254,245 270,717
5,797 Grace W.R. & Co 306,354 274,633
3,692 Grainger (W W) Inc 127,421 273,208
2,643 Great Atlantic & Pacific Tea Co 94,974 67,066
4,400 Great Lakes Chemical Corp 244,433 202,400
9,588 Great Western Financial Corp 181,805 387,116
9,601 Green Tree Financial Inc 325,389 324,034
</TABLE>
- ------------------------
106
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
67,331 GTE Corp $ 1,876,702 $ 3,139,308
5,213 Guidant Corp 293,950 320,600
8,766 Halliburton Co 304,442 593,897
4,926 Harcourt General Inc 117,890 229,059
2,200 Harland (John H) Co 53,487 52,250
3,466 Harnischfeger Industries Inc 85,982 161,169
7,212 Harrah's Entertainment Inc+ 50,984 123,506
2,758 Harris Corp 97,719 212,021
9,082 Hasbro Inc 111,503 248,620
21,962 Healthsouth Corp+ 445,017 420,023
25,689 Heinz (H J) Co 489,996 1,014,716
1,700 Helmerich & Payne Inc 41,748 78,625
7,206 Hercules Inc 140,374 304,454
10,722 Hershey Foods Corp 176,112 536,100
71,192 Hewlett Packard Co 1,106,391 3,790,974
8,971 HFS Inc+ 589,791 528,168
17,293 Hilton Hotels Corp 214,776 419,355
33,640 Home Depot Inc 645,620 1,799,740
10,290 Homestake Mining Co 160,863 155,636
8,804 Honeywell Inc 201,124 597,572
6,800 Household International Inc 188,946 583,950
16,388 Houston Industries Inc 295,487 342,100
11,328 Humana Inc+ 316,680 249,216
9,460 IKON Office Solutions 185,838 316,910
8,714 Illinois Tool Works Inc 241,154 711,280
11,738 Inco Ltd 290,210 382,952
7,634 Ingersoll-Rand Co 163,550 333,033
3,400 Inland Steel Industries Inc 93,798 66,300
57,460 Intel Corp 765,402 7,994,123
3,298 Intergraph Corp+ 75,324 25,560
36,204 International Business Machines Corp 4,519,275 4,973,525
7,763 International Flavors & Fragrances 164,066 339,631
21,031 International Paper Co 578,587 817,580
5,700 Interpublic Group Cos Inc 195,637 300,675
8,169 ITT Corp+ 221,614 480,950
8,169 ITT Hartford Group Inc 208,599 589,189
8,269 ITT Industries Inc 95,017 185,019
</TABLE>
---------------------
107
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,008 James River Corp $ 175,222 $ 174,983
5,003 Jefferson-Pilot Corp 95,337 272,038
93,198 Johnson & Johnson 1,525,485 4,927,844
2,917 Johnson Controls Inc 99,990 234,819
2,700 Jostens Inc 69,906 61,088
33,760 K Mart Corp 641,385 409,340
2,727 Kaufman & Broad Home Corp 35,122 36,133
14,735 Kellogg Co 541,912 990,929
3,383 Kerr-McGee Corp 133,022 209,323
15,772 KeyCorp 504,844 768,885
19,794 Kimberly-Clark Corp 624,543 1,967,029
2,600 King World Productions+ 59,722 94,900
6,576 Knight-Ridder Inc 175,897 262,218
8,870 Kroger Co+ 139,355 450,153
21,964 Laidlaw Inc Class B 197,717 302,005
38,574 Lilly (Eli) & Co 1,106,619 3,172,712
18,985 Limited Inc 400,080 348,849
7,280 Lincoln National Corp 232,565 389,480
4,992 Liz Claiborne Inc 149,658 217,776
13,530 Lockheed Martin Corp 476,761 1,136,520
8,026 Loews Corp 448,417 713,311
2,790 Longs Drug Stores Corp 49,059 65,565
2,353 Louisiana Land & Exploration Co 89,374 111,473
7,612 Louisiana-Pacific Corp 113,437 157,949
12,110 Lowe's Co Inc 159,608 452,611
9,002 LSI Logic Corp+ 326,921 312,820
44,633 Lucent Technologies Inc 1,541,268 2,354,391
5,154 Mallinckrodt Inc 105,656 211,958
4,401 Manor Care Inc 45,653 107,274
9,004 Marriott International 233,209 447,949
5,050 Marsh & McLennan Companies Inc 370,330 571,913
11,186 Masco Corp 333,496 399,900
20,182 Mattel Inc 225,398 484,368
17,110 May Department Stores Co 378,218 778,505
6,968 Maytag Corp 150,757 143,715
3,032 MBIA Inc 313,496 290,693
23,362 MBNA Corp 143,752 651,216
</TABLE>
- ------------------------
108
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,834 McDermott International Inc $ 91,348 $ 81,952
48,866 McDonald's Corp 808,775 2,308,919
14,826 McDonnell Douglas Corp 191,145 904,386
6,916 McGraw-Hill Inc 226,783 353,581
47,942 MCI Communications 693,836 1,707,934
3,659 Mead Corp 123,154 193,927
16,804 Medtronic Inc 223,760 1,046,049
9,054 Mellon Bank Corp 310,580 658,679
2,562 Mercantile Stores Co Inc 106,216 118,813
84,355 Merck & Co Inc 2,331,993 7,106,909
3,792 Meredith Corp 32,768 87,690
