STAGECOACH FUNDS INC /AK/, 497, 1997-02-12

STAGECOACH FUNDS INC /AK/
497, 1997-02-12

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<PAGE> 1
STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND

CLASS A
---------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series investment
company. This Statement of Additional Information ("SAI") contains information
about one of the funds in the Stagecoach Family of Funds -- the SHORT-
INTERMEDIATE U.S. GOVERNMENT INCOME FUND (the "Fund"). The investment
objective of the Fund is described in its Prospectus under the section entitled
"How the Funds Work -- Investment Objectives and Policies."

This SAI is not a prospectus and should be read in conjunction with
the Fund's Prospectus dated February 1, 1997. All terms used in this SAI that
are defined in the Prospectus will have the meanings assigned in the
Prospectus. A copy of the Prospectus for the Fund may be obtained without
charge by writing Stephens Inc. ("Stephens"), the Company's sponsor,
co-administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201 or calling the Transfer Agent at the telephone number indicated above.

---------------

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TABLE OF CONTENTS

<TABLE>
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Permitted Investment Activities . . . . . . . . . . . . . . . . . . . . . . 4
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Additional Purchase and Redemption Information . . . . . . . . . . . . . . . . . . . . 18
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

2
<PAGE> 3
INVESTMENT RESTRICTIONS

Fundamental Investment Policies. The Fund is subject to the following
investment restrictions, all of which are fundamental policies; that is, they
may not be changed without approval by the vote of the holders of a majority of
the Fund's outstanding voting securities, as described under "Capital Stock":

The Fund may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Fund's investments in that industry would
be 25% or more of the current value of the Fund's total assets, provided that
there is no limitation with respect to investments in U.S. Government
Obligations;

(3) purchase commodities or commodity contracts (including futures
contracts), except that the Fund may purchase securities of an issuer which
invests or deals in commodities or commodity contracts;

(4) purchase interests, leases, or limited partnership interests in oil,
gas, or other mineral exploration or development programs;

(5) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;

(7) make investments for the purpose of exercising control or management;

(8) borrow money or issue senior securities as defined in the 1940 Act,
except that the Fund may borrow from banks up to 10% of the current value of
its net assets for temporary purposes only in order to meet redemptions, and
these borrowings may be secured by the pledge of up to 10% of the current value
of its net assets (but investments may not be purchased while any such
outstanding borrowings exceed 5% of its net assets), and except that the Fund
may issue multiple Classes of shares in accordance with applicable laws, rules,
regulations or orders;

(9) write, purchase or sell straddles, spreads, warrants, or any
combination thereof;

3
<PAGE> 4
(10) purchase securities of any issuer (except U.S. Government
Obligations) if, as a result, with respect to 75% of its total assets, more
than 5% of the value of the Fund's total assets would be invested in the
securities of any one issuer or, with respect to 100% of its total assets the
Fund's ownership would be more than 10% of the outstanding voting securities of
such issuer; or

(11) make loans, except that the Fund may purchase or hold debt
instruments or lend its portfolio securities in accordance with its investment
policies, and may enter into repurchase agreements.

Non-Fundamental Investment Policies. The Fund is subject to the following
non-fundamental policies; that is, they may be changed by a majority vote of
the Board of Directors without shareholder approval:

The Fund may not:

(1) (a) purchase or retain securities of any issuer if the officers or
Directors of the Company or of the Investment Adviser owning beneficially more
than one-half of one percent (0.5%) of the securities of the issuer together
owned beneficially more than 5% of such securities;

(b) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets.

(2) The Fund reserves the right to invest up to 15% of the current value
of its net assets in fixed time deposits that are subject to withdrawal
penalties and that have maturities of more than seven days, repurchase
agreements maturing in more than seven days or other illiquid securities.
However, as long as the Fund's shares are registered for sale in a state that
imposes a lower limit on the percentage of a fund's assets that may be so
invested, the Fund will comply with such lower limit. The Fund presently is
limited to investing 10% of its net assets in such securities due to limits
applicable in several states.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

Pass-Through Obligations. The Fund may invest in pass-through obligations
that represent an ownership interest in a pool of mortgages and the resultant
cash flow from those mortgages. Payments by homeowners on the loans in the
pool flow through to certificate holders in amounts sufficient to repay
principal and to pay interest at the pass-through rate. The stated maturities
of pass-through obligations may be shortened by unscheduled prepayments of
principal on the underlying mortgages. Therefore, it is not possible to
predict accurately the

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<PAGE> 5
average maturity of a particular pass-through obligation. Variations in the
maturities of pass-through obligations will affect the yield of the Fund.
Furthermore, as with any debt obligation, fluctuations in interest rates will
inversely affect the market value of pass-through obligations. The Fund may
invest in pass-through obligations that are supported by the full faith and
credit of the U.S. Government (such as those issued by the Government National
Mortgage Association) or those that are guaranteed by an agency or
instrumentality of the U.S. Government (such as the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation) or bonds
collateralized by any of the foregoing.

Loans of Portfolio Securities. The Fund may lend securities from its
portfolio to brokers, dealers and financial institutions (but not individuals)
in order to increase the return on the Fund's portfolio. The value of the
loaned securities may not exceed one-third of the Fund's total assets and loans
of portfolio securities are fully collateralized based on values that are
marked-to-market daily. The Fund will not enter into any portfolio security
lending arrangement having a duration of longer than one year. The principal
risk of portfolio lending is potential default or insolvency of the borrower.
In either of these cases, the Fund could experience delays in recovering
securities or collateral or could lose all or part of the value of the loaned
securities. The Fund may pay reasonable administrative and custodial fees in
connection with loans of portfolio securities and may pay a portion of the
interest or fee earned thereon the borrower or a placing broker.

When-Issued Securities. The Fund may purchase securities on a when-issued
basis, in which case delivery and payment normally take place within 45 days
after the date of the commitment to purchase. However, the Fund does not
intend to invest more than 5% of its net assets in when-issued securities
during the coming year. The Fund will only make commitments to purchase
securities on a when-issued basis with the intention of actually acquiring the
securities, but may sell them before the settlement date if it is deemed
advisable. When-issued securities are subject to market fluctuation, and no
income accrues to the purchaser during the period prior to issuance. The
purchase price and the interest rate that will be received on debt securities
are fixed at the time the purchaser enters into the commitment. Purchasing a
security on a when-issued basis can involve a risk that the market price at the
time of delivery may be lower than the agreed-upon purchase price, in which
case there could be an unrealized loss at the time of delivery.

The Fund will establish a segregated account in which it will maintain
cash, U.S. Government obligations or other high-quality debt instruments in an
amount at least equal in value to the Fund's commitments to purchase
when-issued securities. If the value of these assets declines, the Fund will
place additional liquid assets in the account on a daily basis so that the
value of the assets in the account is equal to the amount of such commitments.

MANAGEMENT

The following information supplements and should be read in conjunction
with the section in the prospectus entitled "The Funds and Management." The
principal occupations

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<PAGE> 6
during the past five years of the Directors and principal executive Officer of
the Company are listed below. The address of each, unless otherwise indicated,
is 111 Center Street, Little Rock, Arkansas 72201. Directors deemed to be
"interested persons" of the Company for purposes of the 1940 Act are indicated
by an asterisk.

<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position During Past 5 Years
- --------------------- -------- -------------------
<S> <C> <C>
Jack S. Euphrat, 74 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate
Professor of Finance of the
School of Business and
Accounting at Wake Forest
University since 1983.

Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
(appointed as of September 6, 1996) Junior College from 1967 to
1971; Adjunct Professor of
Columbia University
Teachers College since
1976.
</TABLE>

6
<PAGE> 7
<TABLE>
<S> <C> <C>
*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

*J. Tucker Morse, 52 Director Private Investor; Real Estate
10 Legrae Street Developer; Chairman
Charleston, SC 29401 of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.

Richard H. Blank, Jr., 40 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary and Director of Stephens
Treasurer Sports Management
Inc.; and Director of
Capo Inc.
</TABLE>

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COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
---------- ------------
December 31, 1995 September 30, 1996
------------------ ------------------
Total Aggregate Total
Aggregate Compensation Compensation Compensation from
Compensation from Registrant from Registrant
Name and Position from Registrant and Fund Complex Registrant and Fund Complex
----------------- --------------- ---------------- ------------ -------------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company and by
all the registrants in each fund complex they serve as indicated above and also
are reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. The Company, Overland Express Funds, Inc., Stagecoach Trust, Life &
Annuity Trust and Master Investment Trust are considered to be members of the
same fund complex as such term is defined in Form N-1A under the 1940 Act (the
"Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master Investment
Portfolio, and Managed Series Investment Trust together form a separate fund
complex (the "BGFA Fund

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<PAGE> 9
Complex"). Each of the Directors and Officers of the Company serves in the
identical capacity as directors and officers or as trustees and/or officers of
each registered open-end management investment company in both the Wells Fargo
and BGFA Fund Complexes, except for Joseph N. Hankin, who only serves the
aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann Hines who,
after September 6, 1996, only serves the aforementioned members of the BGFA
Fund Complex. The Directors are compensated by other companies and trusts
within a fund complex for their services as directors/trustees to such
companies and trusts. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or any other member of each
fund complex. As of the date of this SAI, Directors and Officers of the
Company as a group beneficially owned less than 1% of the outstanding shares of
the Company.

As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.

INVESTMENT ADVISER. The Fund is advised by Wells Fargo Bank. The
Advisory Contract provides that Wells Fargo Bank shall furnish to the Fund
investment guidance and policy direction in connection with the daily portfolio
management of the Fund. Pursuant to the Advisory Contract, Wells Fargo Bank
furnishes to the Board of Directors periodic reports on the investment strategy
and performance of the Fund.

Wells Fargo Bank has agreed to provide to the Fund, among other things,
money market security and fixed-income research, analysis and statistical and
economic data and information concerning interest rate and security market
trends, portfolio composition, credit conditions and average maturities of the
portfolio of the Fund.

The Advisory Contract will continue in effect for more than two years
provided the continuance is approved annually (i) by the holders of a majority
of the Fund's outstanding voting securities or by the Company's Board of
Directors and (ii) by a majority of the Directors of the Company who are not
parties to the Advisory Contract or "interested persons" (as defined in the
1940 Act) of any such party. The Advisory Contract may be terminated on 60
days' written notice by either party and will terminate automatically if
assigned.

For the years ended December 31, 1993, 1994 and 1995, and the period ended
September 30, 1996, the Fund paid to Wells Fargo Bank the advisory fees
indicated below and Wells Fargo Bank waived the indicated amounts:

<TABLE>
<CAPTION>
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995 Sept. 30, 1996
------------- ------------- ------------- --------------
Fees Fees Fees Fees Fees Fees Fees Fees
Paid Waived Paid Waived Paid Waived Paid Waived
---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0 $3,704 $ 0 $58,270 $56,387 $60,241 $213,467 $0
</TABLE>

ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained Wells
Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of the
Fund. The

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<PAGE> 10
Administration Agreement between Wells Fargo and the Fund, and the
Co-Administration Agreement among Wells Fargo, Stephens and the Fund, state
that Wells Fargo and Stephens shall provide as administrative services, among
other things: (i) general supervision of the operation of the Fund, including
coordination of the services performed by the Fund's investment adviser,
transfer agent, custodian, shareholder servicing agent(s), independent public
accountants and legal counsel, regulatory compliance, including the compilation
of information for documents such as reports to, and filings with, the SEC and
state securities commissions; and preparation of proxy statements and
shareholder reports for the Fund; and (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports
distributed to the Company's officers and Board of Directors. Wells Fargo Bank
and Stephens also furnish office space and certain facilities required for
conducting the business of the Fund together with ordinary clerical and
bookkeeping services. Stephens pays the compensation of the Company's
Directors, officers and employees who are affiliated with Stephens. The
Administrator and Co-Administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of the Fund.

For the years ended December 31, 1993, 1994 and 1995, and the period
ended September 30, 1996, the Fund paid the following dollar amounts of
administrative fees to Stephens who, as sole administrator during these
periods, was entitled to receive a fee, payable monthly, at the annual rate of
0.03% of the Fund's average daily net assets:

SPONSOR AND DISTRIBUTOR. As discussed in the Fund's prospectus under the
heading "Management and Servicing Fees," Stephens serves as the Fund's sponsor
and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in the Fund's prospectus under
the heading "Shareholder Servicing Agent," the Fund has entered into a
shareholder servicing agreement with Wells Fargo Bank. The Fund did not pay
any shareholder servicing fees to Wells Fargo Bank for the fiscal year ended
December 31, 1995 but paid $15,851 (after waivers) in such fees to Wells Fargo
Bank for the period ended September 30, 1996.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank
has been retained to act as custodian and transfer and dividend disbursing agent
for the Fund. The custodian, among other things, maintains a custody account or
accounts in the name of the Fund; receives and delivers all assets for the Fund
upon purchase and upon sale or maturity; collects and receives all income and
other payments and distributions on account of the assets of the Fund and pays
all expenses of the Fund. For its services as custodian, Wells Fargo Bank
receives an asset-based fee and transaction charges from the Fund. For its
services as transfer and dividend disbursing agent for the Fund's Class A
shares, Wells Fargo Bank is entitled to receive monthly payments at the annual
rate of 0.14% of the Fund's average daily net assets for Class A shares. Under
the prior transfer agency agreement, Wells Fargo Bank was entitled to receive a
per account fee plus transaction fees and out-of-pocket related costs with a
minimum of $3,000 per month, unless net assets of the Fund were under $20
million. For as long as the Fund's assets remained under $20 million, the Fund
was not charged any transfer agency fees.

For the year ended December 31, 1995 and the period ended September 30,
1996, the Fund paid no custodial or transfer and dividend disbursing agency
fees to Wells Fargo Bank.

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<PAGE> 11
UNDERWRITING COMMISSIONS. For the fiscal years ended December 31, 1993
and 1994, the Funds' distributor retained $26,215,173 and $5,415,227,
respectively in underwriting commissions (front-end sales loads and CDSCs, if
any) in connection with the purchase or redemption of Fund shares. For the
fiscal years ended December 31, 1993 and 1994, Wells Fargo Securities Inc.
("WFSI"), an affiliated broker-dealer of the Company, and its registered
representatives received $378,895 and $904,274, respectively, in underwriting
commissions in connection with the purchase or redemption of Fund shares.

For the year ended December 31, 1995, the aggregate amount of
underwriting commissions on sales/redemptions of the Company's shares was
$1,584,545. Stephens retained $1,251,311 of such commissions. WFSI and its
registered representatives retained $333,234 of such commissions.

For the period ended September 30, 1996, the aggregate amount of
underwriting commissions on sales/redemptions of the Company's shares was
$2,917,738. Stephens retained $198,664 of such commissions. WFSI and its
registered representatives retained $2,538,027 and $136,047, respectively, of
such commissions.

DISTRIBUTION PLAN

As indicated in the Prospectus, the Fund has adopted a distribution plan
(a "Plan") under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the
"Rule") for its Class A shares. The Plan was adopted by the Board of
Directors, including a majority of the Directors who were not "interested
persons" (as defined in the 1940 Act) of the Fund and who had no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan (the "Qualified Directors") and approved by the initial
shareholder of the Fund.

Under the Plan, the Fund may defray all or part of the cost of preparing
and printing prospectuses and other promotional materials and of delivering
prospectuses and those materials to prospective shareholders by paying on an
annual basis up to 0.05% of the Fund's average daily net assets attributable to
Class A shares. The Plan provides only for reimbursement of actual expenses.
In addition, each Plan contemplates that to the extent any fees payable
pursuant to a Shareholder Servicing Agreement are deemed to be for
distribution-related services, rather than shareholder services, such payments
are approved and payable pursuant to such Plan.

The Plan will continue in effect from year to year if such continuance is
approved by a majority vote of both the Directors of the Company and the
Qualified Directors. Any Distribution Agreements related to the Plan also must
be approved by such vote of the Directors and the Qualified Directors. Such
Agreements will terminate automatically if assigned, and may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
outstanding voting securities of the Fund. The Plan may not be amended to
increase materially the amounts payable thereunder without the approval of a
majority of the outstanding voting

11
<PAGE> 12
securities of the Fund, and no material amendment to the Plans may be made
except by a majority of both the Directors of the Company and the Qualified
Directors.

The Plan requires that the Treasurer of the Company shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Plan. The Rule also
requires that the selection and nomination of Directors who are not "interested
persons" of the Company be made by such disinterested directors.

For the periods indicated below, the Fund's distributor received the
following amounts of 12b-1 fees for the specified purposes set forth below
under the Fund's Plan for Class A shares.

<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Total Prospectus Brochures Underwriters
----- ---------- --------- ------------
<S> <C> <C> <C> <C>
Year Ended
December 31, 1995 $7,200 $6,422 $778 N/A

Period Ended
September 30, 1996 $-0- $-0- $-0- N/A
</TABLE>

For the year ended December 31, 1995 and the period ended September 30,
1996, WFSI and its registered representatives received no compensation under
the Fund's Plans.

PERFORMANCE CALCULATIONS

As indicated in the Prospectus, the Fund may advertise certain total
return information computed in the manner described in the Prospectus. As and
to the extent required by the SEC, an average annual compound rate of return
("T") will be computed by using the redeemable value at the end of a specified
period ("ERV") of a hypothetical initial investment ("P") over a period of
years ("n") according to the following formula: P(1+T)n = ERV. In addition,
as indicated in the Prospectus, if the Fund assesses a sales charge, at times,
it also may calculate total return based on net asset value per share (rather
than the public offering price), in which case the figures would not reflect
the effect of any sales charges that would have been paid by an investor, or
based on the assumption that a sales charge other than the maximum sales charge
(reflecting a Volume Discount) was assessed, provided that total return data
derived pursuant to the calculation described above also are presented.

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<PAGE> 13
<TABLE>
<CAPTION>
Average Annual Total Return for the Applicable Period Ended September 30, 1996
------------------------------------------------------------------------------

Inception1 Inception One Year One Year
With No With No
Class Sales Charge2 Sales Charge Sales Charge Sales Charge
----- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
A 3.22% 4.31% 1.44% 4.54%
</TABLE>

1 The Fund commenced operations on October 27, 1993.

2 For all periods ended September 3, 1996, the term "Sales Charge" for
Class A shares means a front-end sales load of 3.00%.

The Fund may advertise the cumulative total return of its shares.
Cumulative total return of shares is computed on a per share basis and assumes
the reinvestment of dividends and distributions. Cumulative total return of
shares generally is expressed as a percentage rate which is calculated by
combining the income and principal changes for a specified period and dividing
by the net asset value per share at the beginning of the period.
Advertisements may include the percentage rate of total return of shares or may
include the value of a hypothetical investment in shares at the end of the
period which assumes the application of the percentage rate of total return.

In addition to the above performance information, the Fund may also
advertise the cumulative total return of the Fund for one-month, three-month,
six-month, and year-to-date periods. The cumulative total return for such
periods is based on the overall percentage change in value of a hypothetical
investment in the Fund, assuming all Fund dividends and capital gain
distributions are reinvested, without reflecting the effect of any sales charge
that would be paid by an investor, and is not annualized.

<TABLE>
<CAPTION>
Cumulative Total Return for the Applicable Period Ended September 30, 1996
--------------------------------------------------------------------------
Inception(1) Inception
With No
Class Sales Charge(2) Sales Charge
------ ------------ ------------
<S> <C> <C>
A 9.70% 13.10%
</TABLE>

(1) The Fund commenced operations on October 27, 1993.

(2) For all periods ended September 30, 1996, the term "Sales Charge" for
Class A Shares means a front-end sales load of 3.00%.

As indicated in the Prospectus, the Fund may advertise certain yield
information. As and to the extent required by the SEC, yield will be
calculated based on a 30-day (or one month) period, computed by dividing the
net investment income share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula: YIELD = 2[((a-b/cd)+1)6-1], where a = dividends and interest earned
during

13
<PAGE> 14
the period; b = expenses accrued for the period (net of reimbursements); c =
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and d = the maximum offering price per share on
the last day of the period. The net investment income includes actual interest
income, plus or minus amortized purchase discount (which may include original
issue discount) or premium, less accrued expenses. Realized and unrealized
gains and losses on portfolio securities are not included in the Fund's net
investment income. For purposes of sales literature, yield also may be
calculated on the basis of the net asset value per share rather than the public
offering price, provided that the yield data derived pursuant to the
calculation described above also are presented.

<TABLE>
<CAPTION>
Yield Calculations for the Applicable Period Ended September 30, 1996(1)
---------------------------------------------------------------------
Thirty Day Yield Thirty-Day Tax-Equivalent Yield(2)
---------------- -------------------------------

After Wavier Before Waiver After Waiver Before Waiver
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Class A 5.66% 5.31% 10.53% 9.88%
</TABLE>

- ---------------
1 "After Waiver" figures reflect any reimbursed expenses throughout the period.

2 Based on a federal income tax rate of 28.00%.

The yield for the Fund will fluctuate from time to time, unlike bank
deposits or other investments that pay a fixed yield for a stated period of
time, and does not provide a basis for determining future yields since it is
based on historical data. Yield is a function of portfolio quality,
composition, maturity and market conditions as well as the expenses allocated
to the Fund.

In addition, investors should recognize that changes in the net asset
values of shares of the Fund will affect the yield of the Fund for any
specified period, and such changes should be considered together with the
Fund's yield in ascertaining the total return to shareholders for the period.
Yield information for the Fund may be useful in reviewing the performance of
the Fund and for providing a basis for comparison with investment alternatives.
The yield of the Fund, however, may not be comparable to the yields from
investment alternatives because of differences in the foregoing variables and
differences in the methods used to value portfolio securities, compute expenses
and calculate yield.

The Company also may disclose in sales literature, information and
statements the distribution rate on the shares of each class of the Funds.
Distribution rate, which may be annualized, is the amount determined by
dividing the dollar amount per share of the most recent dividend by the most
recent NAV or maximum offering price per share as of a date specified in the
sales literature. Distribution rate will be accompanied by the standard 30-day
yield as required by the SEC.

14
<PAGE> 15
From time to time and only to the extent the comparison is appropriate
for the Fund, the Company may quote performance or price-earning ratios for the
Fund in advertising and other types of literature as compared to the
performance of the Lehman Brothers Municipal Bond Index, 1-Year Treasury Bill
Rate, S&P Index, the Dow Jones Industrial Average, the Lehman Brothers 20+
Treasury Index, the Lehman Brothers 5-7 Year Treasury Index, Donoghue's Money
Fund Averages, Real Estate Investment Averages (as reported by the National
Association of Real Estate Investment Trusts), Gold Investment Averages
(provided by the World Gold Council), Bank Averages (which is calculated from
figures supplied by the U.S. League of Savings Institutions based on effective
annual rates of interest on both passbook and certificate accounts), average
annualized certificate of deposit rates (from the Federal Reserve G-13
Statistical Releases or the Bank Rate Monitor), the Salomon One Year Treasury
Benchmark Index, the Consumer Price Index (as published by the U.S. Bureau of
Labor Statistics), Ten Year U.S. Government Bond Average, S&P's Corporate Bond
Yield Averages, Schabacter Investment Management Indices, Salomon Brothers High
Grade Bond Index, Lehman Brothers Long-Term High Quality Government/Corporate
Bond Index, other managed or unmanaged indices or performance data of bonds,
stocks or government securities (including data provided by Ibbotson
Associates), or by other services, companies, publications or persons who
monitor mutual funds on overall performance or other criteria. The S&P Index
and the Dow Jones Industrial Average are unmanaged indices of selected common
stock prices. The Fund's performance also may be compared to the performance
of other mutual funds having similar objectives. This comparative performance
could be expressed as a ranking prepared by Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc., Bloomberg Financial Markets or Morningstar,
Inc., independent services which monitor the performance of mutual funds. The
performance of the Fund will be calculated by relating net asset value per
share at the beginning of a stated period to the net asset value of the
investment, assuming reinvestment of all gains distributions and dividends
paid, at the end of the period. Any such comparisons may be useful to
investors who wish to compare the Fund's past performance with that of its
competitors. Of course, past performance cannot be a guarantee of future
results. The Company also may include, from time to time, a reference to
certain marketing approaches of the Distributor, including, for example, a
reference to a potential shareholder being contacted by a selected broker or
dealer. General mutual fund statistics provided by the Investment Company
Institute may also be used.

In addition, the Company also may use, in advertisements and other types
of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."

15
<PAGE> 16
the Los Angeles Times, the Boston Globe, the Washington Post, the Chicago
Sun-Times, Investor Business Daily, Worth, Bank Investor, American Banker,
Smart Money, the 100 Best Mutual Funds (Adams Publishing), Morningstar or Value
Line.

The Company also may use the following information in advertisements and
other types of literature, only to the extent the information is appropriate
for the Fund: (i) the Consumer Price Index may be used to assess the real rate
of return from an investment in the Fund; (ii) other government statistics,
including, but not limited to, The Survey of Current Business, may be used to
illustrate investment attributes of the Fund or the general economic, business,
investment, or financial environment in which the Fund operates; (iii) the
effect of tax-deferred compounding on the investment returns of the Fund, or on
returns in general, may be illustrated by graphs, charts, etc., where such
graphs or charts would compare, at various points in time, the return from an
investment in the Fund (or returns in general) on a tax-deferred basis
(assuming reinvestment of capital gains and dividends and assuming one or more
tax rates) with the return on a taxable basis; and (iv) the sectors or
industries in which the Fund invests may be compared to relevant indices of
stocks or surveys (e.g., S&P Industry Surveys) to evaluate the historical
performance of the Fund or current or potential value with respect to the
particular industry or sector.

The Company also may include, from time to time, a reference to certain
marketing approaches of the Distributor, including, for example, a reference to
a potential shareholder being contacted by a selected broker or dealer.

The Company also may discuss in advertising and other types of literature
that the Fund has been assigned a rating by a nationally recognized statistical
rating organization ("NRSRO"), such as Standard & Poor's Corporation. Such
rating would assess the creditworthiness of the investments held by the Fund.
The assigned rating would not be a recommendation to purchase, sell or hold the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of the Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating to the Fund or its investments. The Company may compare the Fund's
performance with other investments which are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare the Fund's past
performance with other rated investments.

The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Fargo Investment Management
(""WFIM"), a division of Wells Fargo Bank, is listed in the top 100 by
Institutional Investor magazine in its July 1996 survey "America's Top 300 Money
Managers". This survey ranks money managers in several asset categories. The
Company may also disclose in advertising and other types of sales literature the
assets and categories of assets under management by the Company's investment
adviser. The Company may also disclose in advertising and other types of sales
literature the assets and categories of assets under

16
<PAGE> 17
management by a fund's investment adviser or sub-adviser and the total amount of
assets and mutual fund assets managed by Wells Fargo Bank. As of December 31,
1996, Wells Fargo Bank and its affiliates provided investment advisory services
for approximately $54 billion of assets of individuals, trusts, estates and
institutions and $20 billion of mutual fund assets.

The Company may disclose in advertising and other types of literature
that investors can open and maintain Sweep Accounts over the Internet or
through other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available
to investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the
first major bank to offer an on-line application for a mutual fund account that
can be filled out completely through Electronic Channels. Advertising and
other literature may disclose that Wells Fargo Bank may maintain Web sites,
pages or other information sites accessible through Electronic Channels (an
"Information Site") and may describe the contents and features of the
Information Site and instruct investors on how to access the Information Site
and open a Sweep Account. Advertising and other literature may also disclose
the procedures employed by Wells Fargo Bank to secure information provided by
investors, including disclosure and discussion of the tools and services for
accessing Electronic Channels. Such advertising or other literature may
include discussions of the advantages of establishing and maintaining a Sweep
Account through Electronic Channels and testimonials from Wells Fargo Bank
customers or employees and may also include descriptions of locations where
product demonstrations may occur. The Company may also disclose the ranking of
Wells Fargo Bank as one of the largest money managers in the United States.

DETERMINATION OF NET ASSET VALUE

Net asset value per share for the Fund is determined by the Custodian of
the Fund on each day the NYSE is open for trading.

Securities of the Fund for which market quotations are available are
valued at latest prices. Securities of the Fund for which the primary market
is a national securities exchange or the National Association of Securities
Dealers Automated Quotations National Market System are valued at last sale
prices. In the absence of any sale of such securities on the valuation date
and in the case of other securities, including U.S. Government securities but
excluding money market instruments maturing in 60 days or less, the valuations
are based on latest quoted bid prices. Money market instruments maturing in
60 days or less are valued at amortized cost. Futures contracts will be marked
to market daily at their respective settlement prices determined by the
relevant exchange. These prices are not necessarily final closing prices, but
are intended to represent prices prevailing during the final 30 seconds of the
trading day. Options listed on a national exchange are valued at the last sale
price on the exchange on which they are traded at the close of the NYSE, or, in
the absence of any sale on the valuation date, at latest quoted bid prices.
Options not listed on a national exchange are valued at latest quoted bid
prices. Debt securities maturing in 60 days or less are valued at amortized
cost. In all cases, bid prices will be furnished by a reputable independent
pricing service approved by the Board of Directors. Prices

17
<PAGE> 18
provided by an independent pricing service may be determined without exclusive
reliance on quoted prices and may take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. All other securities and other assets of the Fund for which current
market quotations are not readily available are valued at fair value as
determined in good faith by the Company's Directors and in accordance with
procedures adopted by the Directors.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares may be purchased on any day the Fund is open for business. The
Fund is open for business each day the New York Stock Exchange ("NYSE") is open
for trading (a "Business Day"). Currently, the NYSE is closed on New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day (each a "Holiday"). When any Holiday falls
on a weekend, the NYSE typically is closed on the weekday immediately before or
after such Holiday.

Payment for shares may, in the discretion of the adviser, be made in the
form of securities that are permissible investments for the Fund as described
in the Prospectuses. For further information about this form of payment please
contact Stephens. In connection with an in-kind securities payment, the Fund
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Fund and that the
Fund receives satisfactory assurances that (i) it will have good and marketable
title to the securities received by it; (ii) that the securities are in proper
form for transfer to the Fund; and (iii) adequate information will be provided
concerning the basis and other matters relating to the securities.

Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation), an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption payments
for such periods as are permitted under the 1940 Act. The Company may also
redeem shares involuntarily or make payment for redemption in securities or
other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to reimburse the
Fund for any losses sustained by reason of the failure of a shareholders to
make full payment for shares purchased or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
shares of the Fund as provided from time to time in the Prospectus.

18
<PAGE> 19
PORTFOLIO TRANSACTIONS

The Company has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors, Wells Fargo Bank is
responsible for the Fund's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Company to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Fund will
not necessarily be paying the lowest spread or commission available.

Purchases and sales of securities usually will be principal transactions.
Portfolio securities normally will be purchased or sold from or to dealers
serving as market makers for the securities at a net price. The Fund also will
purchase portfolio securities in underwritten offerings and may purchase
securities directly from the issuer. Generally, money market securities, ARMS
and CMOs are traded on a net basis and do not involve brokerage commissions.
The cost of executing the Fund's portfolio securities transactions will consist
primarily of dealer spreads and underwriting commissions. Under the 1940 Act,
persons affiliated with the Company are prohibited from dealing with the
Company as a principal in the purchase and sale of securities unless an
exemptive order allowing such transactions is obtained from the SEC or an
exemption is otherwise available.

Wells Fargo Bank, as the investment adviser of the Fund, may, in
circumstances in which two or more dealers are in a position to offer
comparable results for the Fund portfolio transaction, give preference to a
dealer that has provided statistical or other research services to Wells Fargo
Bank. By allocating transactions in this manner, Wells Fargo Bank is able to
supplement its research and analysis with the views and information of
securities firms. Information so received will be in addition to, and not in
lieu of, the services required to be performed by Wells Fargo Bank under the
Advisory Contract, and the expenses of Wells Fargo Bank will not necessarily be
reduced as a result of the receipt of this supplemental research information.
Furthermore, research services furnished by dealers through which Wells Fargo
Bank places securities transactions for the Fund may be used by Wells Fargo
Bank in servicing its other accounts, and not all of these services may be used
by Wells Fargo Bank in connection with advising the Fund.

Brokerage Commissions. For the years ended December 31, 1993, 1994 and
1995, and the period ended September 30, 1996, the Fund did not pay any
brokerage commissions.

Securities of Regular Broker/Dealers. On the indicated dates, the Fund
owned securities of its "regular brokers or dealers," or their parents, as
defined in the 1940 Act, as follows:

19
<PAGE> 20

<TABLE>
<CAPTION>
Regular Broker/Dealer Amount
--------------------- ------
<S> <C> <C>
September 30, 1996 Goldman Sachs & Co. $2,170,000

December 31, 1995 Goldman Sachs & Co. $1,119,000
</TABLE>

Portfolio Turnover. Portfolio turnover generally involves some expenses
to the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover can generate short-term capital gain tax
consequences. The portfolio turnover rate for the Fund generally is not
expected to exceed 100%. The portfolio turnover rate is not a limiting factor
when Wells Fargo Bank deems portfolio changes appropriate.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens, the
Company bears all costs of its operations, including the compensation of its
Directors who are not affiliated with Stephens or Wells Fargo Bank or any of
their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing prospectuses (except the expense of printing and mailing prospectuses
used for promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of a Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of Fund shares;
pricing services, and any extraordinary expenses. Expenses attributable to a
Fund are charged against a Fund's assets. General expenses of the Company are
allocated among all of the funds of the Company, including a Fund, in a manner
proportionate to the net assets of each Fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.

FEDERAL INCOME TAXES

In General. The following information supplements and should be read in
conjunction with Prospectus sections entitled "Dividend and Capital Gain
Distributions" and "Taxes." The Prospectus generally describe the tax
treatment of distributions by the Fund. This section of the SAI includes
additional information concerning federal income taxes.

20
<PAGE> 21
provisions of the Code applicable to regulated investment companies will
generally be applied to the Fund, rather than to the Company as a whole. In
addition, net capital gains, net investment income, and operating expenses will
be determined separately for the Fund.

Qualification as a regulated investment company under the Code requires,
among other things, that (a) the Fund derive at least 90% of its annual gross
income from interest, payments with respect to securities loans, dividends and
gains from the sale or other disposition of securities or options thereon; (b)
the Fund derive less than 30% of its gross income from gains from the sale or
other disposition of securities or options thereon held for less than three
months; and (c) the Fund diversify its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the market value of the Fund's
assets is represented by cash, government securities and other securities
limited in respect of any one issuer to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government obligations and the securities of
other regulated investment companies), or in two or more issuers which the Fund
controls and which are determined to be engaged in the same or similar trades
or businesses. As a regulated investment company, the Fund will not be subject
to federal income tax on its net investment income and net capital gains
distributed to its shareholders, provided that it distributes to its
shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. The Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

A 4% nondeductible excise tax will be imposed on the Fund to the extent
it does not meet certain minimum distribution requirements by the end of each
calendar year. The Fund will either actually or be deemed to distribute all of
its net investment income and net capital gains by the end of each calendar
year and, thus, expects not to be subject to the excise tax.

Federal Income Tax Rates. As of the printing of this SAI, the maximum
individual tax rate applicable to ordinary income is 39.60% (marginal rates may
be higher for some individuals due to phase out of exemptions and elimination
of deductions); the maximum individual tax rate applicable to net capital gains
is 28.00%; and the maximum corporate tax rate applicable to ordinary income and
net capital gains is 35.00% (except that to eliminate the benefit of lower
marginal corporate income tax rates, corporations which have taxable income in
excess of $100,000 for a taxable year will be required to pay an additional
amount of income tax of up to $11,750 and corporations which have taxable
income in excess of $15,000,000 for a taxable year will be required to pay an
additional amount of tax of up to $100,000). Naturally, the amount of tax
payable by an individual or corporation will be affected by a combination of
tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

21
<PAGE> 22
Capital Gain Distributions. To the extent that the Fund recognizes
long-term capital gains, such gains will be distributed at least annually and
these distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares. Such distributions
will be designated as capital gain distributions in a written notice mailed by
the Fund to shareholders not later than 60 days after the close of the Fund's
taxable year.

If a shareholder exchanges or otherwise disposes of Fund shares within 90
days of having acquired such shares and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or of a different regulated investment company,
the sales charge previously incurred acquiring the Fund's shares shall not be
taken into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are reacquired within the 61-day
period beginning 30 days before and ending 30 days after the shares are
disposed of.

Taxation of Fund Investments. Gains or losses on sales of portfolio
securities by the Fund will generally be long-term capital gains or losses if
the securities have been held by it for more than one year, except in certain
cases such as where the Fund acquires a put or writes a call thereon. Gains
recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by the Fund at a market
discount (generally at a price less than its principal amount) will generally
be treated as ordinary income to the extent of the portion of market discount
which accrued during the period of time the Fund held the debt obligation.
However, each Fund has elected to recognize accrued market discount annually,
so that the entire gain on the disposition of such instruments, if any, will be
capital in nature. Other gains or losses on the sale of portfolio securities
will be short-term capital gains or losses.

Foreign Shareholders. Under the Code, distributions of net investment
income by the Fund to a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign partnership (a
"foreign shareholder") will be subject to U.S. withholding tax (at a rate of
30% or a lower treaty rate). Withholding will not apply if a dividend paid by
the Fund to a foreign shareholder is "effectively connected" with a U.S. trade
or business, in which case the reporting and withholding requirements
applicable to U.S. citizens, U.S. residents or domestic corporations will
apply. Distributions of net long-term capital gains are not subject to

22
<PAGE> 23
tax withholding, but, in the case of a foreign shareholder who is a nonresident
alien individual, such distributions ordinarily will be subject to U.S. income
tax at a rate of 30% if the individual is physically present in the U.S. for
more than 182 days during the taxable year.

Backup Withholding. The Company may be required to withhold, subject to
certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (including proceeds from
exchanges and redemptions in kind) paid or credited to an individual Fund
shareholder, unless a shareholder certifies that the Taxpayer Identification
Number ("TIN") provided is correct and that the shareholder is not subject to
backup withholding, or the IRS notifies the Company that the shareholder's TIN
is incorrect or the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by the IRS.

Other Matters. Investors should be aware that the investments to be made
by the Fund may involve sophisticated tax rules that may result in income or
gain recognition by the Fund without corresponding current cash receipts.
Although the Fund will seek to avoid significant noncash income, such noncash
income could be recognized by the Fund, in which case the Fund may distribute
cash derived from other sources in order to meet the minimum distribution
requirements described above.

The foregoing discussion and the discussions in the prospectus applicable
to each shareholder address only some of the federal tax considerations
generally affecting investments in the Fund. Each investor is urged to consult
his or her tax advisor regarding specific questions as to federal, state or
local taxes and foreign taxes.

CAPITAL STOCK

The Fund is one of the funds of the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of twenty-four other funds.

Most of the Company's funds are authorized to issue multiple classes of
shares, one class generally subject to a front-end sales charge and, in some
cases, a class subject to a contingent-deferred sales charge, that are offered
to retail investors. Certain of the Company's funds also are authorized to
issue other classes of shares, which are sold primarily to institutional
investors. Each class of shares in a fund represents an equal, proportionate
interest in a fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the fund's operating expenses, except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule
12b-1) that are allocated to a particular class. Please contact Stagecoach
Shareholder Services at 1-800-222-8222 if you would like additional information
about other funds or classes of shares offered.

23
<PAGE> 24
The Fund offers two classes of shares: Class A shares and Institutional
Class shares. All shares of the Company have equal voting rights and will be
voted in the aggregate, and not by series, except where voting by a series is
required by law or where the matter involved only affects one series. For
example, a change in a Fund's fundamental investment policy affects only one
series and would be voted upon only by shareholders of the Fund affected.
Additionally, approval of an advisory contract is a matter to be determined
separately by Fund. Approval by the shareholders of one Fund is effective as
to that Fund whether or not sufficient votes are received from the shareholders
of the other investment portfolios to approve the proposal as to those
investment portfolios. As used in the Prospectus of the Fund and in this SAI,
the term "majority," when referring to approvals to be obtained from
shareholders of the Fund, means the vote of the lesser of (i) 67% of the shares
of the Fund represented at a meeting if the holders of more than 50% of the
outstanding shares of the Fund are present in person or by proxy, or (ii) more
than 50% of the outstanding shares of the Fund. The term "majority," when
referring to the approvals to be obtained from shareholders of the Company as a
whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares. Shareholders are entitled to one vote for
each full share held and fractional votes for fractional shares held.

The Company may dispense with an annual meeting of shareholders in any
year in which it is not required to elect Directors under the 1940 Act.

Each share of the Fund represents an equal proportional interest in the
Fund with each other share and is entitled to such dividends and distributions
out of the income earned on the assets belonging to the Fund as are declared in
the discretion of the Directors. In the event of the liquidation or
dissolution of the Company, shareholders of the Fund are entitled to receive
the assets attributable to the Fund that are available for distribution, and a
distribution of any general assets not attributable to a particular investment
portfolio that are available for distribution in such manner and on such basis
as the Directors in their sole discretion may determine.

Shareholders are not entitled to any preemptive rights. All shares, when
issued for the consideration described in the Prospectus, will be fully paid
and non-assessable by the Company.

Set forth below is the name, address and share ownership of each person
known by the Company to have beneficial or record ownership of 5% or more of a
class of the Fund or 5% or more of the voting securities of the Fund as a
whole.

5% OWNERSHIP AS OF JANUARY 2, 1997
----------------------------------
<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- -------- ------------ --------- ----------
<S> <C> <C> <C> <C>
SHORT-INTERMEDIATE Wells Fargo Bank Class A 27.48% 9.60%
U.S. GOVERNMENT P.O. Box 63015 Beneficially
INCOME San Francisco, CA Owned
94163

Stephens Inc. Class A 14.06% 4.90%
111 Center Street Beneficially
Little Rock, AR Owned
72201
</TABLE>

24
<PAGE> 25
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).

OTHER

The Registration Statement, including the Prospectus for the Fund, the
SAI and the exhibits filed therewith, may be examined at the office of the SEC
in Washington, D.C. Statements contained in the Prospectus or the SAI as to
the contents of any contract or other document referred to herein or in the
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent auditors for
the Company. KPMG Peat Marwick LLP provides audit services, tax return
preparation and assistance and consultation in connection with review of
certain SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero
Center, San Francisco, California 94111.

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the Fund for the fiscal period ended
September 30, 1996 are hereby incorporated by reference to the Company's Annual
Report as filed with the SEC on December 9, 1996. The portfolio of
investments, audited financial statements and independent auditors' report for
the Fund are attached to all SAIs delivered to current or prospective
shareholders.

25
<PAGE> 26
SAI APPENDIX

The following is a description of the ratings given by Moody's and S&P to
corporate bonds and commercial paper.

Corporate Bonds

Moody's: The four highest ratings for corporate bonds are "Aaa," "Aa,"
"A" and "Baa." Bonds rated "Aaa" are judged to be of the "best quality" and
carry the smallest amount of investment risk. Bonds rated "Aa" are of "high
quality by all standards," but margins of protection or other elements make
long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds rated
"A" possess many favorable investment attributes and are considered to be upper
medium grade obligations. Bonds rated "Baa" are considered to be medium grade
obligations; interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1,
2 and 3 in each rating category from "Aa" through "Baa" in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate bonds are "AAA," "AA," "A"
and "BBB." Bonds rated "AAA" have the highest ratings assigned by S&P and have
an extremely strong capacity to pay interest and repay principal. Bonds rated
"AA" have a "very strong capacity to pay interest and repay principal" and
differ "from the highest rated issued only in small degree." Bonds rated "A"
have a "strong capacity" to pay interest and repay principal, but are "somewhat
more susceptible" to adverse effects of changes in economic conditions or other
circumstances than bonds in higher rated categories. Bonds rated "BBB" are
regarded as having an "adequate capacity" to pay interest and repay principal,
but changes in economic conditions or other circumstances are more likely to
lead to a "weakened capacity" to make such repayments. The ratings from "AA"
to "BBB" may be modified by the addition of a plus or minus sign to show
relative standing within the category.

Corporate Commercial Paper

Moody's: The highest rating for corporate commercial paper is "P-1"
(Prime-1). Issuers rated "P-1" have a "superior capacity for repayment of
short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate commercial paper indicates that the
"degree of safety regarding timely payment is either overwhelming or very
strong." Commercial paper with "overwhelming safety characteristics" will be
rated "A-1+." Commercial paper with a strong capacity for timely payments on
issues will be rated "A-2."

A-1

<PAGE> 27

STAGECOACH FUNDS, INC.

Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

DIVERSIFIED INCOME FUND

CLASS A AND CLASS B

----------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about one of the Company's investment portfolios -- the DIVERSIFIED
INCOME FUND (the "Fund"). This SAI relates to Class A and Class B shares. The
investment objective of the Fund is described in the Prospectus under the
selection entitled "How the Fund Works -- Investment Objective and Policies."

This SAI is not a prospectus and should be read in conjunction
with the Fund's Prospectus dated February 1, 1997. All terms used in this SAI
that are defined in the Prospectus will have the meanings assigned in the
Prospectus. A copy of the Prospectus may be obtained without charge by writing
Stephens Inc. ("Stephens"), the Company's sponsor, co-administrator and
distributor, at 111 Center Street, Little Rock, Arkansas 72201, or calling the
Transfer Agent at the telephone number indicated above.

----------------------------

1
<PAGE> 28
TABLE OF CONTENTS

Statement of Additional Information

<TABLE>
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Permitted Investment Activities. . . . . . . . . . . . . . . 5
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Performance Calculations. . . . . . . . . . . . . . . . . . . . . . . . 15
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . . . 19
Additional Purchase and Redemption Information. . . . . . . . . . . . . 19
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . 20
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Federal Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 28
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . 28
SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

2
<PAGE> 29
INVESTMENT RESTRICTIONS

Fundamental Investment Policies. The Fund is subject to the
following investment restrictions, all of which are fundamental policies; that
is, they may not be changed without approval by the vote of the holders of a
majority of the Fund's outstanding voting securities, as described under
"Capital Stock":

(1) The Fund may not purchase the securities of issuers
conducting their principal business activity in the same industry if,
immediately after the purchase and as a result thereof, the value of the Fund's
investments in that industry would equal or exceed 25% of the current value of
the Fund's total assets, provided that there is no limitation with respect to
investments in securities issued or guaranteed by the United States Government,
its agencies or instrumentalities.

(2) The Fund may not purchase or sell real estate (other than
securities secured by real estate or interests therein or securities issued by
companies that invest in real estate or interests therein), commodities or
commodity contracts or interests in oil, gas, or other mineral exploration or
development programs.

(3) The Fund may not purchase securities on margin (except for
short-term credits necessary for the clearance of transactions) or make short
sales of securities.

(4) The Fund may not underwrite securities of other issuers,
except to the extent that the purchase of permitted investments directly from
the issuer thereof or from an underwriter for an issuer and the later
disposition of such securities in accordance with the Fund's investment program
may be deemed to be an underwriting.

(5) The Fund may not make investments for the purpose of
exercising control or management.

(6) The Fund may not issue senior securities, except that the
Fund may borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of its net assets,
but investments may not be purchased while any such outstanding borrowings
exceed 5% of its net assets.

(7) The Fund may not purchase securities of any issuer (except
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities) if, as a result, with respect to 75% of its total assets,
more than 5% of the value of its total assets would be invested in the
securities of any one issuer or, with respect to 100% of its total assets, the
Fund would own more than 10% of the outstanding voting securities of such
issuer.

(8) The Fund may not write, purchase or sell puts, calls or
options or any combination thereof, except that the Fund may purchase
securities with put rights in order to maintain liquidity.

3
<PAGE> 30
(9) The Fund may not make loans of portfolio securities having
a value that exceeds 50% of the current value of its total assets, provided
that, for purposes of this restriction, loans will not include the purchase of
fixed time deposits, repurchase agreements, commercial paper and other types of
debt instruments commonly sold in a public or private offering.

With respect to fundamental investment policy (9), the Fund does
not intend to loan its portfolio securities during the coming year.

Non-Fundamental Investment Policies. The Fund is subject to the
following non-fundamental policies; that is, they may be changed by a majority
vote of the Board of Directors without shareholder approval:

(1) The Fund may invest not more than 5% of its net assets at
the time of purchase in warrants, and not more than 2% of its net assets in
warrants which are not listed on the New York or American Stock Exchange.

(2) The Fund may not purchase or retain securities of any
issuer if the officers or Directors of the Company or its Investment Adviser
owning beneficially more than one-half of one percent (0.50%) of the securities
of the issuer together own beneficially more than 5% of such securities.

(3) The Fund may invest in shares of other open-end, management
investment companies, subject to the limitations of Section 12(d)(1) of the
1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies and the Investment
Adviser will waive its advisory fees for that portion of the Fund's assets so
invested, except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition. The Fund does not intend to invest more than 5%
of its net assets in such securities during the coming year. Notwithstanding
any other investment policy or limitation (whether or not fundamental), the
Fund may invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objective, policies and limitations as the Fund.

(4) The Fund may not invest in securities of issuers who, with
their predecessors, have been in existence less than three years, unless the
securities are fully guaranteed or insured by the U.S. Government if, by reason
thereof, the value of its aggregate investment in such securities will exceed
5% of its total assets.

(5) The Fund may not purchase or sell real estate limited
partnership interests.

(6) The Fund will not invest more than 10% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.

4
<PAGE> 31
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

Privately Issued Securities (Rule 144A). The Fund may invest in
privately issued securities which may be resold only in accordance with Rule
144A under the Securities Act of 1933 ("Rule 144A Securities"). Rule 144A
Securities are restricted securities and will not be publicly traded.
Accordingly, the liquidity of the market for specific Rule 144A Securities may
vary. The investment adviser, under guidelines approved by Board of Directors
of the Company will evaluate the liquidity characteristics of each Rule 144A
Security proposed for purchase by the Fund on a case-by-case basis and will
consider the following factors, among others, in their evaluation: (1) the
frequency of trades and quotes for the Rule 144A Security; (2) the number of
dealers willing to purchase or sell the Rule 144A Security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the
Rule 144A Security; and (4) the nature of the Rule 144A Security and the nature
of the marketplace trades (e.g., the time needed to dispose of the Rule 144A
Security, the method of soliciting offers and the mechanics of transfer).

Warrants. The Fund may invest not more than 5% of its net assets
at the time of purchase in warrants (other than those that have been acquired
in units or attached to other securities) and not more than 2% of its net
assets in warrants which are not listed on the New York or American Stock
Exchange. Warrants represent rights to purchase securities at a specific price
valid for a specific period of time. The prices of warrants do not necessarily
correlate with the prices of the underlying securities. The Fund may only
purchase warrants on securities in which the Fund may invest directly.

When-Issued Securities. The Fund may purchase securities on a
when-issued basis, in which case delivery and payment normally take place
within 120 days after the date of the commitment to purchase. However, the
Fund does not intend to invest more than 5% of its net assets in when-issued
securities during the coming year. The Fund will only make commitments to
purchase securities on a when-issued basis with the intention of actually
acquiring the securities, but may sell them before the settlement date if it is
deemed advisable. When-issued securities are subject to market fluctuation,
and no income accrues to the purchaser during the period prior to issuance.
The purchase price and the interest rate that will be received on debt
securities are fixed at the time the purchaser enters into the commitment.
Purchasing a security on a when-issued basis can involve a risk that the market
price at the time of delivery may be lower than the agreed-upon purchase price,
in which case there could be an unrealized loss at the time of delivery.