11,513 Merrill Lynch & Co Inc 269,981 988,679
4,114 MGIC Investment Corp 257,711 291,066
14,594 Micron Technology Inc 279,629 591,057
84,237 Microsoft Corp+ 2,480,314 7,723,480
3,000 Millipore Corp 56,557 127,125
29,213 Minnesota Mining & Manufacturing Co 1,065,280 2,468,499
27,540 Mobil Corp 1,497,196 3,597,413
41,190 Monsanto Co 422,197 1,575,518
7,000 Moore Corp Ltd 170,585 140,000
13,028 Morgan (J P) & Co Inc 640,513 1,280,001
10,648 Morgan Stanley Group 529,144 625,570
9,956 Morton International Inc 156,306 420,641
41,472 Motorola Inc 905,689 2,503,872
595 NACCO Industries Inc Class A 22,972 29,304
4,750 Nalco Chemical Co 131,727 177,531
15,620 National City Corp 485,021 728,283
9,701 National Semiconductor+ 131,158 266,778
3,327 National Service Industries Inc 84,656 130,169
53,940 NationsBank 1,144,941 2,986,928
5,197 Navistar International+ 164,224 48,722
6,753 New York Times Co Class A 208,711 297,976
11,100 Newell Co 178,643 371,850
6,982 Newmont Mining Corp 181,285 270,553
10,067 Niagara Mohawk Power Corp+ 175,094 85,570
3,500 NICOR Inc 72,450 112,000
20,200 Nike Inc Class B 165,594 1,252,400
</TABLE>
---------------------
109
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
9,600 NorAm Energy Corp $ 177,722 $ 140,400
5,650 Nordstrom Inc 177,378 213,994
8,755 Norfolk Southern Corp 360,074 746,364
4,833 Northern States Power Co 174,170 228,963
18,087 Northern Telecom Ltd 476,812 1,182,438
4,058 Northrop Grumman Corp 166,620 306,886
25,927 Norwest Corp 472,690 1,199,124
23,968 Novell Inc+ 575,907 227,696
6,126 Nucor Corp 111,250 280,265
30,820 NYNEX Corp 1,112,475 1,406,163
22,976 Occidental Petroleum Corp 639,860 565,784
10,660 Ohio Edison Co 219,492 225,193
1,860 ONEOK Inc 31,161 48,360
47,329 Oracle Systems Corp+ 316,343 1,825,125
7,272 Oryx Energy Co+ 192,170 139,986
3,593 Owens Corning Fiberglass Corp 91,088 144,618
2,685 PACCAR Inc 89,448 179,224
5,993 Pacific Enterprises 244,567 181,288
29,972 Pacific Telesis Group 615,339 1,131,443
20,650 PacifiCorp 396,053 441,394
8,750 Pall Corp 110,409 202,344
10,612 Panenergy Corp 251,338 457,643
5,203 Parker Hannifin Corp 112,881 222,428
15,518 PECO Energy Co 345,540 316,179
17,305 Penney (J C) Co Inc 530,110 824,151
3,267 Pennzoil Co 217,724 169,067
2,494 Peoples Energy Corp 58,826 82,614
4,400 Pep Boys-Manny Moe & Jack 75,087 132,000
108,728 Pepsico Inc 1,140,576 3,547,251
3,071 Perkin-Elmer Corp 106,721 197,696
45,160 Pfizer Inc 1,097,823 3,799,085
28,848 PG&E Corp 711,694 677,928
35,567 Pharmacia and Upjohn Inc 1,111,125 1,302,641
4,520 Phelps Dodge Corp 132,124 330,525
56,988 Philip Morris Co Inc 2,248,365 6,503,756
18,419 Phillips Petroleum Co 367,278 752,877
5,728 Pioneer Hi Bred International Inc 216,791 360,148
</TABLE>
- ------------------------
110
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
10,376 Pitney Bowes Inc $ 255,415 $ 609,590
16,763 Placer Dome Inc 261,346 303,829
23,857 PNC Bank Corp 628,588 954,280
3,209 Polaroid Corp 111,857 127,558
1,971 Potlatch Corp 70,259 81,057
11,376 PP & L Resources Inc 293,735 230,364
12,870 PPG Industries Inc 317,672 694,980
10,994 Praxair Inc 193,992 493,356
47,706 Procter & Gamble Co 1,554,084 5,486,190
6,540 Providian Corp 157,492 349,890
16,671 Public Services Enterprise Group 449,373 437,614
1,638 Pulte Corp 26,908 47,912
9,480 Quaker Oats Co 227,455 346,020
7,470 Ralston-Purina Group 286,765 583,594
3,100 Raychem Corp 133,260 255,363
16,476 Raytheon Co 344,484 743,480
3,904 Reebok International Ltd 87,829 175,192
3,836 Republic New York Corp 225,240 338,048
4,420 Reynolds Metals Co 197,904 274,040
8,582 Rite Aid Corp 218,198 360,444
15,274 Rockwell International Corp (New) 388,578 990,901
4,509 Rohm & Haas Co 188,776 337,611
5,939 Rowan Co Inc+ 49,274 134,370
37,546 Royal Dutch Petroleum Co 2,552,160 6,570,550
10,504 Rubbermaid Inc 203,716 261,287
2,670 Russell Corp 56,469 95,453
5,756 Ryder System Inc 153,438 168,363
8,866 SAFECO Corp 161,208 354,640
4,100 Safety-Kleen Corp 106,229 60,475
7,668 Salomon Inc 280,738 382,442