The Fund will segregate cash, U.S. Government obligations, and
other high-quality debt instruments in an amount at least equal in value to the
Fund's commitments to purchase when-issued securities. If the value of these
assets declines, the Fund will segregate additional liquid assets on a daily
basis so that the value of the segregated assets is equal to the amount of such
commitments.

5
<PAGE> 32
Other Investment Companies. As a shareholder in another
investment company, the Fund would bear, along with other shareholders, its pro
rata portion of the other investment company's expenses, including advisory
fees, in addition to the advisory and other expenses the Fund bears directly in
connection with its own operations.

Unrated Investments. The Fund may purchase instruments that are
not rated if, in the opinion of Wells Fargo Bank, such obligations are of
investment quality comparable to other rated investments that are permitted to
be purchased by the Fund. After purchase by a Fund, a security may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither event will require a sale of such security by the Fund. To
the extent the ratings given by Moody's or S&P may change as a result of
changes in such organizations or their rating systems, the Fund will attempt to
use comparable ratings as standards for investments in accordance with the
investment policies contained in its Prospectus and in this SAI. The ratings
of Moody's and S&P are more fully described in the SAI Appendix.

Letters of Credit. Certain of the debt obligations (including
certificates of participation, commercial paper and other short-term
obligations) which the Fund may purchase may be backed by an unconditional and
irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies which, in the opinion of Wells Fargo Bank,
are of comparable quality to issuers of other permitted investments of the Fund
may be used for letter of credit-backed investments.

Convertible Securities (Lower Rated Securities). Subject to the
limitations described in the Fund's Prospectus, the Fund may invest in
convertible securities that are not rated in one of the four highest rating
categories by a NRSRO. The yields on such lower rated securities, which
includes securities also known as junk bonds, generally are higher than the
yields available on higher-rated securities. However, investments in lower
rated securities and comparable unrated securities generally involve greater
volatility of price and risk of loss of income and principal, including the
probability of default by or bankruptcy of the issuers of such securities.
Lower rated securities and comparable unrated securities (a) will likely have
some quality and protective characteristics that, in the judgment of the rating
organization, are outweighed by large uncertainties or major risk exposures to
adverse conditions and (b) are predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation. Accordingly, it is possible that these types of
factors could, in certain instances, reduce the value of securities held in the
Fund's portfolio, with a commensurate effect on the value of the Fund's shares.
Therefore, an investment in the Fund should not be considered as a complete
investment program and may not be appropriate for all investors.

6
<PAGE> 33
conditions than higher-rated securities. In addition, lower rated securities
and comparable unrated securities generally present a higher degree of credit
risk. Issuers of lower rated securities and comparable unrated securities
often are highly leveraged and may not have more traditional methods of
financing available to them so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by such
issuers is significantly greater because lower rated securities and comparable
unrated securities generally are unsecured and frequently are subordinated to
the prior payment of senior indebtedness. The Fund may incur additional
expenses to the extent that it is required to seek recovery upon a default in
the payment of principal or interest on its portfolio holdings. The existence
of limited markets for lower rated securities and comparable unrated securities
may diminish the Fund's ability to (a) obtain accurate market quotations for
purposes of valuing such securities and calculating its net asset value and (b)
sell the securities at fair value either to meet redemption requests or to
respond to changes in the economy or in financial markets.

Certain lower rated debt securities and comparable unrated
securities frequently have call or buy-back features that permit their issuers
to call or repurchase the securities from their holders, such as the Fund. If
an issuer exercises these rights during periods of declining interest rates,
the Fund may have to replace the security with a lower yielding security, thus
resulting in a decreased return to the Fund.

The market for certain lower rated securities and comparable
unrated securities is relatively new and has not weathered a major economic
recession. The effect that such a recession might have on such securities is
not known. Any such recession, however, could disrupt severely the market for
such securities and adversely affect the value of such securities. Any such
economic downturn also could adversely affect the ability of the issuers of
such securities to repay principal and pay interest thereon.

MANAGEMENT

The following information supplements and should be read in
conjunction with the section in the prospectus entitled "The Funds and
Management." The principal occupations during the past five years of the
Directors and principal executive Officer of the Company are listed below. The
address of each, unless otherwise indicated, is 111 Center Street, Little Rock,
Arkansas 72201. Directors deemed to be "interested persons" of the Company
for purposes of the 1940 Act are indicated by an asterisk.

<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position During Past 5 Years
- --------------------- -------- ---------------------
<S> <C> <C>
Jack S. Euphrat, 74 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.
</TABLE>

7
<PAGE> 34
<TABLE>
<S> <C> <C>
*R. Greg Feltus, 45 Director, Senior Vice President
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of Stephens
Sports Management
Inc.; and President of
Investor Brokerage
Insurance Inc.

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate
Professor of Finance
of the School of Business and
Accounting at Wake Forest
University since 1983.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
</TABLE>

8
<PAGE> 35
<TABLE>
<S> <C> <C>
*J. Tucker Morse, 52 Director Private Investor; Real Estate
10 Legrae Street Developer; Chairman
Charleston, SC 29401 of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.

9
<PAGE> 36
COMPENSATION TABLE
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, 1995 September 30, 1996
-------------------------------- --------------------------------
Total Total
Aggregate Compensation Aggregate Compensation
Compensation from Registrant Compensation from Registrant
from and Fund from and Fund
Name and Position Registrant Complex Registrant Complex
----------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company and
by all the registrants in each fund complex they serve as indicated above and
also are reimbursed for all out-of-pocket expenses relating to attendance at
board meetings. The Company, Overland Express Funds, Inc., Stagecoach Trust,
Life & Annuity Trust and Master Investment Trust are considered to be members
of the same fund complex as such term is defined in Form N-1A under the 1940
Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment Trust together form a
separate fund complex (the "BGFA Fund Complex"). Each of the Directors and
Officers of the Company serves in the identical capacity as

10
<PAGE> 37
directors and officers or as trustees and/or officers of each registered
open-end management investment company in both the Wells Fargo and BGFA Fund
Complexes, except for Joseph N. Hankin, who only serves the aforementioned
members of the Wells Fargo Fund Complex, and Zoe Ann Hines who, after September
6, 1996, only serves the aforementioned members of the BGFA Fund Complex. The
Directors are compensated by other companies and trusts within a fund complex
for their services as directors/trustees to such companies and trusts.
Currently the Directors do not receive any retirement benefits or deferred
compensation from the Company or any other member of each fund complex.

As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

INVESTMENT ADVISER. The Fund is advised by Wells Fargo Bank
pursuant to an Advisory Contract which provides that Wells Fargo Bank shall
furnish to the Fund investment guidance and policy direction in connection with
the daily portfolio management of the Fund. Pursuant to the Advisory Contract,
Wells Fargo Bank furnishes to the Board of Directors periodic reports on the
investment strategy and performance of the Fund.

Wells Fargo Bank has agreed to provide to the Fund, among other
things, money market security and fixed- income research, analysis and
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition, credit conditions and, average
maturities of the Fund.

The Advisory Contract will continue in effect for more than two
years provided the continuance is approved annually (i) by the holders of a
majority of the Fund's outstanding voting securities or by the Company's Board
of Directors and (ii) by a majority of the Directors of the Company who are not
parties to the Advisory Contract or "interested persons" (as defined in the
1940 Act) of any such party. The Advisory Contract may be terminated on 60
days' written notice by either party and will terminate automatically if
assigned.

For the years ended December 31, 1993, 1994 and 1995, and the
period ended September 30, 1996, the Fund paid to Wells Fargo Bank the
advisory fees indicated below and Wells Fargo Bank waived the indicated
amounts:

<TABLE>
<CAPTION>
December 31, 1993 December 31, 1994 December 31, 1995 September 30, 1996
------------------ ------------------- ------------------ ------------------
Fees Fees Fees Fees Fees Fees Fees Fees
Paid Waived Paid Waived Paid Waived Paid Waived
---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0 $63,535 $192,033 $ 0 $312,512 $ 0 $415,025 $0
</TABLE>

11
<PAGE> 38
operation of the Fund, including coordination of the services performed by the
Fund's investment adviser, transfer agent, custodian, shareholder servicing
agent(s), independent public accountants and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions; and
preparation of proxy statements and shareholder reports for the Fund; and (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Company's officers and Board
of Directors. Wells Fargo Bank and Stephens also furnish office space and
certain facilities required for conducting the business of the Fund together
with ordinary clerical and bookkeeping services. Stephens pays the
compensation of the Company's Directors, officers and employees who are
affiliated with Stephens. The Administrator and Co-Administrator are entitled
to receive a monthly fee of 0.04% and 0.02%, respectively, of the average daily
net assets of the Fund.

For the years ended December 31, 1993, 1994 and 1995, and the
period ended September 30, 1996, the Fund paid the following dollar amounts of
administrative fees to Stephens who, as sole administrator during these
periods, was entitled to receive a fee, payable monthly, at the annual rate of
0.03% of the Fund's average daily net assets:

SPONSOR AND DISTRIBUTOR. As discussed in the Fund's prospectus
under the heading "Management and Servicing Fees," Stephens serves as the
Fund's sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in the Fund's
prospectus under the heading "Shareholder Servicing Agent," the Fund has
entered into a shareholder servicing agreement with Wells Fargo Bank. The
dollar amount of shareholder servicing fees paid by the Fund to Wells Fargo
Bank or its affiliates for the year ended December 31, 1995 and the period
ended September 30, 1996 were as follows:

<TABLE>
<CAPTION>
December 31, 1995 September 30, 1996
----------------- ------------------
<S> <C>
$174,644 $249,015
</TABLE>

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells
Fargo Bank has been retained to act as custodian and transfer and dividend
disbursing agent for the Fund. The custodian, among other things, maintains a
custody account or accounts in the name of the Fund, receives and delivers all
assets for the Fund upon purchase and upon sale or maturity, collects and
receives all income and other payments and distributions on account of the
assets of the Fund and pays all expenses of the Fund. For its services as
custodian, Wells Fargo Bank is entitled to receive fees as follows: a net asset
charge at the annual rate of 0.0167%, payable monthly, plus specified
transaction charges. Wells Fargo Bank also will provide portfolio accounting
services under the Custody Agreement as follows: a monthly base fee of $2,000
plus a net asset fee at the annual

12
<PAGE> 39
rate of 0.070% of the first $50,000,000 of the Fund's average daily net assets,
0.045% of the next $50,000,000, and 0.020% of the average daily net assets in
excess of $100,000,000.

For the year ended December 31, 1995 and the period ended
September 30, 1996, the Fund paid no custody fees to Wells Fargo Bank.

For its services as transfer and dividend disbursing agent for the
Fund's Class A and B shares, Wells Fargo Bank is entitled to receive monthly
payments at the annual rate of 0.14% of each Fund's average daily net assets
for Class A and B shares. Under the prior transfer agency agreement, Wells
Fargo Bank was entitled to receive a per account fee plus transaction fees and
out-of-pocket related costs with a minimum of $3,000 per month, unless net
assets of the Fund were under $20 million. For as long as the Fund's assets
remained under $20 million, the Fund was not charged any transfer agency fees.

For the year ended December 31, 1995 the Fund paid no transfer and
dividend disbursing agency fees, and for the period ended September 30, 1996,
the Fund paid $27,158 (after waivers) in transfer and dividend disbursing agency
fees to Wells Fargo Bank or its affiliates.

UNDERWRITING COMMISSIONS. For the years ended December 31, 1993
and 1994, the Company's distributor retained $26,215,173 and $5,415,227,
respectively in underwriting commissions (front-end sales loads and CDSCs, if
any) in connection with the purchase or redemption of the Company's shares.
For the years ended December 31, 1993 and 1994, Wells Fargo Securities Inc.
("WFSI"), an affiliated broker-dealer of the Company, and its registered
representatives received $378,895 and $904,274, respectively, in underwriting
commissions in connection with the purchase or redemption of the Company's
shares.

For the period ended September 30, 1996, the aggregate amount of
underwriting commissions on sales/redemptions of the Company's shares was
$2,917,738. Stephens retained $198,664 of such commissions. WFSI and its
registered representatives retained $2,583,027 and $136,047, respectively, of
such commissions.

DISTRIBUTION PLAN

As indicated in the Prospectus, the Fund, on behalf of each Class
of shares, has adopted a distribution plan (a "Plan") under Section 12(b) of
the 1940 Act and Rule 12b-1 thereunder (the "Rule"). The Plan for the shares
of the Fund now designated the Class A Shares was adopted on October 22, 1992,
by the Board of Directors, including a majority of the Directors who were not
"interested persons" (as defined in the 1940 Act) of the Fund and who had no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Qualified Directors"), and was approved by
the initial shareholder of the Fund on October 21, 1992. The Plan for the
Class B Shares was adopted by the Board of Directors, including a majority of
Qualified Directors, on July 27, 1994.

Under the Class A Plan, the Fund may defray all or part of the
cost of preparing and printing prospectuses and other promotional materials and
of delivering prospectuses and those

13
<PAGE> 40
materials to prospective shareholders of the Fund by paying on an annual basis
up to 0.05% of the average daily net assets attributable to Class A Shares.
The Class A Plan provides only for reimbursement of actual expenses. Under the
Class B Plan the Fund may defray all or part of the cost of preparing and
printing prospectuses and other promotional materials and of delivering
prospectuses and those materials to prospective Fund shareholders by paying on
an annual basis up to 0.70% of the average daily net assets of Class B Shares.
The Class B Plan provides for reimbursement of actual expenses and payment of
compensation to the Distributor and Selling Agents for sales support services.
In addition, the Plans contemplate that to the extent any fees payable pursuant
to a Shareholder Servicing Agreement are deemed to be for distribution-related
services, rather than shareholder services, such payments are approved and
payable pursuant to such Plan.

Each Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Qualified Directors. Any Distribution Agreement related to the Plans
also must be approved by such vote of the Directors and the Qualified
Directors. Distribution Agreements will terminate automatically if assigned,
and may be terminated at any time, without payment of any penalty, by a vote of
a majority of the outstanding voting securities of the Class involved. The
Plans may not be amended to increase materially the amounts payable thereunder
without the approval of a majority of the outstanding voting securities of the
Class of the Fund to which said Plan applies, and no material amendment to a
Plan may be made except by the affirmative vote of a majority of both the
Directors of the Company and the Qualified Directors.

For the year ended December 31, 1995, the Funds' distributor
received the following amounts of 12b-1 fees for the specified purposes set
forth below under the Plan for each Class.

<TABLE>
<CAPTION>
Printing & Mailing Marketing Compensation to
Total Prospectus Brochures Underwriters
----- ------------------ --------- ---------------
<S> <C> <C> <C> <C>
Class A $42,250 $27,257 $14,993 N/A
Class B $14,987 N/A N/A $14,987
</TABLE>

For the period ended September 30, 1996, the Fund's distributor
received the following amounts of 12b-1 fees for the specified purposes set
forth below under the Plan for each Class.

14
<PAGE> 41

<TABLE>
<CAPTION>
Printing & Mailing Marketing Compensation to
Total Prospectus Brochures Underwriters
----- ------------------ --------- ---------------
<S> <C> <C> <C> <C>
Class A $ -0- $ -0- $ -0- N/A
Class B $49,796 N/A N/A $49,796
</TABLE>

For the the year ended December 31, 1995, and the period ended
September 30, 1996, WFSI and its registered representatives received no
compensation under the Plan for each Class.

PERFORMANCE CALCULATIONS

As indicated in the Prospectus, the Fund may advertise certain
total return information for a Class of shares computed in the manner described
in the Prospectus. As and to the extent required by the SEC, an average annual
compound rate of return ("T") will be computed by using the redeemable value at
the end of a specified period ("ERV") of a hypothetical initial investment in a
Class of shares ("P") over a period of years ("n") according to the following
formula: P(1+T)n = ERV. In addition, as indicated in the Prospectus, the Fund
also may, at times, calculate total return of a Class of shares based on net
asset value per share of such Class (rather than the public offering price), in
which case the figures would not reflect the effect of any sales charges that
would have been paid by an investor, or based on the assumption that a sales
charge other than the maximum sales charge (reflecting a Volume Discount) was
assessed, provided that total return data derived pursuant to the calculation
described above also are presented.

Average Annual Total Return for the Applicable Period Ended September 30, 1996

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Inception(1) Inception Three Year Three Year One Year One Year
With No With No With No
Class Sales Charge(2) Sales Charge Sales Charge Sales Charge Sales Charge Sales Charge
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A 13.24% 14.59% 12.88% 14.63% 14.02% 19.41%
B 22.62% 23.60% N/A N/A 15.66% 18.65%
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Fund's Class A shares commenced operations November 18, 1992; Class
B shares - January 2, 1995.

(2) For all periods ended September 30, 1996, the term "Sales Charge" for
Class A shares means a front-end sales load of 4.50%. For Class B shares the
term "Sales Charge" means the maximum applicable contingent deferred sales
charge ("CDSC") as described in the prospectus.

The Fund may advertise the cumulative total return on its shares.
Cumulative total return of shares is computed on a per share basis and assumes
the reinvestment of dividends and distributions. Cumulative total return of
shares generally is expressed as a percentage rate which is calculated by
combining the income and principal changes for a specified period and dividing
by the net asset value per share at the beginning of the period.
Advertisements may include the percentage rate of total return of shares or may
include the value of a hypothetical investment in

15
<PAGE> 42
shares at the end of the period which assumes the application of the percentage
rate of total return.

In addition to the above performance information, the Fund may
also advertise the cumulative total return of the Fund for one-month,
three-month, six-month, and year-to-date periods. The cumulative total return
for such periods is based on the overall percentage change in value of a
hypothetical investment in the Fund, assuming all Fund dividends and capital
gain distributions are reinvested, without reflecting the effect of any sales
charge that would be paid by an investor, and is not annualized.

Cumulative Total Return for the Applicable Period Ended September 30, 1996

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Inception(1) Inception Three Year Three Year
With No With No
Class Sales Charge(2) Sales Charge Sales Charge Sales Charge
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A 61.92% 69.53% 43.84% 50.64%
B 42.89% 44.89% N/A N/A
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Fund's Class A shares commenced operations November 18, 1992; Class
B shares - January 2, 1995.

From time to time and only to the extent the comparison is
appropriate for each Class of shares of the Fund, the Company may quote the
performance or price-earning ratio of such Class in advertising and other types
of literature as compared to the performance of the Lehman Brothers Municipal
Bond Index, the 1-Year Treasury Bill Rate, the S&P Index, the Dow Jones
Industrial Average, the Lehman Brothers 20+ Treasury Index, the Lehman Brothers
5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate Investment
Averages (as reported by the National Association of Real Estate Investment
Trusts), Gold Investment Averages (provided by the World Gold Council), Bank
Averages (which are calculated from figures supplied by the U.S. League of
Savings Institutions based on effective annual rates of interest on both
passbook and certificate accounts), average annualized certificate of deposit
rates (from the Federal Reserve G-13 Statistical Releases or the Bank Rate
Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer Price
Index (as published by the U.S. Bureau of Labor Statistics), other managed or
unmanaged indices or performance data of bonds, stocks or government securities
(including data provided by Ibbotson Associates), or by other services,
companies, publications or persons who monitor mutual funds on overall
performance or other criteria. The S&P Index and the Dow Jones Industrial
Average are unmanaged indices of selected common stock prices. The performance
of each Class of the Fund also may be compared to those of other mutual funds
having similar objectives. This comparative performance could be expressed as
a ranking prepared by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Bloomberg Financial Markets or Morningstar, Inc.,
independent services which monitor the performance of mutual funds. The
performance of each Class of the Fund will be calculated by relating net asset
value per share of such Class at the beginning of a

16
<PAGE> 43
stated period to the net asset value of the investment, assuming reinvestment
of all gains distributions and dividends paid, at the end of the period. Any
such comparisons may be useful to investors who wish to compare the Fund's past
performance with that of its competitors. Of course, past performance cannot
be a guarantee of future results. The Company also may include, from time to
time, a reference to certain marketing approaches of the Distributor,
including, for example, a reference to a potential shareholder being contacted
by a selected broker or dealer. General mutual fund statistics provided by the
Investment Company Institute may also be used.

The Company also may use the following information in
advertisements and other types of literature only to the extent the information
is appropriate for each Class of the Fund: (i) the Consumer Price Index may be
used to assess the real rate of return from an investment in a Class of shares
of the Fund; (ii) other government statistics, including, but not limited to,
The Survey of Current Business, may be used to illustrate investment attributes
of a Class of shares of the Fund or the general economic, business, investment,
or financial environment in which the Fund operates; (iii) the effect of
tax-deferred compounding on the investment returns of a Class of the Fund, or
on returns in general, may be illustrated by graphs, charts, etc., where such
graphs or charts would compare, at various points in time, the return from an
investment in a Class of the Fund (or returns in general) on a tax-deferred
basis (assuming reinvestment of capital gains and dividends and assuming one or
more tax rates) with the return on a taxable basis; and (iv) the sectors or
industries in which a Fund invests may be compared to relevant indices of
stocks or surveys (e.g., S&P Industry Surveys) to evaluate a Fund's historical
performance or current or potential value with respect to the particular
industry or sector.

In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."

From time to time the Company may reprint, reference or otherwise
use material from magazines, newsletters, newspapers and books including, but
not limited to the Wall Street Journal, Money Magazine, Barrons, Kiplingers,
Business Week, Fortune, Forbes, the San Francisco Chronicle, the San Jose
Mercury News, The New York Times, the Los Angeles Times, the Boston Globe, the
Washington Post, the Chicago Sun-Times, Investor Business Daily, Worth, Bank
Investor, American Banker, Smart Money, the 100 Best Mutual Funds (Adams
Publishing), Morningstar or Value Line.

17
<PAGE> 44
by S&P and/or Moody's. In the event one rating agency does not rate the issue
or issuer, as the case may be, in the same tier as the other agency, the
highest rating is used in the calculation.

The Company also may discuss in advertisements and other types of
literature that the Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as Standard & Poor's Ratings
Group. Such rating would assess the creditworthiness of the investments held
by the Fund. The assigned rating would not be a recommendation to purchase,
sell or hold the Fund's shares since the rating would not comment on the market
price of the Fund's shares or the suitability of the Fund for a particular
investor. In addition, the assigned rating would be subject to change,
suspension or withdrawal as a result of changes in, or unavailability of,
information relating to the Fund or its investments. The Company may compare
the Fund's performance with other investments which are assigned ratings by
NRSROs. Any such comparisons may be useful to investors who wish to compare
the Fund's past performance with other rated investments.

From time to time, the Fund may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability
of combined Wells Fargo Bank and Stagecoach Funds account statements." The
Company may also disclose in advertising and other types of sales literature
the assets and categories of assets under management by the Company's
investment adviser. The Company may also disclose in advertising and other
types of sales literature the assets and categories of assets under management
by a fund's investment adviser or sub-adviser and the total amount of assets
and mutual fund assets managed by Wells Fargo Bank. As of December 31, 1996,
Wells Fargo Bank and its affiliates provided investment advisory services for
approximately $54 billion of assets of individuals, trusts, estates and
institutions and $20 billion of mutual fund assets.

The Company may disclose in advertising and other types of
literature that investors can open and maintain Sweep Accounts over the
Internet or through other electronic channels (collectively, "Electronic
Channels"). Such advertising and other literature may discuss the investment
options available to investors, including the types of accounts and any
applicable fees. Such advertising and other literature may disclose that Wells
Fargo Bank is the first major bank to offer an on-line application for a mutual
fund account that can be filled out completely through Electronic Channels.
Advertising and other literature may disclose that Wells Fargo Bank may
maintain Web sites, pages or other information sites accessible through
Electronic Channels (an "Information Site") and may describe the contents and
features of the Information Site and instruct investors on how to access the
Information Site and open a Sweep Account. Advertising and other literature
may also disclose the procedures employed by Wells Fargo Bank to secure
information provided by investors, including disclosure and discussion of the
tools and services for accessing Electronic Channels. Such advertising or
other literature may include discussions of the advantages of establishing and
maintaining a Sweep Account through Electronic Channels and testimonials from
Wells Fargo Bank customers or employees and may

18
<PAGE> 45
also include descriptions of locations where product demonstrations may occur.
The Company may also disclose the ranking of Wells Fargo Bank as one of the
largest money managers in the United States.

DETERMINATION OF NET ASSET VALUE

Net asset value per share for each Class of the Fund is determined
by the custodian of the Fund on each day the NYSE is open for trading.

Securities of the Fund for which market quotations are available
are valued at latest prices. Any security for which the primary market is an
exchange is valued at the last sale price on such exchange on the day of
valuation or if there was no sale on such day, the latest bid price quoted on
such day. In the case of other securities, including U.S. Government
securities but excluding money market instruments maturing in 60 days or less,
the valuations are based on latest quoted bid prices. Money market instruments
maturing in 60 days or less are valued at amortized cost. Prices may be
furnished by a reputable independent pricing service approved by the Board of
Directors. Prices provided by an independent pricing service may be determined
without exclusive reliance on quoted prices and may take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. All other securities and other assets
of the Fund for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Company's Directors and
in accordance with procedures adopted by the Directors.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares may be purchased on any day the Fund is open. The Fund is
open for business each day the New York Stock Exchange ("NYSE") is open for
trading (a "Business Day"). Currently, the NYSE is closed on New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day (each a "Holiday"). When any Holiday falls
on a weekend, the NYSE typically is closed on the weekday immediately before or
after such Holiday.

Payment for shares may, in the discretion of the adviser, be made
in the form of securities that are permissible investments for the Fund as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by
the Fund and that the Fund receives satisfactory assurances that (i) it will
have good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

19
<PAGE> 46
Under the 1940 Act, the Fund may suspend the right of redemption
or postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation), an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to
reimburse the Fund for any losses sustained by reason of the failure of a
shareholders to make full payment for shares purchased or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to shares of the Fund as provided from time to time in the
Prospectus.

PORTFOLIO TRANSACTIONS

Purchases and sales of securities by the Fund are usually
principal transactions. Portfolio securities normally are purchased or sold
from or to dealers serving as market makers for the securities at a net price.
The Fund also may purchase portfolio securities in underwritten offerings and
may purchase securities directly from the issuer. The cost of executing the
Fund's portfolio securities transactions consists primarily of dealer spreads
and underwriting commissions. Under the 1940 Act, persons affiliated with the
Company are prohibited from dealing with the Company as a principal in the
purchase and sale of securities unless an exemptive order or other relief
allowing such transactions is obtained from the SEC or an exemption is
otherwise available. The Fund may purchase securities from underwriting
syndicates of which Stephens or Wells Fargo is a member under certain
conditions in accordance with the provisions of a rule adopted under the 1940
Act and in compliance with procedures adopted by the Board of Directors.

The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Company's Board of Directors, Wells Fargo is
responsible for Fund decisions and the placing of portfolio transactions. In
placing orders, it is the policy of the Company to obtain the best overall
terms taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo
generally seeks reasonably competitive spreads or commissions, the Fund will
not necessarily be paying the lowest spread or commission available.

<PAGE> 47
In assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Fund to pay a broker/dealer which
furnishes brokerage and research services a higher commission than that which
might be charged by another broker/dealer for effecting the same transaction,
provided that Wells Fargo Bank determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker/dealer, viewed in terms of either the particular
transaction or the overall responsibilities of Wells Fargo Bank. Such
brokerage and research services might consist of reports and statistics
relating to specific companies or industries, general summaries of groups of
stocks or bonds and their comparative earnings and yields, or broad overviews
of the stock, bond, and government securities markets and the economy.

Supplementary research information so received is in addition to,
and not in lieu of, services required to be performed by Wells Fargo Bank and
does not reduce the advisory fees payable by the Fund. The Board of Directors
will periodically review the commissions paid by the Fund to consider whether
the commissions paid over representative periods of time appear to be
reasonable in relation to the benefits inuring to the Fund. It is possible
that certain of the supplementary research or other services received will
primarily benefit one or more other investment companies or other accounts for
which investment discretion is exercised. Conversely, the Fund may be the
primary beneficiary of the research or services received as a result of
portfolio transactions effected for such other account or investment company.

Under Section 28(e) of the Securities Exchange Act of 1934, an
adviser shall not be "deemed to have acted unlawfully or to have breached its
fiduciary duty" solely because under certain circumstances it has caused the
account to pay a higher commission than the lowest available. To obtain the
benefit of Section 28(e), an adviser must make a good faith determination that
the commissions paid are "reasonable in relation to the value of the brokerage
and research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to the Fund in any transaction may be less favorable than that
available from another broker/dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.

Broker/dealers utilized by Wells Fargo Bank may furnish
statistical, research and other information or services which are deemed by
Wells Fargo Bank to be beneficial to the Fund's investment programs. Research
services received from brokers supplement Wells Fargo Bank's own research and
may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
political developments; portfolio management strategies; performance
information on securities and information concerning prices of securities;

21
<PAGE> 48
and information supplied by specialized services to Wells Fargo Bank and to the
Company's Directors with respect to the performance, investment activities and
fees and expenses of other mutual funds. Such information may be communicated
electronically, orally or in written form. Research services may also include
the providing of equipment used to communicate research information, the
arranging of meetings with management of companies and the providing of access
to consultants who supply research information.

The outside research assistance is useful to Wells Fargo Bank
since the brokers utilized by Wells Fargo Bank as a group tend to follow a
broader universe of securities and other matters than the staff of Wells Fargo
Bank can follow. In addition, this research provides Wells Fargo Bank with a
diverse perspective on financial markets. Research services which are provided
to Wells Fargo Bank by brokers are available for the benefit of all accounts
managed or advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank
that this material is beneficial in supplementing their research and analysis;
and, therefore, it may benefit the Fund by improving the quality of Wells Fargo
Bank's investment advice. The advisory fees paid by the Fund are not reduced
because Wells Fargo Bank receives such services.

Brokerage Commissions. For the years ended December 31, 1993,
1994 and 1995, and the period ended September 30, 1996, the Fund paid the
following in brokerage commissions:

As of September 30, 1996, the Fund owned securities of its "regular
brokers or dealers" or their parents as defined in the Act, as follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
- ---- ------ ---------------------
<S> <C> <C>
Diversified Income $7,521,000 Goldman Sachs & Co.
</TABLE>

Securities of Regular Broker/Dealers. As of December 31, 1995,
the Fund owned securities of its "regular brokers or dealers" or their parents
as defined in the Act, as follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
- ---- ------ ---------------------
<S> <C> <C>
Diversified Income $2,373,000 Goldman Sachs & Co.
</TABLE>

Portfolio Turnover. Portfolio turnover generally involves some
expenses to the Fund, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover also can generate short-term capital gain tax
consequences. The portfolio turnover rate for the Fund generally is not

22
<PAGE> 49
expected to exceed 150%. The portfolio turnover rate will not be a limiting
factor when Wells Fargo Bank deems portfolio changes appropriate.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens,
the Company bears all costs of its operations, including the compensation of
its Directors who are not affiliated with Stephens or Wells Fargo Bank or any
of their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing prospectuses (except the expense of printing and mailing prospectuses
used for promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of the Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of the Fund's shares;
pricing services, and any extraordinary expenses. Expenses attributable to the
Fund are charged against Fund assets. General expenses of the Company are
allocated among all of the funds of the Company, including the Fund, in a
manner proportionate to the net assets of the Fund, on a transactional basis,
or on such other basis as the Company's Board of Directors deems equitable.

FEDERAL INCOME TAXES

In General. The following information supplements and should be
read in conjunction with Prospectus sections entitled "Dividend and Capital
Gain Distributions" and "Taxes." The Prospectus generally describe the tax
treatment of distributions by the Fund. This section of the SAI includes
additional information concerning federal income taxes.

The Company intends to qualify the Fund as a regulated investment
company under Subchapter M of the Code as long as such qualification is in the
best interest of the Fund's shareholders. The Fund will be treated as a
separate entity for tax purposes and thus the provisions of the Code applicable
to regulated investment companies will generally be applied to the Fund, rather
than to the Company as a whole. In addition, net capital gains, net investment
income, and operating expenses will be determined separately for the Fund.

23
<PAGE> 50
least 50% of the market value of the Fund's assets is represented by cash,
government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government obligation and the securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
determined to be engaged in the same or similar trades or businesses. As a
regulated investment company, the Fund will not be subject to federal income
tax on its net investment income and net capital gains distributed to its
shareholders, provided that it distributes to its shareholders at least 90% of
its net investment income, including net tax-exempt income, earned in each
year. The Fund intends to pay out substantially all of its net investment
income and net realized capital gains (if any) for each year.

A 4% nondeductible excise tax will be imposed on the Fund to the
extent it does not meet certain minimum distribution requirements by the end of
each calendar year. The Fund will either actually or be deemed to distribute
all of its net investment income and net capital gains by the end of each
calendar year and, thus, expects not to be subject to the excise tax.

Corporate shareholders of the Fund may be eligible for the
dividends-received deduction on dividends distributed out of the Fund's net
investment income attributable to dividends received from domestic
corporations, which, if received directly by the corporate shareholder, would
qualify for such deduction. In order to qualify for the dividends-received
deduction, a corporate shareholder must hold the Fund shares paying the
dividends upon which the deduction is based for at least 46 days.

Federal Income Tax Rates. As of the printing of this SAI, the
maximum individual tax rate applicable to ordinary income is 39.60% (marginal
rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains is 28.00%; and the maximum corporate tax rate applicable to
ordinary income and net capital gains is 35.00% (except that to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

Capital Gain Distributions. To the extent that the Fund
recognizes long-term capital gains, such gains will be distributed at least
annually and these distributions will be taxable to

24
<PAGE> 51
shareholders as long-term capital gains, regardless of how long a shareholder
has held Fund shares. Such distributions will be designated as capital gain
distributions in a written notice mailed by the Fund to shareholders not later
than 60 days after the close of the Fund's taxable year.

If a shareholder exchanges or otherwise disposes of Fund shares
within 90 days of having acquired such shares and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
on a new purchase of shares of the Fund or of a different regulated investment
company, the sales charge previously incurred acquiring the Fund's shares shall
not be taken into account (to the extent such previous sales charges do not
exceed the reduction in sales charges on the new purchase) for the purpose of
determining the amount of gain or loss on the disposition, but will be treated
as having been incurred in the acquisition of such other shares. Also, any
loss realized on a redemption or exchange of shares of the Fund will be
disallowed to the extent that substantially identical shares are reacquired
within the 61-day period beginning 30 days before and ending 30 days after the
shares are disposed of.

Taxation of Fund Investments. Gains or losses on sales of
portfolio securities by the Fund will generally be long-term capital gains or
losses if the securities have been held by it for more than one year, except in
certain cases such as where the Fund acquires a put or writes a call thereon.
Gains recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by the Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Fund held the debt obligation. Other
gains or losses on the sale of portfolio securities will be short-term capital
gains or losses.

Currency transactions may be subject to Section 988 of the Code,
under which foreign currency gains or losses would generally be computed
separately and treated as ordinary income or losses. The Fund will attempt to
monitor Section 988 transactions to avoid an adverse tax impact.

If the Fund purchases shares in a "passive foreign investment
company" ("PFIC"), the Fund may be subject to federal income tax and an
interest charge imposed by the IRS upon certain distributions from the PFIC or
the Fund's disposition of PFIC shares. If the Fund invests in a PFIC, the Fund
intends to make an available election to mark-to- market its interest in PFIC
shares. Under the election, the Fund will be treated as recognizing at the end
of each taxable year the excess, if any, of the fair market value of its
interest in PFIC shares over its basis in such shares. Although such excess
will be taxable to the Fund as ordinary income notwithstanding

25
<PAGE> 52
any distributions by the PFIC, the Fund will not be subject to federal income
tax or the interest charge with respect to its interest in the PFIC.

Foreign Shareholders. Under the Code, distributions of net
investment income by the Fund to a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or a lower treaty rate). Withholding will not apply if a
dividend paid by the Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but, in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.

Backup Withholding. The Company may be required to withhold,
subject to certain exemptions, at a rate of 31% ("backup withholding") on
dividends, capital gain distributions, and redemption proceeds (including
proceeds from exchanges and redemptions in kind) paid or credited to an
individual Fund shareholder, unless a shareholder certifies that the Taxpayer
Identification Number ("TIN") provided is correct and that the shareholder is
not subject to backup withholding, or the IRS notifies the Company that the
shareholder's TIN is incorrect or the shareholder is subject to backup
withholding. Such tax withheld does not constitute any additional tax imposed
on the shareholder, and may be claimed as a tax payment on the shareholder's
federal income tax return. An investor must provide a valid TIN upon opening
or reopening an account. Failure to furnish a valid TIN to the Company could
subject the investor to penalties imposed by the IRS.

Other Matters. Investors should be aware that the investments to
be made by the Fund may involve sophisticated tax rules that may result in
income or gain recognition by the Fund without corresponding current cash
receipts. Although the Fund will seek to avoid significant noncash income,
such noncash income could be recognized by the Fund, in which case the Fund may
distribute cash derived from other sources in order to meet the minimum
distribution requirements described above.

The foregoing discussion and the discussions in the prospectus
applicable to each shareholder address only some of the federal tax
considerations generally affecting investments in the Fund. Each investor is
urged to consult his or her tax advisor regarding specific questions as to
federal, state or local taxes and foreign taxes.

CAPITAL STOCK

The Fund is one of the funds of the Stagecoach Family
of Funds. The Company was organized as a Maryland corporation on September 9,
1991 and currently offers shares of twenty-four other funds.

26
<PAGE> 53
Most of the Company's funds are authorized to issue multiple
classes of shares, one class generally subject to a front-end sales charge and,
in some cases, a class subject to a contingent-deferred sales charge, that are
offered to retail investors. Certain of the Company's funds also are
authorized to issue other classes of shares, which are sold primarily to
institutional investors. Each class of shares in a fund represents an equal,
proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state
securities registration fees, shareholder servicing fees or distribution fees
that may be paid under Rule 12b-1) that are allocated to a particular class.
Please contact Stagecoach Shareholder Services at 1-800-222-8222 if you would
like additional information about other funds or classes of shares offered.

The Fund is comprised of two Classes of shares -- Class A Shares
and Class B Shares. With respect to matters that affect one Class but not
another (for example, the approval of a Plan), shareholders vote as a Class.
Subject to the foregoing, all shares of a Fund have equal voting rights and
will be voted in the aggregate, and not by series, except where voting by a
series is required by law or where the matter involved only affects one series.
For example, a change in a Fund's fundamental investment policies affects only
one series and would be voted upon only by shareholders of the affected Fund
and not shareholders of the Company's other series. Additionally, approval of
an advisory contract is a matter to be determined separately by series.
Approval by the shareholders of one series is effective as to that series
whether or not sufficient votes are received from the shareholders of the other
series to approve the proposal as to those series. As used in the Prospectus
and in this SAI, the term "majority," when referring to approvals to be
obtained from shareholders of a Class of the Fund, means the vote of the lesser
of (i) 67% of the shares of such Class represented at a meeting if the holders
of more than 50% of the outstanding shares of such Class are present in person
or by proxy, or (ii) more than 50% of the outstanding shares of such Class.
The term "majority," when referring to the approvals to be obtained from
shareholders of the Company as a whole, means the vote of the lesser of (i) 67%
of the Company's shares represented at a meeting if the holders of more than
50% of the Company's outstanding shares are present in person or by proxy, or
(ii) more than 50% of the Company's outstanding shares. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held.

The Company may dispense with annual meetings of shareholders in
any year in which it is not required to elect Directors under the 1940 Act.

Each share of the Fund represents an equal proportional interest
in the Fund with each other share and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of the Directors. In the event of the
liquidation or dissolution of the Company, shareholders of the Fund are
entitled to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to the
Fund or a particular portfolio that are available for distribution in such
manner and on such basis as the Directors in their sole discretion may
determine.

Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Company.

27
<PAGE> 54
Set forth below is the name, address and share ownership of each
person known by the Company to have beneficial or record ownership of 5% or
more of a class of the Fund or 5% or more of the voting securities of the Fund
as a whole.

5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- -------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
DIVERSIFIED Wells Fargo Bank Class A 34.80% 29.40%
INCOME P.O. Box 63015 Beneficially
San Francisco, CA 94163 Owned
</TABLE>

For purposes of the 1940 Act, any person who owns directly or
through one or more controlled companies more than 25% of the voting securities
of a company is presumed to "control" such company. Accordingly, to the extent
that a shareholder identified in the foregoing table is identified as the
beneficial holder of more than 25% of a class (or Fund), or is identified as
the holder of record of more than 25% of a class (or Fund) and has voting
and/or investment powers, it may be presumed to control such class (or Fund).

OTHER

The Registration Statement, including the Prospectus, the SAI and
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C. Statements contained in the Prospectus or the SAI as to the
contents of any contract or other document referred to herein or in the
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent
auditors for the Company. KPMG Peat Marwick LLP provides audit services, tax
return preparation and assistance and consultation in connection with review of
certain SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero
Center, San Francisco, California 94111.

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the Fund for the fiscal period ended September
30, 1996 are hereby incorporated by reference to the Company's Annual Report as
filed with the SEC on December 9, 1996. The portfolio of investments, audited
financial statements and independent auditors' report for the Fund are attached
to all SAIs delivered to current or prospective shareholders.

28
<PAGE> 55
APPENDIX

The following is a description of the ratings given by Moody's and
S&P to corporate bonds and commercial paper.

Corporate Bonds

Moody's: The four highest ratings for corporate bonds are "Aaa,"
"Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best quality"
and carry the smallest amount of investment risk. Bonds rated "Aa" are of
"high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; interest payments and principal security appear adequate for
the present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1,
2 and 3 in each rating category from "Aa" through "Baa" in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by
S&P and have an extremely strong capacity to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity to pay interest and repay
principal" and differ "from the highest rated issued only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.

Commercial Paper

Moody's: The highest rating for commercial paper is "P-1"
(Prime-1). Issuers rated "P-1" have a "superior capacity for repayment of
short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.

A-1
<PAGE> 56
S&P: The "A-1" rating for commercial paper indicates that the
"degree of safety regarding timely payment is either overwhelming or very
strong." Commercial paper with "overwhelming safety characteristics" will be
rated "A- 1+." Commercial paper with a strong capacity for timely payments on
issues will be rated "A-2."

A-2
<PAGE> 57

STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

MONEY MARKET MUTUAL FUND
CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND

CLASS A

----------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about two of the funds in the Stagecoach Family of Funds -- the
MONEY MARKET MUTUAL FUND and the CALIFORNIA TAX-FREE MONEY MARKET MUTUAL FUND
(each a "Fund" and collectively, the "Funds"). This SAI relates to the Class A
shares of the Money Market Mutual Fund and to the shares of the California
Tax-Free Money Market Mutual Fund (collectively, the "Class A shares"). The
investment objective of each Fund is described in its respective Prospectus
under the section entitled "How the Funds Work -- Investment Objectives and
Policies."

This SAI is not a prospectus and should be read in conjunction
with each Fund's Prospectus dated February 1, 1997. All terms used in this SAI
that are defined in the Prospectus for each Fund will have the meanings
assigned in that Fund's Prospectus. A copy of the Prospectus for each Fund may
be obtained without charge by writing Stephens Inc., the Company's sponsor,
administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201 or calling the Transfer Agent at the telephone number indicated above.

----------------------------------
<PAGE> 58
TABLE OF CONTENTS

<TABLE>
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Additional Permitted Investment Activities . . . . . . . . . . . . . . . . . 3
Special Considerations Affecting
California Municipal Obligations . . . . . . . . . . . . . . . . . . . . . 5
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . 19
Additional Purchase and Redemption Information. . . . . . . . . . . . . . . . 20
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

i
<PAGE> 59
INVESTMENT RESTRICTIONS

Fundamental Investment Policies. The Funds are subject to the following
investment restrictions, all of which are fundamental policies.

The Funds may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of such Fund's investments in that industry
would be 25% or more of the current value of such Fund's total assets, provided
that there is no limitation with respect to investments in (i) municipal
securities (for the purpose of this restriction, private activity bonds and
notes shall not be deemed municipal securities if the payments of principal and
interest on such bonds or notes is the ultimate responsibility of
non-governmental issuers), with respect to the California Tax-Free Money Market
Mutual Fund, (ii) obligations of the United States Government, its agencies or
instrumentalities, and (iii) with respect to both Funds, the obligations of
domestic banks (for the purpose of this restriction, domestic bank obligations
do not include obligations of U.S. branches of foreign banks or obligations of
foreign branches of U.S. banks);

(2) purchase or sell real estate or real estate limited
partnerships (other than municipal obligations with respect to the California
Tax-Free Money Market Mutual Fund, or other than money market securities with
respect to the Money Market Mutual Fund, or other securities secured by real
estate or interests therein or securities issued by companies that invest in
real estate or interests therein), commodities or commodity contracts
(including futures contracts);

(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions with regard to both Funds and
except for margin payments in connection with options, futures and options on
futures with regard to the California Tax-Free Money Market Mutual Fund) or
make short sales of securities;

(4) underwrite securities of other issuers, except to the extent
that the purchase of municipal securities or other permitted investments
directly from the issuer thereof or from an underwriter for an issuer and the
later disposition of such securities in accordance with the Fund's investment
program may be deemed to be an underwriting;

(5) make investments for the purpose of exercising control or
management;

(6) issue senior securities, except that a Fund may borrow from
banks up to 10% of the current value of its net assets for temporary purposes
only in order to meet redemptions, and these borrowings may be secured by the
pledge of up to 10% of the current value of its net assets (but investments may
not be purchased while any such outstanding borrowings exceed 5% of its net
assets); or

1
<PAGE> 60
(7) write, purchase or sell puts, calls, options, warrants or any
combination thereof, except that the Funds may purchase securities with put
rights in order to maintain liquidity.

In addition, neither Fund may make loans of portfolio securities
or other assets, except that loans for purposes of this restriction will not
include the purchase of fixed time deposits, repurchase agreements, commercial
paper and other short-term obligations, and other types of debt instruments
commonly sold in public or private offerings.

Non-Fundamental Investment Policies. The Funds are subject to the
following non-fundamental policies.

(1) The Funds may not purchase or retain securities of any issuer
if the officers or Directors of the Company or the investment adviser owning
beneficially more than one-half of one percent (0.5%) of the securities of the
issuer together owned beneficially more than 5% of such securities.

(2) The Funds may not purchase interests, leases, or limited
partnership interests in oil, gas, or other mineral exploration or development
programs.

(3) The Money Market Mutual Fund may not purchase or sell real
estate limited partnership interests.

(4) The Funds may not purchase securities of issuers who, with
their predecessors, have been in existence less than three years, unless the
securities are fully guaranteed or insured by the U.S. Government, a state,
commonwealth, possession, territory, the District of Columbia or by an entity
in existence at least three years, or the securities are backed by the assets
and revenues of any of the foregoing if, by reason thereof, the value of its
aggregate investments in such securities will exceed 5% of its total assets.

(5) The Funds may not purchase securities of unseasoned
issuers, including their predecessors, which have been in operation for less
than three years, and equity securities of issuers which are not readily
marketable if by reason thereof the value of such Fund's aggregate investment
in such classes of securities will exceed 5% of its total assets.

(6) The California Tax-Free Money Market Mutual Fund may not
invest more than 10% of the current value of their net assets in repurchase
agreements maturing in more than seven days or other illiquid securities
(including restricted securities). The Money Market Mutual Fund may not invest
more than 10% of the current value of its net assets in securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale and fixed time deposits that are subject to
withdrawal penalties and that have maturities of more than seven days.

In addition, the Funds may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated

2
<PAGE> 61
investment companies. However, the Funds' investment adviser will waive its
advisory fees for that portion of the Funds' assets so invested, except when
such purchase is part of a plan of merger, consolidation, reorganization or
acquisition. In the case of the California Tax-Free Money Market Mutual Fund
these unaffiliated investment companies must have a fundamental investment
policy of investing at least 80% of their net assets in obligations that are
exempt from federal income taxes and are not subject to the federal alternative
minimum tax.

In addition, as provided in Rule 2a-7 under the 1940 Act, the
Money Market Mutual Fund may only purchase "Eligible Securities" (as defined in
Rule 2a-7) and only if, immediately after such purchase: the Money Market
Mutual Fund would have no more than 5% of its total assets in "First Tier
Securities" (as defined in Rule 2a-7) of any one issuer, excluding government
securities and except as otherwise permitted for temporary purposes and for
certain guarantees and unconditional puts; the Money Market Mutual Fund would
own no more than 10% of the voting securities of any one issuer; the Money
Market Mutual Fund would have no more than 5% of its total assets in "Second
Tier Securities" (as defined in Rule 2a-7); and the Money Market Mutual Fund
would have no more than the greater of $1 million or 1% of its total assets in
Second Tier Securities of any one issuer.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

Unrated Investments. The Funds may purchase instruments that are
not rated if, in the opinion of Wells Fargo Bank, such obligations are of
comparable quality to other rated investments that are permitted to be
purchased by such Funds. The Funds may purchase unrated instruments only if
they are purchased in accordance with the procedures of each Fund adopted by
the Company's Board of Directors in accordance with Rule 2a-7 under the 1940
Act. After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by such Fund. Neither
event will require a sale of such security by the Fund, provided that when a
security ceases to be rated, the Company's Board of Directors determines that
such security presents minimal credit risks and, provided further that, when a
security rating is downgraded below the eligible quality for investment or no
longer presents minimal credit risks, the Board finds that the sale of such
security would not be in such Funds' best interest. To the extent the ratings
given by Moody's or S&P may change as a result of changes in such organizations
or their rating systems, each Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in the Prospectus of the Fund and in this SAI. The ratings of Moody's and S&P
are more fully described in the SAI Appendix.

Letters of Credit. Certain of the debt obligations (including
municipal securities, certificates of participation, commercial paper and other
short-term obligations) which the Funds may purchase may be backed by an
unconditional and irrevocable letter of credit of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Wells Fargo Bank, are of comparable quality to issuers of other permitted
investments of each such Fund may be used for

3
<PAGE> 62
letter of credit-backed investments, provided that, in the case of the
California Tax-Free Money Market Mutual Fund, the Company's Board approves or
ratifies such investments.

When-Issued Securities. Certain of the securities in which the
California Tax-Free Money Market Mutual Fund may invest will be purchased on a
when-issued basis, in which case delivery and payment normally take place
within 45 days after the date of the commitment to purchase. However, the
California Tax-Free Money Market Mutual Fund has no present intention to invest
in when-issued securities during the coming year. The Fund will only make
commitments to purchase securities on a when-issued basis with the intention of
actually acquiring the securities, but may sell them before the settlement date
if it is deemed advisable. When-issued securities are subject to market
fluctuation, and no income accrues to the purchaser during the period prior to
issuance. The purchase price and the interest rate that will be received on
debt securities are fixed at the time the purchaser enters into the commitment.
Purchasing a security on a when-issued basis can involve a risk that the market
price at the time of delivery may be lower than the agreed-upon purchase price,
in which case there could be an unrealized loss at the time of delivery.

Each Fund will establish a segregated account in which it will
maintain cash, U.S. Government obligations, or other high-quality debt
instruments in an amount at least equal in value to their respective
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a
daily basis so that the value of the assets in the account is equal to the
amount of such commitments.