6,411 Santa Fe Energy Resources Inc+ 39,779 88,953
9,183 Santa Fe Pacific Gold Corp 158,960 151,520
33,876 Sara Lee Corp 532,335 1,371,978
42,216 SBC Communication Inc 1,039,358 2,221,617
25,836 Schering-Plough Corp 482,611 1,879,569
17,231 Schlumberger Ltd 828,816 1,848,025
5,396 Scientific-Atlanta Inc 33,627 82,289
</TABLE>
---------------------
111
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
17,546 Seagate Technology Inc+ $ 499,699 $ 787,377
26,124 Seagram Co Ltd 542,741 999,243
27,391 Sears Roebuck & Co 566,487 1,376,398
16,502 Service Corp International 191,468 490,935
1,662 Shared Medical System Corp 47,469 77,283
11,972 Sherwin Williams Co 113,394 323,244
7,024 Sigma-Aldrich Corp 134,320 216,866
12,246 Silicon Graphics Inc+ 399,726 238,797
4,259 Snap-On Inc 96,690 165,036
6,010 Sonat Inc 116,983 327,545
47,182 Southern Co 673,226 996,720
10,174 Southwest Airlines Co 290,550 225,100
1,365 Springs Industries Inc Class A 46,634 61,084
30,100 Sprint Corp 926,819 1,369,550
5,622 St Jude Medical Inc+ 128,180 187,634
5,806 St Paul Co Inc 164,552 376,664
6,210 Stanley Works 108,263 235,204
6,941 Stone Container Corp 152,501 77,219
3,550 Stride Rite Corp 56,185 53,250
5,107 Sun Co Inc 163,803 133,420
25,700 Sun Microsystems Inc+ 185,667 742,088
15,600 SunTrust Banks Inc 214,447 723,450
4,752 Supervalu Inc 126,495 141,372
12,542 Sysco Corp 179,665 427,996
8,218 Tandem Computers Inc+ 185,381 97,589
4,059 Tandy Corp 169,051 203,457
2,257 Tektronix Inc 70,229 113,979
46,488 Tele-Communication Inc Class A+ 570,050 557,856
12,528 Tellabs Inc+ 299,623 452,574
3,896 Temple-Inland Inc 131,169 204,540
21,134 Tenet Healthcare Corp+ 390,441 520,425
11,914 Tenneco 475,064 464,646
18,492 Texaco Inc 888,739 2,024,874
13,360 Texas Instruments Inc 376,435 1,000,330
15,712 Texas Utilities Co 553,753 538,136
5,796 Textron Inc 205,284 608,580
10,482 Thermo Electron Corp+ 429,359 323,632
</TABLE>
- ------------------------
112
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,743 Thomas & Betts Corp $ 121,189 $ 160,013
39,802 Time Warner Inc 1,203,578 1,721,437
6,952 Times Mirror Co Class A 179,779 379,753
2,188 Timken Co 65,019 117,058
5,460 TJX Companies Inc 117,786 233,415
4,900 Torchmark Corp 153,131 271,338
20,350 Toys R Us Inc+ 455,843 569,800
4,665 Transamerica Corp 193,384 417,518
44,848 Travelers Group Inc 719,624 2,147,098
8,622 Tribune Co 181,282 349,191
1,974 Trinova Corp 55,067 66,129
8,836 TRW Inc 231,424 457,263
4,400 Tupperware Corp+ 68,623 147,400
11,622 Tyco International Ltd 309,466 639,210
10,548 U.S. Bancorp 265,188 564,318
2,357 U.S. Life Corp 45,095 110,190
33,432 U.S. West Inc 662,697 1,136,688
43,658 U.S. West Media Group+ 642,672 813,130
15,094 Unicom Corp 512,984 294,333
11,165 Unilever NV 788,185 2,079,481
4,882 Union Camp Corp 201,562 230,064
8,929 Union Carbide Corp 121,241 395,108
7,100 Union Electric Co 241,852 261,813
17,110 Union Pacific Corp 521,918 970,993
17,495 Union Pacific Resources Group Inc 338,173 467,991
12,273 Unisys Corp+ 312,986 78,240
12,865 United Healthcare Corp 601,756 612,696
4,350 United States Surgical 395,823 132,675
16,856 United Technologies Corp 449,809 1,268,414
17,560 Unocal Corp 374,437 669,475
5,127 UNUM Corp 290,945 374,271
4,510 USAir Group Inc+ 141,517 110,495
8,125 USF & G Corp 238,787 174,688
13,040 UST Inc 195,462 363,490
20,122 USX - Marathon Group 480,791 560,901
5,890 USX - US Steel Group 160,959 156,821
4,466 VF Corp 175,532 298,664
</TABLE>
---------------------
113
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
24,711 Viacom Inc Class B+ $ 853,366 $ 818,552
11,593 Wachovia Corp 457,633 631,819
160,514 Wal Mart Stores Inc 2,196,751 4,474,328
17,180 Walgreen Co 207,796 719,413
18,936 Warner Lambert Co 453,662 1,637,964
6,518 Wells Fargo & Co 559,126 1,851,927
9,059 Wendy's International Inc 119,752 186,842
3,801 Western Atlas Inc+ 113,803 230,436
42,096 Westinghouse Electric Corp 982,547 747,204
7,089 Westvaco Corp 141,701 178,111
13,862 Weyerhaeuser Co 450,594 618,592
5,154 Whirlpool Corp 205,898 245,459
7,238 Whitman Corp 87,303 177,331
3,836 Willamette Industries Inc 262,635 239,750
10,992 Williams Co Inc 149,048 489,144
10,536 Winn-Dixie Stores Inc 171,408 347,688
33,936 WMX Technologies Inc 897,208 1,039,290
9,298 Woolworth Corp+ 236,625 217,341
60,992 WorldCom Inc+ 1,497,583 1,341,824
6,675 Worthington Industries Inc 80,418 127,659
8,110 Wrigley (Wm) Jr Co 129,972 473,421
22,732 Xerox Corp 563,495 1,292,825
------------ --------------
TOTAL COMMON STOCKS $203,647,214 $ 405,787,689
</TABLE>
- ------------------------
114
<PAGE>
MASTER INVESTMENT TRUST CORPORATE STOCK MASTER PORTFOLIO
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 0.68%
$ 435,000 U.S. Treasury Bills 4.93%(F) 04/24/97 $ 433,511
29,000 U.S. Treasury Bills 4.94(F) 04/17/97 28,936
470,000 U.S. Treasury Bills 4.98(F) 04/03/97 469,800
32,000 U.S. Treasury Bills 5.14(F) 05/01/97 31,866
106,000 U.S. Treasury Bills 5.16(F) 06/05/97 105,018
55,000 U.S. Treasury Bills 5.17(F) 06/19/97 54,366
549,000 U.S. Treasury Bills 5.18(F) 05/15/97 545,476
328,000 U.S. Treasury Bills 5.19(F) 05/22/97 325,509
762,000 U.S. Treasury Bills 5.20(F) 05/29/97 755,249
--------------
TOTAL U.S. TREASURY SECURITIES $ 2,749,731
(Cost $2,750,741)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $206,397,955)* (Notes 1 and 3) 100.38% $ 408,537,420
Other Assets and Liabilities, Net (0.38) (1,533,997)
------ --------------
TOTAL NET ASSETS 100.00% $ 407,003,423
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</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 $209,636,390
Gross Unrealized Depreciation (7,496,925)
------------
NET UNREALIZED APPRECIATION $202,139,465
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
115
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 83.95%
ADVERTISING - 2.86%
54,125 HA-LO Industries Inc+ $ 1,154,104 $ 825,406
9,000 Outdoor Systems Inc+ 250,500 268,875
------------ --------------
$ 1,404,604 $ 1,094,281
BIOTECHNOLOGY - 1.61%
52,000 Neurex Corp+ $ 852,750 $ 617,500
CAPITAL GOODS - 9.15%
6,000 Advanced Digital Information Corp+ $ 102,000 $ 76,500
20,000 Bitstream Inc+ 115,420 87,500
7,000 Checkfree Corp+ 103,250 84,875
20,000 Crystal Systems Solutions+ 150,000 240,000
5,000 ESS Technology Inc+ 161,656 121,250
27,000 ILOG SA-Sponsored ADR+ 304,200 195,750
20,000 Integrated Circuit Systems+ 270,626 285,000
37,000 Integrated Process Equipment Corp+ 904,695 619,750
30,000 Inter-Tel Inc+ 594,375 341,250
14,000 Neomagic Corp+ 169,250 176,750
20,000 Planning Sciences Int-SP ADR+ 285,938 180,000
34,000 Siebel Systems Inc+ 603,750 569,500
25,000 Talx Corp+ 233,750 193,750
20,000 Xcellenet Inc+ 354,371 330,000
------------ --------------
$ 4,353,281 $ 3,501,875
COMMERCIAL SERVICES - 0.42%
20,000 Stericycle Inc+ $ 187,500 $ 160,000
</TABLE>
- ------------------------
116
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE - 1.17%
14,000 Integrated Systems Inc+ $ 361,875 $ 189,000
10,023 Pure Atria Corp+ 324,795 171,017
3,000 Veritas Software Corp+ 132,500 88,875
------------ --------------
$ 819,170 $ 448,892
COMPUTER SYSTEMS - 1.99%
31,500 Clarify Inc+ $ 917,869 $ 759,938
CONSUMER - BASIC - 9.82%
10,000 Algos Pharmaceuticals Corp+ $ 197,080 $ 167,500
20,500 Enterprises Systems Inc+ 504,479 461,250
13,500 Medicis Pharmaceutical Corp+ 416,875 401,625
32,500 Orthodontic Centers of America Inc+ 685,314 438,750
17,391 Pathogenesis Corp+ 365,859 434,775
29,000 Renal Treatment Centers+ 843,399 652,500
30,000 Selfcare Inc+ 300,000 262,500
35,000 Suiza Foods Corp+ 770,000 936,250
------------ --------------
$ 4,083,006 $ 3,755,150
CONSUMER-DISCRETIONARY - 6.11%
38,000 Equity Corp International+ $ 771,750 $ 798,000
40,000 North Cranberries Inc 931,550 725,000
20,000 Prime Hospitality Corp+ 351,015 312,500
55,556 Quadrax Corp+ 81,598 38,195
14,000 UOL Publishing Inc+ 182,000 168,000
18,900 V-One Corp+ 94,500 108,675
20,000 Viisage Technology+ 217,813 187,500
------------ --------------
$ 2,630,226 $ 2,337,870
ELECTRICAL EQUIPMENT - 0.47%
31,500 Interlink Electronics Inc+ $ 216,563 $ 181,125
</TABLE>