Municipal Bonds. The California Tax-Free Money Market Mutual Fund
may invest in municipal bonds. As discussed in the Fund's Prospectus, the two
principal classifications of municipal bonds are "general obligation" and
"revenue" bonds. Municipal bonds are debt obligations issued to obtain funds
for various public purposes, including the construction of a wide range of
public facilities such as bridges, highways, housing, hospitals, mass
transportation, schools, streets, and water and sewer works. Other purposes
for which municipal bonds may be issued include the refunding of outstanding
obligations and obtaining funds for general operating expenses or to loan to
other public institutions and facilities. Industrial development bonds are a
specific type of revenue bond backed by the credit and security of a private
user. Certain types of industrial development bonds are issued by or on behalf
of public authorities to obtain funds to provide privately-operated housing
facilities, sports facilities, convention or trade show facilities, airport,
mass transit, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity, or
sewage or solid waste disposal. Assessment bonds, wherein a specially created
district or project area levies a tax (generally on its taxable property) to
pay for an improvement or project may be considered a variant of either
category. There are, of course, other variations in the types of municipal
bonds, both within a particular classification and between classifications,
depending on numerous factors.

Municipal Notes. Municipal notes include, but are not limited to,
tax anticipation notes ("TANs"), bond anticipation notes ("BANs"), revenue
anticipation notes ("RANs") and construction loan notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or receipt of
other revenues are usually general obligations of the issuer.

4
<PAGE> 63
TANs. An uncertainty in a municipal issuer's capacity to raise
taxes as a result of such things as a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers mix
various tax proceeds into a general fund that is used to meet obligations other
than those of the outstanding TANs. Use of such a general fund to meet various
obligations could affect the likelihood of making payments on TANs.

BANs. The ability of a municipal issuer to meet its obligations
on its BANs is primarily dependent on the issuer's adequate access to the
longer term municipal bond market and the likelihood that the proceeds of such
bond sales will be used to pay the principal of, and interest on, BANs.

RANs. A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.

The values of outstanding municipal securities will vary as a
result of changing market evaluations of the ability of their issuers to meet
the interest and principal payments (i.e., credit risk). Such values also will
change in response to changes in the interest rates payable on new issues of
municipal securities (i.e., market risk). Should such interest rates rise, the
values of outstanding securities, including those held in a Fund's portfolio,
will decline and (if purchased at par value) sell at a discount. If interests
rates fall, the values of outstanding securities will generally increase and
(if purchased at par value) sell at a premium. Changes in the value of
municipal securities held in the Fund's portfolio arising from these or other
factors will cause changes in the net asset value per share of the Fund.

SPECIAL CONSIDERATIONS AFFECTING
CALIFORNIA MUNICIPAL OBLIGATIONS

Certain California constitutional amendments, legislative measures,
executive orders, civil actions and voter initiatives, as well as the general
financial condition of the state, could adversely affect the ability of issuers
of California municipal obligations to pay interest and principal on such
obligations. The following information constitutes only a brief summary, does
not purport to be a complete description, and is based on information drawn
from official statements relating to securities offerings of the State of
California and various local agencies, available as of the date of this SAI.
While the Company has not independently verified such information, it has no
reason to believe that such information is incorrect in any material respect.

5
<PAGE> 64
among others, were all severely affected. Job losses had been the worst of any
post-war recession. Unemployment reached 10.1% in January 1994, but fell
sharply to 7.7% in October and November 1994, reflecting the state's recovery
from the recession.

The recession seriously affected California tax revenues, which
basically mirror economic conditions. It also caused increased expenditures
for health and welfare programs. In addition, the state has been facing a
structural imbalance in its budget with the largest programs supported by the
General Fund (e.g., K-12 schools and community colleges--also known as "K-14
schools," health and welfare, and corrections) growing at rates higher than the
growth rates for the principal revenue sources of the General Fund. As a
result, the state experienced recurring budget deficits in the late 1980s and
early 1990s. The state's Controller reported that expenditures exceeded
revenues for four of the five fiscal years ending with 1991-92. Moreover,
California accumulated and sustained a budget deficit in its Special Fund for
Economic Uncertainties ("SFEU") approaching $2.8 billion at its peak at June
30, 1993.

However, since the start of 1994, California's economy has been
recovering steadily. Employment has grown in excess of 500,000 during 1994 and
1995, and is expected to continue to grow in 1996. Because of the improving
economy and the California's fiscal austerity, the state has had operating
surpluses for its past four consecutive fiscal years through 1996-97 and has
forecast a balanced 1996-97 fiscal year budget. In addition, the SFEU was
projected to have a small negative balance of approximately $70 million as of
June 30, 1996, all but eliminating the accumulated budget deficit of the early
1990's, and a modest reserve of $305 million, as of June 30, 1997. For these
and other reasons, Standard & Poors upgraded its rating of California municipal
obligations back to "A+" on July 30, 1996.

Local Governments. On December 6,1994, Orange County, California
became the largest municipality in the United States to file for protection
under the Federal Bankruptcy laws. The filing stemmed from approximately $1.7
billion in losses suffered by the county's investment pool because of
investments in high risk "derivative" securities. In September 1995,
California's legislature approved legislation permitting the county to use for
bankruptcy recovery $820 million over 20 years in sales taxes previously
earmarked for highways, transit, and

6
<PAGE> 65
development. In June 1996, the county completed an $880 million bond offering
secured by real property owned by the county. In June 1996, the county emerged
from bankruptcy.

On January 17, 1994, an earthquake of the magnitude of an estimated
6.8 on the Richter Scale struck Los Angeles County, California causing
significant damage to public and private structures and facilities. While
county residents and businesses suffered losses totaling in the billions of
dollars, the overall effect of the earthquake on the county's and California's
economy is not expected to be serious. However, Los Angeles County is
experiencing financial difficulty due in part to the severe operating deficits
for the county's health care system. In August 1995, the credit rating of the
county's long term bonds was downgraded for the third time since 1992.
Although the county has received federal and state assistance, it is still
facing a potential budget gap of approximately $1 billion in the 1996-97 fiscal
year. Even though state has no existing obligations with respect to either
Orange County or Los Angeles County, the state may be required to intervene and
provide funding if the counties cannot maintain certain programs because of
insufficient resources.

State Finances. The moneys of California are segregated into the
General Fund and approximately 600 Special Funds. The General Fund consists of
the revenues received by the state's Treasury and not required by law to be
credited to any other fund, as well as earnings from state moneys not allocable
to another fund. The General Fund is the principal operating fund for the
majority of governmental activities and is the depository of most major revenue
sources of the state. The General Fund may be expended as the result of
appropriation measures by California's Legislature and approved by the
Governor, as well as appropriations pursuant to various constitutional
authorizations and initiative statutes.

The SFEU is funded with General Fund revenues and was established
to protect California from unforeseen revenue reductions and/or unanticipated
expenditure increases. Amounts in the SFEU may be transferred by the state's
Controller to meet cash needs of the General Fund. The Controller is required
to return moneys so transferred without payment of interest as soon as there
are sufficient moneys in the General Fund. Any appropriation made from the
SFEU is deemed an appropriation from the General Fund, for budgeting and
accounting purposes. For year-end reporting purposes, the Controller is
required to add the balance in the SFEU to the balance in the General Fund so
as to show the total moneys then available for General Fund purposes.

Inter-fund borrowing has been used for several years to meet
temporary imbalances of receipts and disbursements in the General Fund. As of
June 30, 1996, the General Fund had outstanding loans from the SFEU and other
Special Funds of approximately $1.5 billion.

7
<PAGE> 66
assumption of certain local obligations by the state so as to assist California
municipal issuers to raise revenue to pay their bond obligations. It is
unknown whether additional revenue redistribution legislation will be enacted
in the future and whether, if enacted, such legislation will provide sufficient
revenue for such California issuers to pay their obligations. California is
also subject to another Constitutional Amendment, Article XIIIB, which may have
an adverse impact on California state and municipal issuers. Article XIIIB
restricts the state from spending certain appropriations in excess of an
appropriation's limit imposed for each state and local government entity. If
revenues exceed such appropriation's limit, such revenues must be returned
either as revisions in the tax rates or fee schedules.

In 1988, California voters approved "Proposition 98," which amended
Article XIIIB and Article XVI of the state's Constitution. Proposition 98 (as
modified by "Proposition 111," which was enacted in 1990), changed state
funding of public education below the university level and the operation of the
state's appropriations limit, primarily by guaranteeing K-14 schools a minimum
share of General Fund revenues. In 1986, California voters approved
"Proposition 62," which provided in part that any tax for general governmental
purposes imposed by a local government be approved by a two-thirds vote of the
governmental entity's legislative body and by a majority of its electorate and
that any special tax imposed by a local government be approved by a two-thirds
vote of the electorate. In September 1995, the California Supreme Court upheld
the constitutionality of Proposition 62, creating uncertainty as to the
legality of certain local taxes enacted by nonchartered cities in California
without voter approval.

Other Information. Certain debt obligations held by the California
Tax-Free Money Market Mutual Fund may be obligations payable solely from lease
payments on real or personal property leased to the state, cities, counties or
their various public entities. California law provides that a lessor may not
be required to make payments during any period that it is denied use and
occupancy of the property in proportion to such loss. Moreover, the lessor
only agrees to appropriate funding for lease payments in its annual budget for
each fiscal year. In case of a default under the lease, the only remedy
available against the lessor is that of reletting the property; no acceleration
of lease payments is permitted. Each of these factors presents a risk that the
lease financing obligations held by the California Tax- Free Money Market
Mutual Fund would not be paid in a timely manner.

Certain debt obligations held by the California Tax-Free Money
Market Mutual Fund may be obligations payable solely from the revenues of
health care institutions. The method of reimbursement for indigent care,
California's selective contracting with health care providers for such care and
selective contracting by health insurers for care of its beneficiaries now in
effect under California and federal law may adversely affect these revenues
and, consequently, payment on those debt obligations.

There can be no assurance that general economic difficulties or
the financial circumstances of California or its towns and cities will not
adversely affect the market value of California municipal securities or the
ability of obligors to continue to make payments on such securities.

8
<PAGE> 67
* * *

The taxable securities market is a broader and more liquid market
with a greater number of investors, issuers and market makers than the market
for municipal securities. The more limited marketability of municipal
securities may make it difficult in certain circumstances to dispose of large
investments advantageously.

MANAGEMENT

9
<PAGE> 68
<TABLE>
<S> <C>
School of Business and
Accounting at Wake
Forest University
since 1983.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

*J. Tucker Morse, 52 Director Private Investor; Real
10 Legrae Street Estate Developer
Charleston, SC 29401 Chairman of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.

10
<PAGE> 69
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
---------- -------------
December 31, 1995 September 30, 1996
------------------ ------------------
Total Total
Aggregate Compensation from Aggregate Compensation from
Compensation Registrant Compensation Registrant
from Registrant and Fund Complex from Registrant and Fund Complex
--------------- ---------------- --------------- -----------------

Name and Position
-----------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director

</TABLE>

Directors of the Company are compensated annually by the Company
and by all the registrants in each fund complex they serve as indicated above
and also are reimbursed for all out-of-pocket expenses relating to attendance
at board meetings. The Company, Overland Express Funds, Inc., Stagecoach
Trust, Life & Annuity Trust and Master Investment Trust are considered to be
members of the same fund complex as such term is defined in Form N-1A under the
1940 Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment Trust together form a
separate fund complex (the "BGFA Fund

11
<PAGE> 70
Complex"). Each of the Directors and Officers of the Company serves in the
identical capacity as directors and officers or as trustees and/or officers of
each registered open-end management investment company in both the Wells Fargo
and BGFA Fund Complexes, except for Joseph N. Hankin, who only serves the
aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann Hines who,
after September 6, 1996, only serves the aforementioned members of the BGFA
Fund Complex. The Directors are compensated by other companies and trusts
within a fund complex for their services as directors/trustees to such
companies and trusts. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or any other member of each
fund complex.

As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

INVESTMENT ADVISER. The Funds are advised by Wells Fargo Bank
pursuant to Advisory Contracts approved by the Board of Directors on October
22, 1991, and by the initial shareholder of each Fund on December 2, 1991. The
Advisory Contract for each Fund provides that Wells Fargo Bank shall furnish to
the Fund investment guidance and policy direction in connection with the daily
portfolio management of the Fund. Pursuant to the Advisory Contracts, Wells
Fargo Bank furnishes to the Company's Board of Directors periodic reports on
the investment strategy and performance of each Fund.

Wells Fargo Bank has agreed to provide to each Fund with, among
other things, money market security and fixed-income research, analysis and
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition, credit conditions and average
maturities of each Fund's portfolio.

Each Advisory Contract will continue in effect for more than two
years provided the continuance is approved annually (i) by the holders of a
majority of the respective Fund's outstanding voting securities or by the
Company's Board of Directors and (ii) by a majority of the Directors of the
Company who are not parties to the Advisory Contract or "interested persons"
(as defined in the 1940 Act) of any such party. The Advisory Contracts may be
terminated on 60 days' written notice by either party and will terminate
automatically if assigned.

For the years ended December 31, 1993, 1994 and 1995, and the
period ended September 30, 1996, the Funds paid to Wells Fargo Bank the
advisory fees indicated below and Wells Fargo Bank waived the indicated
amounts:

December 31, 1993 December 31, 1994 December 31, 1996 September 30, 1996
------------------ ------------------ ----------------- ------------------
Fees Fees Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived Paid Waived
---- ---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California Tax-Free $3,406,799 $458,784 $304,857 $3,809,902 $4,867,523 $0 $4,099,437 $0
Money Market
Mutual

Money Market Mutual $1,285,690 $0 $2,073,686 $2,008,946 $12,729,506 $0 $11,593,678 $0
</TABLE>

12
<PAGE> 71
ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained
Wells Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of
each Fund. The Administration Agreement between Wells Fargo and each Fund, and
the Co-Administration Agreement among Wells Fargo, Stephens and each Fund,
state that Wells Fargo and Stephens shall provide as administrative services,
among other things: (i) general supervision of the operation of the Funds,
including coordination of the services performed by each Fund's investment
adviser, transfer agent, custodian, shareholder servicing agent(s), independent
public accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions; and preparation of proxy statements
and shareholder reports for the Funds; and (ii) general supervision relative to
the compilation of data required for the preparation of periodic reports
distributed to the Company's officers and Board of Directors. Wells Fargo Bank
and Stephens also furnish office space and certain facilities required for
conducting the business of the Funds together with ordinary clerical and
bookkeeping services. Stephens pays the compensation of the Company's
Directors, officers and employees who are affiliated with Stephens. The
Administrator and Co-Administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of each Fund.

For the fiscal years ended December 31, 1993, 1994 and 1995, and
the period ended September 30, 1996, the Funds paid the following dollar
amounts of administrative fees to Stephens, the sole administrator during these
periods, based on a monthly fee at the annual rate of 0.03% of each Fund's
average daily net assets:

Fund Dec. 31, Dec. 31, Dec. 31, Sept. 30,
---- 1993 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
California Tax-Free Money Market Mutual $232,585 $247,666 $292,095 $245,966

Money Market Mutual $ 96,535 $306,209 $954,713 $872,577
</TABLE>

SPONSOR AND DISTRIBUTOR. As discussed in the Fund's prospectus
under the heading "Management and Servicing Fees," Stephens serves as the
Fund's sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in each Fund's
prospectus under the heading "Shareholder Servicing Agent," the Funds have
entered into shareholder servicing agreements with Wells Fargo Bank. The
dollar amounts of shareholder servicing fees paid by each of the Funds to Wells
Fargo Bank or its affiliates for the fiscal year ended December 31, 1995 and
the period ended September 30, 1996, were as follows:

<TABLE>
<CAPTION>
Fund December 31, 1995 September 30, 19961
- ---- ----------------- ------------------
<S> <C> <C>
California Tax-Free Money Market Mutual $522,756 $344,032

Money Market Mutual $8,542,616 $7,594,481
</TABLE>

13
<PAGE> 72
- -------------
1 These amounts include shareholder servicing fees paid by other classes of
each Fund and reflect fee waivers.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo
Bank has been retained to act as custodian and transfer and dividend disbursing
agent for each Fund. The custodian, among other things, maintains a custody
account or accounts in the name of each Fund; receives and delivers all assets
for each Fund upon purchase and upon sale or maturity; collects and receives
all income and other payments and distributions on account of the assets of
each Fund and pays all expenses of each Fund. For its services as custodian,
Wells Fargo Bank receives an asset-based fee and transaction charges from each
Fund.

For its services as transfer and dividend disbursing agent for
the Funds' Class A shares, Wells Fargo Bank is entitled to receive monthly
payments at the annual rate of 0.10% of each Fund's average daily net assets
for Class A shares. Under the prior transfer agency agreement, Wells Fargo Bank
was entitled to receive a per account fee plus transaction fees and
out-of-pocket related costs with a minimum of $3,000 per month per Fund, unless
net assets of the Fund were under $20 million. For as long as a Fund's assets
remained under $20 million, the Fund was not charged any transfer agency fees.

For the year ended December 31, 1995 and the period ended
September 30, 1996, the Funds did not pay any custody fees or transfer and
dividend disbursing agency fees to Wells Fargo Bank.

UNDERWRITING COMMISSIONS. The Funds do not assess any front-end
sales loads or contingent deferred sales charges in connection with the
purchase and redemption of shares, and therefore pay no underwriting
commissions to the Distributor.

DISTRIBUTION PLAN

Each of the Funds has adopted a distribution plan (a "Plan") under
Section 12(b) of the 1940 Act and Rule 12b-1 thereunder as described in each
Fund's Prospectus. The Plans for the Class A shares of the Funds were adopted
by the Company's Board of Directors, including a majority of the Directors who
were not "interested persons" (as defined in the 1940 Act) of the respective
Fund and who had no direct or indirect financial interest in the operation of
the Plans or in any agreement related to the Plans (the "Qualified Directors")
on October 22, 1991, and were approved by the initial shareholder of the
respective Funds on December 2, 1991.

Under the Plans in effect for the Class A shares of the Funds,
each Fund may defray all or part of the cost of preparing and printing
prospectuses and other promotional materials and of delivering prospectuses and
those materials to prospective Fund shareholders by paying on an annual basis
up to 0.05% of the respective Fund's average daily net assets attributable to
Class A shares. The Plans for the Class A shares of the Funds provide only for
reimbursement of actual expenses. In addition, each Plan contemplates that to
the extent any fees payable pursuant to a Shareholder Servicing Agreement are
deemed to be for distribution-related services, rather than shareholder
services, such payments are approved and payable pursuant to such Plan.

Each Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Qualified Directors. Any Agreements related to the Plans also must be
approved by the Majority vote of the Directors and the Qualified Directors.
Such Agreements will terminate automatically if assigned, and may, in the case
of the California Tax-Free Money Market Mutual Fund, be terminated at any time,
without payment of any penalty, by a vote of a majority of the outstanding
voting securities of the respective Fund. In the case of the Money Market
Mutual Fund, such agreement may be

14
<PAGE> 73
terminated at any time without penalty by a vote of a majority of the
outstanding voting securities of the respective Class of such Fund affected by
the Agreement. The Plans may not be amended to increase materially the amounts
payable thereunder, in the case of the California Tax-Free Money Market Mutual
Fund, without the approval of a majority of the outstanding voting securities
of the Fund and in the case of the Money Market Mutual Fund, without the
approval of a majority of the outstanding voting securities of the respective
Class of such Fund affected by the proposed increase. No material amendment to
the Plans may be made except by the approval of a majority of both the
Directors of the Company and the Qualified Directors.

For the year ended December 31, 1995, the Funds' distributor
received the following amounts of 12b-1 fees for the specified purposes set
forth below under each Fund's Plan.

Printing &
Mailing Marketing Compensation to
Fund Total Prospectus Brochures Underwriters
---- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
California Tax-Free
Money Market Mutual $326,122 $132,394 $193,728 N/A
Money Market Mutual
Class A $332,859 $122,263 $210,596 -0-
</TABLE>

For the period ended September 30, 1996, the Funds' distributor
received the following amounts of 12b-1 fees for the specified purposes set
forth below under each Fund's Plan.

Money Market Mutual
Class A $383,963 $ 24,454 $359,509 N/A
</TABLE>

For the year ended December 31, 1995 and the period ended
September 30, 1996, WFSI and its registered representatives received no
compensation under each Fund's Plans.

PERFORMANCE CALCULATIONS

15
<PAGE> 74
Yield for each Fund is calculated based on the net changes,
exclusive of capital changes, over a seven-day period, in the value of a
hypothetical pre-existing account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7) with the
resulting yield figure carried to at least the nearest hundredth of one
percent. Tax-equivalent yield for the California Tax-Free Money Market Mutual
Fund is computed by dividing that portion of the yield of the Fund which is
tax-exempt by one minus a stated income tax rate and adding the product to that
portion, if any, of the yield of the Fund that is not tax-exempt.

Effective yield and effective tax-equivalent yield for the
California Tax-Free Money Market Mutual Fund are calculated by determining the
net change, or tax-equivalent assumed net change, exclusive of capital changes,
in the value of a hypothetical pre-existing account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding one,
raising the sum to a power equal to 365 divided by seven, and subtracting one
from the result.

Yield For The Applicable Period Ended September 30, 1996
<TABLE>
<CAPTION>

Seven-Day
Seven-Day Tax- Seven-Day Effective Effective Tax-
Fund Seven-Day Yield Equivalent Yield Yield Equivalent Yield
---- --------------- ---------------- ----- ----------------
<S> <C> <C> <C> <C>
California Tax-Free Money
Market Mutual 2.94% 5.52% 3.01% 5.60%

Money Market Mutual
Class A 4.86% N/A 4.98% N/A

</TABLE>

The yield for the Funds will fluctuate from time to time, unlike
bank deposits or other investments that pay a fixed yield for a stated period
of time, and does not provide a basis for determining future yields since it is
based on historical data. Yield is a function of portfolio quality,
composition, maturity and market conditions as well as the expenses allocated
to the Fund.

Yield information for a Fund or Class of shares in a Fund may be
useful in reviewing the performance of such Fund or Class of shares and for
providing a basis for comparison with investment alternatives. The yield of a
Fund and the yield of a Class of shares in a Fund, however, may not be
comparable to the yields from investment alternatives because of differences in
the foregoing variables and differences in the methods used to value portfolio
securities, compute expenses and calculate yield.

16
<PAGE> 75
In addition, investors should recognize that changes in the net
asset value of shares of each Class of the Money Market Mutual Fund will affect
the yield of each such Class for any specified period, and such changes should
be considered together with the yield of each Class in ascertaining the total
return to shareholders of each Class of shares for the period. Yield
information for the Funds and each Class may be useful in reviewing the
performance of the Funds and each Class and for providing a basis for
comparison with investment alternatives. The yield of a Fund and the yield of
each Class, however, may not be comparable to the yields from investment
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate yield.

From time to time and only to the extent the comparison is
appropriate for a Fund or a Class of shares, the Company may quote the
performance or price-earning ratio of a Fund or Class in advertising and other
types of literature as compared to the performance of the S&P Index, the Dow
Jones Industrial Average, the Lehman Brothers 20+ Treasury Index, the Lehman
Brothers 5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate
Investment Averages (as reported by the National Association of Real Estate
Investment Trusts), Gold Investment Averages (provided by World Gold Council),
Bank Averages (which are calculated from figures supplied by the U.S. League of
Savings Institutions based on effective annual rates of interest on both
passbook and certificate accounts), average annualized certificate of deposit
rates (from the Federal Reserve G-13 Statistical Releases or the Bank Rate
Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer Price
Index (as published by the U.S. Bureau of Labor Statistics), other managed or
unmanaged indices or performance data of bonds, municipal securities, stocks or
government securities (including data provided by Ibbotson Associates), or by
other services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices. The
performance of the Funds or a Class also may be compared to that of other
mutual funds having similar objectives. This comparative performance could be
expressed as a ranking prepared by Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Bloomberg Financial Markets or Morningstar,
Inc., independent services which monitor the performance of mutual funds. The
Funds' performance will be calculated by relating net asset value per share at
the beginning of a stated period to the net asset value of the investment,
assuming reinvestment of all gains distributions and dividends paid, at the end
of the period. The Funds' comparative performance will be based on a
comparison of yields, as described above, or total return, as reported by
Lipper, Survey Publications, Donoghue or Morningstar, Inc.

Any such comparisons may be useful to investors who wish to
compare past performance of the Funds or a Class with that of competitors. Of
course, past performance cannot be a guarantee of future results. The Company
also may include, from time to time, a reference to certain marketing
approaches of the Distributor, including, for example, a reference to a
potential shareholder being contacted by a selected broker or dealer. General
mutual fund statistics provided by the Investment Company Institute may also be
used.

The Company also may use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for the Fund: (i) the

17
<PAGE> 76
Consumer Price Index may be used to assess the real rate of return from an
investment in a Fund; (ii) other government statistics, including, but not
limited to, The Survey of Current Business, may be used to illustrate
investment attributes of a Fund or the general economic, business, investment,
or financial environment in which a Fund operates; (iii) the effect of
tax-deferred compounding on the investment returns of a Fund, or on returns in
general, may be illustrated by graphs, charts, etc., where such graphs or
charts would compare, at various points in time, the return from an investment
in a Fund (or returns in general) on a tax-deferred basis (assuming
reinvestment of capital gains and dividends and assuming one or more tax rates)
with the return on a taxable basis; and (iv) the sectors or industries in which
a Fund invests may be compared to relevant indices of stocks or surveys (e.g.,
S&P Industry Surveys) to evaluate a Fund's historical performance or current or
potential value with respect to the particular industry or sector.

In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank,
and its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."

The Company also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as Standard & Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by the Fund. The assigned rating would not be a recommendation to
purchase, sell or hold the Fund's shares since the rating would not comment on
the market price of the Fund's shares or the suitability of the Fund for a
particular investor. In addition, the assigned rating would be subject to
change, suspension or withdrawal as a result of changes in, or unavailability
of, information relating to the Fund or its investments. The Company may
compare the Fund's performance with other investments which are assigned
ratings by NRSROs. Any such comparisons may be useful to investors who wish to
compare the Fund's past performance with other rated investments.

From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds. These
services may include access to Stagecoach Funds' account information through
Automated Teller Machines (ATMs), the placement of purchase and redemption
requests for shares of the Funds through ATMs and the availability of combined
Wells Fargo Bank and Stagecoach Funds account statements." The Company may also
disclose in advertising and other types of sales literature the assets and
categories of assets under management by the Company's investment adviser. The
Company also may disclose, in advertising and other types of literature,
information and statements that Wells Fargo Investment Management ("WFIM"), a
division of Wells Fargo Bank, is listed in the top 100 by Institutional Investor
magazine in its July 1996 survey ""America's Top 300 Money Managers''. This
survey ranks money managers in several asset categories. The Company may also
disclose in advertising and other types of sales literature the assets and
categories of assets under management by a fund's investment adviser or
sub-adviser and the total amount of assets and mutual fund assets managed by
Wells Fargo Bank. As of December 31, 1996, Wells Fargo Bank

18
<PAGE> 77
and its affiliates provided investment Advisory services for approximately $54
billion of assets of individual, trusts, estates and institutions and $20
billion of mutual fund assets.

The Company also may discuss in advertising and other types of
literature the features, terms and conditions of Wells Fargo Bank accounts
through which investments in the Funds may be made via a "sweep" arrangement,
including, without limitation, the Managed Sweep Account, Money Market Checking
Account, California Tax-Free Money Market Checking Account, Money Market Access
Account and California Tax-Free Money Market Access Account (collectively, the
"Sweep Accounts"). Such advertisements and other literature may include,
without limitation, discussions of such terms and conditions as the minimum
deposit required to open a Sweep Account, a description of the yield earned on
shares of the Funds through a Sweep Account, a description of any monthly or
other service charge on a Sweep Account and any minimum required balance to
waive such service charges, any overdraft protection plan offered in connection
with a Sweep Account, a description of any ATM or check privileges offered in
connection with a Sweep Account and any other terms, conditions, features or
plans offered in connection with a Sweep Account. Such advertising or other
literature may also include a discussion of the advantages of establishing and
maintaining a Sweep Account, and may include statements from customers as to
the reasons why such customers have established and maintained a Sweep Account.

The Company may disclose in advertising and other types of
literature that investors can open and maintain Sweep Accounts over the
Internet or through other electronic channels (collectively, "Electronic
Channels"). Such advertising and other literature may discuss the investment
options available to investors, including the types of accounts and any
applicable fees. Such advertising and other literature may disclose that Wells
Fargo Bank is the first major bank to offer an on-line application for a mutual
fund account that can be filled out completely through Electronic Channels.
Advertising and other literature may disclose that Wells Fargo Bank may
maintain Web sites, pages or other information sites accessible through
Electronic Channels (an "Information Site") and may describe the contents and
features of the Information Site and instruct investors on how to access the
Information Site and open a Sweep Account. Advertising and other literature
may also disclose the procedures employed by Wells Fargo Bank to secure
information provided by investors, including disclosure and discussion of the
tools and services for accessing Electronic Channels. Such advertising or
other literature may include discussions of the advantages of establishing and
maintaining a Sweep Account through Electronic Channels and testimonials from
Wells Fargo Bank customers or employees and may also include descriptions of
locations where product demonstrations may occur. The Company may also
disclose the ranking of Wells Fargo Bank as one of the largest money managers
in the United States.

DETERMINATION OF NET ASSET VALUE

Net asset value per Fund share is determined by the Custodian on
each Business Day, as described in the Prospectus for each Fund.

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<PAGE> 78
As indicated under "Investing In The Funds -- Share Price" in the
Prospectus, each Fund uses the amortized cost method to determine the value of
its portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The
amortized cost method involves valuing a security at its cost and amortizing
any discount or premium over the period until maturity, regardless of the
impact of fluctuating interest rates on the market value of the security.
While this method provides certainty in valuation, it may result in periods
during which the value, as determined by amortized cost, is higher or lower
than the price that the Funds would receive if the security were sold. During
these periods the yield to a shareholder may differ somewhat from that which
could be obtained from a similar fund that uses a method of valuation based
upon market prices. Thus, during periods of declining interest rates, if the
use of the amortized cost method resulted in a lower value of the Funds'
portfolio on a particular day, a prospective investor in the Funds would be
able to obtain a somewhat higher yield than would result from investment in a
fund using solely market values, and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.

Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, a Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase securities having remaining maturities
(as defined in Rule 2a-7) of thirteen months or less and invest only in those
high-quality securities that are determined by the Board of Directors to
present minimal credit risks. The maturity of an instrument is generally
deemed to be the period remaining until the date when the principal amount
thereof is due or the date on which the instrument is to be redeemed. However,
Rule 2a-7 provides that the maturity of an instrument may be deemed shorter in
the case of certain instruments, including certain variable and floating rate
instruments subject to demand features. Pursuant to the Rule, the Board is
required to establish procedures designed to stabilize, to the extent
reasonably possible, a Fund's price per share as computed for the purpose of
sales and redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether the Fund's net asset value calculated by
using available market quotations deviates from $1.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board of
Directors. If such deviation exceeds 1/2 of 1%, the Board will promptly
consider what action, if any, will be initiated. In the event the Board
determines that a deviation exists that may result in material dilution or
other unfair results to investors or existing shareholders, the Board will take
such corrective action as it regards as necessary and appropriate, including
the sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding dividends or
establishing a net asset value per share by using available market quotations.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares may be purchased on any day a Fund is open for business,
provided Wells Fargo Bank also is open for business (a "Business Day").
Currently, Wells Fargo Bank is closed on New Year's Day, President's Day, Martin
Luther King Jr. Day, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day and Christmas Day (each a "Holiday"). When any
Holiday falls on a weekend, the Funds are typically closed on the

20
<PAGE> 79
weekday immediately before or after such Holiday. The Funds observe the same
Holidays as Wells Fargo Bank, except Martin Luther King Jr. Day, Columbus Day
and Veterans Day. Nonetheless, for purposes of Fund share purchases, these
three days are, effectively, 'Holidays' for the Funds, since Wells Fargo Bank
is closed.

Payment for shares may, in the discretion of the adviser, be made
in the form of securities that are permissible investments for the Funds as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Funds will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by a
Fund and that such Fund receives satisfactory assurances that (i) it will have
good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Funds may suspend the right of redemption
or postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities or
other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to
reimburse the Funds for any losses sustained by reason of the failure of a
shareholders to make full payment for shares purchased or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to shares of a Fund as provided from time to time in the Prospectus.

PORTFOLIO TRANSACTIONS

The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Company's Board of Directors, Wells Fargo Bank is
responsible for the Funds' portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Company to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Funds will
not necessarily be paying the lowest spread or commission available.

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<PAGE> 80
Purchase and sale orders of the securities held by the Funds may
be combined with those of other accounts that Wells Fargo Bank manages, and for
which it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When Wells Fargo Bank determines that a
particular security should be bought or sold for a Fund and other accounts
managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate those
transactions among the participants equitably.

Purchases and sales of securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. The
Funds also will purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, municipal obligations
and taxable money market securities are traded on a net basis and do not
involve brokerage commissions. The cost of executing a Fund's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the
Company are prohibited from dealing with the Company as a principal in the
purchase and sale of securities unless an exemptive order allowing such
transactions is obtained from the SEC or an exemption is otherwise available.

The Funds may purchase municipal obligations from underwriting
syndicates of which Stephens or Wells Fargo Bank is a member under certain
conditions in accordance with the provisions of a rule adopted under the 1940
Act and in compliance with procedures adopted by the Board of Directors.

Wells Fargo Bank, as the investment adviser of each Fund, may, in
circumstances in which two or more dealers are in a position to offer
comparable results for a Fund portfolio transaction, give preference to a
dealer that has provided statistical or other research services to Wells Fargo
Bank. By allocating transactions in this manner, Wells Fargo Bank is able to
supplement its research and analysis with the views and information of
securities firms. Information so received will be in addition to, and not in
lieu of, the services required to be performed by Wells Fargo Bank under the
Advisory Contracts, and the expenses of Wells Fargo Bank will not necessarily
be reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by dealers through which
Wells Fargo Bank places securities transactions for each Fund may be used by
Wells Fargo Bank in servicing its other accounts, and not all of these services
may be used by Wells Fargo Bank in connection with advising such Fund.

Brokerage Commissions. The Funds did not pay any brokerage
commissions on portfolio transactions for the year ended December 31, 1995 and
for the period ended September 30, 1996.

Securities of Regular Broker/Dealers. As of December 31, 1995,
the California Tax-Free Money Market Mutual Fund owned no securities of its
"regular brokers or dealers" or their parents, as defined in the Act. As of
December 31, 1995, the Money Market Mutual Fund owned securities of its
"regular brokers or dealers" or their parents, as defined in the Act, as
follows: $125,955,000 of Goldman Sachs & Co. debt securities.

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<PAGE> 81

As of September 30, 1996, the Fund owned securities of its
"regular brokers or dealers" or their parents as defined in the Act, as
follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
---- ------ ---------------------
<S> <C> <C>
California Tax-Free Money Market Mutual N/A N/A

Money Market Mutual $202,778,000 Goldman Sachs & Co.
</TABLE>

Portfolio Turnover. Because the portfolios of the Funds consist
of securities with relatively short-term maturities, the Funds can expect to
experience high portfolio turnovers. A high portfolio turnover rate should not
adversely affect the Funds, however, because portfolio transactions ordinarily
will be made directly with principals on a net basis and, consequently, the
Funds usually will not incur brokerage expenses.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens,
the Company bears all costs of its operations, including the compensation of
its Directors who are not affiliated with Stephens or Wells Fargo Bank or any
of their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing prospectuses (except the expense of printing and mailing prospectuses
used for promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of a Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of a Fund's shares;
pricing services, and any extraordinary expenses. Expenses attributable to a
Fund are charged against a Fund assets. General expenses of the Company are
allocated among all of the funds of the Company, including a Fund, in a manner
proportionate to the net assets of each Fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.

FEDERAL INCOME TAXES

In General. The following information supplements and should be
read in conjunction with the applicable Prospectus sections entitled "Dividend
and Capital Gain Distributions" and "Taxes." The applicable Prospectus of the
Funds describes generally the tax treatment of distributions by the Funds.
This section of the SAI includes additional information concerning federal
income taxes.

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<PAGE> 82
The Company intends to qualify the Funds as a regulated investment
company under Subchapter M of the Code as long as such qualification is in the
best interest of the Funds' shareholders. Each Fund will be treated as a
separate entity for tax purposes and thus the provisions of the Code applicable
to regulated investment companies will generally be applied to each Fund,
rather than to the Company as a whole. In addition, net capital gains, net
investment income, and operating expenses will be determined separately for
each Fund.

Qualification as a regulated investment company under the Code
requires, among other things, that (a) each Fund derive at least 90% of its
annual gross income from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; (b) each Fund derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) each Fund diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of
the Fund's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government securities and the
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are determined to be engaged in the same or
similar trades or businesses. As a regulated investment company, each Fund
will not be subject to federal income tax on its net investment income and net
capital gains distributed to its shareholders, provided that it distributes to
its shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. Each Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

A 4% nondeductible excise tax will be imposed on each Fund (other
than to the extent of the Fund's tax- exempt income) to the extent it does not
meet certain minimum distribution requirements by the end of each calendar
year. Each Fund will either actually or be deemed to distribute all of its net
investment income and net capital gains by the end of each calendar year and,
thus, expects not to be subject to the excise tax.

Federal Income Tax Rates. As of the printing of this SAI, the
maximum individual tax rate applicable to ordinary income is 39.60% (marginal
rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual marginal tax rate applicable
to net capital gains is 28.00%; the maximum corporate tax rate applicable to
ordinary income and net capital gains is 35.00% (except that to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

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<PAGE> 83
Capital Gain Distributions. To the extent that each Fund
recognizes long-term capital gains, such gains will be distributed at least
annually and these distributions will be taxable to shareholders as long-term
capital gains, regardless of how long a shareholder has held Fund shares. Such
distributions will be designated as capital gain distributions in a written
notice mailed by the Fund to the shareholders not later than 60 days after the
close of the Fund's taxable year.

Other Distributions. Although dividends will be declared daily
based on each Fund's daily earnings, for federal income tax purposes, the
Fund's earnings and profits will be determined at the end of each taxable year
and will be allocated pro rata over the entire year. For federal income tax
purposes, only amounts paid out of earnings and profits will qualify as
dividends. Thus, if during a taxable year the Fund's declared dividends (as
declared daily throughout the year) exceed the Fund's net income (as determined
at the end of the year), only that portion of the year's distributions which
equals the year's earnings and profits will be deemed to have constituted a
dividend. It is expected that the Fund's net income, on an annual basis, will
equal the dividends declared during the year.

Disposition of Fund Shares. If a shareholder receives a
designated capital gain distribution (to be treated by the shareholder as a
long-term capital gain) with respect to any Fund share and such Fund share is
held for six months or less, then (unless otherwise disallowed) any loss on the
sale or exchange of that Fund share will be treated as a long-term capital loss
to the extent of the designated capital gain distribution. In addition, any
loss realized by a shareholder upon the sale or redemption of Fund shares held
less than six months is disallowed to the extent of any exempt-interest
dividends received thereon by the shareholder. These rules shall not apply,
however, to losses incurred under a periodic redemption plan.

If a shareholder exchanges or otherwise disposes of Fund shares
within 90 days of having acquired such shares and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
on a new purchase of shares of the Fund or of a different regulated investment
company, the sales charge previously incurred acquiring the Fund's shares shall
not be taken into account (to the extent such previous sales charges do not
exceed the reduction in sales charges on the new purchase) for the purpose of
determining the amount of gain or loss on the disposition, but will be treated
as having been incurred in the acquisition of such other shares. Also, any
loss realized on a redemption or exchange of shares of a Fund will be
disallowed to the extent that substantially identical shares are reacquired
within the 61-day period beginning 30 days before and ending 30 days after the
shares are disposed of.

Taxation of Fund Investments. Gains or losses on sales of
portfolio securities by each Fund will generally be long-term capital gains or
losses if the securities have been held by it for more than one year, except in
certain cases such as where the Fund acquires a put or writes a call thereon.
Gains recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by a Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Fund held the debt

25
<PAGE> 84
obligation. Other gains or losses on the sale of portfolio securities will be
short-term capital gains or losses.

Foreign Shareholders. Under the Code, distributions of net
investment income by a Fund to a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or a lower treaty rate). Withholding will not apply if a
dividend paid by a Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.

Backup Withholding. The Company may be required to withhold,
subject to certain exemptions, at a rate of 31% ("backup withholding") on
dividends, capital gain distributions, and redemption proceeds (including
proceeds from exchanges) paid or credited to an individual Fund shareholder,
unless a shareholder certifies that the Taxpayer Identification Number ("TIN")
provided is correct and that the shareholder is not subject to backup
withholding, or the IRS notifies the Company that the shareholder's TIN is
incorrect or the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by the IRS.

Special Tax Considerations for the California Tax-Free Money Market Mutual
Fund.

Federal -- The California Tax-Free Money Market Mutual Fund
intends that at least 50% of the value of its total assets at the close of each
quarter of its taxable years will consist of obligations the interest on which
is exempt from federal income tax, so that they will qualify under the Code to
pay "exempt-interest dividends." The portion of total dividends paid by the
Fund with respect to any taxable year that constitutes exempt-interest
dividends will be the same for all shareholders receiving dividends during such
year. Long-term and/or short-term capital gain distributions will not
constitute exempt-interest dividends and will be taxed as capital gain or
ordinary income dividends, respectively. The exemption of interest income
derived from investments in tax-exempt obligations for federal income tax
purposes may not result in a similar exemption under the laws of a particular
state or local taxing authority. However, see "California" below.

Not later than 60 days after the close of its taxable year,
the Fund will notify its shareholders of the portion of the dividends paid with
respect to such taxable year which constitutes exempt-interest dividends. The
aggregate amount of dividends so designated cannot exceed the excess of the
amount of interest excludable from gross income under Section 103 of the Code
received by the Fund during the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code. Finally, interest on
indebtedness

26
<PAGE> 85
incurred to purchase or carry shares of the Fund will not be deductible to the
extent that the Fund's distributions are exempt from federal income tax.

In addition, the federal alternative minimum tax ("AMT") rules
ensure that at least a minimum amount of tax is paid by taxpayers who obtain
significant benefit from certain tax deductions and exemptions. Some of these
deductions and exemptions have been designated "tax preference items" which
must be added back to taxable income for purposes of calculating AMT. Among
the tax preference items is tax-exempt interest from "private activity bonds"
issued after August 7, 1986. To the extent that the Fund invests in private
activity bonds, its shareholders who pay AMT will be required to report that
portion of Fund dividends attributable to income from the bonds as a tax
preference item in determining their AMT. Shareholders will be notified of the
tax status of distributions made by the Fund. Persons who may be "substantial
users" (or "related persons" of substantial users) of facilities financed by
private activity bonds should consult their tax advisors before purchasing
shares in the Fund. Furthermore, shareholders will not be permitted to deduct
any of their share of the Fund's expenses in computing their AMT. With respect
to a corporate shareholder of such Funds, exempt-interest dividends paid by a
Fund is included in the corporate shareholder's "adjusted current earnings" as
part of its AMT calculation, and may also affect its federal "environmental
tax" liability. As of the printing of this SAI, individuals are subject to an
AMT at a maximum rate of 28% and corporations at a maximum rate of 20%.
Shareholders with questions or concerns about AMT should consult their tax
advisors.

Shares of the Fund would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans and IRAs since such plans and accounts
are generally tax-exempt and, therefore, would not benefit from the exempt
status of dividends from the Fund. Such dividends would be ultimately taxable
to the beneficiaries when distributed to them.

California -- The California Tax-Free Money Market Mutual Fund
expects to be exempt from tax in California on the same basis as under
Subchapter M of the Code as described above. Moreover, if at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its total
assets consists of obligations the interest on which, if such obligations were
held by an individual, would be exempt from California personal income tax
(under either the laws of California or of the United States), the Fund will be
entitled to pay dividends to its shareholders which will be exempt from
California personal income tax (referred to herein as "California
exempt-interest dividends"). Under normal market conditions, the Fund will
invest primarily in municipal securities of the State of California, its
cities, municipalities and other political authorities so that it can pay
California exempt-interest dividends.

27
<PAGE> 86
expenditures (including any expenditures attributable to the acquisition of
securities of other investment companies). Dividends paid by the Fund in
excess of this limitation will be treated as ordinary dividends subject to
California personal income tax at ordinary rates.

Long-term and/or short-term capital gain distributions will not
constitute California exempt-interest dividends and will be taxed as capital
gains and ordinary income dividends, respectively. Moreover, interest on
indebtedness incurred by a shareholder to purchase or carry shares of the Fund
is not deductible for California personal income tax purposes to the extent the
shareholder receives California exempt-interest dividends during his or her
taxable year. Exempt-interest dividends will be tax exempt for purposes of the
California personal income tax. For corporate shareholders, dividends will be
subject to the corporate franchise taxes in California.

Other Matters. Investors should be aware that the investments to
be made by a Fund may involve sophisticated tax rules that may result in income
or gain recognition by the Fund without corresponding current cash receipts.
Although each Fund will seek to avoid significant noncash income, such noncash
income could be recognized by the Fund, in which case the Fund may distribute
cash derived from other sources in order to meet the minimum distribution
requirements described above.

The foregoing discussion and the discussions in the Prospectuses
address only some of the federal tax considerations generally affecting
investments in a Fund. Each investor is urged to consult his or her tax
advisor regarding specific questions as to federal, state or local taxes and
foreign taxes.

CAPITAL STOCK

The Funds are two of the funds of the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of twenty-three other funds.

Most of the Company's funds are authorized to issue multiple
classes of shares, one class generally subject to a front-end sales charge and,
in some cases, a class subject to a contingent-deferred sales charge, that are
offered to retail investors. Certain of the Company's funds also are
authorized to issue other classes of shares, which are sold primarily to
institutional investors. Each class of shares in a fund represents an equal,
proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state
securities registration fees, shareholder servicing fees or distribution fees
that may be paid under Rule 12b-1) that are allocated to a particular class.
Please contact Stagecoach Shareholder Services at 1-800-222-8222 if you would
like additional information about other funds or classes of shares offered.

The California Tax-Free Money Market Fund offers a single Class of
shares. The Money Market Mutual Fund is comprised of three Classes of shares:
Class A shares, Class S

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<PAGE> 87
shares and Institutional Class shares. With respect to matters affecting one
Class, but not another, shareholders of the Money Market Mutual Fund vote as a
Class. For example, approval of a distribution plan is voted on only by
members of the Class affected by the plan. Subject to the foregoing, all
shares of a Fund have equal voting rights. In situations where voting by
series is required by law or where the matter involved only affects one series,
shares of each Fund will be voted by series. For example, a change in a Fund's
fundamental investment policy would be voted upon only by shareholders of the
Fund involved. Additionally, approval of an advisory contract is a matter to
be determined separately by Fund. Approval by the shareholders of one Fund is
effective as to that Fund whether or not sufficient votes are received from the
shareholders of the other investment portfolios to approve the proposal as to
those investment portfolios. As used in the Prospectus of the Money Market
Mutual Fund, and in this SAI, the term "majority," when referring to approvals
to be obtained from shareholders of a Class of shares of such Fund means the
vote of the lesser of (i) 67% of the shares of the respective Class of the Fund
represented at a meeting if the holders of more than 50% of the outstanding
shares of such Class of the Fund are present in person or by proxy, or (ii)
more than 50% of the outstanding shares of such Class of the Fund. As used in
the Prospectus of each Fund and in this SAI, the term "majority," when
referring to approvals to be obtained from shareholders of a Fund, means the
vote of the lesser of (i) 67% of the shares of a Fund represented at a meeting
if the holders of more than 50% of the outstanding shares of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of a Fund. The term "majority," when referring to the approvals to be obtained
from shareholders of the Company as a whole, means the vote of the lesser of
(i) 67% of the Company's shares represented at a meeting if the holders of more
than 50% of the Company's outstanding shares are present in person or by proxy,
or (ii) more than 50% of the Company's outstanding shares. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held.

The Company may dispense with an annual meeting of shareholders in
any year in which it is not required to elect Directors under the 1940 Act.
However, the Company has undertaken to hold a special meeting of its
shareholders for the purpose of voting on the question of removal of a Director
or Directors if requested in writing by the holders of at least 10% of the
Company's outstanding voting securities, and to assist in communicating with
other shareholders as required by Section 16(c) of the 1940 Act.

Each share of a Fund represents an equal proportional interest in
the Fund with each other share and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of the Directors. In the event of the
liquidation or dissolution of the Company, shareholders of a Fund are entitled
to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular investment portfolio that are available for distribution in such
manner and on such basis as the Directors in their sole discretion may
determine.

Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Company.

29
<PAGE> 88
Set forth below is the name, address and share ownership of each
person known by the Company to have beneficial or record ownership of 5% or
more of a class of each Fund or 5% or more of the voting securities of each
Fund as a whole.

5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
CALIFORNIA TAX- Wells Fargo Bank Class A 83.96% 83.96%
FREE MONEY P.O. Box 7066 Beneficially
MARKET MUTUAL San Francisco, CA 94120 Owned

MONEY MARKET Wells Fargo Bank Class A 90.12% 76.70%
MUTUAL P.O. Box 7066 Beneficially
San Francisco, CA 94120 Owned
</TABLE>

For purposes of the 1940 Act, any person who owns directly or
through one or more controlled companies more than 25% of the voting securities
of a company is presumed to "control" such company. Accordingly, to the extent
that a shareholder identified in the foregoing table is identified as the
beneficial holder of more than 25% of a class (or Fund) or is identified as the
holder of record or more than 25% of a class (or Fund) and has voting and/or
investment powers, it may be presumed to control such class.

OTHER

The Registration Statement, including the Prospectus of each Fund,
the SAI and the exhibits filed therewith, may be examined at the office of the
SEC in Washington, D.C. Statements contained in the Prospectus or the SAI of
each Fund as to the contents of any contract or other document are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent auditor
for the Company. KPMG Peat Marwick LLP provides audit services, tax return
preparation and assistance and consultation in connection with review of
certain SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero
Center, San Francisco, California 94111.

30
<PAGE> 89

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the Funds for the fiscal period ended
September 30, 1996 are hereby incorporated by reference to the Company's Annual
Reports as filed with the SEC on December 9, 1996. The portfolio of
investments, audited financial statements and independent auditors' report for
the Funds are attached to all SAIs delivered to current or prospective
shareholders.

31
<PAGE> 90
SAI APPENDIX

The following is a description of the ratings given by Moody's and
S&P to corporate and municipal bonds, municipal notes, and corporate and
municipal commercial paper.

Corporate and Municipal Bonds

Moody's: The four highest ratings for corporate and municipal
bonds are "Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of
the "best quality" and carry the smallest amount of investment risk. Bonds
rated "Aa" are of "high quality by all standards," but margins of protection or
other elements make long-term risks appear somewhat greater than "Aaa" rated
bonds. Bonds rated "A" possess many favorable investment attributes and are
considered to be upper medium grade obligations. Bonds rated "Baa" are
considered to be medium grade obligations; interest payments and principal
security appear adequate for the present, but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds have speculative characteristics as well. Moody's applies
numerical modifiers: 1, 2 and 3 in each rating category from "Aa" through
"Baa" in its rating system. The modifier 1 indicates that the security ranks
in the higher end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate and municipal bonds
are "AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings
assigned by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded as having an "adequate capacity" to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of
a plus or minus sign to show relative standing within the category.