---------------------
117
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
ENERGY & RELATED - 5.83%
24,000 American Exploration Co+ $ 311,320 $ 270,000
32,000 American Oilfield Divers Inc+ 396,906 360,000
20,000 Marine Drilling Co Inc+ 332,500 355,000
20,000 Pride Petroleum Services Inc+ 447,500 415,000
8,000 Production Operators Corp+ 389,000 453,000
16,000 Smedvig ASA - Sponsored ADR Class B+ 352,918 378,000
------------ --------------
$ 2,230,144 $ 2,231,000
ENTERTAINMENT & LEISURE - 3.12%
32,000 Family Golf Centers Inc+ $ 920,875 $ 626,000
21,000 Regal Cinemas Inc+ 537,200 567,000
------------ --------------
$ 1,458,075 $ 1,193,000
FINANCE & RELATED - 7.69%
35,000 Applied Graphics Technologies+ $ 940,000 $ 1,238,125
7,000 Criimi Mae Inc 118,642 103,250
25,000 Envoy Corp (New)+ 838,125 584,375
22,000 IMC Mortgage Co+ 404,313 324,500
15,000 Redwood Trust Inc 477,500 693,750
------------ --------------
$ 2,778,580 $ 2,944,000
FOOD & RELATED - 0.48%
15,000 NuCo2 Inc+ $ 326,250 $ 183,750
GENERAL BUSINESS & RELATED - 12.37%
15,000 American Residential Services+ $ 250,635 $ 286,875
14,391 Billing Information Concepts+ 446,221 345,384
20,000 Education Management Corp+ 300,000 455,000
40,000 Intelligroup Inc+ 434,941 405,000
16,400 NCO Group+ 251,325 358,750
25,000 NHP Inc+ 475,000 581,250
32,000 Renter's Choice Inc+ 561,688 460,000
24,000 Romac International Inc+ 581,317 424,500
16,000 Staffmark Inc+ 222,264 210,000
</TABLE>
- ------------------------
118
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
36,000 Superior Telecom Inc+ $ 863,193 $ 747,000
67,000 VDI Media Corp+ 468,045 460,625
------------ --------------
$ 4,854,629 $ 4,734,384
HEALTHCARE - 1.63%
20,000 Genesis Health Ventures Inc+ $ 632,800 $ 625,000
MANUFACTURING PROCESSING - 8.11%
30,000 Cima Labs Inc+ $ 213,750 $ 180,000
30,000 Costilla Energy Inc+ 376,250 435,000
11,000 Eagle Hardware & Garden+ 211,750 198,000
6,680 Fresenius Medical Care - ADR+ 151,682 203,740
35,000 Imperial Credit Industries+ 637,403 704,375
13,000 KOS Pharmaceuticals Inc+ 195,000 260,000
47,000 Philip Environmental Inc+ 601,188 710,875
42,000 Sunquest Information Systems+ 678,500 409,500
------------ --------------
$ 3,065,523 $ 3,101,490
MEDICAL EQUIPMENT & SUPPLIES - 1.49%
25,000 Endosonics Corp+ $ 346,275 $ 237,500
23,000 Ultrafem Inc+ 370,702 330,625
------------ --------------
$ 716,977 $ 568,125
MISCELLANEOUS STOCKS - 4.11%
28,000 JDA Software Group Inc+ $ 717,417 $ 570,500
48,169 Mail Boxes Etc+ 967,555 1,002,517
------------ --------------
$ 1,684,972 $ 1,573,017
PHARMACEUTICALS - 0.60%
10,000 Anesta Corp+ $ 135,000 $ 172,500
10,000 Aronex Pharmaceuticals Inc+ 103,750 57,500
------------ --------------
$ 238,750 $ 230,000
</TABLE>
---------------------
119
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
SHELTER & RELATED - 1.19%
18,750 American Homestar Corp+ $ 343,750 $ 328,125
17,000 Colonial Downs Holdings Class A+ 162,375 125,375
------------ --------------
$ 506,125 $ 453,500
TELECOMMUNICATIONS - 1.63%
20,000 Intermedia Communications Inc+ $ 614,653 $ 332,500
25,000 Winstar Communications Inc+ 471,250 290,625
------------ --------------
$ 1,085,903 $ 623,125
TRANSPORTATION - 1.24%
18,000 Atlas Air Inc+ $ 636,643 $ 472,500
UTILITIES - 0.86%
10,000 KCS Energy $ 335,000 $ 328,750
------------ --------------
TOTAL COMMON STOCKS $ 36,015,340 $ 32,118,272
</TABLE>
- ------------------------
120
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 15.38%
REPURCHASE AGREEMENTS - 15.38%
$ 1,465,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50 % 04/01/97 $ 1,465,000
1,700,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.38 04/01/97 1,700,000
1,638,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.30 04/01/97 1,638,000
1,082,000 Morgan Stanley & Co Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.20 04/01/97 1,082,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 5,885,000
(Cost $5,885,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $41,900,340)* (Notes 1 and 3) 99.33% $ 38,003,272
Other Assets and Liabilities, Net 0.67 256,543
------ --------------
TOTAL NET ASSETS 100.00% $ 38,259,815
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED DEPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 2,026,978
Gross Unrealized Depreciation (5,924,046)
------------
NET UNREALIZED DEPRECIATION $ (3,897,068)
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
121
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ------------------------
122
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - MARCH 31, 1997
<TABLE>
<CAPTION>
CAPITAL CORPORATE
APPRECIATION STOCK SMALL CAP
MASTER MASTER MASTER
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value
(see cost below) $195,596,311 $408,537,420 $38,003,272
Cash 50,943 8,732 218,696
Receivables:
Dividends and Interest 39,764 649,280 10,039
Investment securities sold 1,767,330 0 244,255
Prepaid expenses and other assets 183,380 0 0
TOTAL ASSETS 197,637,728 409,195,432 38,476,262
LIABILITIES
Payables:
Investment securities purchased 1,337,974 27,568 130,980
Distribution to beneficial interest
holders 0 1,500,089 21,268
Due to adviser (Note 2) 148,218 634,128 30,440
Other 18,659 30,224 33,759
TOTAL LIABILITIES 1,504,851 2,192,009 216,447
TOTAL NET ASSETS
$196,132,877 $407,003,423 $38,259,815
INVESTMENT AT COST (NOTE 3) $218,466,249 $206,397,955 $41,900,340
- ------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
123
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CAPITAL APPRECIATION MASTER
PORTFOLIO
----------------------------
FROM FEB.
20, 1996
(COMMENCEMENT
OF
FOR THE SIX OPERATIONS)
MONTHS ENDED TO
MARCH 31, SEPTEMBER
1997 30, 1996
<S> <C> <C>
- -------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 111,588 $ 107,095
Interest 221,953 336,186
TOTAL INVESTMENT INCOME 333,541 443,281
EXPENSES (NOTE 2)
Advisory fees 560,839 453,282
Custody fees 25,869 22,025
Portfolio accounting fees 53,045 58,849
Legal and audit fees 4,975 6,093
Other 11,458 15,232
TOTAL EXPENSES 656,186 555,481
Less:
Waived fees and expenses reimbursed 0 0
Net Expenses 656,186 555,481
NET INVESTMENT INCOME (LOSS) (322,645) (112,200)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 6,562,326 750,785
Net change in unrealized appreciation
(depreciation) of investments (50,304,202) 12,970,872
NET GAIN (LOSS) ON INVESTMENTS (43,741,876) 13,721,657
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(44,064,521) $13,609,457
- -------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ---------------------
124
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CORPORATE STOCK MASTER SMALL CAP MASTER
PORTFOLIO
PORTFOLIO ------------------------
--------------------------- FROM
FROM APRIL SEPT.
28, 1996 16, 1996
(COMMENCEMENT (COMMENCEMENT
FOR THE SIX OF FOR THE SIX OF
MONTHS OPERATIONS MONTHS OPERATIONS)
ENDED TO) ENDED TO
MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER
1997 30, 1996 1997 30, 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 3,948,941 $ 3,711,397 $ 32,148 $ 390
Interest 68,577 46,269 122,485 4,504
TOTAL INVESTMENT INCOME 4,017,518 3,757,666 154,633 4,894
EXPENSES (NOTE 2)
Advisory fees 933,448 710,941 101,857 6,129
Custody fees 0 0 5,325 375
Portfolio accounting fees 0 0 14,506 797
Legal and audit fees 10,255 27,349 27,811 2,664
Other 0 0 7,514 410
TOTAL EXPENSES 943,703 738,290 157,013 10,375
Less:
Waived fees and expenses reimbursed 0 0 (31,728) 0
Net Expenses 943,703 738,290 125,285 10,375
NET INVESTMENT INCOME (LOSS) 3,073,815 3,019,376 29,348 (5,481)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 4,668,147 3,905,323 (1,545,385) 60,298
Net change in unrealized appreciation
(depreciation) of investments 32,613,766 14,221,384 (4,389,698) 492,630
NET GAIN (LOSS) ON INVESTMENTS 37,281,913 18,126,707 (5,935,083) 552,928
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $40,355,728 $21,146,083 $(5,905,735) $547,447
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
125
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAPITAL APPRECIATION MASTER
PORTFOLIO
-----------------------------
FROM FEB.