Municipal Notes

Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality." Notes rated "MIG
2" or "VMIG 2" are of "high quality," with margins of protections "ample
although not as large as in the preceding group." Notes rated "MIG 3" or "VMIG
3" are of "favorable quality," with all security elements accounted for, but
lacking the strength of the preceding grades.

32
<PAGE> 91
S&P: The "SP-1" rating reflects a "very strong or strong capacity
to pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.

Corporate and Municipal Commercial Paper

Moody's: The highest rating for corporate and municipal
commercial paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior
capacity for repayment of short-term promissory obligations." Issuers rated
"P-2" (Prime-2) "have a strong capacity for repayment of short-term promissory
obligations," but earnings trends, while sound, will be subject to more
variation.

S&P: The "A-1" rating for corporate and municipal commercial
paper indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."

Corporate Notes

S&P: The two highest ratings for corporate notes are "SP-1" and
"SP-2." The "SP-1" rating reflects a "very strong or strong capacity to pay
principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.

33
<PAGE> 92
STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

GINNIE MAE FUND
GROWTH AND INCOME FUND

CLASS A AND CLASS B

---------------------------

Stagecoach Funds, Inc. is an open-end series investment company.
This Statement of Additional Information ("SAI") contains information about two
of the funds in the Stagecoach Family of Funds -- the GINNIE MAE FUND and the
GROWTH AND INCOME FUND (each, a "Fund" and collectively, the "Funds"). This
SAI relates to Class A and Class B Shares offered by each Fund. The investment
objective of each Fund is described in its Prospectus under "How the Funds Work
- -- Investment Objectives and Policies."

This SAI is not a prospectus and should be read in conjunction
with the Prospectus dated February 1, 1997, for each of the Funds. All terms
used in this SAI that are defined in each Fund's Prospectus will have the
meaning assigned in such Prospectus. A copy of the Prospectus for each Fund
may be obtained without charge by writing Stephens Inc., the Company's sponsor,
co-administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201 or calling the Transfer Agent at the telephone number indicated above.

---------------------------

1
<PAGE> 93
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Permitted Investment
Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . 15
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . 16
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . 22
Additional Purchase and Redemption Information . . . . . . . . . . . 22
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 23
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 27
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . 32
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . 32
SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

2
<PAGE> 94
INVESTMENT RESTRICTIONS

Fundamental Investment Policies. The Funds are subject to the
following investment restrictions, all of which are fundamental policies; that
is, they may not be changed without approval by the vote of the holders of a
majority of the Funds' outstanding voting securities, as described under
"Capital Stock":

The Funds may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of any Fund's investments in that industry would
be 25% or more of the current value of such Fund's total assets, provided that
there is no limitation with respect to investments in obligations of the United
States Government, its agencies or instrumentalities;

(3) purchase commodities or commodity contracts (including
futures contracts), except that a Fund may purchase securities of an issuer
which invests or deals in commodities or commodity contracts;

(4) purchase interests, leases, or limited partnership
interests in oil, gas, or other mineral exploration or development programs;

(5) purchase securities on margin (except for short-term
credits necessary for the clearance of transactions and except for margin
payments in connection with options, futures and options on futures) or make
short sales of securities;

(7) make investments for the purpose of exercising control or
management;

(8) issue senior securities, except the Growth and Income Fund
may borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of each such Fund's
net assets (but investments may not be purchased by such Funds while any such
outstanding borrowings exceed 5% of the respective Fund's net assets), and
except that the Ginnie Mae Fund may borrow up to 20% of the current value of its
net assets for temporary purposes only in order to meet redemptions, and these
borrowings may be secured

3
<PAGE> 95
by the pledge of up to 20% of the current value of such Fund's net assets (but
investments may not be purchased by such Fund while any such outstanding
borrowings exceed 5% of the Fund's net assets);

(9) write, purchase or sell puts, calls, straddles, spreads,
warrants, options or any combination thereof, except that the Growth and Income
Fund may purchase securities with put rights in order to maintain liquidity and
may invest up to 5% of its net assets in warrants in accordance with its
investment policies as stated below; or

All of the Funds may make loans in accordance with their investment policies.

Non-Fundamental Investment Policies. The Funds are subject to the
following non-fundamental policies which may be changed by a majority vote of
the Board of Directors without shareholder approval:

The Funds may not:

(1) purchase or retain securities of any issuer if the officers
or Directors of the Company or its Investment Adviser owning beneficially more
than one-half of one percent (0.50%) of the securities of the issuer together
owned beneficially more than 5% of such securities;

(2) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets;

(3) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of such Fund's aggregate investment in such Classes of
securities will exceed 5% of its total assets; or

(4) invest more than 10% of the current value of its net assets
in repurchase agreements maturing in more than seven days or other illiquid
securities (including restricted securities).

In addition, the Funds may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided

4
<PAGE> 96
that any such purchases will be limited to temporary investments in shares of
unaffiliated investment companies and the Investment Adviser will waive its
advisory fees for that portion of the Fund's assets so invested, except when
such purchase is part of a plan of merger, consolidation, reorganization or
acquisition.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

Unrated Investments. The Funds may purchase instruments that are
not rated if, in the opinion of Wells Fargo Bank, such obligations are of
investment quality comparable to other rated investments that are permitted to
be purchased by such Fund. After purchase by a Fund, a security may cease to
be rated or its rating may be reduced below the minimum required for purchase
by such Fund. Neither event will require a sale of such security by such Fund.
To the extent the ratings given by Moody's or S&P may change as a result of
changes in such organizations or their rating systems, each Fund will attempt
to use comparable ratings as standards for investments in accordance with the
investment policies contained in its Prospectus and in this SAI. The ratings
of Moody's and S&P are more fully described in the SAI Appendix.

Letters of Credit. Certain of the debt obligations (including
certificates of participation, commercial paper and other short-term
obligations) which the Funds may purchase may be backed by an unconditional and
irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies which, in the opinion of Wells Fargo Bank,
are of comparable quality to issuers of other permitted investments of such
Fund may be used for letter of credit-backed investments.

Pass-Through Obligations. Certain of the debt obligations in
which the Ginnie Mae Fund may invest may be pass-through obligations that
represent an ownership interest in a pool of mortgages and the resultant cash
flow from those mortgages. Payments by homeowners on the loans in the pool
flow through to certificate holders in amounts sufficient to repay principal
and to pay interest at the pass-through rate. The stated maturities of
pass-through obligations may be shortened by unscheduled prepayments of
principal on the underlying mortgages. Therefore, it is not possible to
predict accurately the average maturity of a particular pass-through
obligation. Variations in the maturities of pass-through obligations will
affect the yield of the Ginnie Mae Fund. Furthermore, as with any debt
obligation, fluctuations in interest rates will inversely affect the market
value of pass-through obligations. The Ginnie Mae Fund may invest in
pass-through obligations that are supported by the full faith and credit of the
U.S. Government (such as those issued by the Government National Mortgage
Association) or those that are guaranteed by an agency or instrumentality of
the U.S. Government or government-sponsored enterprise (such as the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation) or
bonds collateralized by any of the foregoing.

When-Issued Securities. Certain of the securities in which the
Funds may invest will be purchased on a when-issued basis, in which case
delivery and payment normally take place

5
<PAGE> 97
within 120 days after the date of the commitment to purchase. The Funds only
will make commitments to purchase securities on a when-issued basis with the
intention of actually acquiring the securities, but may sell them before the
settlement date if it is deemed advisable. When-issued securities are subject
to market fluctuation, and no income accrues to the purchaser during the period
prior to issuance. The purchase price and the interest rate that will be
received on debt securities are fixed at the time the purchaser enters into the
commitment. Purchasing a security on a when-issued basis can involve a risk
that the market price at the time of delivery may be lower than the agreed-upon
purchase price, in which case there could be an unrealized loss at the time of
delivery. The Growth and Income Fund currently does not intend to invest more
than 5% of its assets in when-issued securities during the coming year.

Each Fund will segregate cash, U.S. Government obligations or
other high-quality debt instruments in an amount at least equal in value to the
Fund's commitments to purchase when-issued securities. If the value of these
assets declines, the Fund will segregate additional liquid assets on a daily
basis so that the value of the segregated assets is equal to the amount of such
commitments.

Loans of Portfolio Securities. All of the Funds may lend
securities from their portfolios to brokers, dealers and financial institutions
(but not individuals) if cash, U.S. Government securities or other high-quality
debt obligations equal to at least 100% of the current market value of the
securities loan (including accrued interest thereon) plus the interest payable
to such Fund with respect to the loan is maintained with the Fund. In
determining whether to lend a security to a particular broker, dealer or
financial institution, the Fund's Investment Adviser will consider all relevant
facts and circumstances, including the creditworthiness of the broker, dealer,
or financial institution. Any loans of portfolio securities will be fully
collateralized based on values that are marked to market daily. The Funds will
not enter into any portfolio security lending arrangement having a duration of
longer than one year. Any securities that a Fund may receive as collateral
will not become part of the Fund's portfolio at the time of the loan and, in
the event of a default by the borrower, the Fund will, if permitted by law,
dispose of such collateral except for such part thereof that is a security in
which the Fund is permitted to invest. During the time securities are on loan,
the borrower will pay the Fund any accrued income on those securities, and the
Fund may invest the cash collateral and earn additional income or receive an
agreed-upon fee from a borrower that has delivered cash-equivalent collateral.
None of the Funds will lend securities having a value that exceeds 33 1/3% of
the current value of its total assets. Loans of securities by any of the Funds
will be subject to termination at the Fund's or the borrower's option. The
Funds may pay reasonable administrative and custodial fees in connection with a
securities loan and may pay a negotiated portion of the interest or fee earned
with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with Stagecoach, its Investment Adviser, or its Distributor. The Ginnie Mae
Fund currently intends to limit the practice of lending portfolio securities to
no more than 5% of its net assets during the coming year.

Foreign Obligations. Investments in foreign obligations involve
certain considerations that are not typically associated with investing in
domestic obligations. There

6
<PAGE> 98
may be less publicly available information about a foreign issuer than about a
domestic issuer. Foreign issuers also are not generally subject to uniform
accounting, auditing and financial reporting standards or governmental
supervision comparable to those applicable to domestic issuers. In addition,
with respect to certain foreign countries, taxes may be withheld at the source
under foreign income tax laws, and there is a possibility of expropriation or
confiscatory taxation, political or social instability or diplomatic
developments that could adversely affect investments in, the liquidity of, and
the ability to enforce contractual obligations with respect to, securities of
issuers located in those countries. The Ginnie Mae Fund does not intend to
invest in foreign obligations during the coming year. The Growth and Income
Fund currently does not intend to invest more than 10% of its assets in foreign
obligations. Neither of the Funds may invest 25% or more of its assets in
foreign obligations.

Convertible Securities (Lower Rated Securities) Subject to the
limitations described in its Prospectus, the Growth and Income Fund may invest
in convertible securities that are not rated in one of the four highest rating
categories by an NRSRO. The yields on such lower rated securities, which
include securities also known as junk bonds, generally are higher than the
yields available on higher-rated securities. However, investments in lower
rated securities and comparable unrated securities generally involve greater
volatility of price and risk of loss of income and principal, including the
probability of default by or bankruptcy of the issuers of such securities.
Lower rated securities and comparable unrated securities (a) will likely have
some quality and protective characteristics that, in the judgment of the rating
organization, are outweighed by large uncertainties or major risk exposures to
adverse conditions and (b) are predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation. Accordingly, it is possible that these types of
factors could, in certain instances, reduce the value of securities held in the
Fund's portfolio, with a commensurate effect on the value of the Fund's shares.
Therefore, an investment in the Fund should not be considered as a complete
investment program and may not be appropriate for all investors.

While the market values of lower rated securities and comparable
unrated securities tend to react less to fluctuations in interest rate levels
than the market values of higher-rated securities, the market values of certain
lower rated securities and comparable unrated securities also tend to be more
sensitive to individual corporate developments and changes in economic
conditions than higher-rated securities. In addition, lower rated securities
and comparable unrated securities generally present a higher degree of credit
risk. Issuers of lower rated securities and comparable unrated securities
often are highly leveraged and may not have more traditional methods of
financing available to them so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by such
issuers is significantly greater because lower rated securities and comparable
unrated securities generally are unsecured and frequently are subordinated to
the prior payment of senior indebtedness. The Fund may incur additional
expenses to the extent that it is required to seek recovery upon a default in
the payment of principal or interest on its portfolio holdings. The existence
of limited markets for lower rated securities and comparable unrated securities
may diminish the Fund's ability to (a) obtain accurate market quotations for
purposes of valuing such securities and calculating net asset value

7
<PAGE> 99
and (b) sell the securities at fair value either to meet redemption requests or
to respond to changes in the economy or in financial markets.

Privately Issued Securities (Rule 144A). The Growth and Income
Fund may invest in privately issued securities which may be resold only in
accordance with Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities"). Rule 144A Securities are restricted securities and will not be
publicly traded. Accordingly, the liquidity of the market for specific Rule
144A Securities may vary. The Company's investment adviser, pursuant to
guidelines established by the Board of Directors of the Company will evaluate
the liquidity characteristics of each Rule 144A Security proposed for purchase
by the Fund on a case-by-case basis and will consider the following factors,
among others, in their evaluation: (1) the frequency of trades and quotes for
the Rule 144A Security; (2) the number of dealers willing to purchase or sell
the Rule 144A Security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the Rule 144A Security; and (4) the nature of
the Rule 144A Security and the nature of the marketplace trades (e.g., the time
needed to dispose of the Rule 144A Security, the method of soliciting offers
and the mechanics of transfer). The Growth and Income Fund does not intend to
invest more than 5% of its net assets in Rule 144A Securities during the coming
year.

The Funds so indicated below may engage in the following
investment activities although none has a present intention to do so:

Investment in Warrants. The Growth and Income Fund may invest no
more than 5% of its net assets at the time of purchase in warrants (other than
those that have been acquired in units or attached to other securities), and
not more than 2% of its net assets in warrants which are not listed on the New
York or American Stock Exchange. Warrants represent rights to purchase
securities at a specific price valid for a specific period of time. The prices
of warrants do not necessarily correlate with the prices of the underlying
securities. The Growth and Income Fund may only purchase warrants on
securities in which it may invest directly.

8
<PAGE> 100
MANAGEMENT

9
<PAGE> 101
<TABLE>
<S> <C> <C>
Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
(appointed as of September 6, 1996) Junior College from 1967 to
1971; Adjunct Professor of
Columbia University
Teachers College since
1976.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

10
<PAGE> 102
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, 1995 September 30, 1996
------------------------------- -------------------------------
Total Total
Aggregate Compensation Aggregate Compensation
Compensation from Registrant Compensation from Registrant
from and Fund from and Fund
Name and Position Registrant Complex Registrant Complex
- ----------------- ------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company
and by all the registrants in each fund complex they serve as indicated above
and also are reimbursed for all out-of-pocket expenses relating to attendance
at board meetings. The Company, Overland Express Funds, Inc., Stagecoach
Trust, Life & Annuity Trust and Master Investment Trust are considered to be
members of the same fund complex as such term is defined in Form N-1A under the
1940 Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and

11
<PAGE> 103
Managed Series Investment Trust together form a separate fund complex (the
"BGFA Fund Complex"). Each of the Directors and Officers of the Company serves
in the identical capacity as directors and officers or as trustees and/or
officers of each registered open-end management investment company in both the
Wells Fargo and BGFA Fund Complexes, except for Joseph N. Hankin, who only
serves the aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann
Hines who, after September 6, 1996, only serves the aforementioned members of
the BGFA Fund Complex. The Directors are compensated by other companies and
trusts within a fund complex for their services as directors/trustees to such
companies and trusts. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or any other member of each
fund complex. As of the date of this SAI, Directors and Officers of the
Company as a group beneficially owned less than 1% of the outstanding shares of
the Company.

As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

INVESTMENT ADVISER. Each of the Funds is advised by Wells Fargo
Bank pursuant to an Advisory Contract. The Advisory Contracts provide that
Wells Fargo Bank shall furnish to the Funds investment guidance and policy
direction in connection with the daily portfolio management of each Fund.
Pursuant to the Advisory Contracts, Wells Fargo Bank furnishes to the Board of
Directors periodic reports on the investment strategy and performance of each
Fund. Wells Fargo Bank has agreed to provide to the Funds, among other things,
money market security and fixed-income research, analysis and statistical and
economic data and information concerning interest rate and security market
trends, portfolio composition, credit conditions and, in the case of the Ginnie
Mae Fund, the average maturities of its portfolios.

Each Advisory Contract will continue in effect for more than two
years provided the continuance is approved annually (i) by the holders of a
majority of the respective Fund's outstanding voting securities or by the
Company's Board of Directors and (ii) by a majority of the Directors of the
Company who are not parties to the Advisory Contract or "interested persons"
(as defined in the 1940 Act) of any such party. Each Advisory Contract may be
terminated on 60 days' written notice by either party and will terminate
automatically if assigned.

<TABLE>
<CAPTION>
December 31, 1993 December 31, 1994 December 31, 1995 September 30, 1996
----------------- ----------------- ----------------- ------------------
Fees Fees Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived Paid Waived
---- ---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ginnie Mae $888,174 $437,110 $1,185,036 -0- $840,112 -0- $679,123 $-0-
Growth and
Income $443,874 -0- $587,977 -0- $754,149 -0- $799,899 $-0-
</TABLE>

ADMINISTRATOR AND CO-ADMINISTRATOR . The Company has retained
Wells Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of
each Fund. The

12
<PAGE> 104

Administration Agreement between Wells Fargo and each Fund, and the
Co-Administration Agreement among Wells Fargo, Stephens and each Fund, state
that Wells Fargo and Stephens shall provide as administrative services, among
other things: (i) general supervision of the operation of each Fund, including
coordination of the services performed by the Fund's investment adviser,
transfer agent, custodian, shareholder servicing agent(s), independent public
accountants and legal counsel, regulatory compliance, including the compilation
of information for documents such as reports to, and filings with, the SEC and
state securities commissions; and preparation of proxy statements and
shareholder reports for each Fund; and (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports
distributed to the Company's officers and Board of Directors. Wells Fargo Bank
and Stephens also furnish office space and certain facilities required for
conducting the business of each Fund together with ordinary clerical and
bookkeeping services. Stephens pays the compensation of the Company's
Directors, officers and employees who are affiliated with Stephens. The
Administrator and Co-Administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of each Fund.

For the fiscal years ended December 31, 1993, 1994 and 1995, and
the period ended September 30, 1996, the Funds paid the following dollar
amounts of administrative fees to Stephens who, as sole administrator during
these periods, was entitled to receive a fee, payable monthly, at the annual
rate of 0.05% of each Fund's average daily net assets:

<TABLE>
<CAPTION>
Fund Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995 Sept. 30, 1996
---- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Ginnie Mae $ 81,058 $71,842 $50,407 $40,747
Growth and Income $ 26,644 $35,279 $45,249 $51,193
</TABLE>

SPONSOR AND DISTRIBUTOR. As discussed in each Fund's prospectus
under the heading "Management and Servicing Fees," Stephens serves as each
Fund's sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in each Fund's
prospectus under the heading "Shareholder Servicing Agent," the Funds have
entered into shareholder servicing agreements with Wells Fargo Bank. The
dollar amounts of shareholder servicing fees paid by each Fund to Wells Fargo
Bank or its affiliates for the year ended December 31, 1995 and the period
ended September 30, 1996 were as follows:

<TABLE>
<CAPTION>
Fund December 31, 1995 September 30, 1996
---- ----------------- ------------------
<S> <C> <C>
Ginnie Mae $255,060 $214,996(1)
Growth and Income $452,488 $457,088
</TABLE>

- -------------

(1) This amount include shareholder servicing fees paid by other classes of
each Fund and reflects fee waivers.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo
Bank has been retained to act as custodian and transfer and dividend disbursing
agent for the Funds. The

13
<PAGE> 105
custodian, among other things, maintains a custody account or accounts in the
name of each Fund; receives and delivers all assets for each Fund upon purchase
and upon sale or maturity; collects and receives all income and other payments
and distributions on account of the assets of each Fund and pays all expenses
of each Fund. For its services as custodian, Wells Fargo Bank receives an
asset-based fee and transaction charge from the respective Funds.

For the year ended December 31, 1995 and the period ended
September 30, 1996, the Funds paid custody fees to Wells Fargo Bank as
follows:

<TABLE>
<CAPTION>
Fund December 31, 1995 September 30, 1996(1)
---- ----------------- ------------------
<S> <C> <C>
Ginnie Mae $-0- $-0-
Growth and Income $15,578 $17,963
</TABLE>
- -------------
(1) These amounts reflect fee waivers.

For its services as transfer and dividend disbursing agent for
the Funds' Class A and B shares, Wells Fargo Bank is entitled to receive monthly
payments at the annual rate of 0.14% of each Fund's average daily net assets for
Class A and B shares. Under the prior transfer agency agreement, Wells Fargo
Bank was entitled to receive a per account fee plus transaction fees and
out-of-pocket related costs with a minimum of $3,000 per month per Fund, unless
net assets of the Fund were under $20 million. For as long as a Fund's assets
remained under $20 million, the Fund was not charged any transfer agency fees.

For the year ended December 31, 1995 and the period ended
September 30, 1996, the Funds paid transfer and dividend disbursing agency
fees to Wells Fargo Bank or its affiliates as follows:

<TABLE>
<CAPTION>
Fund December 31, 1995 September 30, 1996
---- ----------------- ------------------
<S> <C> <C>

Ginnie Mae $-0- $-0-(1)
Growth and Income $160,168 $217,737
</TABLE>

- -------------

(1) This amount reflects fee waivers.

UNDERWRITING COMMISSIONS. For the years ended December 31, 1993
and 1994, the Company's distributor retained $26,215,173 and $5,415,227,
respectively in underwriting commissions (front-end sales loads and CDSCs, if
any) in connection with the purchase or redemption of Company shares. For the
years ended December 31, 1993 and 1994, Wells Fargo Securities Inc. ("WFSI"),
an affiliated broker-dealer of the Company, and its registered representatives
received $378,895 and $904,274, respectively, in underwriting commissions in
connection with the purchase or redemption of Company shares.

For the period ended September 30, 1996, the aggregate amount of
underwriting commissions on sales/redemptions of the Company's shares was
$2,917,738. Stephens retained $198,664 of such commissions. WFSI and its
registered representatives retained $2,583,027 and $136,047, respectively, of
such commissions.

14
<PAGE> 106
DISTRIBUTION PLANS

As indicated in each Fund's respective Prospectus, each of the
Funds has adopted a distribution plan (a "Plan") under Section 12(b) of the
1940 Act and Rule 12b-1 thereunder (the "Rule"). The Plans for the Class A
Shares of each Fund were adopted by the Company's Board of Directors on October
22, 1991, including a majority of the Directors who were not "interested
persons" (as defined in the 1940 Act) of the respective Fund and who had no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Qualified Directors"), and were approved by
the initial shareholder of each Fund on December 31, 1991. The Plans for the
Class B Shares of each Fund were adopted by the Company's Board of Directors,
including a majority of the Qualified Directors, on July 27, 1994.

The Plans in effect for the Class A Shares of each Fund allow the
Funds to defray all or part of the cost of preparing and printing prospectuses
and other promotional materials and of delivering prospectuses and those
materials to prospective shareholders of each Fund by paying on an annual basis
up to 0.05% of the respective Fund's average daily net assets attributable to
Class A Shares. The Plans for the Class A Shares provide only for the
reimbursement of actual expenses. The Plans for the Class B Shares allow each
Fund to defray all or part of the cost of printing prospectuses and other
promotional materials and of delivering materials to prospective shareholders
by paying on an annual basis up to 0.70% of the average daily net assets
attributable to the Class B Shares of each respective Fund. In addition, each
Plan contemplates that to the extent any fees payable pursuant to a Shareholder
Servicing Agreement are deemed to be for distribution-related services, rather
than shareholder services, such payments are approved and payable pursuant to
such Plan.

Each Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Qualified Directors. Any agreements related to the Plans
("Agreements") also must be approved by majority vote of the Directors and the
Qualified Directors. Such Agreements will terminate automatically if assigned.
Each Fund may terminate such Agreements at any time, without payment of any
penalty, by a vote of a majority of outstanding voting securities of the Class
of shares affected by such Agreement. The amounts payable under each Plan may
not be increased materially without the approval of a majority of the voting
securities of each Class of Funds affected by such Agreements. Material
amendments to a Plan may not be made except by affirmative vote of a majority
of both the Directors of the Company and the Qualified Directors.

Each Plan requires that the Treasurer of the Company shall provide
to the Directors, and the Directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Plan. The
Rule also requires that the selection and nomination of Directors who are not
"interested persons" of the Company be made by such disinterested directors.
For the year ended December 31, 1995, the Funds' distributor received the
following amounts of 12b-1 fees for the specified purposes set forth below
under the Plans.

15
<PAGE> 107
<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Fund Total Prospectus Brochures Underwriters
---- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
Ginnie Mae Fund
Class A $66,400 $20,590 $45,810 N/A
Class B $29,355 N/A N/A $29,355

Growth and Income Fund
Class A $50,138 $ 41,902 $ 8,236 N/A
Class B $13,068 N/A N/A $13,068
</TABLE>

For the period ended September 30, 1996, the Funds' distributor
received the following amounts of 12b-1 fees for the specified purposes set
forth below under the Plans.

<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Fund Total Prospectus Brochures Underwriters
---- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
Ginnie Mae
Class A $29,455 $3,510 $25,945 N/A
Class B $98,885 N/A N/A $98,885

Growth and Income
Class A $35,064 $1,266 $33,798 N/A
Class B $43,495 N/A N/A $43,495
</TABLE>

For the year ended December 31, 1995 and the period ended
September 30, 1996, WFSI and its registered representatives received no
compensation under the Plans.

PERFORMANCE CALCULATIONS

As described in the Prospectuses for each Fund, the IRA Funds of
the Trust were reorganized into the corresponding Funds of the Company on
January 2, 1992. Therefore, the performance information for the Funds is based
on that of the IRA Funds for the periods prior to January 2, 1992, and
reference should be made to the footnotes to the condensed financial
information in the "Financial Highlights" section of each Prospectus regarding
differences in investment objectives, policies and/or restrictions between
certain of the Funds and the IRA Funds, which may affect the relevance of the
performance information provided below.

Each Fund may advertise certain total return information computed
in the manner described in its Prospectus. As and to the extent required by
the SEC, an average annual compound rate of return ("T") will be computed by
using the redeemable value at the end of a specified period ("ERV") of a
hypothetical initial investment in a Class of shares ("P") over a

16
<PAGE> 108
period of years ("n") according to the following formula: P(1+T)n = ERV. In
addition, a Fund that assesses a sales charge, at times, also may calculate
total return based on net asset value per share of each Class (rather than the
public offering price), in which case the figures would not reflect the effect
of any sales charges that would have been paid by an investor, or based on the
assumption that a sales charge other than the maximum sales charge (reflecting
a Volume Discount) was assessed, provided that total return data derived
pursuant to the calculation described above also are presented.

Average Annual Total Return for the Applicable Period Ended September 30, 1996

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Inception(1) Inception Five Year Five Year Three Year Three Year One Year One Year
With No With No With No With No
Sales Sales Sales Sales Sales Sales Sales Sales
Fund Charge(2) Charge Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ginnie Mae
Class A 6.37% 7.22% 5.51% 6.48% 3.11% 4.71% -0.44% 4.21%
Class B 8.08% 9.15% N/A N/A N/A N/A 0.57% 3.48%
- --------------------------------------------------------------------------------------------------------------------
Growth and
Income
Class A 13.48% 14.32% 13.96% 12.67% 14.42% 9.52% 14.67%
Class B 22.06% 23.04% N/A N/A N/A N/A 10.90% 13.90%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Each Fund commenced operations as follows: Ginnie Mae Class A - January 3,
1991, Class B - January 2, 1995; Growth and Income Class A - August 2,
1990, Class B - January 2, 1995.

(2) For all periods ended September 30, 1996, the term "Sales Charge" for
Class A Shares means a front-end sales load of 4.50%. For Class B
Shares the term "Sales Charge" means the maximum applicable contingent
deferred sales charge ("CDSC") as described in the respective Fund's
prospectus.

The Funds may advertise the cumulative total return on each class
of shares. Cumulative total return of shares is computed on a per share basis
and assumes the reinvestment of dividends and distributions. Cumulative total
return of shares generally is expressed as a percentage rate which is
calculated by combining the income and principal changes for a specified period
and dividing by the net asset value per share at the beginning of the period.
Advertisements may include the percentage rate of total return of shares or may
include the value of a hypothetical investment in shares at the end of the
period which assumes the application of the percentage rate of total return.

In addition to the above performance information, the Fund may
also advertise the cumulative total return of the Fund for one-month,
three-month, six-month, and year-to-date periods. The cumulative total return
for such periods is based on the overall percentage change in value of a
hypothetical investment in the Fund, assuming all Fund dividends and capital
gain distributions are reinvested, without reflecting the effect of any sales
charge that would be paid by an investor, and is not annualized.

17
<PAGE> 109
Cumulative Total Return for the Applicable Period Ended September 30, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Inception(1) Inception Five Year Five Year Three Year Three Year
With No With No With No
Fund Sales Charge(2) Sales Charge Sales Charge Sales Charge Sales Charge Sales Charge
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ginnie Mae
Class A 42.61% 49.31% 30.74% 36.85% 9.62% 14.79%
Class B 14.56% 16.56% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
Growth and
Income
Class A 118.05% 128.30% 83.52% 92.17% 43.02% 49.80%
Class B 41.73% 43.73% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(1) Each Fund commenced operations as follows: Ginnie Mae Class A -
January 3, 1991, Class B - January 2, 1995; Growth and Income Class A
- August 2, 1990, Class B - January 2, 1995.

(2) For all periods ended September 30, 1996, the term "Sales Charge"
for Class A Shares means a front-end sales load of 4.50%. For Class B
Shares the term "Sales Charge" means the maximum applicable contingent
deferred sales charge ("CDSC") as described in the respective Fund's
prospectus.

The Ginnie Mae Fund may advertise certain yield information on its
shares. As and to the extent required by the SEC, yield on each Class of
shares will be calculated based on a 30-day (or one month) period, computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to
the following formula: YIELD = 2[((a-b/cd)+1)6-1], where a = dividends and
interest earned during the period; b = expenses accrued for the period (net of
reimbursements); c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and d = the maximum offering
price per share on the last day of the period. The net investment income of a
Fund includes actual interest income, plus or minus amortized purchase discount
(which may include original issue discount) or premium, less accrued expenses.
Realized and unrealized gains and losses on portfolio securities are not
included in a Fund's net investment income. For purposes of sales literature,
yield also may be calculated on the basis of the net asset value per share
rather than the public offering price, provided that the yield data derived
pursuant to the calculation described above also are presented.

Yield for the Applicable Period Ended September 30, 1996(1)

<TABLE>
<CAPTION>
Thirty Day Yield Thirty Day Yield
Ginnie Mae Fund After Waiver Before Waiver
- --------------- ------------ -------------
<S> <C> <C>
Class A 6.52% 6.17%
Class B 6.13% 5.68%
</TABLE>

___________________________________
(1) "After Waiver" figures reflect any reimbursed expenses throughout the
period.

The yield on each Class of the Ginnie Mae Fund will fluctuate from
time to time, unlike bank deposits or other investments that pay a fixed yield
for a stated period of time, and does not provide a basis for determining
future yields since it is based on historical data. Yield is

18
<PAGE> 110
a function of portfolio quality, composition, maturity and market conditions as
well as the expenses allocated to the Fund.

In addition, investors should recognize that changes in the net
asset values of shares of each Class of shares of the Ginnie Mae Fund will
affect the yield of each such Class for any specified period, and such changes
should be considered together with the yield of each Class in ascertaining the
total return for the period to shareholders. Yield information for each Class
of shares of the Fund may be useful in reviewing the Fund's performance and for
providing a basis for comparison with investment alternatives. The yield of
each Class of the Fund, however, may not be comparable to the yields from
investment alternatives because of differences in the foregoing variables and
differences in the methods used to value portfolio securities, compute expenses
and calculate yield.

From time to time and only to the extent the comparison is
appropriate for a Class of shares of a Fund, the Company may quote the
performance or price-earning ratio of a Class of shares in advertising and
other types of literature as compared to the performance of the Lehman Brothers
Municipal Bond Index, the 1-Year Treasury Bill Rate, the S&P Index, the Dow
Jones Industrial Average, the Lehman Brothers 20+ Treasury Index, the Lehman
Brothers 5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate
Investment Averages (as reported by the National Association of Real Estate
Investment Trusts), Gold Investment Averages (provided by the World Gold
Council), Bank Averages (which is calculated from figures supplied by the U.S.
League of Savings Institutions based on effective annual rates of interest on
both passbook and certificate accounts), average annualized certificate of
deposit rates (from the Federal Reserve G-13 Statistical Releases or the Bank
Rate Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer
Price Index (as published by the U.S. Bureau of Labor Statistics), Ten Year
U.S. Government Bond Average, S&P's Corporate Bond Yield Averages, Schabacter
Investment Management Indices, Salomon Brothers High Grade Bond Index, Lehman
Brothers Long-Term High Quality Government/Corporate Bond Index, other managed
or unmanaged indices or performance data of bonds, stocks or government
securities (including data provided by Ibbotson Associates), or by other
services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices. The
performance of a Class of shares of a Fund also may be compared to those of
other mutual funds having similar objectives. This comparative performance
could be expressed as a ranking prepared by Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc., Bloomberg Financial Markets or Morningstar,
Inc., independent services which monitor the performance of mutual funds. The
performance of a Class of shares of a Fund will be calculated by relating net
asset value per share at the beginning of a stated period to the net asset
value of the investment, assuming reinvestment of all gains, distributions and
dividends paid, at the end of the period. Any such comparisons may be useful
to investors who wish to compare the past performance of a Class of shares of a
Fund with that of its competitors. Of course, past performance cannot be a
guarantee of future results. The Company also may include, from time to time,
a reference to certain marketing approaches of the Distributor, including, for
example, a reference to a potential shareholder being contacted by a selected
broker or dealer. General mutual fund statistics provided by the Investment
Company Institute may also be used.

19
<PAGE> 111
In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."

The Company may also disclose in advertising and other types of
literature, information and statements the average credit quality of the Fund's
portfolio, or categories of investments therein, as of a specified date or
period. Average credit quality is calculated on a dollar weighted average
basis based on ratings assigned each issue or issuer, as the case may be, by
S&P and/or Moody's. In the event one rating agency does not rate the issue or
issuer, as the case may be, in the same tier as the other agency, the highest
rating is used in the calculation.

The Company also may use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for a Fund: (i) the Consumer Price Index may be
used to assess the real rate of return from an investment in a Fund; (ii) other
government statistics, including, but not limited to, The Survey of Current
Business, may be used to illustrate investment attributes of a Fund or the
general economic, business, investment, or financial environment in which a
Fund operates; (iii) the effect of tax-deferred compounding on the investment
returns of a Class of Fund shares, or on returns in general, may be illustrated
by graphs, charts, etc., where such graphs or charts would compare, at various
points in time, the return from an investment in a Class of Fund shares (or
returns in general) on a tax-deferred basis (assuming reinvestment of capital
gains and dividends and assuming one or more tax rates) with the return on a
taxable basis; and (iv) the sectors or industries in which a Fund invests may
be compared to relevant indices of stocks or surveys (e.g., S&P Industry
Surveys) to evaluate a

20
<PAGE> 112
Fund's historical performance or current or potential value with respect to the
particular industry or sector.

The Company also may include, from time to time, a reference to
certain marketing approaches of the Distributor, including, for example, a
reference to a potential shareholder being contacted by a selected broker or
dealer.

The Company also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as Standard & Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by a Fund. The assigned rating would not be a recommendation to purchase,
sell or hold a Fund's shares since the rating would not comment on the market
price of the Fund's shares or the suitability of the Fund for a particular
investor. In addition, the assigned rating would be subject to change,
suspension or withdrawal as a result of changes in, or unavailability of,
information relating to the Fund or its investments. The Company may compare a
Fund's performance with other investments which are assigned ratings by NRSROs.
Any such comparisons may be useful to investors who wish to compare the Fund's
past performance with other rated investments.

From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability
of combined Wells Fargo Bank and Stagecoach Funds account statements." The
Company may also disclose in advertising and other types of sales literature
the assets and categories of assets under management by the Company's
investment adviser. The Company also may disclose, in advertising and other
types of literature, information and statements that Wells Fargo Investment
Management ("WFIM"), a division of Wells Fargo Bank, is listed in the top 100
by Institutional Investor magazine in its July 1996 survey "America's Top 300
Money Managers". This survey ranks money managers in several asset categories.
The Company may also disclose in advertising and other types of sales literature
the assets and categories of assets and mutual fund assets managed by Wells
Fargo Bank. As of December 31, 1996, Wells Fargo Bank and its affiliates
provided investment advisory services for approximately $54 billion of assets of
individuals, trusts, estates and institutions and $20 billion of mutual fund
assets.

The Company may disclose in advertising and other types of
literature that investors can open and maintain Sweep Accounts over the
Internet or through other electronic channels (collectively, "Electronic
Channels"). Such advertising and other literature may discuss the investment
options available to investors, including the types of accounts and any
applicable fees. Such advertising and other literature may disclose that Wells
Fargo Bank is the first major bank to offer an on-line application for a mutual
fund account that can be filled out completely through Electronic Channels.
Advertising and other literature may disclose that Wells Fargo Bank may
maintain Web sites, pages or other information sites accessible through
Electronic Channels (an "Information Site") and may describe the contents and
features of the Information Site and instruct investors on how to access the
Information Site and open a Sweep Account. Advertising and other literature
may also disclose the procedures employed by Wells Fargo Bank to secure
information provided by investors, including disclosure and discussion of the
tools and

21
<PAGE> 113
services for accessing Electronic Channels. Such advertising or other
literature may include discussions of the advantages of establishing and
maintaining a Sweep Account through Electronic Channels and testimonials from
Wells Fargo Bank customers or employees and may also include descriptions of
locations where product demonstrations may occur. The Company may also
disclose the ranking of Wells Fargo Bank as one of the largest money managers
in the United States.

DETERMINATION OF NET ASSET VALUE

Net asset value per share for each Class of each Fund is
determined by the Custodian of the Fund on each day the NYSE is open for
trading.

Securities of a Fund for which market quotations are available are
valued at latest prices. Securities of a Fund for which the primary market is
a national securities exchange or the National Association of Securities
Dealers Automated Quotations National Market System are valued at last sale
prices. In the absence of any sale of such securities on the valuation date
and in the case of other securities, including U.S. Government securities but
excluding money market instruments maturing in 60 days or less, the valuations
are based on latest quoted bid prices. Money market instruments maturing in 60
days or less are valued at amortized cost. Futures contracts will be marked to
market daily at their respective settlement prices determined by the relevant
exchange. These prices are not necessarily final closing prices, but are
intended to represent prices prevailing during the final 30 seconds of the
trading day. Options listed on a national exchange are valued at the last sale
price on the exchange on which they are traded at the close of the NYSE, or, in
the absence of any sale on the valuation date, at latest quoted bid prices.
Options not listed on a national exchange are valued at latest quoted bid
prices. Debt securities maturing in 60 days or less are valued at amortized
cost. In all cases, bid prices will be furnished by a reputable independent
pricing service approved by the Board of Directors. Prices provided by an
independent pricing service may be determined without exclusive reliance on
quoted prices and may take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. All other securities and other assets of the Funds for which current
market quotations are not readily available are valued at fair value as
determined in good faith by the Company's Directors and in accordance with
procedures adopted by the Directors.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Funds may be purchased on any day the Funds are open for
business. The Funds are open for business each day the NYSE is open for
trading (a "Business Day"). Currently, the NYSE is closed on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day (each a "Holiday"). When any Holiday falls
on a weekend, the NYSE typically is closed on the weekday immediately before or
after such Holiday.

22
<PAGE> 114
Payment for shares may, in the discretion of the adviser, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Funds will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by a
Fund and that such Fund receives satisfactory assurances that (i) it will have
good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to reimburse
the Funds for any losses sustained by reason of the failure of a shareholders
to make full payment for shares purchased or to collect any charge relating to
a transaction effected for the benefit of a shareholder which is applicable to
shares of a Fund as provided from time to time in the Prospectus.

PORTFOLIO TRANSACTIONS

The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Company's Board of Directors, Wells Fargo Bank is
responsible for each Fund's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Company to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Funds will
not necessarily be paying the lowest spread or commission available.

Except in the case of equity securities purchased by the Growth
and Income Fund, purchases and sales of securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. Each of
the Funds also will purchase portfolio securities in underwritten offerings and
may purchase securities directly from the issuer. Generally, money market
securities,

23
<PAGE> 115
ARMS and CMOs are traded on a net basis and do not involve brokerage
commissions. The cost of executing a Fund's portfolio securities transactions
will consist primarily of dealer spreads and underwriting commissions. Under
the 1940 Act, persons affiliated with the Company are prohibited from dealing
with the Company as a principal in the purchase and sale of securities unless
an exemptive order allowing such transactions is obtained from the SEC or an
exemption is otherwise available.

The Growth and Income Fund. Purchases and sales of equity
securities on a securities exchange are effected through brokers who charge a
negotiated commission for their services. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law,
Stephens or Wells Fargo Securities Inc. In the over-the- counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. No Fund will deal with Stephens, Wells Fargo Bank or
their affiliates in any transaction in which any of them acts as principal
without an exemptive order from the SEC or unless an exemption is otherwise
available.

In assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Growth and Income Fund to pay a
broker/dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker/dealer for
effecting the same transaction, provided that Wells Fargo Bank determines in
good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker/dealer, viewed in terms
of either the particular transaction or the overall responsibilities of Wells
Fargo Bank. Such brokerage and research services might consist of reports and
statistics relating to specific companies or industries, general summaries of
groups of stocks or bonds and their comparative earnings and yields, or broad
overviews of the stock, bond, and government securities markets and the
economy.

24
<PAGE> 116
Under Section 28(e) of the Securities Exchange Act of 1934, an
adviser shall not be "deemed to have acted unlawfully or to have breached its
fiduciary duty" solely because under certain circumstances it has caused the
account to pay a higher commission than the lowest available. To obtain the
benefit of Section 28(e), an adviser must make a good faith determination that
the commissions paid are "reasonable in relation to the value of the brokerage
and research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to a Fund in any transaction may be less favorable than that
available from another broker/dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.

Broker/dealers utilized by Wells Fargo Bank may furnish
statistical, research and other information or services which are deemed by
Wells Fargo Bank to be beneficial to a Fund's investment programs. Research
services received from brokers supplement Wells Fargo Bank's own research and
may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
political developments; portfolio management strategies; performance
information on securities and information concerning prices of securities; and
information supplied by specialized services to Wells Fargo Bank and to the
Company's Directors with respect to the performance, investment activities and
fees and expenses of other mutual funds. Such information may be communicated
electronically, orally or in written form. Research services may also include
the providing of equipment used to communicate research information, the
arranging of meetings with management of companies and the providing of access
to consultants who supply research information.

The outside research assistance is useful to Wells Fargo Bank since
the brokers utilized by Wells Fargo Bank as a group tend to follow a broader
universe of securities and other matters than the staff of Wells Fargo Bank can
follow. In addition, this research provides Wells Fargo Bank with a diverse
perspective on financial markets. Research services which are provided to
Wells Fargo Bank by brokers are available for the benefit of all accounts
managed or advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank
that this material is beneficial in supplementing their research and analysis;
and, therefore, it may benefit the Funds by improving the quality of Wells
Fargo Bank's investment advice. The advisory fees paid by the Funds are not
reduced because Wells Fargo Bank receives such services.

Brokerage Commissions. For the years ended December 31, 1993,
1994 and 1995, and the period ended September 30, 1996, the Funds paid the
following for brokerage commissions:

<TABLE>
<CAPTION>
Fund Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995 Sept. 30, 1996
- ---- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Ginnie Mae $ -0- $ -0- $ -0- $ -0-
Growth and Income $ 347,779 $ 407,643 $ 607,442 $ 531,052
</TABLE>

25
<PAGE> 117
As of September 30, 1996, each Fund owned securities of its
"regular brokers or dealers" or their parents as defined in the Act, as
follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
- ---- ------ ---------------------
<S> <C> <C>
Ginnie Mae Fund $4,475,000 Goldman Sachs & Co.
Growth and Income Fund $6,438,000 Goldman Sachs & Co.
</TABLE>

Securities of Regular Broker/Dealers. As of December 31, 1995,
each Fund owned securities of its "regular brokers or dealers" or their parents
as defined in the Act, as follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
- ---- ------ ---------------------
<S> <C> <C>
Ginnie Mae $ 587,000 Goldman Sachs & Co.
Growth and Income $1,998,000 Goldman Sachs & Co.
</TABLE>

Portfolio Turnover Rate. The higher portfolio turnover rates for
the Ginnie Mae Fund should not adversely affect it because portfolio
transactions ordinarily are made directly with principals on a net basis and,
consequently, the Fund usually does not incur brokerage expenses. Portfolio
turnover rate is not a limiting factor when Wells Fargo Bank deems portfolio
changes appropriate.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens,
the Company bears all costs of its operations, including the compensation of
its Directors who are not affiliated with Stephens or Wells Fargo Bank or any
of their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing prospectuses (except the expense of printing and mailing prospectuses
used for promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of a Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of Fund shares;
pricing services, and any extraordinary expenses. Expenses attributable to a
Fund are charged against a Fund's assets. General expenses of the Company are
allocated among all of the funds of the Company, including a Fund, in a manner
proportionate to the net assets of each Fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.

26
<PAGE> 118
FEDERAL INCOME TAXES

In General. The following information supplements and should be
read in conjunction with Prospectus sections entitled "Dividend and Capital
Gain Distributions" and "Taxes." The Prospectuses generally describe the tax
treatment of distributions by each Fund. This section of the SAI includes
additional information concerning federal income taxes.

The Company intends to qualify each Fund as a regulated investment
company under Subchapter M of the Code as long as such qualification is in the
best interest of the Fund's shareholders. Each Fund will be treated as a
separate entity for tax purposes and thus the provisions of the Code applicable
to regulated investment companies will generally be applied to each Fund,
rather than to the Company as a whole. In addition, net capital gains, net
investment income, and operating expenses will be determined separately for
each Fund.

Qualification as a regulated investment company under the Code
requires, among other things, that (a) each Fund derive at least 90% of its
annual gross income from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; (b) each Fund derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) each Fund diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of
each Fund's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to an amount not greater than
5% of each Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government obligation and the
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are determined to be engaged in the same or
similar trades or businesses. As a regulated investment company, each Fund
will not be subject to federal income tax on its net investment income and net
capital gains distributed to its shareholders, provided that it distributes to
its shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. Each Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

A 4% nondeductible excise tax will be imposed on each Fund to the
extent it does not meet certain minimum distribution requirements by the end of
each calendar year. Each Fund will either actually or be deemed to distribute
all of its net investment income and net capital gains by the end of each
calendar year and, thus, expects not to be subject to the excise tax.

Income and dividends received by each Fund from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Although in some circumstances a regulated
investment company can elect to "pass through" foreign tax credits to its
shareholders, each Fund does not expect to be eligible to make such an
election.

27
<PAGE> 119
Corporate shareholders of the Growth and Income Fund may be
eligible for the dividends-received deduction on dividends distributed out of
the Fund's net investment income attributable to dividends received from
domestic corporations, which, if received directly by the corporate
shareholder, would qualify for such deduction. In order to qualify for the
dividends-received deduction, a corporate shareholder must hold the Fund shares
paying the dividends upon which the deduction is based for at least 46 days.

Federal Income Tax Rates. As of the printing of this SAI, the
maximum individual tax rate applicable to ordinary income is 39.60% (marginal
rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains is 28.00%; and the maximum corporate tax rate applicable to
ordinary income and net capital gains is 35.00% (except that to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

Capital Gain Distributions. To the extent that a Fund recognizes
long-term capital gains, such gains will be distributed at least annually and
these distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares. Such distributions
will be designated as capital gain distributions in a written notice mailed by
the Fund to shareholders not later than 60 days after the close of the Fund's
taxable year.

Other Distributions. Although dividends by the Ginnie Mae Fund
will be declared daily based on the Fund's daily earnings, for federal income
tax purposes, the Fund's earnings and profits will be determined at the end of
each taxable year and will be allocated pro rata over the entire year. For
federal income tax purposes, only amounts paid out of earnings and profits will
qualify as dividends. Thus, if during a taxable year the Fund's declared
dividends (as declared daily throughout the year) exceed the Fund's net income
(as determined at the end of the year), only that portion of the year's
distributions which equals the year's earnings and profits will be deemed to
have constituted a dividend. It is expected that the Fund's net income, on an
annual basis, will equal the dividends declared during the year.

28
<PAGE> 120
If a shareholder exchanges or otherwise disposes of Fund shares
within 90 days of having acquired such shares and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
on a new purchase of shares of the Fund or of a different regulated investment
company, the sales charge previously incurred acquiring the Fund's shares shall
not be taken into account (to the extent such previous sales charges do not
exceed the reduction in sales charges on the new purchase) for the purpose of
determining the amount of gain or loss on the disposition, but will be treated
as having been incurred in the acquisition of such other shares. Also, any
loss realized on a redemption or exchange of shares of the Fund will be
disallowed to the extent that substantially identical shares are reacquired
within the 61-day period beginning 30 days before and ending 30 days after the
shares are disposed of.

Taxation of Fund Investments. Gains or losses on sales of
portfolio securities by a Fund will generally be long-term capital gains or
losses if the securities have been held by it for more than one year, except in
certain cases such as where a Fund acquires a put or writes a call thereon.
Gains recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by a Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Fund held the debt obligation. Other
gains or losses on the sale of portfolio securities will be short-term capital
gains or losses.

Currency transactions may be subject to Section 988 of the Code,
under which foreign currency gains or losses would generally be computed
separately and treated as ordinary income or losses. Although the Growth and
Income Fund may engage in transactions subject to Section 988 of the Code, the
Fund will attempt to monitor Section 988 transactions to avoid an adverse tax
impact.

If a Fund purchases shares in a "passive foreign investment
company" ("PFIC"), the Fund may be subject to federal income tax and an
interest charge imposed by the IRS upon certain distributions from the PFIC or
the Fund's disposition of PFIC shares. If a Fund invests in a PFIC, the Fund
intends to make an available election to mark-to- market its interest in PFIC
shares. Under the election, the Fund will be treated as recognizing at the end
of each taxable year the excess, if any, of the fair market value of its
interest in PFIC shares over its basis in such shares. Although such excess
will be taxable to the Fund as ordinary income notwithstanding any
distributions by the PFIC, the Fund will not be subject to federal income tax
or the interest charge with respect to its interest in the PFIC.

Foreign Shareholders. Under the Code, distributions of net
investment income by a Fund to a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or a lower treaty rate). Withholding will not apply if a
dividend paid by each Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject

29
<PAGE> 121
to tax withholding, but, in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.

Backup Withholding. The Company may be required to withhold,
subject to certain exemptions, at a rate of 31% ("backup withholding") on
dividends, capital gain distributions, and redemption proceeds (including
proceeds from exchanges and redemptions in kind) paid or credited to an
individual Fund shareholder, unless a shareholder certifies that the Taxpayer
Identification Number ("TIN") provided is correct and that the shareholder is
not subject to backup withholding, or the IRS notifies the Company that the
shareholder's TIN is incorrect or the shareholder is subject to backup
withholding. Such tax withheld does not constitute any additional tax imposed
on the shareholder, and may be claimed as a tax payment on the shareholder's
federal income tax return. An investor must provide a valid TIN upon opening
or reopening an account. Failure to furnish a valid TIN to the Company could
subject the investor to penalties imposed by the IRS.