20, 1996
(COMMENCEMENT
OF
FOR THE SIX OPERATIONS)
MONTHS ENDED TO
MARCH 31, SEPTEMBER
1997 30, 1996
<S> <C> <C>
- --------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ (322,645) $ (112,200)
Net realized gain (loss) on sale of
investments 6,562,326 750,785
Net change in unrealized appreciation
(depreciation) of investments (50,304,202) 12,970,872
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM
OPERATIONS (44,064,521) 13,609,457
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM
BENEFICIAL INTEREST TRANSACTIONS 12,885,241 213,702,700
INCREASE (DECREASE) IN NET ASSETS (31,179,280) 227,312,157
NET ASSETS:
Beginning net assets 227,312,157 0
ENDING NET ASSETS $196,132,877 $227,312,157
- --------------------------------------------------------------------------
</TABLE>
(1) "NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST
TRANSACTIONS" INCLUDES $197,709,375 AS A RESULT OF THE CONVERSION FROM
STAND-ALONE TO MASTER-FEEDER STRUCTURE.
The accompanying notes are an integral part of these financial statements.
- ---------------------
126
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CORPORATE STOCK MASTER
PORTFOLIO SMALL CAP MASTER PORTFOLIO
----------------------------- ---------------------------
FROM APRIL FROM SEPT.
28, 1996 16, 1996
(COMMENCEMENT (COMMENCEMENT
OF FOR THE SIX OF
FOR THE SIX OPERATIONS) MONTHS OPERATIONS)
MONTHS ENDED TO ENDED TO
MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER
1997 30, 1996(1) 1997 30, 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 3,073,815 $ 3,019,376 $ 29,348 $ (5,481)
Net realized gain (loss) on sale of
investments 4,668,147 3,905,323 (1,545,385) 60,298
Net change in unrealized appreciation
(depreciation) of investments 32,613,766 14,221,384 (4,389,698) 492,630
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM
OPERATIONS 40,355,728 21,146,083 (5,905,735) 547,447
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM
BENEFICIAL INTEREST TRANSACTIONS (3,626,103) 349,127,715 17,869,288 25,748,815
INCREASE (DECREASE) IN NET ASSETS 36,729,625 370,273,798 11,963,553 26,296,262
NET ASSETS:
Beginning net assets 370,273,798 0 26,296,262 0
ENDING NET ASSETS $407,003,423 $370,273,798 $38,259,815 $26,296,262
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) "NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST
TRANSACTIONS" INCLUDES $197,709,375 AS A RESULT OF THE CONVERSION FROM
STAND-ALONE TO MASTER- FEEDER STRUCTURE.
The accompanying notes are an integral part of these financial statements.
---------------------
127
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Capital Appreciation Master Portfolio, Corporate Stock Master Portfolio, and
Small Cap Master Portfolio (the "Master Portfolios") are three series of Master
Investment Trust (the "Trust"), a business trust organized under the laws of
Delaware on August 14, 1991. The Trust is registered as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Declaration of Trust permits the issuance of beneficial interests ("interests").
The Trust currently issues nine series of investment portfolios: the Asset
Allocation, Capital Appreciation, Cash Investment Trust, Corporate Stock,
Tax-Free Money Market, Short-Term Government-Corporate Income, Short-Term
Municipal Income, Small Cap and U.S. Government Allocation Master Portfolios.
These financial statements represent only the Capital Appreciation, Corporate
Stock and Small Cap Master Portfolios.
The following significant accounting policies are consistently followed by the
Trust 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
Each Master Portfolio's investments include equities, fixed-, variable- and
floating-rate instruments. 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 at the reported bid prices. Securities not
listed on an exchange or national securities market, or securities in which
there were no transactions, excluding debt securities maturing in 60 days or
less, are valued at the most recent bid prices, or if such prices are not
readily available, at fair value as determined in accordance with procedures
approved by the Board of Trustees. Debt securities maturing in 60 days or less
are valued at amortized cost, which approximates market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are recorded no later than one business day after trade
date. Dividend income is recognized on the ex-dividend date, and interest income
is accrued daily. Realized gains and losses are reported on the basis of
identified cost of securities delivered.
- ---------------------
128
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Bond discounts are accreted and premiums are 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 Portfolio of Investments of
each Master Portfolio. The Master Portfolios 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 Master Portfolios at March 31, 1997, are
collateralized by U.S. Government obligations.
FEDERAL INCOME TAXES
Each Master Portfolio intends to qualify for federal income tax purposes as a
partnership. Management of each Master Portfolio therefore believes that it will
not be subject to any federal or state income tax on its income and net capital
gains (if any). However, each investor in a Master Portfolio will be taxed on
its distributive share of the partnership's income for purposes of determining
its federal and state income tax liabilities. The determination of such share
will be made in accordance with the Internal Revenue Code of 1986, as amended
("Code"), and the regulations promulgated thereunder.
It is intended that the Master Portfolios' assets, income, gain/loss and
allocations will be managed in such a way that a regulated investment company
investing in the Master Portfolio will be able to satisfy the requirements of
Subchapter M of the Code, assuming that the investment company invests all of
its assets in the Master Portfolio.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into separate advisory contracts with WFB on behalf of
each Master Portfolio. Pursuant to the contracts, WFB furnishes investment
guidance and policy direction in connection with the daily portfolio management
of each Master Portfolio. Under the contract with the Capital Appreciation and
Small Cap Master Portfolios, WFB is entitled to receive a monthly advisory fee
at an annual rate of 0.50% and 0.60%, respectively, of the average daily net
assets. WFB is also entitled to receive from the Corporate Stock Master
Portfolio a monthly advisory fee at an annual rate of 0.50% of the first $250
million, 0.40% of the next $250 million and 0.30% of the average daily net
assets in excess of $500 million.