Other Matters. Investors should be aware that the investments to
be made by the Funds may involve sophisticated tax rules that may result in
income or gain recognition by the Funds without corresponding current cash
receipts. Although the Funds will seek to avoid significant noncash income,
such noncash income could be recognized by the Funds, in which case the Fund
may distribute cash derived from other sources in order to meet the minimum
distribution requirements described above.

The foregoing discussion and the discussions in the prospectus
applicable to each shareholder address only some of the federal tax
considerations generally affecting investments in a Fund. Each investor is
urged to consult his or her tax advisor regarding specific questions as to
federal, state or local taxes and foreign taxes.

CAPITAL STOCK

The Funds are two of the funds of the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of twenty-three other funds.

Most of the Company's funds are authorized to issue multiple
classes of shares, one class generally subject to a front-end sales charge and,
in some cases, a class subject to a contingent-deferred sales charge, that are
offered to retail investors. Certain of the Company's funds also are
authorized to issue other classes of shares, which are sold primarily to
institutional investors. Each class of shares in a fund represents an equal,
proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state
securities registration fees, shareholder servicing fees or distribution fees
that may be paid under Rule 12b-1) that are allocated to a particular class.
Please contact Stagecoach Shareholder Services at 1-800-222-8222 if you would
like additional information about other funds or classes of shares offered.

30
<PAGE> 122
Each of the Funds has three classes of shares -- Class A Shares,
Class B Shares and Institutional Class Shares. With respect to matters
affecting one Class but not another, shareholders vote as a Class. Subject to
the foregoing, all shares of a Fund have equal voting rights and will be voted
in the aggregate, and not by series, except where voting by a series is
required by law or where the matter involved only affects one series. For
example, a change in a Fund's fundamental investment policy affects only one
series and would be voted upon only by shareholders of the Fund involved.
Additionally, approval of an advisory contract, since it affects only one Fund,
is a matter to be determined separately by Series. Approval by the
shareholders of one Series is effective as to that Series whether or not
sufficient votes are received from the shareholders of the other Series to
approve the proposal as to those Series. As used in the Prospectus of each
Fund and in this SAI, the term "majority," when referring to approvals to be
obtained from shareholders of a Class of shares of a Fund, means the vote of
the lesser of (i) 67% of the shares of the Class represented at a meeting if
the holders of more than 50% of the outstanding shares of the Class are present
in person or by proxy, or (ii) more than 50% of the outstanding shares of the
Class of the Fund. As used in the Prospectus of each Fund and in this SAI, the
term "majority," when referring to approvals to be obtained from shareholders
of the Fund, means the vote of the lesser of (i) 67% of the shares of the Fund
represented at a meeting if the holders of more than 50% of the outstanding
shares of the Fund are present in person or by proxy, or (ii) more than 50% of
the outstanding shares of the Fund. The term "majority," when referring to the
approvals to be obtained from shareholders of the Company as a whole, means the
vote of the lesser of (i) 67% of the Company's shares represented at a meeting
if the holders of more than 50% of the Company's outstanding shares are present
in person or by proxy, or (ii) more than 50% of the Company's outstanding
shares. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held.

The Company may dispense with an annual meeting of shareholders in
any year in which it is not required to elect Directors under the 1940 Act.

Each share represents an equal proportional interest in the Fund
with each other share in the same Class of shares and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
the Fund as are declared in the discretion of the Directors. In the event of
the liquidation or dissolution of the Company, shareholders of a Fund are
entitled to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular investment portfolio that are available for distribution in such
manner and on such basis as the Directors in their sole discretion may
determine.

Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Company.

31
<PAGE> 123
Set forth below is the name, address and share ownership of each
person known by the Company to have beneficial or record ownership of 5% or
more of a class of each Fund or 5% or more of the voting securities of each
Fund as a whole.

5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
GINNIE MAE Wells Fargo Bank Class A 33.01% 27.52%
P.O. Box 63015 Beneficially
San Francisco, CA Owned
94163

GROWTH AND Wells Fargo Bank Class A 53.01% 46.20%
INCOME P.O. Box 63015 Beneficially
San Francisco, CA Owned
94163
</TABLE>

OTHER

The Registration Statement, including the Prospectus for each
Fund, the SAI and the exhibits filed therewith, may be examined at the office
of the SEC in Washington, D.C. Statements contained in a Prospectus or the SAI
as to the contents of any contract or other document referred to herein or in a
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent
auditors for the Company. KPMG Peat Marwick LLP provides audit services, tax
return preparation and assistance and consultation in connection with review of
certain SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero
Center, San Francisco, California 94111.

32
<PAGE> 124
FINANCIAL INFORMATION

33
<PAGE> 125
SAI APPENDIX

The following is a description of the ratings given by Moody's and
S&P to corporate bonds and commercial paper.

Corporate Bonds

Moody's: The four highest ratings for corporate bonds are "Aaa,"
"Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best quality"
and carry the smallest amount of investment risk. Bonds rated "Aa" are of
"high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1,
2 and 3 in each rating category from "Aa" through "Baa" in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by
S&P and have an extremely strong capacity to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity to pay interest and repay
principal" and differ "from the highest rated issued only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.

Corporate Commercial Paper

Moody's: The highest rating for corporate commercial paper is
"P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for repayment
of short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate commercial paper indicates
that the "degree of safety regarding timely payment is either overwhelming or
very strong." Commercial paper with "overwhelming safety characteristics" will
be rated "A-1+." Commercial paper with a strong capacity for timely payments
on issues will be rated "A-2."

A-1
<PAGE> 126
STAGECOACH FUNDS, INC.
Telephone: (800) 222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

SMALL CAP FUND

CLASS A AND CLASS B

---------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about one of the Company's series -- the SMALL CAP FUND (the
"Fund"). The Fund offers three classes of shares -- Class A Shares, Class B
Shares and Institutional Class shares. This SAI relates only to the Class A
Shares and Class B Shares of the Fund. The investment objective of the Fund is
described in the Prospectus under the heading "Investment Objective and
Policies." The Fund seeks to achieve its investment objective by investing all
of its assets in the Small Cap Master Portfolio (at times, the "Master
Portfolio") of Master Investment Trust ("MIT"), which has the same investment
objective as the Fund. The Fund may withdraw its investment in the Small Cap
Master Portfolio at any time, if the Board of Directors of the Company
determines that such action is in the best interests of the Fund and its
shareholders. Upon such withdrawal, the Company's Board would consider
alternative investments, including investing all of the Fund's assets in
another investment company with the same investment objective as the Fund or
hiring an investment adviser to manage the Fund's assets in accordance with the
investment policies and restrictions described in the Prospectus and below with
respect to MIT.

This SAI is not a prospectus and should be read in conjunction
with the Fund's Prospectus, dated February 1, 1997. All terms used in this SAI
that are defined in the Prospectus will have the meanings assigned in the
Prospectus. A copy of the Prospectus may be obtained without charge by writing
Stephens Inc. ("Stephens"), the Company's sponsor, co-administrator and
distributor, at 111 Center Street, Little Rock, Arkansas 72201, or calling the
Transfer Agent at the telephone number indicated above.

---------------------------
<PAGE> 127
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 1

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Servicing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . 12

Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . 16

Additional Purchase and Redemption Information . . . . . . . . . . . . . 17

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 18

Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

<PAGE> 128
INVESTMENT RESTRICTIONS

Fundamental Investment Policies. The Fund and the Master
Portfolio are subject to the following investment restrictions, all of which
are fundamental policies. These restrictions cannot be changed, as to either
the Fund or the Master Portfolio, without approval by the holders of a majority
(as defined by the 1940 Act) of the outstanding voting securities of the Fund
or the Master Portfolio, as appropriate. Whenever the Fund is requested to
vote on a fundamental policy of the Master Portfolio, the Fund will hold a
meeting of Fund shareholders and it will cast its votes as instructed by such
shareholders.

The Fund and the Master Portfolio may not:

(1) purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately after the
purchase and as a result thereof, the value of the Fund's investments in that
industry would equal or exceed 25% of the current value of the Fund's total
assets, provided that there is no limitation with respect to investments in
securities issued or guaranteed by the United States Government, its agencies
or instrumentalities; and provided further, that the Fund may invest all its
assets in a diversified, open-end management investment company, or a series
thereof, with substantially the same investment objective, policies and
restrictions as such Fund, without regard to the limitations set forth in this
paragraph (1);

(2) purchase or sell real estate (other than securities secured
by real estate or interests therein or securities issued by companies that
invest in real estate or interests therein, including mortgage passthrough
securities), commodities or commodity contracts or interests in oil, gas, or
other mineral exploration or development programs;

(3) purchase securities on margin (except for short-term
credits necessary for the clearance of transactions) or make short sales of
securities;

(4) underwrite securities of other issuers, except to the
extent that the purchase of permitted investments directly from the issuer
thereof or from an underwriter for an issuer and the later disposition of such
securities in accordance with the Fund's investment program may be deemed to be
an underwriting; and provided further, that the purchase by the Fund of
securities issued by a diversified, open-end management investment company, or
a series thereof, with substantially the same investment objective, policies
and restrictions as such Fund shall not constitute an underwriting for purposes
of this paragraph (4);

(5) make investments for the purpose of exercising control or
management; provided that the Fund may invest all its assets in a diversified,
open-end management company, or a series thereof, with substantially the same
investment objective, policies and restrictions as such Fund, without regard to
the limitations set forth in this paragraph (5);

1
<PAGE> 129
(6) issue senior securities, except that the Fund may borrow
from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets);

(7) make loans of portfolio securities having a value that
exceeds 33 1/3% of the current value of its total assets, provided that, this
restriction does not apply to the purchase of fixed time deposits, repurchase
agreements, commercial paper and other types of debt instruments commonly sold
in a public or private offering; nor

(8) purchase securities of any issuer (except securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) if, as
a result, with respect to 75% of its total assets, more than 5% of the value of
its total assets would be invested in the securities of any one issuer or, with
respect to 100% of its total assets, the Fund's ownership would be more than
10% of the outstanding voting securities of such issuer, provided that the Fund
may invest all its assets in a diversified, open-end management investment
company, or a series thereof, with substantially the same investment objective,
policies and restrictions as such Fund, without regard to the limitations set
forth in this paragraph (8).

Non-Fundamental Investment Policies. The Fund and the Master
Portfolio are subject to the following investment restrictions, all of which
are non-fundamental policies. These restrictions may be changed by a vote of a
majority of the Directors of the Company or the Trustees of MIT, as the case
may be, at any time.

The Fund and the Master Portfolio may not:

(1) purchase or retain securities of any issuer if the officers
or directors of the Fund or its Investment Adviser owning beneficially more
than one-half of one percent (0.5%) of the securities of the issuer together
own beneficially more than 5% of such securities;

(2) purchase or sell real estate limited partnership interests;

(3) invest in securities of issuers who, with their
predecessors, have been in existence less than three years, unless the
securities are fully guaranteed or insured by the U.S. Government if, by reason
thereof, the value of its aggregate investment in such securities will exceed
5% of its total assets;

(4) purchase securities of any issuer (except securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) if, as
a result, more than 5% of the value of the Fund's total assets would be
invested in the securities of any one issuer;

2
<PAGE> 130
(5) invest more than 15% of the Fund's net assets in illiquid
securities. For this purpose, illiquid securities include, among others, (a)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale, (b) fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, and (c) repurchase agreements not terminable within seven days;

(6) In addition, as a matter of non-fundamental policy, the
Fund may invest in shares of other open-end, management investment companies,
subject to the limitations of Section 12(d)(1) of the Act, provided that any
such purchases will be limited to temporary investments in shares of
unaffiliated investment companies and the Investment Adviser will waive its
advisory fees for that portion of the Fund's assets so invested, except when
such purchase is part of a plan of merger, consolidation, reorganization or
acquisition; nor

(7) Invest more than 25% of their respective net assets in
securities of foreign governmental and foreign private issues that are
denominated in and pay interest in U.S. dollars.

Notwithstanding any other investment policy or limitation (whether
or not fundamental), the Fund may invest all of its assets in the securities of
a single open-end management investment company with substantially the same
fundamental investment objective, policies and limitations as the Fund. A
decision to so invest all of its assets may, depending on the circumstances
applicable at the time, require approval of shareholders.

MANAGEMENT

*R. Greg Feltus, 45 Director, Senior Vice President
Chairman and of Stephens; Manager
</TABLE>

3
<PAGE> 131
<TABLE>
<S> <C> <C>
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of Stephens
Sports Management
Inc.; and President of
Investor Brokerage
Insurance Inc.

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate Professor of Finance
of the School of Business and Accounting at
Wake Forest University since 1983.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
</TABLE>

4
<PAGE> 132
<TABLE>
<S> <C> <C>
*J. Tucker Morse, 52 Director Private Investor; Real Estate
10 Legrae Street Developer; Chairman
Charleston, SC 29401 of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.

5
<PAGE> 133
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
------------------------------- -------------------------------
December 31, 1995 September 30, 1996
------------------------------- -------------------------------
Total Total
Aggregate Compensation Aggregate Compensation
Compensation from Registrant Compensation from Registrant
from and Fund from and Fund
Name and Position Registrant Complex Registrant Complex
----------------- ------------ --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of September
6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company
and by all the registrants in each fund complex they serve as indicated above
and also are reimbursed for all out-of-pocket expenses relating to attendance
at board meetings. The Company, Overland Express Funds, Inc., Stagecoach
Trust, Life & Annuity Trust and Master Investment Trust are considered to be
members of the same fund complex as such term is defined in Form N-1A under the
1940 Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment Trust together form a
separate fund complex (the "BGFA Fund Complex"). Each of the

6
<PAGE> 134
Directors and Officers of the Company serves in the identical capacity as
directors and officers or as trustees and/or officers of each registered
open-end management investment company in both the Wells Fargo and BGFA Fund
Complexes, except for Joseph N. Hankin, who only serves the aforementioned
members of the Wells Fargo Fund Complex, and Zoe Ann Hines who, after September
6, 1996, only serves the aforementioned members of the BGFA Fund Complex. The
Directors are compensated by other companies and trusts within a fund complex
for their services as directors/trustees to such companies and trusts.
Currently the Directors do not receive any retirement benefits or deferred
compensation from the Company or any other member of each fund complex.

As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

MASTER/FEEDER STRUCTURE. The Fund seeks to achieve its investment
objective by investing all of its assets into the Small Cap Master Portfolio of
MIT. The Fund and other entities investing in the Master Portfolio are each
liable for all obligations of the Master Portfolio. However, the risk of the
Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and MIT itself is
unable to meet its obligations. Accordingly, the Company's Board of Directors
believes that neither the Fund nor its shareholders will be adversely affected
by investing Fund assets in the Master Portfolio. However, if a mutual fund or
other investor withdraws its investment from the Master Portfolio, the economic
efficiencies (e.g., spreading fixed expenses among a larger asset base) that
the Company's Board believes may be available through investment in the Master
Portfolio may not be fully achieved. In addition, given the relative novelty of
the master/feeder structure, accounting or operational difficulties, although
unlikely, could arise. See "Management and Servicing Fees" for additional
description of the Fund's and Master Portfolio's expenses and management.

The Fund may withdraw its investment in the Master Portfolio only
if the Company's Board of Directors determines that such action is in the best
interests of the Fund and its shareholders. Upon such withdrawal, the Company's
Board would consider alternative investments, including investing all of the
Fund's assets in another investment company with the same investment objective
as the Fund or hiring an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Master Portfolio.

The investment objective and other fundamental policies of the
Master Portfolio cannot be changed without approval by the holders of a
majority (as defined in the 1940 Act) of the Master Portfolio's outstanding
interests. See "Investment Objectives and Policies." Whenever the Fund, as an
interestholder of the Master Portfolio, is requested to vote on any matter
submitted to interestholders of the Master Portfolio, the Fund will hold a
meeting of its shareholders to consider such matters. The Fund will cast its
votes in proportion to the votes received from its shareholders. Shares for
which the Fund receives no voting instructions will be voted in the same
proportion as the votes received from the other Fund shareholders.

7
<PAGE> 135
Certain policies of the Master Portfolio which are non-fundamental
may be changed by vote of a majority of MIT's Trustees without interestholder
approval. If the Master Portfolio's investment objective or fundamental or non-
fundamental policies are changed, the Fund may elect to change its objective or
policies to correspond to those of the Master Portfolio. The Fund may also
elect to redeem its interests in the Master Portfolio and either seek a new
investment company with a matching objective in which to invest or retain its
own investment adviser to manage the Fund's portfolio in accordance with its
objective. In the latter case, the Fund's inability to find a substitute
investment company in which to invest or equivalent management services could
adversely affect shareholders' investments in the Fund. The Fund will provide
shareholders with 30 days' written notice prior to the implementation of any
change in the investment objective of the Fund or the Master Portfolio, to the
extent possible. See "Investment Objective and Policies" for additional
information regarding the Fund's and the Master Portfolio's investment
objectives and policies. Additional information regarding the officers and
Directors/Trustees of the Company and MIT is located in the Fund's SAI under
"Management."

INVESTMENT ADVISER. The Fund has not engaged an investment
adviser. The Master Portfolio (which has the same investment objective as the
Fund, and in which the Fund invests all its assets) is advised by Wells Fargo.
The Advisory Contract provides that Wells Fargo shall furnish to the Master
Portfolio investment guidance and policy direction in connection with the daily
portfolio management of the Master Portfolio. Pursuant to the Advisory
Contract, Wells Fargo furnishes to the Board of Trustees of MIT periodic
reports on the investment strategy and performance of the Master Portfolio.
For its services as investment adviser to the Master Portfolio, Wells Fargo is
entitled to receive a monthly fee at the annual rate of 0.60% of the Master
Portfolio's average daily net assets.

For the period begun September 16, 1996 (the Fund's commencement
of operations) and ended September 30, 1996, the Master Portfolio paid to Wells
Fargo Bank $6,129 in advisory fees. No fees were waived.

Wells Fargo Bank has agreed to provide to the Master Portfolio,
among other things, money market security and fixed-income research, analysis
and statistical and economic data and information concerning interest rate and
security market trends, portfolio composition, credit conditions and average
maturities of the Master Portfolio.

The Advisory Contract will continue in effect for more than two
years provided the continuance is approved annually (i) by the holders of a
majority of the Master Portfolio's outstanding voting securities or by MIT's
Board of Trustees and (ii) by a majority of the Trustees of MIT who are not
parties to the Advisory Contract or "interested persons" (as defined in the
Act) of any such party. The Advisory Contract may be terminated on 60 days'
written notice by either party and will terminate automatically if assigned.

8
<PAGE> 136
ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained
Wells Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of
the Fund. In addition, MIT has retained Wells Fargo Bank as Administrator and
Stephens as Co-Administrator on behalf of the Master Portfolio. Under the
respective Administration and Co- Administration Agreements among Wells Fargo
Bank, Stephens and the Company and MIT, Wells Fargo Bank, Stephens shall
provide as administrative services, among other things: (i) general
supervision of the Fund's and the Master Portfolio's operations, including
coordination of the services performed by the investment adviser (in the case
of the Master Portfolio), transfer agent, custodian, shareholder servicing
agent(s), independent auditors and legal counsel, regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC and state securities commissions; and preparation of
proxy statements and shareholder reports for the Fund and the Master Portfolio;
and (ii) general supervision relative to the compilation of data required for
the preparation of periodic reports distributed to the Company's and MIT's
Officers, Directors and Trustees. Wells Fargo Bank and Stephens also furnish
office space and certain facilities required for conducting the Fund's and the
Master Portfolio's business together with ordinary clerical and bookkeeping
services. Stephens pays the compensation of MIT's and Company's
Directors/Trustees, Officers and employees who are affiliated with Stephens.
The Administrator and Co-Administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of the Fund.

For the period begun September 16, 1996 and ended September 30,
1996, Stephens served as sole administrator to the Fund, and received $492 in
administrative fees. Stephens was entitled to receive a monthly fee at the
annual rate of 0.05% of the Fund's average daily net assets.

SPONSOR AND DISTRIBUTOR. As discussed in the Fund's prospectus
under the heading "Management and Servicing Fees," Stephens serves as the Fund's
sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in the Fund's
prospectus under the heading "Shareholder Servicing Agent," the Fund has
entered into a shareholder servicing agreement with Wells Fargo Bank. The
Class A and B shares of the Fund paid no shareholder servicing fees to Wells
Fargo Bank or its affiliates for the period ended September 30, 1996.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo
has been retained to act as custodian and transfer and dividend disbursing
agent for the Fund and the Master Portfolio. The custodian, among other
things, maintains a custody account or accounts in the name of the Fund and the
Master Portfolio, receives and delivers all assets for the Fund and the Master
Portfolio upon purchase and upon sale or maturity, collects and receives all
income and other payments and distributions on account of the assets of the
Fund and the Master Portfolio and pays all expenses of the Fund and the Master
Portfolio. For its services as custodian, Wells Fargo is entitled to receive
fees as

9
<PAGE> 137
follows: a net asset charge at the annual rate of 0.0167%, payable monthly,
plus specified transaction charges. Wells Fargo also will provide portfolio
accounting services under the Custody Agreement as follows: a monthly base fee
of $2,000 plus a net asset fee at the annual rate of 0.070% of the first
$50,000,000 of the Fund's average daily net assets, 0.045% of the next
$50,000,000, and 0.020% of the average daily net assets in excess of
$100,000,000.

For the period begun September 16, 1996 and ended September 30,
1996, the Fund paid no custody fees to Wells Fargo Bank.

For its services as transfer and dividend disbursing agent for the
Class A and B shares of the Fund, Wells Fargo Bank is entitled to receive
monthly payments at the annual rate of 0.14% of the average daily net assets of
the Fund's Class A and B shares. Under the prior transfer agency agreement for
the Fund, Wells Fargo Bank was entitled to receive monthly payments at the
annual rate of 0.07% of the Fund's average daily net assets, regardless of
Class, as well as reimbursement for all reasonable out-of-pocket expenses.

For the period begun September 16, 1996 and ended September 30,
1996, the Fund paid to Wells Fargo Bank $617 (after waivers) in transfer and
dividend disbursing agency fees.

UNDERWRITING COMMISSIONS. For the years ended December 31, 1993
and 1994, the Company's distributor retained $26,215,173 and $5,415,227,
respectively in underwriting commissions (front-end sales loads and CDSCs, if
any) in connection with the purchase or redemption of Company shares. For the
years ended December 31, 1993 and 1994, Wells Fargo Securities Inc. ("WFSI"),
an affiliated broker-dealer of the Company, and its registered representatives
received $378,895 and $904,274, respectively, in underwriting commissions in
connection with the purchase or redemption of Company shares.

For the period ended September 30, 1996, the aggregate amount of
underwriting commissions on sales/redemptions of the Company's shares was
$2,917,738. Stephens retained $198,664 of such commissions. WFSI and its
registered representatives retained $2,583,027 and $136,047, respectively, of
such commissions.

COLLECTIVE INVESTMENT FUND MANAGEMENT FEES. Prior to September
16, 1996, Wells Fargo provided management and administrative services to the
Collective Investment Fund. For these services Wells Fargo charged fees at an
annual rate of 0.75% of the Collective Investment Fund's average net assets.
Wells Fargo was also entitled to be reimbursed by the Collective Investment
Fund for expenses incurred on its behalf, excluding costs incurred in
establishing and organizing the Fund. The Collective Investment Fund was
entitled to pay up to 0.10% of its net assets for "Audit Expenses."

10
<PAGE> 138
There were no sales charges. The Collective Investment Fund paid all brokerage
commissions incurred on its portfolio transactions.

DISTRIBUTION PLANS

The following information supplements and should be read in
conjunction with the Prospectus section entitled "Distribution Plans." As
indicated in the Prospectus, the Fund, on behalf of each of its classes of
shares, has adopted a Plan under Section 12(b) of the Act and Rule 12b-1
thereunder (the "Rule"). Each Plan was adopted by a majority of the directors
who were not "interested persons" (as defined in the Act) of the Fund and who
had no direct or indirect financial interest in the operation of the Plans or
in any agreement related to the Plans (the "Qualified Directors").

Under the Distribution Agreement for the Class A Shares, Stephens
is entitled to receive from the Fund, as reimbursement for all or part of the
cost of preparing and printing prospectuses and other promotional materials and
of delivering prospectuses and those materials to prospective shareholders and
as reimbursement for other distribution- related services, a fee computed on a
monthly basis at an annual rate of up to 0.10% of the average daily net assets
of the Class A Shares of the Fund.

Under the Distribution Agreement for the Class B Shares, Stephens
is entitled to receive from the Fund as compensation for distribution-related
services provided or as reimbursement for distribution-related expenses
incurred, a monthly fee at an annual rate of up to 0.75% of the average daily
net assets of the Class B Shares of the Fund.

For the period begun September 16, 1996 and ended September 30,
1996, the Fund's distributor received the following amounts of 12b-1 fees for
the specified purposes set forth below under each Plan.

<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Small Cap Fund Total Prospectus Brochures Underwriters
- -------------- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
Class A $ 2 $-0- $ 2 N/A
Class B $-0- N/A N/A $-0-
</TABLE>

Each Plan will continue in effect from year to year if its
continuance is approved by a majority vote of both the directors of the Company
and the Qualified Directors. Agreements related to the Plans also must be
approved by such vote of the directors and the Qualified Directors. Such
agreements will terminate automatically if assigned, and may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
outstanding voting securities of the Fund. The Plans may not be amended to
increase materially the amounts payable thereunder without the approval of a
majority of the outstanding voting securities of the Fund, and no material
amendment to a

11
<PAGE> 139
Plan may be made except by a majority of both the directors of the Company and
the Qualified Directors.

The Plans require that the Treasurer of the Fund shall provide to
the directors, and the directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefore) under such Plan. The
Rule also requires that the selection and nomination of directors who are not
"interested persons" of the Company be made by such disinterested directors.

SERVICING PLAN

The Company's Board of Directors, on behalf of the Fund, adopted a
Servicing Plan ("Servicing Plan") on August 28th and 29th, 1996, with respect
to each class of the Fund's shares. The Servicing Plan was approved by a
majority of the Directors who were not "interested persons" (as defined in the
Act) of the Fund and who had no direct or indirect financial interest in the
operation of the Servicing Plan or in any agreement related to the Servicing
Plan (the "Servicing Plan Non-Interested Directors").

Under the Servicing Plan and pursuant to the shareholder servicing
agreements for the Class A or B Shares, the Fund may pay one or more servicing
agents, as compensation for performing certain services, a fee at an annual
rate of up to 0.25% of the average daily net assets of the Fund's Class A or B
Shares attributable to the servicing agent's customers. The actual fee payable
to servicing agents is determined, within such limits, from time to time by
mutual agreement between the Company and each servicing agent and will not
exceed the maximum service fees payable by mutual funds sold by members of the
NASD under the NASD Rules of Fair Practice.

Each Servicing Plan continues in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Servicing Plan Non-Interested Directors. Any form of servicing
agreement related to the Servicing Plan also must be approved by such vote of
the Directors and the Servicing Plan Non- Interested Directors. Servicing
agreements may be terminated at any time, without payment of any penalty, by
vote of a majority of the Servicing Plan Non-Interested Directors. No material
amendment to the Servicing Plans may be made except by a majority of both the
Directors of the Company and the Servicing Plan Non-Interested Directors.

Each Servicing Plan requires that the administrator shall provide
to the Directors, and the Directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Servicing
Plan.

12
<PAGE> 140
PERFORMANCE CALCULATIONS

The following information supplements and should be read in
conjunction with the sections in the Prospectus entitled "Investing in the Fund
- -- Share Value" and "How the Fund Works -- Performance."

As indicated in the Prospectus, the Fund may advertise certain
total return information for a class of shares, computed in the manner
described in the Prospectus. As and to the extent required by the Commission,
an average annual compound rate of return ("T") will be computed by using the
redeemable value at the end of a specified period ("ERV") of a hypothetical
initial investment in a class of shares ("P") over a period of years ("n")
according to the following formula: P(1+T)n = ERV. In addition, as indicated
in the Prospectus, the Fund also may, at times, calculate total return for a
class of shares based on net asset value per share (rather than the public
offering price), in which case the figures would not reflect the effect of any
sales charges that would have been paid by an investor, or would be based on
the assumption that a sales charge other than the maximum sales charge
(reflecting a Volume Discount) was assessed, provided that total return data
derived pursuant to the calculation described above also are presented.

In addition to the above performance information, the Fund may
also advertise the cumulative total return of a class. The cumulative total
return for such periods is based on the overall percentage change in value of a
hypothetical investment in a class of shares, assuming all dividends and
capital gain distributions are reinvested in shares of that class, without
reflecting the effect of any sales charge that would be paid by an investor,
and is not annualized.

Performance information may be advertised for non-standardized
periods, including year-to-date and other periods less than a year.

The total return information presented below and advertised by the
Fund for the period prior to September 16, 1996, the date the Fund commenced
operations, is based upon the prior performance of the Collective Investment
Fund. The performance information is adjusted to reflect each class' current
level of operating expenses.

For the Applicable Period Ended September 30, 1996

<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Total Return
------------------------------------------------- ----------------------------
Inception(1) Inception One Year One Year Inception Inception
With Sales No Sales With Sales No Sales With Sales No Sales
CLASS Charge(2) Charge Charge Charge Charge Charge
----- ----------- --------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
A 47.00% 50.56% 29.94% 36.08% 109.25% 119.09%
B 48.96% 49.68% 32.39% 35.39% 114.63% 116.63%
</TABLE>

13
<PAGE> 141
- -----------

(1) The Small Cap Fund commenced operations on September 16, 1996, as the
successor to Small Capitalization Growth Fund for BRP Employment Retirement
Plans, an unregistered bank collective investment fund (the "Predecessor
Fund") which, in turn, commenced operations on November 2, 1994.

(2) For Class A Shares, there is a front-end sales charge of 4.50%. For Class
B Shares, there is a maximum contingent deferred sales charge ("CDSC") of
3.00%.

From time to time and only to the extent the comparison is
appropriate for a class of shares of the Fund, the Company may quote the
performance or price-earning ratio of a class of shares of the Fund in
advertising and other types of literature as compared to the performance of the
1-Year Treasury Bill Rate, the S&P Index, the Dow Jones Industrial Average, the
Lehman Brothers 20+ Years Treasury Index, the Lehman Brothers 5-7 Year Treasury
Index, Donoghue's Money Fund Averages, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by the World Gold Council), Bank Averages (which
is calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), average annualized certificate of deposit rates (from the Federal
Reserve G-13 Statistical Releases or the Bank Rate Monitor), the Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), Ten Year U.S. Government Bond Average, S&P's
Corporate Bond Yield Averages, Schabacter Investment Management Indices,
Salomon Brothers High Grade Bond Index, Lehman Brothers Long-Term High Quality
Government/Corporate Bond Index, other managed or unmanaged indices or
performance data of bonds, stocks or government securities (including data
provided by Ibbotson Associates), or by other services, companies, publications
or persons who monitor mutual funds on overall performance or other criteria.
The S&P Index and the Dow Jones Industrial Average are unmanaged indices of
selected common stock prices. The performance of a class of shares of the Fund
also may be compared to the performance of other mutual funds having similar
objectives. This comparative performance could be expressed as a ranking
prepared by Lipper Analytical Services, Inc., CDA Investment Technologies,
Inc., Bloomberg Financial Markets or Morningstar, Inc., independent services
which monitor the performance of mutual funds. The performance of a class of
shares of the Fund will be calculated by relating net asset value per share at
the beginning of a stated period to the net asset value of the investment,
assuming reinvestment of all gains distributions and dividends paid, at the end
of the period. Any such comparisons may be useful to investors who wish to
compare the class' past performance with that of its competitors. Of course,
past performance cannot be a guarantee of future results. The Company also may
include, from time to time, a reference to certain marketing approaches of the
Distributor, including, for example, a reference to a potential shareholder
being contacted by a selected broker or dealer. General mutual fund statistics
provided by the Investment Company Institute may also be used.

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<PAGE> 142
growth; and (2) describing Wells Fargo, and its affiliates and predecessors, as
one of the first investment managers to advise investment accounts using asset
allocation and index strategies. The Company also may include in advertising
and other types of literature information and other data from reports and
studies prepared by the Tax Foundation, including information regarding federal
and state tax levels and the related "Tax Freedom Day."

The Company also may use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for a class of shares of the Fund: (i) the Consumer
Price Index may be used to assess the real rate of return from an investment in
a class of shares of the Fund; (ii) other government statistics, including, but
not limited to, The Survey of Current Business, may be used to illustrate
investment attributes of a class of shares of the Fund or the general economic,
business, investment, or financial environment in which the Fund operates;
(iii) the effect of tax-deferred compounding on the investment returns of a
class of shares of the Fund, or on returns in general, may be illustrated by
graphs, charts, etc., where such graphs or charts would compare, at various
points in time, the return from an investment in a class of shares of the Fund
(or returns in general) on a tax-deferred basis (assuming reinvestment of
capital gains and dividends and assuming one or more tax rates) with the return
on a taxable basis; and (iv) the sectors or industries in which the Fund
invests may be compared to relevant indices of stocks or surveys (e.g., S&P
Industry Surveys) to evaluate the historical performance or current or
potential value of a class of shares of the Fund with respect to the particular
industry or sector.

The Company may also disclose in advertising and other types of
literature, information and statements the distribution rate on the shares of
each class of the Fund. Distribution rate is the amount determined by dividing
the dollar amount per share of the most recent dividend by the most recent NAV
per share.

The Company also may discuss in advertising and other types of
literature that the Fund has been assigned a rating by an NRSRO, such as S&P or
Moody's. Such rating would assess the creditworthiness of the investments held
by the Fund. The assigned rating would not be a recommendation to purchase,
sell or hold the Fund's shares since the rating would not comment on the market
price of the Fund's shares or the suitability of the Fund for a particular
investor. In addition, the assigned rating would be subject to change,
suspension or withdrawal as a result of changes in, or the unavailability of,
information relating to the Fund or its investments. The Company may compare
the performance of

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<PAGE> 143

the Fund with other investments that are assigned ratings by the NRSROs. Any
such comparisons may be useful to investors who wish to compare the Fund's past
performance with other rated investments.

The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Fargo Investment Management
("WFIM"), a division of Wells Fargo Bank is listed in the top 100 by
Institutional Investor magazine in its July 1996 survey "America's Top 300 Money
Managers." This survey ranks money managers in several asset categories. The
Company may also disclose in advertising and other types of sales literature the
assets and categories of assets under management by the Company's investment
adviser and the total amount of assets and mutual fund assets managed by Wells
Fargo Bank. As of December 31, 1996, Wells Fargo Bank and its affiliates
provided investment advisory services for approximately $54 billion of assets of
individuals, trusts, estates and institutions and $20 billion of mutual fund
assets.

The Company may disclose in advertising and other types of
literature that investors can open and maintain Sweep Accounts over the
Internet or through other electronic channels (collectively, "Electronic
Channels"). Such advertising and other literature may discuss the investment
options available to investors, including the types of account and any
applicable fees. Such advertising and other literature may disclose that Wells
Fargo Bank is the first major bank to offer an on-line application for a mutual
fund account that can be filled out completely through Electronic Channels.
Advertising and other literature may disclose that Wells Fargo may maintain Web
sites, pages or other information sites accessible through Electronic Channels
(an "Information Site") and may describe the contents and features of the
Information Site and instruct investors on how to access the Information Site
and open a Sweep Account. Advertising and other literature may also disclose
the procedures employed by Wells Fargo Bank to secure information provided by
investors, including disclosure and discussion of the tools and services for
accessing Electronic Channels. Such advertising or other literature may
include discussions of the advantages of establishing and maintaining a Sweep
Account through Electronic Channels and testimonials from Wells Fargo Bank
customers or employees and may also include descriptions of locations where
product demonstrations may occur. The Company may also disclose the ranking of
Wells Fargo Bank as one of the largest money managers in the United States.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the Prospectus section entitled "Investing in the Fund." Net
asset value per share for each class of the Fund and net asset value per unit
of the Master Portfolio are each determined by Wells Fargo on each day the
Exchange is open for trading as of the close of regular trading on the
Exchange, which is currently 1:00 p.m. Pacific time.

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<PAGE> 144
Securities of the Master Portfolio for which market quotations are
available are valued at latest prices. Any security for which the primary
market is an exchange is valued at the last sale price on such exchange on the
day of valuation or, if there was no sale on such day, the latest bid price
quoted on such day. In the case of other securities, including U.S. Government
securities but excluding money market instruments maturing in 60 days or less,
the valuations are based on latest quoted bid prices. Money market instruments
maturing in 60 days or less are valued at amortized cost. The assets of the
Master Portfolio other than money market instruments maturing in 60 days or
less are valued at latest quoted bid prices. Prices may be furnished by a
reputable independent pricing service approved by the Board of Trustees.
Prices provided by an independent pricing service may be determined without
exclusive reliance on quoted prices and may take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data. All other securities and other assets of the Master
Portfolio for which current market quotations are not readily available are
valued at fair value as determined in good faith by MIT's Trustees and in
accordance with procedures adopted by the Trustees.

Expenses and fees, including advisory fees are accrued daily and
are taken into account for the purpose of determining the net asset value of
the Master Portfolio's interests and the Fund's shares.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Payment for shares may, in the discretion of the adviser, be made
in the form of securities that are permissible investments for the Fund as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by
the Fund and that the Fund receives satisfactory assurances that (i) it will
have good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Fund may suspend the right of redemption
or postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation), an emergency exists as a

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<PAGE> 145
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such periods as the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to
reimburse the Fund for any losses sustained by reason of the failure of a
shareholders to make full payment for shares purchased or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to shares of the Fund as provided from time to time in the
Prospectus.

PORTFOLIO TRANSACTIONS

Purchases and sales of securities by the Master Portfolio are
usually principal transactions. Portfolio securities normally are purchased or
sold from or to dealers serving as market makers for the securities at a net
price. The Master Portfolio also may purchase portfolio securities in
underwritten offerings and may purchase securities directly from the issuer.
The cost of executing the Master Portfolio's portfolio securities transactions
consists primarily of dealer spreads and underwriting commissions. Under the
1940 Act, persons affiliated with MIT are prohibited from dealing with MIT as a
principal in the purchase and sale of securities unless an exemptive order or
other relief allowing such transactions is obtained from the SEC or an
exemption is otherwise available. The Master Portfolio may purchase securities
from underwriting syndicates of which Stephens or Wells Fargo is a member under
certain conditions in accordance with the provisions of a rule adopted under
the 1940 Act and in compliance with procedures adopted by the Board of
Trustees.

The Trust has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by MIT's Board of Trustees, Wells Fargo is responsible for
the Master Portfolio decisions and the placing of portfolio transactions. In
placing orders, it is the policy of MIT to obtain the best overall terms taking
into account the dealer's general execution and operational facilities, the
type of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While Wells Fargo generally seeks
reasonably competitive spreads or commissions, the Master Portfolio will not
necessarily be paying the lowest spread or commission available.

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<PAGE> 146
broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. Wells Fargo Bank may cause
the Master Portfolio to pay a broker/dealer which furnishes brokerage and
research services a higher commission than that which might be charged by
another broker/dealer for effecting the same transaction, provided that Wells
Fargo Bank determines in good faith that such commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker/dealer, viewed in terms of either the particular transaction or the
overall responsibilities of Wells Fargo Bank. Such brokerage and research
services might consist of reports and statistics relating to specific companies
or industries, general summaries of groups of stocks or bonds and their
comparative earnings and yields, or broad overviews of the stock, bond, and
government securities markets and the economy.
Supplementary research information so received is in addition to,
and not in lieu of, services required to be performed by Wells Fargo Bank and
does not reduce the advisory fees payable by the Master Portfolio. The Board of
Trustees will periodically review the commissions paid by the Master Portfolio
to consider whether the commissions paid over representative periods of time
appear to be reasonable in relation to the benefits inuring to the Master
Portfolio. It is possible that certain of the supplementary research or other
services received will primarily benefit one or more other investment companies
or other accounts for which investment discretion is exercised. Conversely,
the Master Portfolio may be the primary beneficiary of the research or services
received as a result of portfolio transactions effected for such other account
or investment company.

Under Section 28(e) of the Securities Exchange Act of 1934, an adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), an adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to the Master Portfolio in any transaction may be less favorable than
that available from another broker/dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.

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<PAGE> 147
securities and information concerning prices of securities; and information
supplied by specialized services to Wells Fargo Bank and to MIT's Trustees with
respect to the performance, investment activities and fees and expenses of
other mutual Funds. Such information may be communicated electronically,
orally or in written form. Research services may also include the providing of
equipment used to communicate research information, the arranging of meetings
with management of companies and the providing of access to consultants who
supply research information.

The outside research assistance is useful to Wells Fargo Bank
since the brokers utilized by Wells Fargo Bank as a group tend to follow a
broader universe of securities and other matters than the staff of Wells Fargo
Bank can follow. In addition, this research provides Wells Fargo Bank with a
diverse perspective on financial markets. Research services which are provided
to Wells Fargo Bank by brokers are available for the benefit of all accounts
managed or advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank
that this material is beneficial in supplementing their research and analysis;
and, therefore, it may benefit the Master Portfolio by improving the quality of
Wells Fargo Bank's investment advice. The advisory fees paid by the Master
Portfolio are not reduced because Wells Fargo Bank receives such services.

Brokerage Commissions. For the period ended September 30, 1996,
the Fund paid the following for brokerage commissions:
<TABLE>
<CAPTION>
September 30, 1996
------------------
<S> <C>
Small Cap Fund $1,856
</TABLE>

Securities of Regular Broker/Dealers. As of September 30, 1996,
the Fund owned no securities of its "regular brokers or dealers" or their
parents as defined in the Act.

Portfolio Turnover. Portfolio turnover generally involves some
expenses to the Master Portfolio, including brokerage commissions or dealer
mark-ups and other transactions costs on the sale of securities and the
reinvestment in other securities. Portfolio turnover also can generate
short-term capital gains tax consequences. The portfolio turnover rate will
not be a limiting factor when Wells Fargo deems portfolio changes appropriate.

FUND EXPENSES

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<PAGE> 148
and printing prospectuses (except the expense of printing and mailing
prospectuses used for promotional purposes, unless otherwise payable pursuant
to a Plan), shareholders' reports, notices, proxy statements and reports to
regulatory agencies; insurance premiums and certain expenses relating to
insurance coverage; trade association membership dues; brokerage and other
expenses connected with the execution of portfolio transactions; fees and
expenses of its custodian, including those for keeping books and accounts and
calculating the NAV per share of the Fund; expenses of shareholders' meetings;
expenses relating to the issuance, registration and qualification of the Fund's
shares; pricing services, and any extraordinary expenses. Expenses
attributable to the Fund are charged against Fund assets. General expenses of
the Company are allocated among all of the funds of the Company, including the
Fund, in a manner proportionate to the net assets of the Fund, on a
transactional basis, or on such other basis as the Company's Board of Directors
deems equitable.

FEDERAL INCOME TAXES

In General. The following information supplements and should be
read in conjunction with the Prospectus sections entitled "Dividend and Capital
Gain Distributions" and "Taxes." The Prospectus of the Fund describes
generally the tax treatment of distributions by the Master Portfolio and the
Fund. This section of the SAI includes additional information concerning
federal income taxes.

Qualification as a regulated investment company under the Code
requires, among other things, that (a) the Fund derive at least 90% of its
annual gross income from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; (b) the Fund derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) the Fund diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of
the Fund's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government securities and the
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are determined to be engaged in the same or
similar trades or businesses. For purposes of complying with these
qualification requirements, the

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<PAGE> 149
Fund will be deemed to own a proportionate share of the Master Portfolio's
assets. As a regulated investment company, the Fund will not be subject to
federal income tax on its net investment income and net capital gains
distributed to its shareholders, provided that it distributes to its
shareholders at least 90% its net investment income, including net tax-exempt
income, earned in each year. The Fund intends to pay out substantially all of
its net investment income and net realized capital gains (if any) for each
year.

A 4% nondeductible excise tax will be imposed on the Fund to the
extent it does not meet certain minimum distribution requirements by the end of
each calendar year. The Fund will either actually or be deemed to distribute
all of its net investment income and net capital gains by the end of each
calendar year and, thus, expects not to be subject to the excise tax.

The Fund seeks to qualify as a regulated investment company by
investing substantially all of its assets in the Master Portfolio. The Master
Portfolio will be treated as a non-publicly traded partnership rather than as a
regulated investment company or a corporation under the Code. As a
non-publicly traded partnership, any interest, dividends, gains and losses of
the Master Portfolio shall be deemed to have been "passed through" to the Fund
(and the Master Portfolio's other investors) in proportion to the Fund's
ownership interest in the Master Portfolio. Therefore, to the extent the
Master Portfolio were to accrue but not distribute any interest, dividends or
gains, the Fund would be deemed to have realized and recognized its
proportionate share of interest, dividends or gains without receipt of any
corresponding distribution. However, the Master Portfolio will seek to
minimize recognition by investors of interest, dividends, gains or losses
without a corresponding distribution.

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<PAGE> 150
that to eliminate the benefit of lower marginal corporate income tax rates,
corporations which have taxable income in excess of $100,000 for a taxable year
will be required to pay an additional amount of income tax of up to $11,750 and
corporations which have taxable income in excess of $15,000,000 for a taxable
year will be required to pay an additional amount of tax of up to $100,000).
Naturally, the amount of tax payable by an individual or corporation will be
affected by a combination of tax laws covering, for example, deductions,
credits, deferrals, exemptions, sources of income and other matters.

Capital Gain Distributions. To the extent that the Fund
recognizes long-term capital gains, such gains will be distributed at least
annually and these distributions will be taxable to shareholders as long-term
capital gains, regardless of how long a shareholder has held Fund shares. Such
distributions will be designated as capital gain distributions in a written
notice mailed by the Fund to shareholders not later than 60 days after the
close of the Fund's taxable year.

If a shareholder exchanges or otherwise disposes of Fund shares
within 90 days of having acquired such shares and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
on a new purchase of shares of the Fund or of a different regulated investment
company, the sales charge previously incurred acquiring the Fund's shares shall
not be taken into account (to the extent such previous sales charges do not
exceed the reduction in sales charges on the new purchase) for the purpose of
determining the amount of gain or loss on the disposition, but will be treated
as having been incurred in the acquisition of such other shares. Also, any
loss realized on a redemption or exchange of shares of the Fund will be
disallowed to the extent that substantially identical shares are reacquired
within the 61-day period beginning 30 days before and ending 30 days after the
shares are disposed of.

Taxation of Fund Investments. Gains or losses on sales of
portfolio securities by the Master Portfolio will generally be long-term
capital gains or losses if the securities have been held by it for more than
one year, except in certain cases such as where the Master Portfolio acquires a
put or writes a call thereon. Gains recognized on the disposition of a debt
obligation (including tax-exempt obligations purchased after April 30, 1993)
purchased by the Master Portfolio at a market discount (generally at a price
less than its principal amount) will be treated as ordinary income to the
extent of the portion of market discount which accrued during the period of
time the Master Portfolio held the debt obligation. Other gains or losses on
the sale of portfolio securities will be short-term capital gains or losses.

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<PAGE> 151
If an option written by the Master Portfolio lapses or is
terminated through a closing transaction, such as a repurchase by the Master
Portfolio of the option from its holder, the Master Portfolio will realize a
short-term capital gain or loss, depending on whether the premium income is
greater or less than the amount paid by the Master Portfolio in the closing
transaction. Some realized capital losses may be deferred if they result from
a position which is part of a "straddle," discussed below. If securities are
sold by the Master Portfolio pursuant to the exercise of a call option written
by it, the Master Portfolio will add the premium received to the sale price of
the securities delivered in determining the amount of gain or loss on the sale.
If securities are purchased by the Master Portfolio pursuant to the exercise of
a put option written by it, the Master Portfolio will subtract the premium
received from its cost basis in the securities purchased. The requirement that
the Fund derive less than 30% of its gross income from gains from the sale of
securities held for less than three months may limit the Master Portfolio's
ability to write options.

The amount of any gain or loss realized by a Fund on closing out a
futures contract will generally result in a realized capital gain or loss for
tax purposes. Futures contracts held at the end of each fiscal year will be
required to be "marked to market" for federal income tax purposes pursuant to
Section 1256 of the Code. In this regard, they will be deemed to have been
sold at market value. Sixty percent (60%) of any net gain or loss recognized
on these deemed sales and sixty percent (60%) of any net realized gain or loss
from any actual sales, generally will be treated as long-term capital gain or
loss, and the remaining forty percent (40%) will be treated as short-term
capital gain or loss. Transactions that qualify as designated hedges are
excepted from the "marked to market" and "60%/40%" rules. Currency
transactions may be subject to Section 988 of the Code, under which foreign
currency gains or losses would generally be computed separately and treated as
ordinary income or losses. The Funds will attempt to monitor Section 988
transactions to avoid an adverse tax impact.

If a regulated investment company were treated as entering into
"straddles" by reason of its engaging in certain financial forward, futures or
option contracts, such straddles could be characterized as "mixed straddles" if
the futures, forwards, or options comprising a part of such straddles were
governed by Section 1256 of the Code. The regulated investment company may
make one or more elections with respect to "mixed straddles." Depending upon
which election is made, if any, the results with respect to the regulated
investment company may differ. Generally, to the extent the straddle rules
apply to positions established by the regulated investment company, losses
realized by the regulated investment company may be deferred to the extent of
unrealized gain in any

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<PAGE> 152
offsetting positions. Moreover, as a result of the straddle and the conversion
transaction rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gain may be
characterized as short-term capital gain or ordinary income.

If the Master Portfolio purchases shares in a "passive foreign
investment company" ("PFIC"), the Fund may be subject to federal income tax and
an interest charge imposed by the IRS upon certain distributions from the PFIC
or the Master Portfolio's disposition of its PFIC shares. If the Master
Portfolio invests in a PFIC, the Fund intends to make an available election to
mark-to-market its interest in PFIC shares (through the Master Portfolio).
Under the election, the Fund will be treated as recognizing at the end of each
taxable year the excess, if any, of the fair market value of its interest in
PFIC shares over its basis in such shares. Although such excess will be
taxable to the Fund as ordinary income notwithstanding any distributions by the
PFIC, the Fund will not be subject to federal income tax or the interest charge
with respect to its interest in the PFIC.

Foreign Shareholders. Under the Code, distributions of net
investment income by the Fund to a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or a lower treaty rate). Withholding will not apply if a
dividend paid by the Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.

Backup Withholding. The Company may be required to withhold,
subject to certain exemptions, at a rate of 31% ("backup withholding") on
dividends, capital gain distributions, and redemption proceeds (including
proceeds from exchanges) paid or credited to an individual Fund shareholder,
unless a shareholder certifies that the Taxpayer Identification Number ("TIN")
provided is correct and that the shareholder is not subject to backup
withholding, or the IRS notifies the Company that the shareholder's TIN is
incorrect or the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by the IRS.