The Corporate Stock Master Portfolio currently retains Barclays Global Fund
---------------------
129
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Advisors ("BGFA") as sub-adviser. BGFA is an indirect subsidiary of Barclays
Bank PLC. BGFA was formed by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo & Company. Pursuant to a
sub-advisory contract with the Corporate Stock Master Portfolio and subject to
the overall supervision of WFB, the investment adviser, BGFA is responsible for
day-to-day portfolio management of the Corporate Stock Master Portfolio. BGFA is
entitled to receive from WFB as compensation for its sub-advisory services
monthly fees at the annual rate of 0.08% of the average daily net assets of the
Corporate Stock Master Portfolio. BGFA is also entitled to receive from WFB
annual fees of $40,000 for its services for the Corporate Stock Master
Portfolio.
The Trust has also entered into a contract with WFB whereby WFB has agreed to
provide custody and portfolio accounting services for the Capital Appreciation
and Small Cap Master Portfolios. For providing custody services, WFB is entitled
to certain transaction charges plus an annual fee at a rate of 0.0167% of the
average daily net assets of each Master Portfolio. For portfolio accounting
services, WFB is entitled to a monthly base fee from each Master Portfolio of
$2,000 plus an annual fee of 0.07% of the first $50 million of the 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.
Barclays Global Investors, N.A. ("BGI") currently acts as custodian to the
Corporate Stock Master Portfolio. BGI is an affiliate of BGFA. BGI will not be
entitled to compensation for its custodial services to the Master Portfolio so
long as BGFA is entitled to receive compensation for providing sub-advisory
services to the Master Portfolio.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for the
Master Portfolios for the six months ended March 31, 1997, were as follows:
<TABLE>
<CAPTION>
CAPITAL CORPORATE
APPRECIATION STOCK SMALL CAP
AGGREGATE PURCHASES MASTER MASTER MASTER
AND SALES PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total purchases at cost $258,677,110 $ 9,414,319 $ 34,911,838
Total sales proceeds 217,687,786 11,372,865 20,158,383
</TABLE>
- ---------------------
130
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. FINANCIAL HIGHLIGHTS
The portfolio turnover rates, exclusive of short-term securities, and average
commission rate paid for each Master Portfolio for the stated periods were as
follows:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION CORPORATE STOCK SMALL CAP
MASTER PORTFOLIO MASTER PORTFOLIO MASTER PORTFOLIO
-------------------- -------------------- --------------------
FOR THE FOR THE FOR THE
SIX FOR THE SIX FOR THE SIX FOR THE
MONTHS PERIOD MONTHS PERIOD MONTHS PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
MAR. 31, SEPT. 30, MAR. 31, SEPT. 30, MAR. 31, SEPT. 30,
1997 1996 (1) 1997 1996 (2) 1997 1996 (3)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover 104% 75% 2% 3% 69% 10%
Average Commission Rate Paid $ 0.0743 $ 0.0785 $ 0.0266 $ 0.0265 $ 0.0764 $ 0.0800
</TABLE>
(1) THE PERIOD REPORTED IS FROM COMMENCEMENT OF OPERATIONS, FEBRUARY 20, 1996,
TO SEPTEMBER 30, 1996.
(2) THE PERIOD REPORTED IS FROM COMMENCEMENT OF OPERATIONS, APRIL 28, 1996, TO
SEPTEMBER 30, 1996.
(3) THE PERIOD REPORTED IS FROM COMMENCEMENT OF OPERATIONS, SEPTEMBER 16, 1996,
TO SEPTEMBER 30, 1996.
---------------------
131
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE UNITHOLDERS AND BOARD OF TRUSTEES
MASTER INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Capital Appreciation Master Portfolio,
Corporate Stock Master Portfolio, and Small Cap Master Portfolio (three of the
master portfolios comprising Master Investment Trust) 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 for the period from
February 20, 1996 (commencement of operations) to September 30, 1996, for the
Capital Appreciation Master Portfolio, the period from April 28, 1996
(commencement of operations) to September 30, 1996, for the Corporate Stock
Master Portfolio, and the period from September 16, 1996 (commencement of
operations) to September 30, 1996, for the Small Cap Master Portfolio. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included 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 each
of the aforementioned master portfolios of Master Investment Trust as of March
31, 1997, the results of their operations, the changes in their net assets and
their financial highlights for the periods indicated herein in conformity with
generally accepted accounting principles.
[SIG]
[KPMG Peat Marwick LLP]
SAN FRANCISCO, CALIFORNIA
MAY 9, 1997
- ---------------------
132
<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>
---------------------
133
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
134
<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 076 (5/97)
<TABLE>
<S> <C>
STAGECOACH
FUNDS-REGISTERED TRADEMARK-
P.O. Box 7066
San Francisco, CA 94120-7066
DATED MATERIAL
PLEASE EXPEDITE
</TABLE>
[LOGO]
-C- 1997 Stagecoach Funds
<PAGE>