Other Matters. Investors should be aware that the investments to
be made by the Master Portfolio may involve sophisticated tax rules that may
result in income or gain recognition by the Fund without corresponding current
cash receipts. Although the Master Portfolio will seek to avoid significant
noncash income, such noncash income could be recognized by the Master
Portfolio, in which case the Fund may distribute cash derived

25
<PAGE> 153
from other sources in order to meet the minimum distribution requirements
described above.

The foregoing discussion and the discussions in the Prospectus
address only some of the federal tax considerations generally affecting
investments in a Fund. Each investor is urged to consult his or her tax
advisor regarding specific questions as to federal, state or local taxes and
foreign taxes.

CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Fund, the Master
Portfolio and Management."

The Fund is one of the funds of the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of twenty-four other funds.

Most of the Company's funds are authorized to issue multiple
classes of shares, one class generally subject to a front-end sales charge and,
in some cases, a class subject to a contingent-deferred sales charge, that are
offered to retail investors. Certain of the Company's funds also are
authorized to issue other classes of shares, which are sold primarily to
institutional investors. Each class of shares in a fund represents an equal,
proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state
securities registration fees, shareholder servicing fees or distribution fees
that may be paid under Rule 12b-1) that are allocated to a particular class.
Please contact Stagecoach Shareholder Services at 1-800-222-8222 if you would
like additional information about other funds or classes of shares offered.

The Fund is comprised of three classes of shares, Class A Shares,
Class B Shares and Institutional Class Shares. With respect to matters that
affect one class but not another, shareholders vote as a class; for example,
the approval of a Plan. Subject to the foregoing, on any matter submitted to a
vote of shareholders, all shares then entitled to vote will be voted separately
by portfolio unless otherwise required by the Act, in which case all shares
will be voted in the aggregate. For example, a change in the Fund's
fundamental investment policies would be voted upon only by shareholders of the
Fund and not shareholders of the Company's other investment portfolios.
Additionally, approval of an advisory contract is a matter to be determined
separately by the Fund. Approval by the shareholders of one portfolio is
effective as to that portfolio whether or not sufficient votes are received
from the shareholders of the other portfolios to approve the proposal as to
those portfolios. As used in the Prospectus and in this Statement of
Additional Information, the term "majority," when referring to approvals to be
obtained from shareholders of a class of the Fund, means the vote of the lesser
of (i) 67% of the shares of such class of the Fund represented at a meeting if
the holders of more than 50%

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<PAGE> 154
of the outstanding shares of such class of the Fund are present in person or by
proxy, or (ii) more than 50% of the outstanding shares of such class of the
Fund. The term "majority," when referring to the approvals to be obtained from
shareholders of the Company as a whole, means the vote of the lesser of (i) 67%
of the Company's shares represented at a meeting if the holders of more than
50% of the Company's outstanding shares are present in person or by proxy, or
(ii) more than 50% of the Company's outstanding shares. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held.

The Company may dispense with annual meetings of shareholders in
any year in which it is not required to elect directors under the Act.
However, the Company undertakes to hold a special meeting of its shareholders
for the purpose of voting on the question of removal of a director or directors
if requested in writing of the holders of at least 10% of the Company's
outstanding voting securities, and to assist in communicating with other
shareholders as required by Section 16(c) of the Act.

Each share of a class of the Fund represents an equal proportional
interest in the Fund with each other share of the same class and is entitled to
such dividends and distributions out of the income earned on the assets
belonging to the Fund as are declared in the discretion of the Directors. In
the event of the liquidation or dissolution of the Company, shareholders of the
Fund are entitled to receive the assets attributable to the Fund that are
available for distribution, and a distribution of any general assets not
attributable to the Fund that are available for distribution in such manner and
on such basis as the Directors in their sole discretion may determine.

Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Company.

The Trust is a business trust organized under the laws of
Delaware. In accordance with Delaware law and in connection with the tax
treatment sought by MIT, MIT's Declaration of Trust provides that its investors
would be personally responsible for Trust liabilities and obligations, but only
to the extent MIT property is insufficient to satisfy such liabilities and
obligations. The Declaration of Trust also provides that MIT shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of MIT, its investors, Trustees, officers,
employees and agents covering possible tort and other liabilities, and that
investors will be indemnified to the extent they are held liable for a
disproportionate share of Trust obligations. Thus, the risk of an investor
incurring financial loss on account of investor liability is limited to
circumstances in which both inadequate insurance existed and MIT itself was
unable to meet its obligations.

The Declaration of Trust further provides that obligations of MIT
are not binding upon the Trustees individually but only upon the property of
MIT and that Trustees will not be liable for any action or failure to act.
However, nothing in the Declaration of Trust protects a Trustee against any
liability to which the Trustee would

27
<PAGE> 155
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of the
Trustee's office.

The interests in the Master Portfolio have substantially identical
voting and other rights as those rights enumerated above for Fund shares. The
Trust also intends to dispense with annual meetings, but will hold a special
meeting and assist investor communications under the circumstances described
above with respect to the Company in accord with provisions under Section 16(c)
of the Act. Whenever the Fund is requested to vote on a matter with respect to
the Master Portfolio, the Fund will hold a meeting of Fund shareholders and
will cast its votes as instructed by such shareholders. In a situation where
the Fund does not receive instruction from certain of its shareholders on how
to vote the corresponding shares of the Master Portfolio, the Fund will vote
such shares in the same proportion as the shares for which the Fund does
receive voting instructions.

Set forth below is the name, address and share ownership of
each person known by the Company to have beneficial or record ownership of 5%
or more of a class of the Fund or 5% or more of the voting securities of the
Fund as a whole.

5% OWNERSHIP AS OF JANUARY 2, 1997

Wells Fargo Bank Class A 48.93% N/A
P.O. Box 63015 Benefically
San Francisco, CA 94163 Owned

Stephens Inc. Class A 33.62% N/A
111 Center Street Benefically
Little Rock, AR 72201 Owned

Stephens Inc. Class B 5.90% N/A
P.O. Box 34127 Benefically
Little Rock, AR 72203 Owned
Acct. 77586707

Stephens Inc. Class B 11.71% N/A
P.O. Box 34127 Benefically
Little Rock, AR 72203 Owned
Acct. 77478661
</TABLE>

28
<PAGE> 156
Fund) and has voting and/or investment powers, it may be presumed to control
such class (or Fund).

OTHER

The Registration Statements of MIT and the Company, including the
Fund's Prospectus, the SAI and the exhibits filed therewith, may be examined at
the office of the Commission in Washington, D.C. Statements contained in the
Prospectus or the SAI as to the contents of any contract or other document
referred to herein or in the Prospectus are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent
auditors for the Company and MIT. KPMG Peat Marwick LLP provides audit
services, tax return preparation and assistance and consultation in connection
with review of certain Securities & Exchange Commission filings. KPMG Peat
Marwick LLP's address is Three Embarcadero Center, San Francisco, California
94111.

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the Fund for the fiscal period ended September
30, 1996 are hereby incorporated by reference to the Company's Annual Report as
filed with the SEC on December 9, 1996. The portfolio of investments, audited
financial statements and independent auditors' report for the Fund are attached
to all SAIs delivered to current or prospective shareholders.

The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal period ended September 30, 1996 for
the Small Cap Master Portfolio of Master Investment Trust are hereby
incorporated by reference to the Company's Annual Reports as filed with the
SEC on December 9, 1996.

29
<PAGE> 157

SAI APPENDIX

The following is a description of the ratings given by Moody's and
S&P to corporate bonds and commercial paper.

Corporate Bonds

Moody's: The four highest ratings for corporate bonds are "Aaa,"
"Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best quality"
and carry the smallest amount of investment risk. Bonds rated "Aa" are of
"high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1,
2 and 3 in each rating category from "Aa" through "Baa" in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by
S&P and have an extremely strong capacity to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity to pay interest and repay
principal" and differ "from the highest rated issued only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.

Corporate Commercial Paper

Moody's: The highest rating for corporate commercial paper is
"P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for repayment
of short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate commercial paper indicates
that the "degree of safety regarding timely payment is either overwhelming or
very strong." Commercial paper with "overwhelming safety characteristics" will
be rated "A-1+." Commercial paper with a strong capacity for timely payments
on issues will be rated "A-2."

A-1
<PAGE> 158

STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND

----------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about one of the funds in the Stagecoach Family of Funds -- the
NATIONAL TAX-FREE MONEY MARKET MUTUAL FUND (the "Fund"). The Fund seeks to
achieve its investment objective by investing all of its assets in the Tax-Free
Money Market Master Portfolio (the "Master Portfolio") of Master Investment
Trust ("MIT"). The Master Portfolio has the same investment objective as the
Fund.

The Fund may withdraw its investment in the Master Portfolio at
any time if the Board of Directors of the Company determines that such action
is in the best interests of the Fund and its shareholders. Upon such
withdrawal, the Company's Board of Directors would consider alternative
investments, including investing all of the Fund's assets in another investment
company with the same investment objective as the Fund or hiring an investment
adviser to manage the Fund's assets in accordance with the investment policies
and restrictions described in the Fund's then current Prospectus and SAI.

This SAI is not a prospectus and should be read in conjunction
with the Fund's Prospectus dated February 1, 1997. All terms used in this SAI
that are defined in the Fund's Prospectus have the meanings assigned in such
Prospectus. A copy of the Prospectus may be obtained without charge by writing
Stephens Inc. ("Stephens"), the Company's sponsor, co-administrator and
distributor, at 111 Center Street, Little Rock, Arkansas 72201, or by calling
Wells Fargo Bank, N.A. ("Wells Fargo Bank") at 1-800-222-8222.

1
<PAGE> 159
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction............................................................ 3

Investment Restrictions................................................. 3

Additional Permitted Investment
Activities.............................................................. 6

Management.............................................................. 9

Distribution Plan....................................................... 14

Performance Calculations................................................ 15

Determination of Net Asset Value........................................ 20

Additional Purchase and Redemption Information.......................... 21

Portfolio Transactions.................................................. 21

Fund Expenses........................................................... 23

Federal Income Taxes.................................................... 23

Capital Stock........................................................... 26

Other................................................................... 29

Independent Auditors................................................... 29

Financial Information.................................................. 29

SAI Appendix........................................................... A-1
</TABLE>

2
<PAGE> 160
INTRODUCTION

MIT is a registered, open-end, management investment company. MIT
is a "series fund," which is a mutual fund divided into separate portfolios.
MIT currently offers nine diversified portfolios: the Asset Allocation,
Capital Appreciation, Cash Investment Trust, Corporate Stock, Short-Term
Municipal Income, Short-Term Government-Corporate Income, Small Cap, Tax-Free
Money Market and U.S. Government Allocation Master Portfolios. The Fund
invests substantially all of its assets in the Tax-Free Money Market Master
Portfolio, which has the same investment objective as the Fund.

INVESTMENT RESTRICTIONS

Fundamental Investment Policies. The Fund and the Master
Portfolio are subject to the following investment restrictions, all of which
are fundamental policies.

The Fund and the Master Portfolio may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Fund's or the Master Portfolio's
investments in that industry would be 25% or more of the current value of the
Fund's or the Master Portfolio's total assets, provided that there is no
limitation with respect to investments in (i) municipal securities (for the
purpose of this restriction, private activity bonds and notes shall not be
deemed municipal securities if the payment of principal and interest on such
bonds or notes is the ultimate responsibility of non-governmental entities);
(ii) obligations of the U.S. Government, its agencies or instrumentalities
(including government-sponsored enterprises); and (iii) the obligations of
domestic banks (for the purpose of this restriction, domestic bank obligations
do not include obligations of U.S. branches of foreign banks or obligations of
foreign branches of U.S. banks); and further provided that this investment
restriction does not affect the Fund's ability to invest all or a portion of
its assets in the Master Portfolio;

(2) purchase or sell real estate or real estate limited
partnerships (other than municipal obligations or other securities secured by
real estate or interests therein or securities issued by companies that invest
in real estate or interests therein), commodities or commodity contracts
(including futures contracts) except that the Fund and Master Portfolio may
purchase securities of an issuer which invests or deals in commodities and
commodity contracts and except that the Fund and Master Portfolio may enter
into futures and options contracts in accordance with their respective
investment policies;

(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions), or make short sales of
securities;

(4) underwrite securities of other issuers, except to the extent
that the purchase of municipal securities or other permitted investments
directly from the issuer thereof or from an

3
<PAGE> 161
underwriter for an issuer and the later disposition of such securities in
accordance with the Fund's or Master Portfolio's investment program (including
the Fund's investments in the Master Portfolio) may be deemed to be an
underwriting;

(5) make investments for the purpose of exercising control or
management, provided that this restriction does not affect the Fund's ability
to invest all or a portion of its assets in the Master Portfolio;

(6) issue senior securities, except that the Fund and Master
Portfolio may each borrow from banks up to 10% of the current value of its net
assets for temporary purposes only in order to meet redemptions, and these
borrowings may be secured by the pledge of up to 10% of the current value of
its net assets (but investments may not be purchased while any such outstanding
borrowing in excess of 5% of its net assets exists);

(7) write, purchase or sell puts, calls, warrants, options or any
combination thereof, except that the Fund and Master Portfolio may purchase
securities with put rights in order to maintain liquidity;

(8) purchase securities of any issuer (except securities issued
or guaranteed by the U.S. Government, its agencies and instrumentalities,
including government-sponsored enterprises) if, as a result, with respect to
75% of its total assets, more than 5% of the value of the Fund's or Master
Portfolio's total assets would be invested in the securities of any one issuer
or, with respect to 100% of its total assets the Fund's or Master Portfolio's
ownership would be more than 10% of the outstanding voting securities of such
issuer, provided that this restriction does not affect the Fund's ability to
invest all or a portion of its assets in the Master Portfolio; or

(9) make loans, except that the Fund and Master Portfolio may
each purchase or hold debt instruments, lend its portfolio securities or enter
into repurchase agreement transactions in accordance with its investment
policies; loans for purposes of this restriction will not include the Fund's
purchase of interests in the Master Portfolio.

With regard to fundamental investment restriction number (1)
above, the Fund and Master Portfolio intend to reserve freedom of action to
have in excess of 25% of the value of the respective total assets invested in
obligations of the banking industry. Regarding this fundamental concentration
policy, the Fund or Master Portfolio may hold in excess of 25% of the value of
the assets in obligations of the banking industry to the extent that the Fund
or Master Portfolio holds obligations with such credit enhancements as letters
of credit issued by domestic bank issuers, which will be considered to be
obligations of domestic banks. The SEC staff's position is that the exclusion
with respect to banks may only be applied to domestic banks. For this purpose,
the staff also takes the position that U.S. branches of foreign banks and
foreign branches of domestic banks may, if certain conditions are met, be
treated as "domestic banks". The Company and MIT currently intend to consider
only obligations of "domestic banks" to be within the exclusion with respect to
bank obligations.

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<PAGE> 162
Fundamental investment restriction number (8), above, is less
restrictive than Rule 2a-7 of the 1940 Act. Nonetheless, it is the operating
policy of the Fund and the Master Portfolio to comply with Rule 2a-7's
diversification requirements.

Non-Fundamental Investment Policies. The Fund and the Master
Portfolio are subject to the following non- fundamental policies.

Neither the Fund nor the Master Portfolio may:

(1) purchase or retain securities of any issuer if the Officers
or Directors/Trustees of the Company, MIT or the investment adviser owning
beneficially more than one-half of one percent (0.5%) of the securities of the
issuer together own beneficially more than 5% of such securities;

(2) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;

(3) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets, provided
that this restriction does not affect the Fund's ability to invest all or a
portion of its assets in the Master Portfolio; and

(4) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if, by reason
thereof, the value of the Fund's or Master Portfolio's aggregate investment in
such classes of securities will exceed 5% of its total assets.

The Fund and the Master Portfolio may each invest in shares of
other open-end, management investment companies, subject to the limitations of
Section 12(d)(1) of the 1940 Act, provided that any such purchases will be
limited to temporary investments in shares of unaffiliated investment
companies. However, the investment adviser will waive its advisory fees for
that portion of the Fund's or the Master Portfolio's assets so invested, except
when such purchase is part of a plan of merger, consolidation, reorganization
or acquisition. In addition, these unaffiliated investment companies must have
a fundamental investment policy of investing at least 80% of their net assets
in obligations that are exempt from federal income taxes and are not subject to
the federal alternative minimum tax. However, the above restrictions do not
affect the Fund's ability to invest all or a portion of its assets in the
Master Portfolio.

In addition, the Fund and the Master Portfolio each reserves the
right to invest up to 10% of the current value of its net assets in fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, repurchase agreements maturing in more than seven days,
illiquid securities and restricted securities. However, as long as the

5
<PAGE> 163
Fund's shares are registered for sale in a state that imposes a lower limit on
the percentage of a fund's assets that may be so invested, the Fund and the
Master Portfolio will comply with such lower limit. The Fund presently is
limited to investing 10% of its net assets in such securities due to limits
applicable in several states.

Furthermore, the Fund and the Master Portfolio may not purchase or
sell real estate limited partnership interests. The Fund and the Master
Portfolio do not currently intend to make loans of their portfolio securities.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

Unrated and Downgraded Investments. The Master Portfolio may
purchase instruments that are not rated if, in the opinion of Wells Fargo Bank
the investment adviser, such obligations are of comparable quality to other
rated investments that are permitted to be purchased by the Master Portfolio.
The Master Portfolio may purchase unrated instruments only if they are
purchased in accordance with the Master Portfolio's procedures adopted by MIT's
Board of Trustees in accordance with Rule 2a-7 under the 1940 Act. After
purchase by the Master Portfolio, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Master
Portfolio. In the event that a portfolio security ceases to be an "Eligible
Security" or no longer "presents minimal credit risks", immediate sale of such
security is not required, provided that the Board of Trustees has determined
that disposal of the portfolio security would not be in the best interests of
the Master Portfolio. To the extent the ratings given by Moody's or S&P may
change as a result of changes in such organizations or their rating systems,
the Master Portfolio will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in its Part A
and in this SAI. The ratings of Moody's and S&P are more fully described in
the SAI Appendix.

Letters of Credit. Certain of the debt obligations (including
municipal securities, certificates of participation, commercial paper and other
short-term obligations) which the Master Portfolio may purchase may be backed
by an unconditional and irrevocable letter of credit of a bank, savings and
loan association or insurance company which assumes the obligation for payment
of principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Wells Fargo Bank, are of comparable quality to issuers of other permitted
investments of the Master Portfolio may be used for letter of credit-backed
investments, provided that MIT's Board of Trustees approves or ratifies such
investments.

Loans of Portfolio Securities. The Master Portfolio may lend
securities from its portfolio to brokers, dealers and financial institutions
(but not individuals) if cash, U.S. Government obligations or other
high-quality debt obligations equal to at least 100% of the current market
value of the securities loaned (including accrued interest thereon) plus the
interest payable to the Master Portfolio with respect to the loan is maintained
with the Master Portfolio. In determining whether or not to lend a security to
a particular broker, dealer or financial institution, the Master Portfolio's
investment adviser considers all relevant facts and

6
<PAGE> 164
circumstances, including the size, creditworthiness and reputation of the
broker, dealer, or financial institution. Any loans of portfolio securities
are fully collateralized based on values that are marked to market daily. The
Master Portfolio will not enter into any portfolio security lending arrangement
having a duration longer than one year. Any securities that the Master
Portfolio receives as collateral do not become part of the Master Portfolio's
portfolio at the time of the loan and, in the event of a default by the
borrower, the Master Portfolio will, if permitted by law, dispose of such
collateral except for such part thereof that is a security in which the Master
Portfolio is permitted to invest. During the time securities are on loan, the
borrower will pay the Master Portfolio any accrued income on those securities,
and the Master Portfolio may invest the cash collateral and earn additional
income or receive an agreed-upon fee from a borrower that has delivered
cash-equivalent collateral. The Master Portfolio will not lend securities
having a value that exceeds one-third of the current value of its total assets.
Loans of securities by the Master Portfolio are subject to termination at the
Master Portfolio's or the borrower's option. The Master Portfolio may pay
reasonable administrative and custodial fees in connection with a securities
loan and may pay a negotiated portion of the interest or fee earned with
respect to the collateral to the borrower or the placing broker. Borrowers and
placing brokers are not permitted to be affiliated, directly or indirectly,
with MIT, the Company, the investment adviser, or the distributor.

Foreign Obligations. Investments in foreign obligations involve
certain considerations that are not typically associated with investing in
domestic obligations. There may be less publicly available information about a
foreign issuer than about a domestic issuer. Foreign issuers also are not
generally subject to uniform accounting, auditing and financial reporting
standards or governmental supervision comparable to those applicable to
domestic issuers. In addition, with respect to certain foreign countries,
taxes may be withheld at the source under foreign income tax laws, and there is
a possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries. The Master
Portfolio may not invest 25% or more of its assets in foreign obligations.

Obligations of foreign banks and foreign branches of U.S. banks
involve somewhat different investment risks from those affecting obligations of
U.S. banks, including the possibilities that liquidity could be impaired
because of future political and economic developments, that the obligations may
be less marketable than comparable obligations of U.S. banks, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that foreign deposits may be seized or nationalized, that foreign
governmental restrictions (such as foreign exchange controls) may be adopted
which might adversely affect the payment of principal and interest on those
obligations and that the selection of those obligations may be more difficult
because there may be less publicly available information concerning foreign
banks or the accounting, auditing and financial reporting standards, practices
and requirements applicable to foreign banks may differ from those applicable
to U.S. banks. In that connection, foreign banks are not subject to
examination by any U.S. Government agency or instrumentality.

7
<PAGE> 165
Municipal Bonds. The Master Portfolio may invest in municipal
bonds. The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. Municipal bonds are debt obligations issued
to obtain funds for various public purposes, including the construction of a
wide range of public facilities such as bridges, highways, housing, hospitals,
mass transportation, schools, streets, and water and sewer works. Other
purposes for which municipal bonds may be issued include the refunding of
outstanding obligations and obtaining funds for general operating expenses or
to loan to other public institutions and facilities. Industrial development
bonds are a specific type of revenue bond backed by the credit and security of
a private user. Certain types of industrial development bonds are issued by or
on behalf of public authorities to obtain funds to provide privately-operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity, or sewage or solid waste disposal. The Master Portfolio may not
invest 25% or more of its assets in industrial development bonds. Assessment
bonds, wherein a specially created district or project area levies a tax
(generally on its taxable property) to pay for an improvement or project may be
considered a variant of either category. There are, of course, other
variations in the types of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors.

TANs. Uncertainty concerning a municipal issuer's capacity to
raise taxes as a result of such things as a decline in its tax base or a rise
in delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers mix
various tax proceeds into a general fund that is used to meet obligations other
than those of the outstanding TANs. Use of such a general fund to meet various
obligations could affect the likelihood of making payments on TANs.

The values of outstanding municipal securities vary as a result of
changing market evaluations of the ability of their issuers to meet the
interest and principal payments (i.e., credit risk). Such values also change
in response to changes in the interest rates payable on new issues

8
<PAGE> 166
of municipal securities (i.e., market risk). Should such interest rates rise,
the values of outstanding securities, including those held in the Master
Portfolio's portfolio, will decline and (if purchased at par value) sell at a
discount. If interest rates fall, the values of outstanding securities will
generally increase and (if purchased at par value) would sell at a premium.
Changes in the value of municipal securities held in the Master Portfolio's
portfolio arising from these or other factors will cause changes in the net
asset value per share of the Master Portfolio.

MANAGEMENT

The following information supplements and should be read in
conjunction with the section in the prospectus entitled "The Funds and
Management." The principal occupations during the past five years of the
Directors and principal executive Officer of the Company are listed below. The
address of each, unless otherwise indicated, is 111 Center Street, Little Rock,
Arkansas 72201. Directors deemed to be "interested persons" of the Company for
purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position During Past 5 Years
- --------------------- -------- ---------------------

<S> <C> <C>
Jack S. Euphrat, 74 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate Professor of
Finance of the School of Business and
Accounting at Wake Forest University
since 1983.
</TABLE>

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<PAGE> 167
<TABLE>
<S> <C> <C>
Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
(appointed as of Junior College from 1967 to
September 6, 1996) 1971; Adjunct Professor of
Columbia University
Teachers College since
1976.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

Richard H. Blank, Jr., 40 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary Director of Stephens
and Sports Management
Treasurer Inc.; and Director of
Capo Inc.
</TABLE>

10
<PAGE> 168

COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
---------- -------------
December 31, 1995 September 30, 1996
------------------ ------------------
Total
Aggregate Total Compensation Aggregate Compensation from
Compensation from Registrant Compensation Registrant
Name and Position from Registrant and Fund Complex from Registrant and Fund Complex
----------------- --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director

</TABLE>

Directors of the Company are compensated annually by the Company
and by all the registrants in each fund complex they serve as indicated above
and also are reimbursed for all out-of-pocket expenses relating to attendance
at board meetings. The Company, Overland Express Funds, Inc., Stagecoach
Trust, Life & Annuity Trust and Master Investment Trust are considered to be
members of the same fund complex as such term is defined in Form N-1A under the
1940 Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and

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<PAGE> 169
Managed Series Investment Trust together form a separate fund complex (the
"BGFA Fund Complex"). Each of the Directors and Officers of the Company serves
in the identical capacity as directors and officers or as trustees and/or
officers of each registered open-end management investment company in both the
Wells Fargo and BGFA Fund Complexes, except for Joseph N. Hankin, who only
serves the aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann
Hines who, after September 6, 1996, only serves the aforementioned members of
the BGFA Fund Complex. The Directors are compensated by other companies and
trusts within a fund complex for their services as directors/trustees to such
companies and trusts. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or any other member of each
fund complex.

As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

MASTER/FEEDER STRUCTURE. The Fund seeks to achieve its investment
objective by investing all of its assets in the Tax-Free Money Market Master
Portfolio of MIT. The Fund and other entities investing in the Master
Portfolio are each liable for all obligations of the Master Portfolio. However,
the risk of the Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and MIT
itself is unable to meet its obligations. Accordingly, the Company's Board of
Directors believes that neither the Fund nor its shareholders will be adversely
affected by investing Fund assets in the Master Portfolio. However, if a mutual
fund or other investor withdraws its investment from the Master Portfolio, the
economic efficiencies (e.g., spreading fixed expenses among a larger asset
base) that the Company's Board believes may be available through investment in
the Master Portfolio may not be fully achieved. In addition, given the relative
novelty of the master/feeder structure, accounting or operational difficulties,
although unlikely, could arise. See "Management and Servicing Fees" for
additional description of the Fund's and Master Portfolio's expenses and
management.

12
<PAGE> 170
Certain policies of the Master Portfolio which are non-fundamental
may be changed by vote of a majority of MIT's Trustees without interestholder
approval. If the Master Portfolio's investment objective or fundamental or non-
fundamental policies are changed, the Fund may elect to change its objective or
policies to correspond to those of the Master Portfolio. The Fund may also
elect to redeem its interests in the Master Portfolio and either seek a new
investment company with a matching objective in which to invest or retain its
own investment adviser to manage the Fund's portfolio in accordance with its
objective. In the latter case, the Fund's inability to find a substitute
investment company in which to invest or equivalent management services could
adversely affect shareholders' investments in the Fund. The Fund will provide
shareholders with 30 days' written notice prior to the implementation of any
change in the investment objective of the Fund or the Master Portfolio, to the
extent possible. See "Investment Objective and Policies" for additional
information regarding the Fund's and the Master Portfolio's investment
objectives and policies. Additional information regarding the officers and
Directors/Trustees of the Company and MIT is located in the Fund's SAI under
"Management."

INVESTMENT ADVISER. The Fund has not engaged an investment
adviser. The Master Portfolio is advised by Wells Fargo Bank pursuant to an
Investment Advisory Contract approved by the Board of Trustees of MIT. The
Investment Advisory Contract for the Master Portfolio provides that Wells Fargo
Bank shall furnish to the Master Portfolio investment guidance and policy
direction in connection with the daily portfolio management of the Master
Portfolio. Pursuant to the Investment Advisory Contract, Wells Fargo Bank also
furnishes to MIT's Board of Trustees periodic reports on the investment
strategy and performance of the Master Portfolio.

Wells Fargo Bank has agreed to provide to the Master Portfolio,
among other things, money market security and fixed-income research, analysis,
and statistical and economic data, and information concerning interest rate and
security market trends, portfolio composition, credit conditions and average
maturities of the Master Portfolio's portfolio.

For the period begun April 2, 1996 (commencement of operations)
and ended September 30, 1996, the Master Portfolio paid to Wells Fargo Bank
$76,987 in advisory fees. $10,704 in advisory fees were waived during this
period.

The Investment Advisory Contract will continue in effect for more
than two years provided the continuance is approved annually (i) by the holders
of a majority of the Master Portfolio's outstanding voting securities or by
MIT's Board of Trustees and (ii) by a majority of the Trustees of MIT who are
not parties to the Investment Advisory Contract or "interested persons" (as
defined in the 1940 Act) of any such party. The Investment Advisory Contract
may be terminated on 60 days' written notice by either party and will terminate
automatically if assigned.

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<PAGE> 171
Agreements among Wells Fargo Bank, Stephens and the Company and MIT, Wells
Fargo Bank, Stephens shall provide as administrative services, among other
things: (i) general supervision of the Fund's and the Master Portfolio's
operations, including coordination of the services performed by the investment
adviser (in the case of the Master Portfolio), transfer agent, custodian,
shareholder servicing agent(s), independent auditors and legal counsel,
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions;
and preparation of proxy statements and shareholder reports for the Fund and
the Master Portfolio; and (ii) general supervision relative to the compilation
of data required for the preparation of periodic reports distributed to the
Company's and MIT's Officers, Directors and Trustees. Wells Fargo Bank and
Stephens also furnish office space and certain facilities required for
conducting the Fund's and the Master Portfolio's business together with
ordinary clerical and bookkeeping services. Stephens pays the compensation of
MIT's and Company's Directors/Trustees, Officers and employees who are
affiliated with Stephens. The Administrator and Co-Administrator are entitled
to receive a monthly fee of 0.04% and 0.02%, respectively, of the average daily
net assets of the Fund.

For the period begun April 2, 1996 and ended September 30, 1996,
Stephens served as sole administrator to the Fund, and received $731 in
administrative fees. Stephens was entitled to receive a monthly fee at the
annual rate of 0.05% of the Fund's average daily net assets for such services.

SPONSOR AND DISTRIBUTOR. As discussed in the Fund's prospectus
under the heading "Management and Servicing Fees," Stephens serves as the
Fund's sponsor and distributor.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo
Bank has been retained to act as custodian and transfer and dividend disbursing
agent for both the Fund and the Master Portfolio. The custodian, among other
things, maintains separate custody accounts in the names of the Fund and the
Master Portfolio; receives and delivers all assets for the Fund and the Master
Portfolio upon purchase and upon sale or maturity; collects and receives all
income and other payments and distributions on account of the assets of the Fund
and the Master Portfolio and pays all expenses of the Fund and the Master
Portfolio.

For its services as transfer and dividend disbursing agent for the
Fund, Wells Fargo Bank is entitled to receive monthly payments at the annual
rate of 0.10% of each Fund's average daily net assets. Under the prior transfer
agency agreement for the Fund, Wells Fargo Bank was entitled to receive monthly
payments at the annual rate of 0.10% of the Fund's average daily net assets plus
reimbursement for all reasonable out-of-pocket expenses.

For the period begun April 2, 1996 and ended September 30, 1996,
the Fund paid no compensation for custodial services or transfer and
dividend disbursing agency services to Wells Fargo Bank.

DISTRIBUTION PLAN

The Fund has adopted a Distribution Plan (the "Distribution Plan")
under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder. The
Distribution Plan for the Fund was adopted by the Company's Board of Directors
on October 10, 1995, including a majority of Directors who were not "interested
persons" (as defined in the 1940 Act) of the Fund and who

14
<PAGE> 172
had no direct or indirect financial interest in the operation of the
Distribution Plan (the "Qualified Directors").

The Distribution Plan permits the Fund to pay Stephens, for
distribution-related activities provided and related expenses incurred, a
monthly fee at the annual rate of up to 0.05% of the average daily net assets
of the Fund. The Distribution Plan authorizes Stephens to compensate
broker/dealers or financial institutions that have entered into Selling Group
Agreements with Stephens for distribution-related series.

The Distribution Plan continues in effect from year to year if
such continuance is approved by a majority vote of both the Directors of the
Company and the Qualified Directors. Any Agreements related to the
Distribution Plan also must be approved by such vote of the Directors and the
Qualified Directors. Such Agreements terminate automatically if assigned, and
may be terminated at any time, without payment of any penalty, by a vote of a
majority of the outstanding voting securities of the Fund. The Distribution
Plan may not be amended to increase materially the amounts payable thereunder
without the approval of a majority of the outstanding voting securities of the
Fund, and no material amendment to the Distribution Plan may be made except by
a majority of both the Directors of the Company and the Qualified Directors.

The Distribution Plan requires the Company to provide to the
Directors, and the Directors to review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under the Distribution Plan and
any related agreements. The Rule also requires that the selection and
nomination of Directors who are not "interested persons" of the Company be made
by such disinterested Directors.

For the period begun April 2, 1996 and ended September 30, 1996,
the Fund's distributor received the following amounts of 12b-1 fees for the
specified purposes set forth below under its Plan.

<TABLE>
<CAPTION>
Printing & Mailing Marketing Compensation to
Total Prospectus Brochures Underwriters
- ----- ---------- --------- ------------
<S> <C> <C> <C>
$144 $ -0- $ 144 N/A
</TABLE>

PERFORMANCE CALCULATIONS

TOTAL RETURN. The Fund may advertise certain total return
information for a class of shares, computed in the manner described in the
Prospectus. As and to the extent required by the Commission, an average annual
compound rate of return ("T") will be computed by using the redeemable value at
the end of a specified period ("ERV") of a hypothetical initial investment in a
class of shares ("P") over a period of years ("n") according to the following
formula: P(1+T)n = ERV. In addition, as indicated in the Prospectus, the Fund
also may, at times, calculate total

15
<PAGE> 173
return for a class of shares based on net asset value per share (rather than
the public offering price), in which case the figures would not reflect the
effect of any sales charges that would have been paid by an investor, or would
be based on the assumption that a sales charge other than the maximum sales
charge (reflecting a Volume Discount) was assessed, provided that total return
data derived pursuant to the calculation described above also are presented.

Performance information may be advertised for non-standardized
periods, including year-to-date and other periods less than a year.

<TABLE>
<CAPTION>
Average Annual Total Return(1) Cumulative Total Return
Inception to September 30, 1996 Inception to September 30, 1996
- ------------------------------- -------------------------------
<S> <C>
1.51% 1.51%
</TABLE>

(1) The Fund commenced operations on April 2, 1996 and does not assess sales
charges.

YIELD. The Fund may advertise certain yield information. Yield
for the Fund is calculated based on the net changes, exclusive of capital
changes, over a seven- or thirty-day period, in the value of a hypothetical
pre- existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7 or 365/30, as applicable) with the
resulting yield figure carried to at least the nearest hundredth of one
percent.

Tax-equivalent yield for the Fund is computed by dividing that
portion of the yield of the Fund which is tax-exempt by one minus a stated
income tax rate and then adding the product to that portion, if any, of the
Fund's yield that is not tax-exempt.

Effective yield for the Fund is calculated by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding one, raising the sum to a power
equal to 365 divided by seven, and subtracting one from the result.

The yield for the Fund fluctuates from time to time, unlike bank
deposits or other investments that pay a fixed yield for a stated period of
time, and does not provide a basis for

16
<PAGE> 174
determining future yields since it is based on historical data. Yield is a
function of portfolio quality, composition, maturity and market conditions as
well as the expenses allocated to the Fund.

In addition, investors should recognize that changes in the net
asset value of shares of the Fund will affect the Fund's yield for any
specified period, and such changes should be considered together with the
Fund's yield in ascertaining the Fund's total return to shareholders for the
period. Yield information for the Fund may be useful in reviewing the
performance of the Fund and for providing a basis for comparison with
investment alternatives. The Fund's yield, however, may not be comparable to
the yields from investment alternatives because of differences in the foregoing
variables and differences in the methods used to value portfolio securities,
compute expenses and calculate yield.

Yield for the Applicable Period Ended September 30, 1996(1)
<TABLE>
<CAPTION>
Thirty-Day Tax-
Thirty-Day Equivalent Seven-Day
Fund Yield Yield(2) Seven-Day Yield Effective Yield
---- ----- ----- --------------- ---------------
<S> <C> <C> <C> <C>
National Tax-Free Money Market 2.73% 5.08% 3.00% 3.04%
</TABLE>

(1) These figures reflect any reimbursed expenses throughout the period.
The yield of the predecessor portfolio's shares through September 5, 1996 is
also reflected for the thirty day figures.

(2) Based on a federal income tax rate of 28.00%.

Performance Comparisons. From time to time and only to the extent
the comparison is appropriate for the Fund, the Company may quote the Fund's
performance or price-earning ratio in advertising and other types of literature
as compared to the performance of the 91-Day Treasury Bill Average (Federal
Reserve), Lipper Money Market Fund Average, Donoghue Taxable Money Market Fund
Average, Salomon Three-Month Treasury Bill Index, Bank Averages (which are
calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), Dow Jones Industrial Average, Lehman Brothers 20+ Treasury Index,
Lehman Brother 5-7 Year Treasury Index, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by the World Gold Council), the Consumer Price
Index (as published by the U.S. Bureau of Labor Statistics and which is an
established measure of change over time in the prices of goods and services in
major expenditure groups), average annualized certificate of deposit rates
(from the Federal Reserve G-13 Statistical Releases or the Bank Rate Monitor),
the Salomon One Year Treasury Benchmark Index, the Consumer Price Index (as
published by the U.S. Bureau of Labor Statistics), other managed or unmanaged
indices or performance data of bonds, municipal securities, stocks or
government securities (including data provided by Ibbotson Associates), or by
other services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices.

17
<PAGE> 175
The Fund's performance also may be compared to the performance of
other mutual funds having similar objectives. This comparative performance
could be expressed as a ranking prepared by Lipper Analytical Services, Inc.
(including the Lipper General Bond Fund Average, the Lipper Intermediate
Investment Grade Debt Fund Average, the Lipper Bond Fund Average, the Lipper
Growth Fund Average, the Lipper Flexible Fund Average), Donoghue's Money Fund
Report, including Donoghue's Taxable Money Market Fund Average, Morningstar,
Inc., or other independent services which monitor the performance of mutual
funds. The Fund's performance will be calculated by relating net asset value
per share at the beginning of a stated period to the net asset value of the
investment, assuming reinvestment of all gains distributions and dividends
paid, at the end of the period. Any such comparisons may be useful to
investors who wish to compare the Fund's past performance with that of its
competitors. Of course, past performance cannot be a guarantee of future
results. The Company also may include in advertisements and other types of
literature references to certain marketing approaches of the Distributor and
may also refer to general mutual fund statistics provided by the Investment
Company Institute.

The Company also may use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for the Fund: (i) the Consumer Price Index may be
used to assess the real rate of return from an investment in the Fund; (ii)
other government statistics, including, but not limited to, The Survey of
Current Business, may be used to illustrate investment attributes of the Fund
or the general economic, business, investment, or financial environment in
which the Fund operates; (iii) the effect of tax-deferred compounding on the
investment returns of the Fund, or on returns in general, may be illustrated by
graphs, charts, etc., where such graphs or charts would compare, at various
points in time, the return from an investment in the Fund (or returns in
general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the return on a taxable
basis; and (iv) the sectors or industries in which the Fund invests may be
compared to relevant indices of stocks or surveys (e.g., S&P Industry Surveys)
to evaluate the Fund's historical performance or current or potential value
with respect to the particular industry or sector.

The Company also may use, in advertisements and other types of
literature, information and statements: (1) showing that bank savings accounts
offer a guaranteed return of principal and a fixed rate of interest, but no
opportunity for capital growth; and (2) describing Wells Fargo Bank, and its
affiliates and predecessors, as some of the first investment managers to advise
investment accounts using asset allocation and index strategies. The Company
also may include in advertising and other types of literature information and
other data from reports and studies prepared by the Tax Foundation, including
information regarding federal and state tax levels and the related "Tax Freedom
Day."

The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Fargo Investment Management
("WFIM"), a division of Wells Fargo Bank, is listed in the top 100 by
Institutional Investor magazine in its July 1996 survey "America's Top 300 Money
Managers". This survey ranks money managers in several asset categories. The
Company also may disclose in sales literature the assets and categories of
assets under management by the Fund's or Master Portfolio's investment adviser
and its affiliates. The Company may also disclose in advertising and other
types of sales literature the assets and categories of assets under management
by a fund's investment adviser or sub-adviser and the total amount of assets and
mutual fund assets managed by Wells Fargo Bank. As of December 31, 1996, Wells
Fargo Bank and its affiliates

18
<PAGE> 176
provided investment advisory services for approximately $54 billion of assets
of individuals, trusts, estates and institutions and $20 billion of mutual fund
assets.

The Company also may discuss in advertisements and other types of
literature that the Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as Standard & Poors
Corporation. Such rating would assess the creditworthiness of the investments
held by the Fund. The assigned rating would not be a recommendation to
purchase, sell or hold the Fund's shares since the rating would not comment on
the market price of the Fund's shares or the suitability of the Fund for a
particular investor. In addition, the assigned rating would be subject to
change, suspension or withdrawal as a result of changes in, or unavailability
of, information relating to the Fund or its investments. The Company may
compare the Fund's performance with other investments which are assigned
ratings by NRSROs. Any such comparisons may be useful to investors who wish to
compare the Fund's past performance with other rated investments.

The Company also may discuss in advertisements and other types of
literature the features, terms and conditions of Wells Fargo Bank accounts
through which investments in the Fund may be made via a "sweep" arrangement,
including, without limitation, through investments in a Managed Sweep Account,
National Tax-Free Money Market Checking Account or National Tax-Free Money
Market Access Account (collectively, the "Sweep Accounts"). Such
advertisements and other literature may include, without limitation,
discussions of such terms and conditions as the minimum deposit required to
open a Sweep Account, a description of the yield earned on shares of the Fund
through a Sweep Account, a description of any monthly or other service charge
on a Sweep Account and any minimum required balance to waive such service
charges, any overdraft protection plan offered in connection with a Sweep
Account, a description of any express transfer or "AutoSaver" plan offered in
connection with a Sweep Account, a description of any automated teller machine
("ATM") or check privileges offered in connection with a Sweep Account and any
other terms, conditions, features or plans offered in connection with a Sweep
Account. Such advertising or other literature may also include a discussion of
the advantages of establishing and maintaining a Sweep Account, and may include
statements from customers as to the reasons why such customers have established
and maintained a Sweep Account.

19
<PAGE> 177
services for accessing Electronic Channels. Such advertising or other
literature may include discussions of the advantages of establishing and
maintaining a Sweep Account through Electronic Channels and testimonials from
Wells Fargo Bank customers or employees and may also include descriptions of
locations where product demonstrations may occur. The Company may also
disclose the ranking of Wells Fargo Bank as one of the largest money managers
in the United States.

DETERMINATION OF NET ASSET VALUE

Net asset value per share of the Fund is determined by the
Custodian on each day the Fund is open for trading. The Fund's investments in
the Master Portfolio are valued at the net asset value of the Master
Portfolio's shares.

As indicated in the Fund's Prospectus, the Master Portfolio uses
the amortized cost method to determine the value of its portfolio securities
pursuant to Rule 2a-7 under the 1940 Act. The amortized cost method involves
valuing a security at its cost and amortizing any discount or premium over the
period until maturity, regardless of the impact of fluctuating interest rates
on the market value of the security. While this method provides certainty in
valuation, it may result in periods during which the value, as determined by
amortized cost, is higher or lower than the price that the Master Portfolio
would receive if the security were sold. During these periods the yield to a
shareholder may differ somewhat from that which could be obtained from a
similar fund that uses a method of valuation based upon market prices. Thus,
during periods of declining interest rates, if the use of the amortized cost
method resulted in a lower value of the Master Portfolio's portfolio on a
particular day, a prospective investor in the Master Portfolio would be able to
obtain a somewhat higher yield than would result from investment in a fund
using solely market values, and existing Master Portfolio shareholders would
receive correspondingly less income. The converse would apply during periods
of rising interest rates.

Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Master Portfolio must maintain a dollar-weighted
average portfolio maturity of 90 days or less, purchase securities having
remaining maturities (as defined in Rule 2a-7) of thirteen months or less and
invest only in those high-quality securities that are determined by MIT's Board
of Trustees to present minimal credit risks. The maturity of an instrument is
generally deemed to be the period remaining until the date when the principal
amount thereof is due or the date on which the instrument is to be redeemed.
However, Rule 2a-7 provides that the maturity of an instrument may be deemed
shorter in the case of certain instruments, including certain variable- and
floating-rate instruments subject to demand features. Pursuant to the Rule,
MIT's Board of Trustees is required to establish procedures designed to
stabilize, to the extent reasonably possible, the Master Portfolio's price per
share as computed for the purpose of sales and redemptions at $1.00. Such
procedures include review of the Master Portfolio's portfolio holdings by MIT's
Board of Trustees, at such intervals as it may deem appropriate, to determine
whether or not the Master Portfolio's net asset value calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation

20
<PAGE> 178
will be examined by said Board of Trustees. If such deviation exceeds 1/2 of
1%, said Board will promptly consider what action, if any, will be initiated.
In the event the Board determines that a deviation exists that may result in
material dilution or other unfair results to investors or existing
shareholders, the Board will take such corrective action as it regards as
necessary and appropriate, including the sale of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity, withholding dividends or establishing a net asset value per share by
using available market quotations.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Fund may be purchased on any day the Fund is open for
business, provided Wells Fargo Bank also is open for business (a "Business
Day"). Currently, Wells Fargo Bank is closed on New Year's Day, President's
Day, Martin Luther King Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day (each a
"Holiday"). When any Holiday falls on a weekend, the Fund typically is closed
on the weekday immediately before or after such Holiday.

Payment for shares may, in the discretion of the adviser, be made
in the form of securities that are permissible investments for the Fund as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Fund and that the Fund receives satisfactory assurances that (i) it will have
good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities or
other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to
reimburse the Fund for any losses sustained by reason of the failure of a
shareholders to make full payment for shares purchased or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to shares of a Fund as provided from time to time in the Prospectus.

21
<PAGE> 179
PORTFOLIO TRANSACTIONS

MIT has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by MIT's Board of Trustees, Wells Fargo Bank is responsible for the
Master Portfolio's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of MIT to obtain the best
results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Master
Portfolio will not necessarily be paying the lowest spread or commission
available.

Purchase and sale orders of the securities held by the Master
Portfolio may be combined with those of other accounts that Wells Fargo Bank
manages, and for which it has brokerage placement authority, in the interest of
seeking the most favorable overall net results. When Wells Fargo Bank
determines that a particular security should be bought or sold for the Master
Portfolio and other accounts managed by Wells Fargo Bank, Wells Fargo Bank
undertakes to allocate those transactions among the participants equitably.

Purchases and sales of securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. The
Master Portfolio also purchases portfolio securities in underwritten offerings
and may purchase securities directly from the issuer. Generally, municipal
obligations, taxable money market securities, adjustable rate mortgage
securities and collateralized mortgage obligations are traded on a net basis
and do not involve brokerage commissions. The cost of executing the Master
Portfolio's portfolio securities transactions consists primarily of dealer
spreads and underwriting commissions. Under the 1940 Act, persons affiliated
with the Master Portfolio are prohibited from dealing with the Master Portfolio
as a principal in the purchase and sale of securities unless an exemptive order
allowing such transactions is obtained from the SEC or an exemption is
otherwise available.

The Master Portfolio may purchase municipal obligations from
underwriting syndicates of which Stephens or Wells Fargo Bank is a member under
certain conditions in accordance with the provisions of a rule adopted under
the 1940 Act and in compliance with procedures adopted by MIT's Board of
Trustees.

Wells Fargo Bank, as the Master Portfolio's investment adviser,
may, in circumstances in which two or more dealers are in a position to offer
comparable results for a Master Portfolio transaction, give preference to a
dealer that has provided statistical or other research services to Wells Fargo
Bank. By allocating transactions in this manner, Wells Fargo Bank is able to
supplement its research and analysis with the views and information of
securities firms. Information so received will be in addition to, and not in
lieu of, the services required to be performed by Wells Fargo Bank under the
Investment Advisory Contracts, and the expenses of Wells Fargo Bank will not
necessarily be reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by dealers through which
Wells Fargo Bank places securities transactions for the Master Portfolio may be
used by

22
<PAGE> 180
Wells Fargo Bank in servicing its other accounts, and not all of these services
may be used by Wells Fargo Bank in connection with advising the Master
Portfolio.

Portfolio Turnover. Because the Master Portfolio's portfolio
consists of securities with relatively short- term maturities, the Master
Portfolio can expect to experience high portfolio turnover. A high portfolio
turnover rate should not adversely affect the Master Portfolio (or the Fund),
however, because portfolio transactions ordinarily will be made directly with
principals on a net basis and, consequently, the Master Portfolio (and,
accordingly, the Fund) usually will not incur excessive transaction costs.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens,
the Company bears all costs of its operations, including the compensation of
its Directors who are not affiliated with Stephens or Wells Fargo Bank or any
of their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing prospectuses (except the expense of printing and mailing prospectuses
used for promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of the Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of the Fund's shares;
pricing services, and any extraordinary expenses. Expenses attributable to the
Fund are charged against Fund assets. General expenses of the Company are
allocated among all of the funds of the Company, including the Fund, in a
manner proportionate to the net assets of the Fund, on a transactional basis,
or on such other basis as the Company's Board of Directors deems equitable.

FEDERAL INCOME TAXES

In General. The following information supplements and should be
read in conjunction with the Prospectus sections entitled "Dividend and Capital
Gain Distributions" and "Taxes." The Prospectus describes generally the tax
treatment of distributions by the Fund. This section of the SAI includes
additional information concerning federal income taxes.

23
<PAGE> 181
Qualification as a regulated investment company under the Code
requires, among other things, that (a) the Fund derive at least 90% of its
annual gross income from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; (b) the Fund derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) the Fund diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of
the Fund's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government securities and the
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are determined to be engaged in the same or
similar trades or businesses. As a regulated investment company, the Fund will
not be subject to federal income tax on its net investment income and net
capital gains distributed to its shareholders, provided that it distributes to
its shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. The Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

A 4% nondeductible excise tax will be imposed on the Fund (other
than to the extent of the Fund's tax- exempt income) to the extent it does not
meet certain minimum distribution requirements by the end of each calendar
year. The Fund will either actually or be deemed to distribute all of its net
investment income and net capital gains by the end of each calendar year and,
thus, expects not to be subject to the excise tax.

Federal Income Tax Rates. As of the printing of this SAI, the
maximum individual tax rate applicable to ordinary income is 39.60% (marginal
rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual marginal tax rate applicable
to net capital gains is 28.00%; the maximum corporate tax rate applicable to
ordinary income and net capital gains is 35.00% (except that to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

Capital Gain Distributions. To the extent that the Fund
recognizes long-term capital gains, such gains will be distributed at least
annually and these distributions will be taxable to shareholders as long-term
capital gains, regardless of how long a shareholder has held Fund shares. Such
distributions will be designated as capital gain distributions in a written
notice mailed by the Fund to the shareholders not later than 60 days after the
close of the Fund's taxable year.

24
<PAGE> 182
Other Distributions. Although dividends will be declared daily
based on the Fund's daily earnings, for federal income tax purposes, the Fund's
earnings and profits will be determined at the end of each taxable year and
will be allocated pro rata over the entire year. For federal income tax
purposes, only amounts paid out of earnings and profits will qualify as
dividends. Thus, if during a taxable year the Fund's declared dividends (as
declared daily throughout the year) exceed the Fund's net income (as determined
at the end of the year), only that portion of the year's distributions which
equals the year's earnings and profits will be deemed to have constituted a
dividend. It is expected that the Fund's net income, on an annual basis, will
equal the dividends declared during the year.

If a shareholder exchanges or otherwise disposes of Fund shares
within 90 days of having acquired such shares and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
on a new purchase of shares of the Fund or of a different regulated investment
company, the sales charge previously incurred acquiring the Fund's shares shall
not be taken into account (to the extent such previous sales charges do not
exceed the reduction in sales charges on the new purchase) for the purpose of
determining the amount of gain or loss on the disposition, but will be treated
as having been incurred in the acquisition of such other shares. Also, any
loss realized on a redemption or exchange of shares of the Fund will be
disallowed to the extent that substantially identical shares are reacquired
within the 61-day period beginning 30 days before and ending 30 days after the
shares are disposed of.

Taxation of Fund Investments. Gains or losses on sales of
portfolio securities by the Fund will generally be long-term capital gains or
losses if the securities have been held by it for more than one year, except in
certain cases such as where the Fund acquires a put or writes a call thereon.
Gains recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by the Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Fund held the debt obligation. Other
gains or losses on the sale of portfolio securities will be short-term capital
gains or losses.

25
<PAGE> 183
Fund to a foreign shareholder is "effectively connected" with a U.S. trade or
business, in which case the reporting and withholding requirements applicable
to U.S. citizens, U.S. residents or domestic corporations will apply.
Distributions of net long-term capital gains are not subject to tax
withholding, but in the case of a foreign shareholder who is a nonresident
alien individual, such distributions ordinarily will be subject to U.S. income
tax at a rate of 30% if the individual is physically present in the U.S. for
more than 182 days during the taxable year.

Backup Withholding. The Company may be required to withhold,
subject to certain exemptions, at a rate of 31% ("backup withholding") on
dividends, capital gain distributions, and redemption proceeds (including
proceeds from exchanges) paid or credited to an individual Fund shareholder,
unless a shareholder certifies that the Taxpayer Identification Number ("TIN")
provided is correct and that the shareholder is not subject to backup
withholding, or the IRS notifies the Company that the shareholder's TIN is
incorrect or the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by the IRS.

Other Matters. Investors should be aware that the investments to
be made by the Fund may involve sophisticated tax rules that may result in
income or gain recognition by the Fund without corresponding current cash
receipts. Although the Fund will seek to avoid significant noncash income,
such noncash income could be recognized by the Fund, in which case the Fund may
distribute cash derived from other sources in order to meet the minimum
distribution requirements described above.

The foregoing discussion and the discussions in the Prospectus
address only some of the federal tax considerations generally affecting
investments in the Fund. Each investor is urged to consult his or her tax
advisor regarding specific questions as to federal, state or local taxes and
foreign taxes.

CAPITAL STOCK

The Fund is one of the funds of the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of twenty-four other funds.

Most of the Company's funds are authorized to issue multiple
classes of shares, one class generally subject to a front-end sales charge and,
in some cases, a class subject to a contingent-deferred sales charge, that are
offered to retail investors. Certain of the Company's funds also are
authorized to issue other classes of shares, which are sold primarily to
institutional investors. Each class of shares in a fund represents an equal,
proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state
securities registration fees, shareholder servicing fees or distribution fees
that may be paid under Rule 12b-1) that are

26
<PAGE> 184
allocated to a particular class. Please contact Stagecoach Shareholder
Services at 1-800-222-8222 if you would like additional information about other
funds or classes of shares offered.

All shares of the Fund have equal voting rights and will be voted
in the aggregate, and not by series, except where voting by series is required
by law or where the matter involved only affects one series. For example, a
change in the Fund's fundamental investment policy would be voted upon only by
shareholders of the Fund. Additionally, approval of an advisory contract is a
matter to be determined separately by Fund. As used in the Fund's Prospectus
and in this SAI, the term "majority," when referring to approvals to be
obtained from shareholders of the Fund, means the vote of the lesser of (i) 67%
of the shares of the Fund represented at a meeting if the holders of more than
50% of the outstanding shares of the Fund are present in person or by proxy, or
(ii) more than 50% of the outstanding shares of the Fund. The term "majority,"
when referring to the approvals to be obtained from shareholders of the Company
as a whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares. Shareholders are entitled to one vote for
each full share held and fractional votes for fractional shares held.

Each share of the Fund represents an equal proportional interest
in the Fund with each other share and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of the Directors. In the event of the
liquidation or dissolution of the Company, shareholders of the Fund are
entitled to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular investment portfolio that are available for distribution in such
manner and on such basis as the Directors in their sole discretion may
determine.

Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Company.

MIT, a no-load, diversified, open-end management investment
company, was organized as a Delaware business trust on August 15, 1991. In
accordance with Delaware law and in connection with the tax treatment sought by
MIT, MIT's Declaration of Trust provides that its investors would be personally
responsible for MIT liabilities and obligations, but only to the extent MIT's
property is insufficient to satisfy such liabilities and obligations. The
Declaration of Trust also provides that MIT shall maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance)
for the protection of MIT, its investors, Trustees, Officers, employees and
agents covering possible tort and other liabilities, and that investors will be
indemnified to the extent they are held liable for a disproportionate share of

27
<PAGE> 185
MIT obligations. Thus, the risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which both
inadequate insurance exists and MIT itself is unable to meet its obligations.

The Declaration of Trust further provides that obligations of MIT
are not binding upon the Trustees individually but only upon the property of
MIT and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Trust protects a Trustee against any
liability to which the Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of the Trustee's office.

The interests in the Master Portfolio have substantially identical
voting and other rights as those rights enumerated above for shares of the
Fund. MIT also intends to dispense with annual meetings, but is required by
Section 16(c) of the Act to hold a special meeting and assist investor
communications under the circumstances described above with respect to the
Company. Whenever the Fund is requested to vote on a matter with respect to
the Master Portfolio, the Fund will hold a meeting of Fund shareholders and
will cast its votes as instructed by such shareholders.

In a situation where the Fund does not receive instruction from
certain of its shareholders on how to vote the corresponding shares of the
Master Portfolio, the Fund will vote such shares in the same proportion as the
shares for which the Fund does receive voting instructions.

Set forth below is the name, address and share ownership of each
person known by the Company to have beneficial or record ownership of 5% or
more of a class of the Fund or 5% or more of the voting securities of the Fund
as a whole.

28
<PAGE> 186
5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
NATIONAL TAX- Wells Fargo Bank Class A 84.18% 84.18%
FREE MONEY P.O. Box 7066 Beneficially Owned
MARKET MUTUAL San Francisco, CA
94120
Class A 6.82% 6.82%
Karl R. Kriegbaum [Record Holder]
11259 Good Night
Lane #1
Dallas, TX 75229
</TABLE>

OTHER

The Registration Statements of the Company and MIT, including the
Fund's Prospectus, the SAI and the exhibits filed therewith, may be examined at
the office of the SEC in Washington, D.C. Statements contained in the
Prospectus or the SAI as to the contents of any contract or other document
referred to herein or in the Prospectus are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statements, each such statement being
qualified in all respects by such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP have been selected as the independent
auditors for the Company and MIT. KPMG Peat Marwick LLP provides audit
services, tax return preparation and assistance and consultation in connection
with review of certain SEC filings. KPMG Peat Marwick LLP's address is Three
Embarcadero Center, San Francisco, California 94111.

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' reports for the Fund for the fiscal period ended
September 30, 1996 are hereby incorporated by reference to the Company's Annual
Report as filed with the SEC on December 9, 1996. The portfolio of
investments, audited financial statements and independent auditors' report for
the Fund are attached to all SAIs delivered to current or prospective
shareholders.

The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal period ended September 30, 1996 for
the Tax-Free Money Market Master Portfolio of Master Investment Trust are
hereby incorporated by reference to the Company's Annual Reports as filed with
the SEC on December 9, 1996.

29
<PAGE> 187

SAI APPENDIX

The following is a description of the ratings given by Moody's and
S&P to corporate and municipal bonds, municipal notes, and corporate and
municipal commercial paper.

Corporate and Municipal Bonds

Moody's: The four highest ratings for corporate and municipal
bonds are "Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of
the "best quality" and carry the smallest amount of investment risk. Bonds
rated "Aa" are of "high quality by all standards," but margins of protection or
other elements make long-term risks appear somewhat greater than "Aaa" rated
bonds. Bonds rated "A" possess many favorable investment attributes and are
considered to be upper medium grade obligations. Bonds rated "Baa" are
considered to be medium grade obligations; interest payments and principal
security appear adequate for the present, but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds have speculative characteristics as well. Moody's also
applies numerical modifiers in its rating system: 1, 2 and 3 in each rating
category from "Aa" through "Baa" in its rating system. The modifier 1
indicates that the security ranks in the higher end of its category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end.

Municipal Notes

A-1
<PAGE> 188

S&P: The "SP-1" rating reflects a "very strong or strong capacity
to pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.

Corporate and Municipal Commercial Paper

Moody's: The highest rating for corporate and municipal
commercial paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior
capacity for repayment of short-term promissory obligations." Issuers rated
"P-2" (Prime- 2) "have a strong capacity for repayment of short-term promissory
obligations," but earnings trends, while sound, will be subject to more
variation.

Corporate Notes

A-2
<PAGE> 189
STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997
U.S. GOVERNMENT ALLOCATION FUND
CORPORATE STOCK FUND
ASSET ALLOCATION FUND

CLASS A AND CLASS B

---------------------------

Stagecoach Funds, Inc. is an open-end, series investment company.
This Statement of Additional Information ("SAI") contains information about
three of the funds in the Stagecoach Family of Funds. This SAI is not a
prospectus, but supplements and should be read in conjunction with the current
Prospectus describing the U.S. GOVERNMENT ALLOCATION FUND and the ASSET
ALLOCATION FUND, and the prospectus describing the CORPORATE STOCK FUND, each
dated February 1, 1997, (each, a "Fund" and collectively, the "Funds") of
Stagecoach Funds, Inc. (the "Company") as it may be revised from time to time.
All terms used in this SAI that are defined in each Fund's Prospectus will have
the meaning assigned in such Prospectus. A copy of the Prospectus for each
Fund may be obtained without charge by writing Stephens Inc. ("Stephens"), the
Company's sponsor, co-administrator and distributor, at 111 Center Street,
Little Rock, Arkansas 72201, or calling the Transfer Agent at the telephone
number indicated above.

As described in each Prospectus, each of these Funds invests all of
its assets in a separate Master Portfolio of Master Investment Trust ("MIT"),
an open-end management investment company, having the same investment objective
as the Fund bearing the corresponding name. Each of the Funds, other than the
Corporate Stock Fund, offers two classes (each a "Class") of shares -- Class A
shares and Class B shares. This SAI relates to the shares offered by the
Corporate Stock Fund (which shares sometimes referred to herein collectively,
the "Class A shares") and to both Classes of shares offered by the other Funds.
The investment objective of each Fund is described in its Prospectus under the
Section entitled "How the Funds Work -- Investment Objectives and Policies."

Wells Fargo Bank, N.A. ("Wells Fargo Bank") is investment adviser and
administrator, and Barclays Global Fund Advisors ("BGFA"), an affiliate of
Barclays Bank PLC ("Barclays"), is investment sub-adviser to each of the Master
Portfolios of MIT.

---------------------------

1
<PAGE> 190
TABLE OF CONTENTS

<TABLE>
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . 3

Additional Permitted Investment Activities . . . . . 8

Management of the Company . . . . . . . . . . . . . . 18

Compensation Table . . . . . . . . . . . . . . . . . 21

Distribution Plans . . . . . . . . . . . . . . . . . 27

Performance Calculations . . . . . . . . . . . . . . 29

Determination of Net Asset Value . . . . . . . . . . 36

Additional Purchase and Redemption Information . . . 36

Portfolio Transactions . . . . . . . . . . . . . . . 37

Fund Expenses . . . . . . . . . . . . . . . . . . . . 40

Federal Income Taxes . . . . . . . . . . . . . . . . 41

Capital Stock . . . . . . . . . . . . . . . . . . . . 46

Other . . . . . . . . . . . . . . . . . . . . . . . . 49

Independent Auditors . . . . . . . . . . . . . . . . 49

Financial Information . . . . . . . . . . . . . . . . 49

SAI Appendix . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

2
<PAGE> 191
INTRODUCTION

The Company is a registered investment company consisting of
twenty-five series including the Funds. MIT is a registered investment company
consisting of nine series including the Master Portfolios. Each Fund invests
all of its assets in the corresponding Master Portfolio of MIT (as illustrated
below), which has the same investment objectives as the related Fund.

Fund Corresponding Master Portfolio

U.S. Government Allocation Fund U.S. Government Allocation Master Portfolio
Corporate Stock Fund Corporate Stock Master Portfolio
Asset Allocation Fund Asset Allocation Master Portfolio

INVESTMENT RESTRICTIONS

General. Each Master Portfolio has the same investment objective as
its related Fund. Each Fund may withdraw its investment in the corresponding
Master Portfolio at any time if the Board of Directors of the Company
determines that such action is in the best interests of the Fund and its
shareholders. Upon such withdrawal, the Company's Board of Directors would
consider alternative investments, including investing all of the Fund's assets
in another investment company with the same investment objective as the Fund or
hiring an investment adviser to manage the Fund's assets in accordance with the
investment policies and restrictions described in the Fund's Prospectus and
this SAI.

Fundamental Investment Policies. Each Fund has adopted the following
investment restrictions, all of which are fundamental policies; that is, they
may not be changed without approval by the vote of the holders of a majority
(as defined in the Investment Company Act of 1940, as amended (the "1940 Act"))
of the outstanding voting securities of such Fund. Whenever a Fund is
requested to vote on a fundamental policy of the Master Portfolio in which it
invests, such Fund holds a meeting of Fund shareholders and casts its votes as
instructed by such Fund's shareholders.

The Funds may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of any Fund's investments in that industry would
be 25% or more of the current value of its total assets, provided that there is
no limitation with respect to investments in (i) obligations of the United
States Government, its agencies or instrumentalities, (ii) in the case of the
Corporate Stock Fund and the Asset Allocation Fund, any industry in which the
S&P 500 Index becomes concentrated to the same degree during the same period,
and (iii) in the case of the Asset Allocation Fund, money market instruments

3
<PAGE> 192
invested in the banking industry (but the Fund will not do so unless the SEC
staff confirms that it does not object to the Fund reserving freedom of action
to concentrate investments in the banking industry); and provided further, that
a Fund may invest all of its assets in a diversified, open-end management
investment company, or a series thereof, with substantially the same investment
objective, policies and restrictions as such Fund, without regard to the
limitations set forth in this paragraph (1);

(3) purchase or sell commodities or commodity contracts; except
that each Fund may purchase and sell (i.e., write) options, forward contracts,
futures contracts, including those relating to indices, and options on futures
contracts or indices, and may participate in interest rate and index swaps;

(4) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;

(5) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and except for margin payments in
connection with transactions in options, forward contracts, futures contracts,
including those relating to indices, and options on futures contracts or
indices) or make short sales of securities;

(6) underwrite securities of other issuers, except to the extent
that the purchase of permitted investments directly from the issuer thereof or
from an underwriter for an issuer and the later disposition of such securities
in accordance with the Fund's investment program may be deemed to be an
underwriting; and provided further, that the purchase by a Fund of securities
issued by a diversified, open-end management investment company, or a series
thereof, with substantially the same investment objective, policies and
restrictions as such Fund shall not constitute an underwriting for purposes of
this paragraph (6);

(7) make investments for the purpose of exercising control or
management; provided that a Fund may invest all its assets in a diversified,
open-end management investment company, or a series thereof, with substantially
the same investment objective, policies and restrictions as such Fund, without
regard to the limitations set forth in this paragraph (7);

(8) issue senior securities, except to the extent the activities
permitted in Investment Restrictions Nos. 3 and 5 may be deemed to give rise
to a senior security but do not violate the provisions of section 18 of the
1940 Act, and except that each Fund may borrow up to 20% of the current value
of each such Fund's net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 20% of
the current value of each such Fund's net assets (but investments

4
<PAGE> 193
may not be purchased by such Funds while any such outstanding borrowings exceed
5% of the respective Fund's net assets);

(9) write, purchase or sell puts, calls, straddles, spreads,
warrants, options or any combination thereof, except that each Fund may engage
in options transactions to the extent permitted in Investment Restrictions Nos.
3 and 5, and except that each Fund may purchase securities with put rights in
order to maintain liquidity; or

(10) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, more than 5% of the value of the Fund's total assets would be invested
in the securities of any one issuer or the Fund's ownership would be more than
10% of the outstanding voting securities of such issuer, provided that a Fund
may invest all its assets in a diversified, open-end management investment
company, or a series thereof, with substantially the same investment objective,
policies and restrictions as such Fund, without regard to the limitations set
forth in this paragraph (10).

Each Fund may make loans in accordance with its investment policies.

As a fundamental policy, each Fund may invest, notwithstanding any
other investment restrictions (whether or not fundamental), all of its assets
in the securities of a single open-end, management investment company with
substantially the same fundamental investment objectives, policies and
restrictions as such Fund.

Non-Fundamental Investment Policies. Each Fund is subject to the
following non-fundamental policies which may be changed by a majority vote of
the Board of Directors of the Company at any time and without approval of the
shareholders.

The Funds may not:

(1) purchase or retain securities of any issuer if the officers or
Directors of the Company or the investment adviser owning beneficially more
than one-half of one percent (0.50%) of the securities of the issuer together
owned beneficially more than 5% of such securities;

(3) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers

5
<PAGE> 194
which are not readily marketable if by reason thereof the value of its
aggregate investment in such classes of securities will exceed 5% of its total
assets; or

(4) invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.

Fundamental Investment Policies of the Master Portfolios. Each Master
Portfolio has adopted the following investment restrictions, all of which are
fundamental policies; that is, they may not be changed without approval by the
vote of the holders of a majority (as defined in the 1940 Act) of the
outstanding voting securities of such Master Portfolio.

The Master Portfolios may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of any Master Portfolio's investments in that
industry would be 25% or more of the current value of its total assets,
provided that there is no limitation with respect to investments in (i)
obligations of the United States Government, its agencies or instrumentalities,
(ii) in the case of the Corporate Stock Master Portfolio and the Asset
Allocation Master Portfolio, any industry in which the S&P 500 Index becomes
concentrated to the same degree during the same period, and (iii) in the case
of the Asset Allocation Master Portfolio, money market instruments invested in
the banking industry (but the Master Portfolio will not do so unless the SEC
staff confirms that it does not object to the Master Portfolio reserving
freedom of action to concentrate investments in the banking industry);

(3) purchase or sell commodities or commodity contracts; except
that each Master Portfolio may purchase and sell (i.e., write) options, forward
contracts, futures contracts, including those relating to indices, and options
on futures contracts or indices, and may participate in interest rate and index
swaps;

(4) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;

(6) underwrite securities of other issuers, except to the extent
that the purchase of permitted investments directly from the issuer thereof or
from an underwriter for an

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issuer and the later disposition of such securities in accordance with the
Master Portfolio's investment program may be deemed to be an underwriting;

(7) make investments for the purpose of exercising control or
management;

(8) issue senior securities, except to the extent the activities
permitted in Investment Restrictions Nos. 3 and 5 may be deemed to give rise
to a senior security but do not violate the provisions of section 18 of the
1940 Act, and except that each Master Portfolio may borrow up to 20% of the
current value of each such Master Portfolio's net assets for temporary purposes
only in order to meet redemptions, and these borrowings may be secured by the
pledge of up to 20% of the current value of each such Master Portfolio's net
assets (but investments may not be purchased by such Master Portfolios while
any such outstanding borrowings exceed 5% of the respective Master Portfolio's
net assets);

(9) write, purchase or sell puts, calls, straddles, spreads,
warrants, options or any combination thereof, except that each Master Portfolio
may engage in options transactions to the extent permitted in Investment
Restrictions Nos. 3 and 5, and except that each Master Portfolio may purchase
securities with put rights in order to maintain liquidity; or

Each Master Portfolio may make loans in accordance with their
investment policies.

Non-Fundamental Investment Policies. Each Master Portfolio is subject
to the following non-fundamental policies which may be changed by a majority
vote of the Board of Trustees of MIT at any time and without approval of the
shareholders.

The Master Portfolios may not:

(1) purchase or retain securities of any issuer if the officers or
Directors of MIT or Wells Fargo Bank owning beneficially more than one-half of
one percent (0.50%) of the securities of the issuer together owned beneficially
more than 5% of such securities;

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and revenues of any of the foregoing if, by reason thereof, the value of its
aggregate investments in such securities will exceed 5% of its total assets;

(3) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of its aggregate investment in such classes of securities
will exceed 5% of its total assets; or

(4) invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.

In addition, the Master Portfolios may invest in shares of other open-
end, management investment companies, subject to the limitations of Section
12(d)(1) of the 1940 Act, provided that any such purchases will be limited to
temporary investments in shares of unaffiliated investment companies and Wells
Fargo Bank will waive its advisory fees for that portion of the Master
Portfolios' assets so invested, except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition.

MIT may make commitments more restrictive than the restrictions listed
above, so as to permit the sale of shares of a feeder fund that invests in the
Master Portfolio in certain states. Should MIT determine that a commitment is
no longer in the best interest of the Master Portfolio and its interestholders,
MIT reserves the right to revoke the commitment by terminating the sale of such
Master Portfolio's shares in the state involved.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

PORTFOLIO SECURITIES. To the extent set forth in the Prospectus and
SAI, each Master Portfolio may invest in the securities described below.

Asset Allocation Model. A key component of the Asset Allocation Model
is a set of assumptions concerning expected risk and return and investor
attitudes toward risk which are incorporated into the asset allocation decision.
The principal inputs of financial data to the Asset Allocation Model currently
are (i) consensus estimates of the earnings, dividends and payout ratios on a
broad cross-section of common stocks as reported by independent financial
reporting services which survey a broad cross-section of Wall Street analysts,
(ii) the estimated current yield to maturity on new long-term corporate bonds
rated "AA" by S&P, (iii) the present yield on money market instruments, (iv) the
historical statistical standard deviation in investment return for each class of
asset, and (v) the historical statistical correlation of investment returns
among the various asset classes in which the Asset Allocation Master Portfolio
invests. Using these data, the Asset Allocation Model is run daily to determine
the recommended asset allocation. The model's recommendations are presently
made in 10% increments.

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Unrated Investments. Each Master Portfolio may purchase instruments
that are not rated if, in the opinion of Wells Fargo Bank, such obligations are
of investment quality comparable to other rated investments that are permitted
to be purchased by such Master Portfolio. After purchase by a Master Portfolio,
a security may cease to be rated or its rating may be reduced below the minimum
required for purchase by such Master Portfolio. Neither event will require a
sale of such security by such Master Portfolio. To the extent the ratings given
by Moody's or S&P may change as a result of changes in such organizations or
their rating systems, each Master Portfolio will attempt to use comparable
ratings as standards for investments in accordance with the investment policies
contained in its Prospectus and in this SAI. The ratings of Moody's and S&P are
more fully described in the SAI Appendix.

Letters of Credit. Certain of the debt obligations (including
certificates of participation, commercial paper and other short-term
obligations) which the Master Portfolios may purchase may be backed by an
unconditional and irrevocable letter of credit of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Wells Fargo Bank, are of comparable quality to issuers of other permitted
investments of such Fund may be used for letter of credit-backed investments.

Pass-Through Obligations. The Master Portfolios may invest in
pass-through obligations that are supported by the full faith and credit of the
U.S. Government (such as those issued by the Government National Mortgage
Association) or those that are guaranteed by an agency or instrumentality of
the U.S. Government or government- sponsored enterprise (such as the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation) or
bonds collateralized by any of the foregoing.

When-Issued Securities. Certain of the securities in which the U.S.
Government Allocation Master Portfolio and the Asset Allocation Master
Portfolio may invest will be purchased on a when-issued basis, in which case
delivery and payment normally take place within 45 days after the date of the
commitment to purchase. These Master Portfolios only will make commitments to
purchase securities on a when-issued basis with the intention of actually
acquiring the securities, but may sell them before the settlement date if it is
deemed advisable. When- issued securities are subject to market fluctuation,
and no income accrues to the purchaser during the period prior to issuance.
The purchase price and the interest rate that will be received on debt
securities are fixed at the time the purchaser enters into the commitment.
Purchasing a security on a when-issued basis can involve a risk that the market
price at the time of delivery may be lower than the agreed-upon purchase price,
in which case there could be an unrealized loss at the time of delivery.

Each Master Portfolio will segregate cash, U.S. Government obligations
or other high-quality debt instruments in an amount at least equal in value to
the Master

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Portfolio's commitments to purchase when-issued securities. If the value of
these assets declines, the Master Portfolio will segregate additional liquid
assets on a daily basis so that the value of the segregated assets is equal to
the amount of such commitments.

Loans of Portfolio Securities. All of the Master Portfolios may lend
securities from their portfolios to brokers, dealers and financial institutions
(but not individuals) if cash, U.S. Government obligations or other
high-quality debt instruments equal to at least 100% of the current market
value of the securities loan (including accrued interest thereon) plus the
interest payable to such Master Portfolio with respect to the loan is
maintained with the Master Portfolio. In determining whether to lend a
security to a particular broker, dealer or financial institution, Wells Fargo
Bank will consider all relevant facts and circumstances, including the
creditworthiness of the broker, dealer, or financial institution. Any loans of
portfolio securities will be fully collateralized based on values that are
marked to market daily. The Master Portfolios will not enter into any
portfolio security lending arrangement having a duration of longer than one
year. The principal risk of portfolio lending is potential default or
insolvency of the borrower. In either of these cases, a Master Portfolio could
experience delays in recovering securities or collateral or could lose all or
part of the value of the loaned securities. Any securities that a Master
Portfolio may receive as collateral will not become part of the Master
Portfolio's portfolio at the time of the loan and, in the event of a default by
the borrower, the Master Portfolio will, if permitted by law, dispose of such
collateral except for such part thereof that is a security in which the Master
Portfolio is permitted to invest. During the time securities are on loan, the
borrower will pay the Master Portfolio any accrued income on those securities,
and the Master Portfolio may invest the cash collateral and earn additional
income or receive an agreed-upon fee from a borrower that has delivered
cash-equivalent collateral. None of the Master Portfolios will lend securities
having a value that exceeds one third of the current value of its total assets.
Loans of securities by any of the Master Portfolios will be subject to
termination at the Master Portfolio's or the borrower's option. The Master
Portfolios may pay reasonable administrative and custodial fees in connection
with a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with the Company, MIT, its Adviser, or its Distributor.

Futures Contracts and Options Transactions. The Corporate Stock Fund
may engage in futures transactions as discussed below. A futures transaction
involves a firm agreement to buy or sell a commodity or financial instrument at
a particular price on a specified future date, while an option transaction
generally involves a right, which may or may not be exercised, to buy or sell a
commodity of financial instrument at a particular price on a specified future
date. Futures contracts and options are standardized and exchange-traded, where
the exchange serves as the ultimate counterparty for all contracts.
Consequently, the only credit risk on futures contracts is the creditworthiness
of the exchange. Futures contracts, however, are subject to market risk (i.e.,
exposure to adverse price changes).

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The Corporate Stock Fund may trade futures contracts and options on
futures contracts in U.S. domestic markets, such as the Chicago Board of Trade
and the International Monetary Market of the Chicago Mercantile Exchange.

The Corporate Stock Fund's futures transactions must constitute
permissible transactions pursuant to regulations promulgated by the Commodity
Futures Trading Commission. In addition, the Fund may not engage in futures
transactions if the sum of the amount of initial margin deposits and premiums
paid for unexpired options on futures contracts, other than those contracts
entered into for bona fide hedging purposes, would exceed 5% of the liquidation
value of the Fund's assets, after taking into account unrealized profits and
unrealized losses on such contracts; provided, however, that in the case of an
option on a futures contract that is in-the money at the time of purchase, the
in-the money amount may be excluded in calculating the 5% liquidation amount.
Pursuant to regulations and/or published positions of the SEC, the Fund may be
required to segregate cash, U.S. Government obligations or other high-quality
debt instruments in connection with its futures transactions in an amount
generally equal to the entire value of the underlying commitment.

Initially, when purchasing or selling futures contracts the Corporate
Stock Fund will be required to deposit with its custodian in the broker's name
an amount of cash or cash equivalents up to approximately 10% of the contract
amount. This amount is subject to change by the exchange or board of trade on
which the contract is traded, and members of such exchange or board of trade
may impose their own higher requirements. This amount is known as "initial
margin" and is in the nature of a performance bond or good faith deposit on the
contract that is returned to the Fund upon termination of the futures position,
assuming all contractual obligations have been satisfied. Subsequent payments,
known as "variation margin", to and from the broker will be made daily as the
price of the index or securities underlying the futures contract fluctuates,
making the long and short positions in the futures contract more or less
valuable. At any time prior to the expiration of a futures contract, the Fund
may elect to close the position by taking an opposite position, at the then
prevailing price, thereby terminating its existing position in the contract.

Although the Corporate Stock Fund intends to purchase or sell futures
contracts only if there is an active market for such contracts, no assurance
can be given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount
of fluctuation permitted in futures contract prices during a single trading
day. Once the daily limit has been reached in a particular contract, no trades
may be made that day at a price beyond that limit or trading may be suspended
for specified periods during the trading day. Futures contracts prices could
move to the limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
potentially subject the Fund to substantial losses. If it is not possible, or
the Fund determines not, to close a

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futures position in anticipation of adverse price movements, the Fund will be
required to make daily cash payments of variation margin.

An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the option exercise period.
The writer (i.e. seller) of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a
long position if the option is a put). Upon exercise of the option, the
assumption of offsetting futures positions by both the writer and the holder of
the option will be accompanied by delivery of the accumulated cash balance in
the writer's futures margin account in the amount by which the market price of
the futures contract, at exercise, exceeds (in the case of a call) or is less
than (in the case of a put) the exercise price of the option on the futures
contract.

Each Master Portfolio may enter into futures contracts and may purchase
and write options thereon. Upon the exercise, the writer of the option
delivers to the holder of the option the futures position and the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of options on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time of
sale, there are no daily cash payments to reflect changes in the value of the
underlying contract; however, the value of the option may change daily, and
that change would be reflected in the net asset value of the relevant Master
Portfolio.

Foreign Currency Transactions. If a Master Portfolio enters into a
foreign currency transaction or forward contract, such Master Portfolio
deposits, if required by applicable regulations, with MIT's custodian cash or
high-grade debt securities in a segregated account of the Master Portfolio in
an amount at least equal to the value of the Master Portfolio's total assets
committed to the consummation of the forward contract. If the value of the
securities placed in the segregated account declines, additional cash or
securities are placed in the account so that the value of the account equals
the amount of the Master Portfolio's commitment with respect to the contract.

At or before the maturity of a forward contract, a Master Portfolio
either may sell a portfolio security and make delivery of the currency, or may
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which such Master Portfolio
obtains, on the same maturity date, the same amount of the currency which it is
obligated to deliver. If the Master Portfolio retains the portfolio security
and engages in an offsetting transaction, such Master Portfolio, at the time of
execution of the offsetting transaction, incurs a gain or a loss to the extent
that movement has occurred in forward contract prices. Should forward prices
decline during

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the period between the Master Portfolio's entering into a forward contract for
the sale of a currency and the date it enters into an offsetting contract for
the purchase of the currency, the Master Portfolio will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Master
Portfolio will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.

The cost to a Master Portfolio of engaging in current transactions
varies with factors such as the currency involved, the length of the contract
period and the market conditions then prevailing. Because transactions in
currency exchange usually are conducted on a principal basis, no fees or
commissions are involved. Wells Fargo Bank or BGFA, as appropriate, considers
on an ongoing basis the creditworthiness of the institutions with which a Master
Portfolio enters into foreign currency transactions. The use of forward
currency exchange contracts does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. If a devaluation generally is anticipated, the Master
Portfolio may not be able to contract to sell the currency at a price above the
devaluation level it anticipates.

The purchase of options on currency futures allows a Master Portfolio,
for the price of the premium it must pay for the option, to decide whether or
not to buy (in the case of a call option) or to sell (in the case of a put
option) a futures contract at a specified price at any time during the period
before the option expires.

Future Developments. Each Master Portfolio may take advantage of
opportunities in the areas of options and futures contracts and options on
futures contracts and any other derivative investments which are not presently
contemplated for use by such Master Portfolio or which are not currently
available but which may be developed, to the extent such opportunities are both
consistent with a Master Portfolio's investment objective and legally
permissible for the Master Portfolio. Before entering into such transactions
or making any such investment, a Master Portfolio would provide appropriate
disclosure in its Prospectus or this SAI.

Stock Index Options. The Master Portfolios may purchase and write
(i.e., sell) put and call options on stock indices as a substitute for
comparable market positions in the underlying securities. A stock index
fluctuates with changes in the market values of the stocks included in the
index. The aggregate premiums paid on all options purchased may not exceed 20%
of a Master Portfolio's total assets and the value of the options written may
not exceed 10% of the value of the Master Portfolio's total assets.

The effectiveness of purchasing or writing stock index options will
depend upon the extent to which price movements in a Master Portfolio's
portfolio correlate with price movements of the stock index selected. Because
the value of an index option depends upon movements in the level of the index
rather than the price of a particular stock,

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whether a Master Portfolio will realize a gain or loss from purchasing or
writing stock index options depends upon movements in the level of stock prices
in the stock market generally or, in the case of certain indices, in an
industry or market segment, rather than movements in the price of particular
stock.

When a Master Portfolio writes an option on a stock index, the Master
Portfolio will place in a segregated account with the Master Portfolio's
custodian cash or liquid securities in an amount at least equal to the market
value of the underlying stock index and will maintain the account while the
option is open or otherwise will cover the transaction.

Stock Index Futures and Options on Stock Index Futures. Each Master
Portfolio may invest in stock index futures and options on stock index futures
as a substitute for a comparable market position in the underlying securities.
A stock index future obligates the seller to deliver (and the purchaser to
take), effectively, an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks in the index is made. With
respect to stock indices that are permitted investments, each Master Portfolio
intends to purchase and sell futures contracts on the stock index for which it
can obtain the best price with consideration also given to liquidity.

Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. Each Master Portfolio may invest in interest-rate futures contracts
and options on interest-rate futures contracts as a substitute for a comparable
market position in the underlying securities. Each Master Portfolio may also
sell options on interest- rate futures contracts as part of closing purchase
transactions to terminate its options positions. No assurance can be given
that such closing transactions can be effected or as to the degree of
correlation between price movements in the options on interest rate futures and
price movements in the Master Portfolio's portfolio securities which are the
subject of the transaction.

Interest-Rate and Index Swaps. Each Master Portfolio may enter into
interest-rate and index swaps in pursuit of its investment objective.
Interest-rate swaps involve the exchange by a Master Portfolio with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating-rate payments for fixed-rate payments). Index swaps
involve the exchange by the Master Portfolio with another party of cash flows
based upon the performance of an index of securities or a portion of an index
of securities that usually include dividends or income. In each case, the
exchange commitments can involve payments to be made in the same currency or in
different currencies. Each Master Portfolio will usually enter into swaps on a
net basis. In so doing, the two payment streams are netted out, with the
Master Portfolio receiving or paying, as the case may be, only the net amount
of the two payments. If a Master Portfolio enters into a swap, it will
maintain a segregated account on a gross basis, unless

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the contract provides for a segregated account on a net basis. If there is a
default by the other party to such a transaction, the Master Portfolio will
have contractual remedies pursuant to the agreements related to the
transaction.

The use of interest-rate and index swaps is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. There is no limit,
except as provided below, on the amount of swap transactions that may be entered
into by a Master Portfolio. These transactions generally do not involve the
delivery of securities or other underlying assets or principal. Accordingly,
the risk of loss with respect to swaps generally is limited to the net amount of
payments that the Master Portfolio is contractually obligated to make. There is
also a risk of a default by the other party to a swap, in which case the Fund
may not receive net amount of payments that the Master Portfolio contractually
is entitled to receive. Each Fund and Master Portfolio may invest up to 10% of
its respective net assets in interest-rate and index swaps.

Some of the permissible investments described herein are considered
"derivative" securities because their value is derived, at least in part, from
the price of another security or a specified asset, index or rate. For
example, the futures contracts and options on futures contracts that the Master
Portfolios may purchase are considered derivatives. The Master Portfolios may
only purchase or sell these contracts or options as substitutes for comparable
market positions in the underlying securities. Also, asset-backed securities
issued or guaranteed by U.S. Government agencies or instrumentalities and
certain floating- and variable-rate instruments can be considered derivatives.
Some derivatives may be more sensitive than direct securities to changes in
interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms.

Wells Fargo Bank and BGFA use a variety of internal risk management
procedures to ensure that derivatives use is consistent with a Master
Portfolio's investment objective, does not expose the Master Portfolio to undue
risk and is closely monitored. These procedures include providing periodic
reports to the Board of Trustees concerning the use of derivatives.

The use of derivatives by the Master Portfolios also is subject to
broadly applicable investment policies. For example, a Master Portfolio may not
invest more than a specified percentage of its assets in "illiquid securities,"
including those derivatives that do not have active secondary markets. Nor may
a Master Portfolio use certain derivatives without establishing adequate "cover"
in compliance with Securities and Exchange Commission rules limiting the use of
leverage.

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domestic issuer. Foreign issuers also are not generally subject to uniform
accounting, auditing and financial reporting standards or governmental
supervision comparable to those applicable to domestic issuers. In addition,
with respect to certain foreign countries, taxes may be withheld at the source
under foreign income tax laws, and there is a possibility of expropriation or
confiscatory taxation, political or social instability or diplomatic
developments that could adversely affect investments in, the liquidity of, and
the ability to enforce contractual obligations with respect to, securities of
issuers located in those countries. None of the Master Portfolios may invest
25% or more of its assets in foreign obligations.

Warrants. The Master Portfolios each may invest no more than 5% of
their respective net assets at the time of purchase in warrants (other than
those that have been acquired in units or attached to other securities) and not
more than 2% of each of their net assets in warrants which are not listed on the
New York or American Stock Exchange. Warrants represent rights to purchase
securities at a specific price valid for a specific period of time. The price
of warrants do not necessarily correlate with the prices of the underlying
securities. The Master Portfolios may not only purchase warrants on securities
in which they may invest directly.

ASSET ALLOCATION MODEL

BGFA compares the Asset Allocation Master Portfolio's investments
daily to the Asset Allocation Model's recommended allocation. The investment
model recommends allocations among each asset class in 10% increments only. Any
recommended reallocation will be implemented in accordance with trading policies
that have been designed to take advantage of market opportunities and to reduce
transaction costs. Under current trading policies employed by BGFA, recommended
reallocations may be implemented promptly upon receipt of recommendations or may
not be acted upon for as long as two or three months thereafter depending on
factors such as the percentage change from previous recommendations and the
consistency of recommended reallocations over a period of time. In addition, the
Asset Allocation Master Portfolio generally will invest the net proceeds from
the sale of shares of the Master Portfolio and will liquidate existing Master
Portfolio investments to meet net redemption requirements in a manner that best
allows the Master Portfolio's existing asset allocation to follow that
recommended by the Model. Notwithstanding any recommendation of the Model to the
contrary, the Asset Allocation Master Portfolio will generally maintain at least
that portion of its assets in money market instruments reasonably considered
necessary to meet redemption requirements. In general, cash maintained for
short- term liquidity needs is only invested in U.S. Treasury bills, shares of
other mutual funds and repurchase agreements. There is no requirement that the
Master Portfolio maintain positions in any particular asset class or classes.

Wells Fargo Bank and BGFA manage other portfolios which also invest in
accordance with the Asset Allocation Model. The performance of each of those
other

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portfolios is likely to vary among themselves and from the performance of the
Fund and the Master Portfolio. Such variation in performance is primarily due
to different equilibrium asset mix assumptions used for the various portfolios,
timing differences in the implementation of the model's recommendations and
differences in expenses and liquidity requirements.

There are 500 common stocks, including Wells Fargo & Company stock,
which make up the S&P 500 Index. S&P occasionally makes changes in the S&P 500
Index based on its criteria for inclusion of stocks in the S&P 500 Index. The
S&P 500 Index is market-capitalization-weighted so that each stock in the S&P
500 Index represents its proportion of the total market value of all stocks in
the S&P 500 Index. In making its stock investments, the policy of the Asset
Allocation Master Portfolio is to invest its assets in substantially the same
stocks, and in substantially the same percentages, as the S&P 500 Index,
including Wells Fargo & Company stock.

U.S. GOVERNMENT ALLOCATION MODEL

BGFA compares the U.S. Government Allocation Master Portfolio's
investments daily to the U.S. Government Allocation Model's recommended
allocation. Any recommended reallocation will be implemented in accordance with
trading policies that have been designed to take advantage of market
opportunities and to reduce transaction costs. Under current trading policies
employed by BGFA, recommended reallocations may be implemented promptly upon
receipt of recommendations or may not be acted upon for as long as two to three
months thereafter depending on factors such as the percentage change from
previous recommendations and the consistency of recommended reallocations over
a period of time. In addition, the U.S. Government Allocation Master Portfolio
generally will invest the net proceeds from the sale of shares of the Master
Portfolio and will liquidate existing Master Portfolio investments to meet net
redemption requirements in a manner that best allows the Master Portfolio's
existing asset allocation to follow the allocation recommended by the computer
Model. Notwithstanding any recommendation of the computer model to the
contrary, the Master Portfolio will generally maintain at least that portion of
its assets in money market instruments reasonably considered necessary to meet
redemption requirements. In general, cash maintained for short-term liquidity
needs is only invested in U.S. Treasury bills, shares other mutual funds and
repurchase agreements. There is no requirement that the Master Portfolio
maintain positions in any particular asset class or classes.

BGFA manages other funds which invest in accordance with a
substantially similar version of the Model. The performance of each of those
other funds is likely to vary among themselves and from the performance of the
Master Portfolio. Such variation in performance is primarily due to timing
differences in the implementation of the Model's recommendations, differences in
expenses and liquidity requirements, and the ability of other funds to invest a
higher portion of their assets in short-term investments

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that may generate a higher yield, but are not issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.

Although BGFA intends to use the Models as bases for its investment
decisions with respect to the Asset Allocation Master Portfolio and U.S.
Government Allocation Master Portfolio, BGFA may change from time to time the
criteria and methods it uses to implement the model's recommendations if it
believes such a change is desirable for a Master Portfolio. Nevertheless, Wells
Fargo Bank has continuing and exclusive authority over the management of the
Master Portfolios, the conduct of their affairs and the disposition of the
Master Portfolios' assets, and Wells Fargo Bank has the right to reject BGFA's
investment decisions for a Master Portfolio if Wells Fargo Bank determines that
any such decision is not consistent with the best interests of a Master
Portfolio.

A key component of the U.S. Government Allocation Model is a set of
assumptions concerning expected risk and return and investor attitudes toward
risk, which are incorporated into the allocation decision. The principal inputs
of financial data to the model currently are: (i) yields on 90-day U.S.
Treasury bills, 5-year U.S. Treasury notes and 30-year U.S. Treasury bonds;
(ii) the expected statistical standard deviation in investment returns for each
class of fixed income instrument; and (iii) the expected statistical
correlation of investment return among the various classes of fixed income
instruments. Using these and other data, the model is run daily to determine
the recommended allocation. The model's recommendations are presently
implemented in 10% increments. Because the Master Portfolio may shift its
investment allocations significantly from time to time, its performance may
differ from funds which invest in one asset class or from funds with a constant
mix of assets.

MANAGEMENT OF THE COMPANY

The following information supplements and should be read in conjunction
with the section in the prospectus entitled "The Funds and Management." The
principal occupations during the past five years of the Directors and principal
executive Officer of the Company are listed below. The address of each, unless
otherwise indicated, is 111 Center Street, Little Rock, Arkansas 72201.
Directors deemed to be "interested persons" of the Company for purposes of the
1940 Act are indicated by an asterisk.

*R. Greg Feltus, 45 Director, Senior Vice President
</TABLE>

<PAGE> 207

<TABLE>
<S> <C> <C>
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of
Stephens
Sports Management
Inc.; and President of
Investor Brokerage
Insurance Inc.

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate
Professor of Finance
of the School of Business
and Accounting at Wake
Forest University since 1983.

Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
(Appointed as of September 6, 1996) Junior College from 1967 to
1971; Adjunct Professor of
Columbia University
Teachers College since
1976.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
</TABLE>

19
<PAGE> 208
<TABLE>
<S> <C> <C>
*J. Tucker Morse, 52 Director Private Investor;
10 Legrae Street Real Estate
Charleston, SC 29401 Developer; Chairman
of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.

20
<PAGE> 209
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, 1995 September 30, 1996
----------------------------- ----------------------------
Total Total
Aggregate Compensation Aggregate Compensation
Compensation from Registrant Compensation from Registrant
from and Fund from and Fund
Name and Position Registrant Complex Registrant Complex
----------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $ 9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $ 9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $ 8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company and
by all the registrants in each fund complex they serve as indicated above and
also are reimbursed for all out-of-pocket expenses relating to attendance at
board meetings. The Company, Overland Express Funds, Inc., Stagecoach Trust,
Life & Annuity Trust and Master Investment Trust are considered to be members
of the same fund complex as such term is defined in Form N-1A under the 1940
Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment

<PAGE> 210
Trust together form a separate fund complex (the "BGFA Fund Complex"). Each of
the Directors and Officers of the Company serves in the identical capacity as
directors and officers or as trustees and/or officers of each registered
open-end management investment company in both the Wells Fargo and BGFA Fund
Complexes, except for Joseph N. Hankin, who only serves the aforementioned
members of the Wells Fargo Fund Complex, and Zoe Ann Hines who, after September
6, 1996, only serves the aforementioned members of the BGFA Fund Complex. The
Directors are compensated by other companies and trusts within a fund complex
for their services as directors/trustees to such companies and trusts.
Currently the Directors do not receive any retirement benefits or deferred
compensation from the Company or any other member of each fund complex.

As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.

MASTER/FEEDER STRUCTURE. Each Fund seeks to achieve its investment
objective by investing all of its assets into a corresponding Master Portfolio
of MIT. The Funds and other entities investing in the corresponding Master
Portfolio are each liable for all obligations of the Master Portfolio. However,
the risk of a Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and MIT
itself is unable to meet its obligations. Accordingly, the Company's Board of
Directors believes that neither a Fund nor its shareholders will be adversely
affected by investing Fund assets in the Master Portfolio. However, if a mutual
fund or other investor withdraws its investment from the Master Portfolio, the
economic efficiencies (e.g., spreading fixed expenses among a larger asset
base) that the Company's Board believes may be available through investment in
the Master Portfolio may not be fully achieved. In addition, given the relative
novelty of the master/feeder structure, accounting or operational difficulties,
although unlikely, could arise. See "Management and Servicing Fees" for
additional description of the Funds' and Master Portfolios' expenses and
management.

A Fund may withdraw its investment in a Master Portfolio only if the
Company's Board of Directors determines that such action is in the best
interests of the Fund and its shareholders. Upon such withdrawal, the Company's
Board would consider alternative investments, including investing all of such
Fund's assets in another investment company with the same investment objective
as the Fund or hiring an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Master Portfolio.

The investment objective and other fundamental policies of a Master
Portfolio cannot be changed without approval by the holders of a majority (as
defined in the 1940 Act) of the Master Portfolio's outstanding interests. See
"Investment Objectives and Policies." Whenever a Fund, as an interestholder of
the corresponding Master Portfolio, is requested to vote on any matter
submitted to interestholders of such Master Portfolio, the Fund will hold a
meeting of its shareholders to consider such matters. A Fund will cast its

22
<PAGE> 211
votes in proportion to the votes received from its shareholders. Shares for
which a Fund receives no voting instructions will be voted in the same
proportion as the votes received from the other Fund shareholders.

Certain policies of a Master Portfolio which are non-fundamental may be changed
by vote of a majority of MIT's Trustees without interestholder approval. If a
Master Portfolio's investment objective or fundamental or non-fundamental
policies are changed, the Fund may elect to change its objective or policies to
correspond to those of the Master Portfolio. A Fund may also elect to redeem
its interests in a Master Portfolio and either seek a new investment company
with a matching objective in which to invest or retain its own investment
adviser to manage the Fund's portfolio in accordance with its objective. In the
latter case, the Fund's inability to find a substitute investment company in
which to invest or equivalent management services could adversely affect
shareholders' investments in the Fund. The Funds will provide shareholders with
30 days' written notice prior to the implementation of any change in the
investment objective of such Fund or Master Portfolio, to the extent possible.
See "Investment Objective and Policies" for additional information regarding
the Funds' and the Master Portfolios' investment objectives and policies.
Additional information regarding the officers and Directors/Trustees of the
Company and MIT is located in each Fund's SAI under "Management."

INVESTMENT ADVISER. Wells Fargo Bank provides investment advisory
services to each Master Portfolio pursuant to an Investment Advisory Agreement
dated April 30, 1996 with MIT. Each such Investment Advisory Agreement will be
referred to as the "Advisory Agreement". The Advisory Agreements provide that
Wells Fargo Bank shall furnish to the Master Portfolios investment guidance and
policy direction in connection with the daily portfolio management of each
Master Portfolio. Pursuant to the Advisory Agreements, Wells Fargo Bank
furnishes to the Board of Trustees periodic reports on the investment strategy
and performance of each Master Portfolio. As to each Master Portfolio, the
applicable Advisory Agreement has an initial two-year term, and will thereafter
be subject to annual approval by (i) MIT's Board of Trustees or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
such Master Portfolio, provided that in either event the continuance also is
approved by a majority of MIT's Board of Trustees who are not "interested
persons" (as defined in the 1940 Act) of MIT or Wells Fargo Bank, by vote cast
in person at a meeting called for the purpose of voting on such approval. As
to each Master Portfolio, the Advisory Agreement is terminable without penalty,
on 60 days' written notice, by MIT's Board of Trustees or by vote of the
holders of a majority of such Master Portfolio's shares or, on not less than 60
days' written notice, by Wells Fargo Bank. Each Advisory Agreement terminates
automatically, as to the relevant Master Portfolio, in the event of its
assignment (as defined in the 1940 Act).

Wells Fargo Bank has engaged BGFA to provide sub-investment advisory
services to each Master Portfolio of MIT pursuant to a Sub-Investment Advisory

23
<PAGE> 212
Agreement (the "Sub-Advisory Agreement") dated April 30, 1996. As to each
Master Portfolio, the Sub-Advisory Agreement has an initial two-year term, and
will thereafter be subject to annual approval by (i) MIT's Board of Trustees or
(ii) vote of a majority (as defined in the 1940 Act) of the outstanding
securities of such Master Portfolio, provided that in either event the
continuance also is approved by a majority of MIT's Board of Trustees who are
not interested persons (as defined in the 1940 Act) of the Master Portfolio or
BGFA, by vote cast in person at a meeting called for the purpose of voting on
such approval. As to each Master Portfolio, the Sub-Advisory Agreement is
terminable without penalty, on 60 days' written notice, by MIT's Board of
Trustees or by vote of the holders of a majority of such Master Portfolio's
interests. The Sub-Advisory Agreement terminates automatically upon an
assignment (as defined in the 1940 Act). Subject to the direction of MIT's
Board of Trustees and the overall supervision and control of Wells Fargo Bank
and MIT, BGFA is responsible for investing and reinvesting the Master
Portfolios' assets. BGFA has agreed to furnish to Wells Fargo Bank periodic
reports on the investment activity and performance of the Master Portfolios,
and such additional reports and information as Wells Fargo Bank and MIT's Board
of Trustees and officers shall reasonably request.

Wells Fargo Bank has agreed to provide to the Master Portfolios, among
other things, money market security and fixed-income research, analysis and
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition, credit conditions and, in the
case of the U.S. Government Allocation Master Portfolio and the Asset
Allocation Master Portfolio, average maturities of the portfolios of each of
those Master Portfolios.

Prior to the Funds' conversion to master/feeder structure on April 29,
1996, Wells Fargo Bank provided investment advisory services directly to the
Funds. After the Funds' conversion to master/feeder structure, Wells Fargo
Bank provided investment advisory services to each Fund's corresponding Master
Portfolio. For the years ended December 31, 1993, 1994 and 1995 and the period
ended September 30, 1996 the Fund paid advisory fees to Wells Fargo Bank as
indicated below. For the period begun April 29, 1996 and ended September 30,
1996, these amounts represent advisory fees paid by the Master Portfolios on
behalf of the corresponding Funds. No advisory fees were waived during these
periods.

<TABLE>
<CAPTION>
Fund/ Year Ended Year Ended Year Ended Period Ended Period Ended
Master Portfolio 12/31/93 12/31/94 12/31/95 04/28/96 09/30/96
- ---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Asset Allocation $3,136,581 $3,907,880 $3,814,364 $1,353,641 $1,764,081
Corporate Stock $1,248,207 $1,259,739 $1,398,439 $ 538,107 $ 710,941
U.S. Government $1,090,400 $1,034,079 $ 680,049 $ 231,278 $ 308,379
Allocation
</TABLE>

24
<PAGE> 213
Prior to the Reorganization on January 1, 1996, WFNIA provided
sub-advisory services directly to the Funds. After the Reorganization on
January 1, 1996, BGFA provided sub-advisory services to each Fund. BGFA was
created by the reorganization of Wells Fargo Nikko Investment Advisors
("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an affiliate
of Wells Fargo Institutional Trust Company, N.A. (the "Reorganization"). After
the Funds' conversion to master/feeder structure on April 29, 1996, BGFA
provided sub-advisory services to each Fund's corresponding Master Portfolio.
For the years ended December 31, 1993, 1994 and 1995, Wells Fargo paid to
WFNIA, and for the periods ended April 28 and September 30, 1996, Wells Fargo
paid to BGFA the sub-advisory fees indicated below with respect to the Funds
and Master Portfolios, respectively:

<TABLE>
<CAPTION>
Fund/ Year Ended Year Ended Year Ended Period Ended Period Ended
Master Portfolio 12/31/93 12/31/94 12/31/95 04/28/96 09/30/96
- ---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Asset Allocation $1,586,982 $2,106,980 $2,043,249 $758,967 $956,278
Corporate Stock $ 239,319 $ 241,489 $ 269,787 $105,272 $136,733
U.S. Government $ 366,951 $ 353,761 $ 244,478 $ 84,527 $107,540
Allocation
</TABLE>

ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained Wells
Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of each
Fund. In addition, MIT has retained Wells Fargo Bank as Administrator and
Stephens as Co-Administrator on behalf of each Master Portfolio. Under the
respective Administration and Co-Administration Agreements among Wells Fargo
Bank, Stephens, the Company and MIT, Wells Fargo Bank and Stephens shall
provide as administrative services, among other things: (i) general
supervision of each Fund's and Master Portfolio's operations, including
coordination of the services performed by the investment adviser (in the case
of the Master Portfolios), transfer agent, custodian, shareholder servicing
agent(s), independent auditors and legal counsel, regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC and state securities commissions; and preparation of
proxy statements and shareholder reports for each Fund and Master Portfolio;
and (ii) general supervision relative to the compilation of data required for
the preparation of periodic reports distributed to the Company's and MIT's
Officers, Directors and Trustees. Wells Fargo Bank and Stephens also furnish
office space and certain facilities required for conducting the Funds' and the
Master Portfolios' business together with ordinary clerical and bookkeeping
services. Stephens pays the compensation of MIT's and the Company's
Directors/Trustees, Officers and employees who are affiliated with Stephens.
The Administrator and Co-Administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of the Fund.

For the fiscal years ended December 31, 1993, 1994 and 1995, and the
period ended September 30, 1996, the Funds paid the following dollar amounts of
administrative

25
<PAGE> 214
fees to Stephens, the sole administrator during these periods, at the annual
rate of 0.05% of the Fund's average daily net assets:

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Period Ended
Fund 12/31/93 12/31/94 12/31/95 09/30/96
---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Asset Allocation $238,347 $315,787 $306,436 $257,419
Corporate Stock $ 74,804 $ 75,748 $ 92,555 $ 79,533
U.S. Government $ 65,395 $ 62,168 $ 40,803 $ 32,354
Allocation
</TABLE>

SPONSOR AND DISTRIBUTOR. As discussed in each Fund's prospectus under
the heading "Management and Servicing Fees," Stephens serves as each Fund's
sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in each Fund's Prospectus
under the heading "Shareholder Servicing Agent," the Funds have entered into
shareholder servicing agreements with Wells Fargo Bank. The dollar amount of
shareholder servicing fees paid by the Corporate Stock Fund and each class of
the Asset Allocation and U.S. Government Allocation Funds is listed below:

<TABLE>
<CAPTION>
Year-Ended Period Ended
Fund December 31, 1995 September 30, 1996
---- ----------------- ------------------
<S> <C> <C>
Corporate Stock Fund $ 861,478 $ 793,396

Asset Allocation Fund: Class A $3,029,551 $ 2,464,701

Asset Allocation Fund: Class B $ 34,813 $ 109,487

U.S. Government Allocation Fund: Class A $ 406,707 $ 310,872

U.S. Government Allocation Fund: Class B $ 1,322 $ 12,668
</TABLE>

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Barclays Global
Investors, N.A. ("BGI") acts as the custodian for the Funds and the Master
Portfolios. For its services as custodian, BGI receives an asset-based fee and
transaction charge from the respective Funds. For the year ended December 31,
1995 and the period ended September 30, 1996, the Funds did not pay any custody
fees.

Wells Fargo Bank has been retained to act as the transfer and dividend
disbursing agent for the Funds and the Master Portfolios. For its services as
transfer and dividend disbursing agent for the Funds' Class A and B shares,
Wells Fargo Bank is entitled to receive monthly payments at the annual rate of
0.14% of each Fund's average daily net assets for Class A and B shares. Under
the prior transfer agency agreement, Wells Fargo Bank was entitled to receive a
per account fee plus transaction fees and out-of-pocket related costs with a
minimum of $3,000 per month per Fund, unless net assets of the Fund were under
$20 million. For as long as a Fund's assets remained under $20 million, the Fund
was not charged any transfer agency fees.

For the year ended December 31, 1995 and the period ended September 30,
1996, the Funds paid transfer and dividend disbursing agency fees to Wells Fargo
Bank as follows:

26
<PAGE> 215
<TABLE>
<CAPTION>
Year Ended Period Ended
Fund December 31, 1995 September 30, 1996(1)
---- ----------------- ---------------------
<S> <C> <C>
Asset Allocation Fund $470,918 $662,394
Corporate Stock Fund $ 43,987 $153,589
U.S. Government Allocation Fund $ 95,715 $ 77,292
</TABLE>

- ----------

(1) These amounts reflect fee waivers.

UNDERWRITING COMMISSIONS. For the fiscal years ended December 31,
1993 and 1994, the Funds' distributor retained $26,215,173 and $5,415,227,
respectively, in underwriting commissions (front-end sales loads and CDSCs, if
any) in connection with the purchase or redemption of Fund shares. For the
fiscal years ended December 31, 1993 and 1994, Wells Fargo Securities Inc.
("WFSI"), and its registered representatives received $378,895 and $904,274,
respectively, in underwriting commissions in connection with the purchase or
redemption of Fund shares.

For the year ended December 31, 1995, the aggregate amount of
underwriting commissions paid to Stephens on sales/redemptions of the
Registrant's shares was $1,251,311. Stephens retained $162,660 of such
commissions. WFSI and its registered representatives retained $399,809 of such
commissions.

For the period ended September 30, 1996, the aggregate amount of
underwriting commissions paid to Stephens on sales/redemptions of the
Registrant's shares was $2,917,738. Stephens retained $198,664 of such
commissions. WFSI and its registered representatives retained $2,583,027 and
$136,047, respectively, of such commissions.

DISTRIBUTION PLANS

As indicated in each Fund's respective Prospectus, each of the Funds
has adopted a distribution plan (a "Plan") under Section 12(b) of the 1940 Act
and Rule 12b-1 thereunder (the "Rule"). The Plans for the Corporate Stock Fund
and the shares now designated the Class A Shares of each other Fund were
adopted by the Company's Board of Directors on October 22, 1991, including a
majority of the Directors who were not "interested persons" (as defined in the
1940 Act) of the respective Fund and who had no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan
(the "Qualified Directors"), and were approved by the initial shareholder of
each Fund on December 31, 1991. The Plans for the Class B shares of each Fund
having such shares were adopted by the Company's Board of Directors, including
a majority of the Qualified Directors, on July 27, 1994.

The Plans in effect for the Corporate Stock Fund and the Class A
Shares of each other Fund allow such Funds to defray all or part of the cost of
preparing and printing

27
<PAGE> 216
prospectuses and other promotional materials and of delivering prospectuses and
those materials to prospective shareholders of each such Fund by paying on an
annual basis up to 0.05% of the respective Fund's average daily net assets or
average daily net assets attributable to Class A Shares of such Fund, as the
case may be. The plans for the Corporate Stock Fund and Class A Shares of the
other Funds provide only for the reimbursement of actual expenses. The plans
for the Class B Shares allow each Fund with such shares to pay to Stephens
Inc., as compensation for distribution- related services provided, or as
reimbursement for distribution-related expenses incurred a monthly fee at the
annual rate of up to 0.70% of the average daily net assets attributable to the
Class B Shares of each respective Fund. The actual fee payable to Stephens
shall, within such limit, be determined from time to time by mutual agreement
between the Company and Stephens. In addition, each Plan contemplates that to
the extent any fees payable pursuant to a Shareholder Servicing Agreement are
deemed to be for distribution-related services, rather than shareholder
services, such payments are approved and payable pursuant to such Plan.

Each Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Qualified Directors. Any agreements related to the Plans
("Agreements") also must be approved by majority vote of the Directors and the
Qualified Directors. Such Agreements will terminate automatically if assigned.
The Corporate Stock Fund may terminate such Agreements at any time, without
payment of any penalty, by a vote of a majority of the outstanding voting
securities of such Fund. Each of the Funds with Class A and Class B shares may
terminate such Agreements at any time, without payment of any penalty, by a
vote of a majority of outstanding voting securities of the Class of shares
affected by such Agreement. The amounts payable under each Plan may not be
increased materially without, in the case of the Corporate Stock Fund, the
approval of a majority of the voting securities of such Fund, or, in the case
of the other Funds, without the approval of a majority of the voting securities
of each Class of Funds effected by such Agreements. Material amendments to a
Plan may not be made except by affirmative vote of a majority of both the
Directors of the Company and the Qualified Directors.

For the year ended December 31, 1995, the Funds paid the fees and/or
expenses listed below pursuant to their 12b-1 distribution plans.

28
<PAGE> 217
<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation
Fund Total Prospectus Brochures to Dealers
---- ----- ---------- --------- ----------
<S> <C> <C> <C> <C>
Asset Allocation
Class A $955,893 $58,656 $897,237 N/A
Class B $59,525 N/A N/A $59,525

Corporate Stock $41,620 $16,503 $25,117 N/A

U.S. Government Allocation
Class A $95,225 $19,422 $ 75,803 N/A
Class B $13,468 N/A N/A $13,468
</TABLE>

For the period ended September 30, 1996, the Funds paid the fees
and/or expenses listed below pursuant to their 12b-1 distribution plans.

<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation
Fund Total Prospectus Brochures to Dealers
---- ----- ---------- --------- ----------
<S> <C> <C> <C> <C>
Asset Allocation
Class A $154,937 $10,773 $144,164 N/A
Class B $255,252 N/A N/A $255,252

Corporate Stock $174,041 $10,228 $163,813 N/A

U.S. Government Allocation
Class A $ 11,912 $ 464 $ 11,448 N/A
Class B $ 27,524 N/A N/A $ 27,524
</TABLE>

For the year ended December 31, 1995 and the period ended September
30, 1996, WFSI and its registered representatives received no compensation
under the Plan for each Class.

PERFORMANCE CALCULATIONS

As described in the Prospectuses for each Fund, the IRA Funds of the
Trust were reorganized into the corresponding Funds of the Company on January
2, 1992. Therefore, the performance information for the Funds is based on that
of the IRA Funds for the periods prior to January 2, 1992, and reference should
be made to the footnotes to the condensed financial information in the
"Financial Highlights" section of each Prospectus regarding differences in
investment objectives, policies and/or restrictions

29
<PAGE> 218
between certain of the Funds and the IRA Funds, which may affect the relevance
of the performance information provided below.

TOTAL RETURN: Each Fund may advertise certain total return
information computed in the manner described in its Prospectus. As and to the
extent required by the SEC, an average annual compound rate of return ("T")
will be computed by using the redeemable value at the end of a specified period
("ERV") of a hypothetical initial investment in shares of the Fund ("P") over a
period of years ("n") according to the following formula: P(1+T)n = ERV. In
addition, the Funds, at times, may calculate total return based on net asset
value per share (rather than the public offering price), in which case the
figures would not reflect the effect of any sales charges that would have been
paid by an investor, or based on the assumption that a sales charge other than
the maximum sales charge (reflecting a Volume Discount) was assessed, provided
that total return data derived pursuant to the calculation described above also
are presented.

Average Annual Total Return for the Applicable Period Ended September 30, 1996

<TABLE>
<CAPTION>
Inception(1) Inception Five Year Five Year Three Year Three Year One Year One Year
With No With No With No With No
Sales Sales Sales Sales Sales Sales Sales Sales
Fund Charge(2) Charge Charge Charge Charge Charge Charge Charge
---- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset
Allocation
Class A 10.73% 11.25% 10.71% 11.74% 8.29% 9.96% 5.49% 10.46%
Class B 17.22% 18.23% N/A N/A N/A N/A 7.07% 10.06%

Corporate
Stock(3) N/A 14.28% N/A 14.05% N/A 16.20% N/A 19.06%

U.S.
Government
Allocation
Class A 7.37% 7.88% 6.60% 7.60% 0.57% 2.13% -1.25% 3.44%
Class B 6.82% 7.90% N/A N/A N/A N/A -0.32% 2.61%
</TABLE>

(1) Each Fund commenced operations as follows: Asset Allocation Class A -
11/13/86, Class B - 1/2/95; U.S. Government Allocation Class A -
3/31/87, Class B - 1/2/95; Corporate Stock - 1/25/84.

(2) With respect to periods ended September 30, 1996, the term "Sales Charge"
for Class A Shares reflects a front-end sales load of 4.50%, and for Class B
Shares reflects the maximum applicable Contingent Deferred Sales Charge
("CDSC").

(3) The Corporate Stock Fund has been in operation for over ten years without
any sales charges. Its

30
<PAGE> 219
Average Annual Total Return for the ten year period ended September 30,
1996 was 13.54%.

CUMULATIVE TOTAL RETURN: Each Fund may advertise cumulative total
return. Cumulative total return of shares is computed on a per share basis and
assumes the reinvestment of dividends and distributions. Cumulative total
return of shares generally is expressed as a percentage rate which is
calculated by combining the income and principal changes for a specified period
and dividing by the net asset value per share at the beginning of the period.
Advertisements may include the percentage rate of total return of shares or may
include the value of a hypothetical investment in shares at the end of the
period which assumes the application of the percentage rate of total return.

Cumulative Total Return for the Applicable Period Ended September 30, 1996

<TABLE>
<CAPTION>
Inception(1) Inception Ten Year Ten Year Five Year Five Year Three Year Three Year
With No With No With No With No
Sales Sales Sales Sales Sales Sales Sales Sales
Fund Charge(2) Charge Charge Charge Charge Charge Charge Charge
---- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset
Allocation
Class A 173.65% 186.51% N/A N/A 66.29% 74.17% 26.99% 32.96%
Class B 32.05% 34.05% N/A N/A N/A N/A N/A N/A

Corporate
Stock N/A 442.32% N/A 256.09% N/A 92.93% N/A 56.90%

U.S.
Government
Allocation
Class A 97.65% 106.94% N/A N/A 37.68% 44.21% 1.72% 6.53%
Class B 12.24% 14.24% N/A N/A N/A N/A N/A N/A
</TABLE>

(1) Each Fund commenced operations as follows: Asset Allocation Class A -
11/13/86, Class B - 1/2/95; U.S. Government Allocation Class A -
3/31/87, Class B - 1/2/95; Corporate Stock - 1/25/84.

(2) The term "Sales Charge" for Class A Shares reflects a front-end sales
load of 4.50%, and for Class B Shares reflects the maximum applicable
Contingent Deferred Sales Charge ("CDSC").

YIELD CALCULATIONS: As indicated in its Prospectus, the U.S.
Government Allocation Fund may advertise certain yield information on their
shares. As and to the extent required by the SEC, yield on each Class of
shares, will be calculated based on a 30-day (or one month) period, computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to
the following formula: YIELD = 2[((a-b/cd)+1)6-1], where a = dividends and
interest earned during the period; b = expenses accrued for the period (net of
reimbursements); c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and d = the maximum offering
price per share on the last day of the period. The net investment income of a
Fund includes actual interest income, plus or minus amortized purchase discount
(which may include original

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<PAGE> 220
issue discount) or premium, less accrued expenses. Realized and unrealized
gains and losses on portfolio securities are not included in a Fund's net
investment income. For purposes of sales literature, yield also may be
calculated on the basis of the net asset value per share rather than the public
offering price, provided that the yield data derived pursuant to the
calculation described above also are presented.

Yield for the Applicable Period Ended September 30, 1996(1)

<TABLE>
<CAPTION>
Fund Thirty Day Yield
---- -----------------
<S> <C>
U.S. Government Allocation
Class A 4.93%
Class B 4.72%
</TABLE>

- -----------

(1) This figure reflects any reimbursed expenses throughout the period.

The yield on each Class of the U.S. Government Allocation Fund will
fluctuate from time to time, unlike bank deposits or other investments that pay
a fixed yield for a stated period of time, and does not provide a basis for
determining future yields since it is based on historical data. Yield is a
function of portfolio quality, composition, maturity and market conditions as
well as the expenses allocated to the Fund.

In addition, investors should recognize that changes in the net asset
values of shares of each Class of the U.S. Government Allocation Fund will
affect the yield of each such Class for any specified period, and such changes
should be considered together with the yield of each Class in ascertaining the
total return for the period to shareholders of each Fund. Yield information
for each Fund or each Class of shares of the Funds, as the case may be, may be
useful in reviewing the performance of such Funds and for providing a basis for
comparison with investment alternatives. The yield of each Fund or each Class
of a Fund, however, may not be comparable to the yields from investment
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate yield.

From time to time and only to the extent the comparison is appropriate
for a Fund or Class of shares of a Fund, the Company may quote the performance
or price-earning ratio of a Fund or Class of shares in advertising and other
types of literature as compared to the performance of the Lehman Brothers
Municipal Bond Index, the 1-Year Treasury Bill Rate, the S&P Index, the Dow
Jones Industrial Average, the Lehman Brothers 20+ Treasury Index, the Lehman
Brothers 5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate
Investment Averages (as reported by the National Association of Real Estate
Investment Trusts), Gold Investment Averages (provided by the World Gold
Council), Bank Averages (which is calculated from figures supplied by the U.S.
League

32
<PAGE> 221
of Savings Institutions based on effective annual rates of interest on both
passbook and certificate accounts), average annualized certificate of deposit
rates (from the Federal Reserve G-13 Statistical Releases or the Bank Rate
Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer Price
Index (as published by the U.S. Bureau of Labor Statistics), Ten Year U.S.
Government Bond Average, sap's Corporate Bond Yield Averages, Schabacter
Investment Management Indices, Salomon Brothers High Grade Bond Index, Lehman
Brothers Long-Term High Quality Government/Corporate Bond Index, other managed
or unmanaged indices or performance data of bonds, stocks or government
securities (including data provided by Ibbotson Associates), or by other
services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices. The
performance of a Fund or Class of shares, as appropriate, also may be compared
to those of other mutual funds having similar objectives. This comparative
performance could be expressed as a ranking prepared by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Bloomberg Financial Markets
or Morningstar, Inc., independent services which monitor the performance of
mutual funds. The performance of a Fund or Class of shares, as appropriate,
will be calculated by relating net asset value per share at the beginning of a
stated period to the net asset value of the investment, assuming reinvestment
of all gains, distributions and dividends paid, at the end of the period. Any
such comparisons may be useful to investors who wish to compare the past
performance of a Fund or Class of shares with that of its competitors. Of
course, past performance cannot be a guarantee of future results. The Company
also may include, from time to time, a reference to certain marketing
approaches of the Distributor, including, for example, a reference to a
potential shareholder being contacted by a selected broker or dealer. General
mutual fund statistics provided by the Investment Company Institute may also be
used.

In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."

From time to time the Company may reprint, reference or otherwise use
material from magazines, newsletters, newspapers and books including, but not
limited to the Wall Street Journal, Money Magazine, Barrons, Kiplingers,
Business Week, Fortune, Forbes, the San Francisco Chronicle, the San Jose
Mercury News, The New York Times, the Los Angeles Times, the Boston Globe, the
Washington Post, the Chicago Sun-Times, Investor Business Daily, Worth, Bank
Investor, American Banker, Smart Money, the 100 Best Mutual Funds (Adams
Publishing), Morningstar or Value Line.

33
<PAGE> 222
The Company also may use the following information in advertisements
and other types of literature, only to the extent the information is
appropriate for a Fund: (i) the Consumer Price Index may be used to assess the
real rate of return from an investment in a Fund; (ii) other government
statistics, including, but not limited to, The Survey of Current Business, may
be used to illustrate investment attributes of a Fund or the general economic,
business, investment, or financial environment in which a Fund operates; (iii)
the effect of tax-deferred compounding on the investment returns of a Fund or a
Class of shares, or on returns in general, may be illustrated by graphs,
charts, etc., where such graphs or charts would compare, at various points in
time, the return from an investment in a Fund or Class of shares (or returns in
general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the return on a taxable
basis; and (iv) the sectors or industries in which a Fund invests may be
compared to relevant indices of stocks or surveys (e.g., S&P Industry Surveys)
to evaluate a Fund's historical performance or current or potential value with
respect to the particular industry or sector.

In addition, performance information for a Class of shares of the U.S.
Government Allocation Fund, the Asset Allocation Fund and the shares of the
Corporate Stock Fund may be compared, in reports and promotional literature, to
the S&P 500 Index, the Wilshire 5000 Equity Index, the Lehman Brothers 20+
Treasury Index, Donoghue's Money Fund Averages, the Lehman Brothers 5-7 Year
Treasury Index, or other appropriate managed or unmanaged indices of the
performance of various types of investments, so that investors may compare
results of a Fund or Class of shares with those of indices widely regarded by
investors as representative of the security markets in general. Unmanaged
indices may assume the reinvestment of dividends, but generally do not reflect
deductions for administrative and management costs and expenses. Managed
indices generally do reflect such deductions.

From time to time, the Company also may include in advertisements or
other marketing materials a discussion of certain of the objectives of the
investment strategy of the U.S. Government Allocation Fund and the
corresponding Master Portfolio and the Asset Allocation Fund and the
corresponding Master Portfolio and a comparison of this strategy with other
investment strategies. In particular, the responsiveness of these Funds as to
changing market conditions may be discussed. For example, the Company may
describe the benefits derived by having Wells Fargo Bank monitor and reallocate
investments among the asset categories described in the Prospectus of each Fund
and Master Portfolio. The Company's advertising or other marketing material
also might set forth illustrations depicting examples of recommended
allocations in different market conditions. It may state, for example, that
when the model indicates that stocks represent a better value than bonds or
money market instruments, the Asset Allocation Master Portfolio might consist
of 70% stocks, 25% bonds and 5% money market instruments and that when the
model indicates that bonds represent a better value than stocks or money market
instruments, the balance of assets might shift to 60% bonds, 20% stocks and 20%
money market instruments.

34
<PAGE> 223
The Company also may include, from time to time, a reference to
certain marketing approaches of the Distributor, including, for example, a
reference to a potential shareholder being contacted by a selected broker or
dealer.

The Company also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as Standard & Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by the Fund. The assigned rating would not be a recommendation to
purchase, sell or hold the Fund's shares since the rating would not comment on
the market price of the Fund's shares or the suitability of the Fund for a
particular investor. In addition, the assigned rating would be subject to
change, suspension or withdrawal as a result of changes in, or unavailability
of, information relating to the Fund or its investments. The Company may
compare a Fund's performance with other investments which are assigned ratings
by NRSROs. Any such comparisons may be useful to investors who wish to compare
the Fund's past performance with other rated investments.

From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability of
combined Wells Fargo Bank and Stagecoach Funds account statements." The Company
also may disclose, in advertising and other types of literature, information and
statements that Wells Fargo Investment Management ("WFIM"), a division of Wells
Fargo Bank, is listed in the top 100 by Institutional Investor magazine in its
July 1996 survey "America's Top 300 Money Managers". This survey ranks money
managers in several asset categories. The Company may also disclose in
advertising and other types of sales literature the assets and categories of
assets under management by its investment adviser or sub-adviser and the total
amount of assets and mutual fund assets managed by Wells Fargo Bank. As of
December 31, 1996, Wells Fargo Bank and its affiliates provided investment
advisory services for approximately $54 billion of assets of individuals,
trusts, estates and institutions and $20 billion of mutual fund assets.

The Company also may disclose in sales literature the distribution
rate on the shares of each class of a Fund. Distribution rate, which may be
annualized, is the amount determined by dividing the dollar amount per share of
the most recent dividend by the most recent NAV or maximum offering price per
share as of a date specified in the sales literature. Distribution rate will
be accompanied by the standard 30-day yield as required by the SEC.

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<PAGE> 224
account that can be filled out completely through Electronic Channels.
Advertising and other literature may disclose that Wells Fargo Bank may
maintain Web sites, pages or other information sites accessible through
Electronic Channels (an "Information Site") and may describe the contents and
features of the Information Site and instruct investors on how to access the
Information Site and open a Sweep Account. Advertising and other literature
may also disclose the procedures employed by Wells Fargo Bank to secure
information provided by investors, including disclosure and discussion of the
tools and services for accessing Electronic Channels. Such advertising or
other literature may include discussions of the advantages of establishing and
maintaining a Sweep Account through Electronic Channels and testimonials from
Wells Fargo Bank customers or employees and may also include descriptions of
locations where product demonstrations may occur. The Company may also
disclose the ranking of Wells Fargo Bank as one of the largest money managers
in the United States.

DETERMINATION OF NET ASSET VALUE

Net asset value per share for each Master Portfolio or per share for
each Class of each Master Portfolio is determined by the Custodian of the
Master Portfolio on each day the NYSE is open for trading.

Securities of a Master Portfolio for which market quotations are
available are valued at latest prices. Securities of a Master Portfolio for
which the primary market is a national securities exchange or the National
Association of Securities Dealers Automated Quotations National Market System
are valued at last sale prices. In the absence of any sale of such securities
on the valuation date and in the case of other securities, including U.S.
Government securities but excluding money market instruments maturing in 60
days or less, the valuations are based on latest quoted bid prices. Money
market instruments maturing in 60 days or less are valued at amortized cost.
Futures contracts will be marked to market daily at their respective settlement
prices determined by the relevant exchange. These prices are not necessarily
final closing prices, but are intended to represent prices prevailing during
the final 30 seconds of the trading day. Options listed on a national exchange
are valued at the last sale price on the exchange on which they are traded at
the close of the NYSE, or, in the absence of any sale on the valuation date, at
latest quoted bid prices. Options not listed on a national exchange are valued
at latest quoted bid prices. Debt securities maturing in 60 days or less are
valued at amortized cost. In all cases, bid prices will be furnished by a
reputable independent pricing service approved by the Board of Directors.
Prices provided by an independent pricing service may be determined without
exclusive reliance on quoted prices and may take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data. All other securities and other assets of the Master
Portfolios for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Company's Directors and
in accordance with procedures adopted by the Directors.

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<PAGE> 225
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Payment for shares may, in the discretion of the adviser, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Funds will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by a
Fund and that such Fund receives satisfactory assurances that (i) it will have
good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to reimburse
the Funds for any losses sustained by reason of the failure of a shareholders
to make full payment for shares purchased or to collect any charge relating to
a transaction effected for the benefit of a shareholder which is applicable to
shares of a Fund as provided from time to time in the Prospectus.

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<PAGE> 226
PORTFOLIO TRANSACTIONS

GENERAL

MIT has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policies
established by the MIT's Board of Trustees, Wells Fargo Bank is responsible for
each Master Portfolio's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the MIT to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Master
Portfolios will not necessarily be paying the lowest spread or commission
available.

Except in the case of equity securities purchased by the Corporate
Stock Master Portfolio and the Asset Allocation Master Portfolio, purchases and
sales of securities usually will be principal transactions. Portfolio
securities normally will be purchased or sold from or to dealers serving as
market makers for the securities at a net price. Each of the Master Portfolios
also will purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, money market
securities, ARMs and CMOs are traded on a net basis and do not involve
brokerage commissions. The cost of executing a Master Portfolio's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with MIT are
prohibited from dealing with MIT as a principal in the purchase and sale of
securities unless an exemptive order allowing such transactions is obtained
from the SEC or an exemption is otherwise available.

The Corporate Stock and Asset Allocation Master Portfolios. Purchases
and sales of equity securities on a securities exchange are effected through
brokers who charge a negotiated commission for their services. Orders may be
directed to any broker including, to the extent and in the manner permitted by
applicable law, Stephens or Wells Fargo Securities Inc. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price that includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. No Master Portfolio will deal with
Stephens, Wells Fargo Bank or their affiliates in any transaction in which any
of them acts as principal without an exemptive order from the SEC or unless an
exemption is otherwise available.

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<PAGE> 227
reasonable in relation to the value of the brokerage and research services
provided by such broker/dealer, viewed in terms of either the particular
transaction or the overall responsibilities of Wells Fargo Bank. Such
brokerage and research services might consist of reports and statistics
relating to specific companies or industries, general summaries of groups of
stocks or bonds and their comparative earnings and yields, or broad overviews
of the stock, bond, and government securities markets and the economy.

Supplementary research information so received is in addition to, and
not in lieu of, services required to be performed by Wells Fargo Bank and does
not reduce the advisory fees payable by the Master Portfolios. The Board of
Trustees will periodically review the commissions paid by the Master Portfolios
to consider whether the commissions paid over representative periods of time
appear to be reasonable in relation to the benefits inuring to the Master
Portfolios. It is possible that certain of the supplementary research or other
services received will primarily benefit one or more other investment companies
or other accounts for which investment discretion is exercised. Conversely,
the Master Portfolios may be the primary beneficiary of the research or
services received as a result of portfolio transactions effected for such other
account or investment company.

Under Section 28(e) of the Securities Exchange Act of 1934, an adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), an adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to a Master Portfolio in any transaction may be less favorable than
that available from another broker/dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.

Broker/dealers utilized by Wells Fargo Bank may furnish statistical,
research and other information or services which are deemed by Wells Fargo Bank
to be beneficial to a Master Portfolio's investment programs. Research
services received from brokers supplement Wells Fargo Bank's own research and
may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
political developments; portfolio management strategies; performance
information on securities and information concerning prices of securities; and
information supplied by specialized services to Wells Fargo Bank and to MIT's
Trustees with respect to the performance, investment activities and fees and
expenses of other mutual funds. Such

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<PAGE> 228
information may be communicated electronically, orally or in written form.
Research services may also include the providing of equipment used to
communicate research information, the arranging of meetings with management of
companies and the providing of access to consultants who supply research
information.

The outside research assistance is useful to Wells Fargo Bank since
the brokers utilized by Wells Fargo Bank as a group tend to follow a broader
universe of securities and other matters than the staff of Wells Fargo Bank can
follow. In addition, this research provides Wells Fargo Bank with a diverse
perspective on financial markets. Research services which are provided to
Wells Fargo Bank by brokers are available for the benefit of all accounts
managed or advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank
that this material is beneficial in supplementing their research and analysis;
and, therefore, it may benefit the Master Portfolios by improving the quality
of Wells Fargo Bank's investment advice. The advisory fees paid by the Master
Portfolios are not reduced because Wells Fargo Bank receives such services.

Brokerage Commissions. For the years ended December 31, 1993, 1994
and 1995, and the period ended September 30, 1996, the Funds paid the following
for brokerage commissions, none of which were paid to affiliated brokers:

<TABLE>
<CAPTION>
Fund Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995 Sept. 30, 1996
- ---- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Asset Allocation $294,861 $99,002 $34,488 $6,561
Corporate Stock $30,123 $31,896 $8,696 $6,233
U.S. Government $- 0 - $- 0 - $- 0 - $-0-
Allocation
</TABLE>

Securities of Regular Broker/Dealers. As of December 31, 1995 the
Asset Allocation Fund owned securities of J.P. Morgan & Co., Inc. in an amount
equal to $1,895,104. The other Funds did not own securities of their regular
broker-dealers. As of September 30, 1996, none of the Funds owned securities
of their "regular brokers or dealers" or their parents, as defined in the 1940
Act.

Portfolio Turnover Rate: The historically higher portfolio turnover
rate for the U.S. Government Allocation Master Portfolio should not adversely
affect this Master Portfolio because portfolio transactions ordinarily are made
directly with principals on a net basis and, consequently, this Master
Portfolio usually does not incur brokerage expenses. Portfolio turnover rate
is not a limiting factor when Wells Fargo Bank deems portfolio changes
appropriate.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens, the
Company bears all costs of its operations, including the compensation of its
Directors who are not

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<PAGE> 229
affiliated with Stephens or Adviser or any of their affiliates; advisory,
shareholder servicing and administration fees; payments pursuant to any Plan;
interest charges; taxes; fees and expenses of its independent accountants,
legal counsel, transfer agent and dividend disbursing agent; expenses of
redeeming shares; expenses of preparing and printing prospectuses (except the
expense of printing and mailing prospectuses used for promotional purposes,
unless otherwise payable pursuant to a Plan), shareholders' reports, notices,
proxy statements and reports to regulatory agencies; insurance premiums and
certain expenses relating to insurance coverage; trade association membership
dues; brokerage and other expenses connected with the execution of portfolio
transactions; fees and expenses of its custodian, including those for keeping
books and accounts and calculating the NAV per share of a Fund; expenses of
shareholders' meetings; expenses relating to the issuance, registration and
qualification of Fund shares; pricing services, and any extraordinary expenses.
Expenses attributable to a Fund are charged against a Fund's assets. General
expenses of the Company are allocated among all of the funds of the Company,
including a Fund, in a manner proportionate to the net assets of each Fund, on
a transactional basis, or on such other basis as the Company's Board of
Directors deems equitable.

FEDERAL INCOME TAXES

In General. The following information supplements and should be
read in conjunction with Prospectus sections entitled "Dividend and Capital
Gain Distributions" and "Taxes." The Prospectuses describe generally the tax
treatment of distributions by each Master Portfolio and each Fund. This
section of the SAI includes additional information concerning federal income
taxes.

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<PAGE> 230
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its assets is invested in the securities of any one issuer
(other than U.S. Government obligation and the securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are determined to be engaged in the same or similar trades or businesses.
For purposes of complying with these qualification requirements, each Fund will
be deemed to own a proportionate share of the corresponding Master Portfolio's
assets. As a regulated investment company, each Fund will not be subject to
federal income tax on its net investment income and net capital gains
distributed to its shareholders, provided that it distributes to its
shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. Each Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

Each Fund seeks to qualify as regulated investment company by
investing substantially all of its assets in a corresponding Master Portfolio.
Each Master Portfolio will be treated as a non-publicly traded partnership
rather than as a regulated investment company or a corporation under the Code.
As a non-publicly traded partnership, any interest, dividends, gains and losses
of a Master Portfolio shall be deemed to have been "passed through" to its
corresponding Fund (and the Master Portfolio's other investors) in proportion
to the Fund's ownership interest in the Master Portfolio. Therefore, to the
extent a Master Portfolio were to accrue but not distribute any interest,
dividends or gains, its corresponding Fund would be deemed to have realized and
recognized its proportionate share of interest, dividends or gains without
receipt of any corresponding distribution. However, each Master Portfolio will
seek to minimize recognition by investors of interest, dividends, gains or
losses without a corresponding distribution.

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<PAGE> 231
dividends-received deduction, a corporate shareholder must hold the Fund shares
paying the dividends upon which the deduction is based for at least 46 days.

Federal Income Tax Rates. As of the printing of this SAI, the
maximum individual tax rate applicable to ordinary income is 39.60% (marginal
rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains is 28.00%; and the maximum corporate tax rate applicable to
ordinary income and net capital gains is 35.00% (except that to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

If a shareholder exchanges or otherwise disposes of Fund shares
within 90 days of having acquired such shares and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
on a new purchase of shares of the Fund or of a different regulated investment
company, the sales charge previously incurred acquiring the Fund's shares shall
not be taken into account (to the extent such previous sales charges do not
exceed the reduction in sales charges on the new purchase) for the purpose of
determining the amount of gain or loss on the disposition, but will be treated
as having been incurred in the acquisition of such other shares. Also, any
loss realized on a redemption or exchange of shares of the Fund will be
disallowed to the extent that substantially identical shares are reacquired
within the 61-day period beginning 30 days before and ending 30 days after the
shares are disposed of.

Taxation of Fund Investments. Gains or losses on sales of
portfolio securities by a Master Portfolio will generally be long-term capital
gains or losses if the securities have been held by it for more than one year,
except in certain cases such as where a

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Master Portfolio acquires a put or writes a call thereon. Gains recognized on
the disposition of a debt obligation (including tax-exempt obligations
purchased after April 30, 1993) purchased by a Master Portfolio at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Master Portfolio held the debt
obligation. Other gains or losses on the sale of portfolio securities will be
short-term capital gains or losses.

If an option written by a Master Portfolio lapses or is terminated
through a closing transaction, such as a repurchase by such Master Portfolio of
the option from its holder, the Master Portfolio will realize a short-term
capital gain or loss, depending on whether the premium income is greater or
less than the amount paid by the Master Portfolio in the closing transaction.
Some realized capital losses may be deferred if they result from a position
which is part of a "straddle," discussed below. If securities are sold by a
Master Portfolio pursuant to the exercise of a call option written by it, the
Master Portfolio will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on the sale. If
securities are purchased by a Master Portfolio pursuant to the exercise of a
put option written by it, such Master Portfolio will subtract the premium
received from its cost basis in the securities purchased. The requirement that
the Funds derive less than 30% of its gross income from gains from the sale of
securities held for less than three months may limit each Master Portfolio's
ability to write options.

44
<PAGE> 233
contracts, such straddles could be characterized as "mixed straddles" if the
futures, forwards, or options comprising a part of such straddles were governed
by Section 1256 of the Code. The regulated investment company may make one or
more elections with respect to "mixed straddles." Depending upon which
election is made, if any, the results with respect to the regulated investment
company may differ. Generally, to the extent the straddle rules apply to
positions established by the regulated investment company, losses realized by
the regulated investment company may be deferred to the extent of unrealized
gain in any offsetting positions. Moreover, as a result of the straddle and
the conversion transaction rules, short-term capital loss on straddle positions
may be recharacterized as long-term capital loss, and long-term capital gain
may be characterized as short-term capital gain or ordinary income.

If a Master Portfolio purchases shares in a "passive foreign
investment company" ("PFIC"), its corresponding Fund may be subject to federal
income tax and an interest charge imposed by the IRS upon certain distributions
from the PFIC or the Master Portfolio's disposition of its PFIC shares. If a
Master Portfolio invests in a PFIC, the corresponding Fund intends to make an
available election to mark-to-market its interest in PFIC shares (through the
Master Portfolio). Under the election, the Fund will be treated as recognizing
at the end of each taxable year the excess, if any, of the fair market value of
its interest in PFIC shares over its basis in such shares. Although such
excess will be taxable to the Fund as ordinary income notwithstanding any
distributions by the PFIC, the Fund will not be subject to federal income tax
or the interest charge with respect to its interest in the PFIC.

Foreign Shareholders. Under the Code, distributions of net
investment income by a Fund to a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or a lower treaty rate). Withholding will not apply if a
dividend paid by each Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but, in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.

45
<PAGE> 234
withholding. Such tax withheld does not constitute any additional tax imposed
on the shareholder, and may be claimed as a tax payment on the shareholder's
federal income tax return. An investor must provide a valid TIN upon opening
or reopening an account. Failure to furnish a valid TIN to the Company could
subject the investor to penalties imposed by the IRS.

Other Matters. Investors should be aware that the investments to
be made by the Master Portfolios may involve sophisticated tax rules that may
result in income or gain recognition by the Fund without corresponding current
cash receipts. Although the Master Portfolios will seek to avoid significant
noncash income, such noncash income could be recognized by the Funds, in which
case the Fund may distribute cash derived from other sources in order to meet
the minimum distribution requirements described above.

The foregoing discussion and the discussions in the prospectus
applicable to each shareholder address only some of the federal tax
considerations generally affecting investments in a Fund. Each investor is
urged to consult his or her tax advisor regarding specific questions as to
federal, state or local taxes and foreign taxes.

CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Funds and
Management."

The Funds are three of the funds of the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of twenty-two other funds.

Most of the Company's funds are authorized to issue multiple classes
of shares, one class generally subject to a front-end sales charge and, in some
cases, a class subject to a contingent-deferred sales charge, that are offered
to retail investors. Certain of the Company's funds also are authorized to
issue other classes of shares, which are sold primarily to institutional
investors. Each class of shares in a fund represents an equal, proportionate
interest in a fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the fund's operating expenses, except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule
12b-1) that are allocated to a particular class. Please contact Stagecoach
Shareholder Services at 1-800-222-8222 if you would like additional information
about other funds or classes of shares offered.

The Asset Allocation and U.S. Government Allocation Funds have two
classes of shares -- Class A shares and Class B shares. The Corporate Stock
Fund has a single class of shares. With respect to matters affecting one Class
but not another, shareholders

46
<PAGE> 235
vote as a Class. Subject to the foregoing, all shares of a Fund have equal
voting rights and will be voted in the aggregate, and not by series, except
where voting by a series is required by law or where the matter involved only
affects one series. For example, a change in a Fund's fundamental investment
policy affects only one series and would be voted upon only by shareholders of
the Fund involved. Additionally, approval of an advisory contract, since it
affects only one Fund, is a matter to be determined separately by Series.
Approval by the shareholders of one Series is effective as to that Series
whether or not sufficient votes are received from the shareholders of the other
Series to approve the proposal as to those Series. As used in the Prospectus
of each Fund and in this SAI, the term "majority," when referring to approvals
to be obtained from shareholders of a Class of shares of a Fund, means the vote
of the lesser of (i) 67% of the shares of the Class represented at a meeting if
the holders of more than 50% of the outstanding shares of the Class are present
in person or by proxy, or (ii) more than 50% of the outstanding shares of the
Class of the Fund. As used in the Prospectus of each Fund and in this SAI, the
term "majority," when referring to approvals to be obtained from shareholders
of the Fund, means the vote of the lesser of (i) 67% of the shares of the Fund
represented at a meeting if the holders of more than 50% of the outstanding
shares of the Fund are present in person or by proxy, or (ii) more than 50% of
the outstanding shares of the Fund. The term "majority," when referring to the
approvals to be obtained from shareholders of the Company as a whole, means the
vote of the lesser of (i) 67% of the Company's shares represented at a meeting
if the holders of more than 50% of the Company's outstanding shares are present
in person or by proxy, or (ii) more than 50% of the Company's outstanding
shares. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held.

The Company may dispense with an annual meeting of shareholders in any
year in which it is not required to elect Directors under the 1940 Act.
However, the Company has undertaken to hold a special meeting of its
shareholders for the purpose of voting on the question of removal of a Director
or Directors if requested in writing by the holders of at least 10% of the
Company's outstanding voting securities, and to assist in communicating with
other shareholders as required by Section 16(c) of the 1940 Act.

Each share of a Fund or Class represents an equal proportional
interest in the Fund or Class with each other share and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
the Fund as are declared in the discretion of the Directors. In the event of
the liquidation or dissolution of the Company, shareholders of a Fund are
entitled to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular investment portfolio that are available for distribution in such
manner and on such basis as the Directors in their sole discretion may
determine.

Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non- assessable by the Company.

47
<PAGE> 236
MIT is an open-end, series management investment company organized as
a Delaware business trust. In accordance with Delaware law and in connection
with the tax treatment sought by MIT, MIT's Declaration of Trust provides that
its investors would be personally responsible for MIT's liabilities and
obligations, but only to the extent MIT property is not sufficient to satisfy
such liabilities and obligations. The Declaration of Trust also provides that
MIT shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of MIT, its investors,
Trustees, officers, employees and agents covering possible tort and other
liabilities, and that investors will be indemnified to the extent they are held
liable for a disproportionate share of MIT obligations. Thus, the risk of an
investor incurring financial loss on account of investor liability is limited
to circumstances in which both inadequate insurance existed and MIT itself was
unable to meet its obligations.

The Declaration of Trust further provides that obligations of MIT are
not binding upon its Trustees individually but only upon the property of MIT
and that the Trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which the Trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in
the conduct of the Trustee's office.

The interests in each Master Portfolio of MIT have substantially
identical voting and other rights as those rights described above for shares of
the Funds. MIT may dispense with annual meetings, but is required by Section
16(c) of the Act to hold a special meeting and assist investor communications
under the circumstances described above with respect to the Company. Whenever
a Fund is required to vote on a matter with respect to MIT, the Fund will hold
a meeting of Fund shareholders and will cast its votes as instructed by such
shareholders. In a situation where a Fund does not receive instruction from
certain of its shareholders on how to vote the corresponding shares of MIT,
such Fund will vote such shares in the same proportion as the shares for which
the Fund does receive voting instructions.

Set forth below is the name, address and share ownership of each
person known by the Company to have beneficial or record ownership of 5% or
more of a class of Fund or 5% or more of the voting securities of each Fund as
a whole.

5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- -------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
ASSET ALLOCATION Wells Fargo Bank Class A 74.34% 66.60%
P.O. Box 63015 Beneficially Owned
San Francisco, CA 94163

U.S. GOVERNMENT Wells Fargo Bank Class A 51.90% 47.10%
ALLOCATION P.O. Box 63015 Beneficially Owned
San Francisco, CA 94163
</TABLE>

48
<PAGE> 237
<TABLE>
<S> <C> <C> <C> <C>
CORPORATE STOCK Wells Fargo Bank Class A 95.71% 95.71%
P.O. Box 63015 Beneficially Owned
San Francisco, CA 94163
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).

OTHER

The Registration Statements for MIT and the Company, including the
Prospectus for each Fund, the SAI and the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C. Statements contained in
a Prospectus or the SAI as to the contents of any contract or other document
referred to herein or in a Prospectus are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent auditors
for the Company and MIT. KPMG Peat Marwick LLP provides audit services, tax
return preparation and assistance and consultation in connection with review of
certain SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero
Center, San Francisco, California 94111.

FINANCIAL INFORMATION

The portfolio of investments, financial statements and independent
auditors' report for the Funds contained in the Company's Annual Reports dated
September 30, 1996, as filed with the SEC on December 9, 1996, are hereby
incorporated by reference into this SAI. The portfolio of investments, audited
financial statements and independent auditors' reports are attached to all SAIs
delivered to current or prospective shareholders.

The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal period ended September 30, 1996 for
the Asset Allocation, Corporate Stock and U.S. Government Allocation Master
Portfolios of Master Investment Trust are hereby incorporated by reference to
the Company's Annual Reports as filed with the SEC on December 9, 1996.

49
<PAGE> 238
SAI APPENDIX

The following is a description of the ratings given by Moody's and S&P
to corporate bonds and commercial paper.

Corporate Bonds

Moody's: The four highest ratings for corporate bonds are "Aaa,"
"Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best quality"
and carry the smallest amount of investment risk. Bonds rated "Aa" are of
"high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1,
2 and 3 in each rating category from "Aa" through "Baa" in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate bonds are "AAA," "AA,"
"A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by S&P and
have an extremely strong capacity to pay interest and repay principal. Bonds
rated "AA" have a "very strong capacity to pay interest and repay principal"
and differ "from the highest rated issued only in small degree." Bonds rated
"A" have a "strong capacity" to pay interest and repay principal, but are
"somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.

Corporate Commercial Paper

S&P: The "A-1" rating for corporate commercial paper indicates that
the "degree of safety regarding timely payment is either overwhelming or very
strong." Commercial paper with "overwhelming safety characteristics" will be
rated "A-1+." Commercial paper with a strong capacity for timely payments on
issues will be rated "A-2."

A-1
<PAGE> 239

STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

AGGRESSIVE GROWTH FUND

CLASS A AND CLASS B

------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company, commonly referred to as a "mutual fund." This Statement of
Additional Information ("SAI") contains information about one of the funds in
the Stagecoach Family of Funds -- the AGGRESSIVE GROWTH FUND (the "Fund"). The
Fund offers two classes of shares -- Class A Shares and Class B Shares. This
SAI relates to both such classes of shares. The investment objective of the
Fund is described in its Prospectus under the section entitled "How the Fund
Works -- Investment Objectives and Policies." The Fund seeks to achieve its
investment objective by investing all of its assets in the Capital Appreciation
Master Portfolio (at times, the "Master Portfolio") of Master Investment Trust
("MIT"), which has the same investment objective as the Fund. The Fund may
withdraw its investment in the Capital Appreciation Master Portfolio at any
time, if the Board of Directors of the Company determines that such action is
in the best interests of the Fund and its shareholders. Upon such withdrawal,
the Company's Board would consider alternative investments, including investing
all of the Fund's assets in another investment company with the same investment
objective as the Fund or hiring an investment adviser to manage the Fund's
assets in accordance with the investment policies and restrictions described in
the Prospectus and below with respect to MIT.

This SAI is not a prospectus and should be read in conjunction
with the Fund's Prospectus, dated February 1, 1997. All terms used in this SAI
that are defined in the Prospectus have the meanings assigned in the
Prospectus. A copy of the Prospectus for the Fund may be obtained without
charge by writing Stephens Inc. ("Stephens"), the Company's sponsor,
co-administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201 or by calling the Transfer Agent at the telephone number indicated above.

------------------------------
<PAGE> 240
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . 3
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Servicing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . 15
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . 19
Additional Purchase and Redemption Information . . . . . . . . . . . 19
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 20
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 23
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . 31
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . 31
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

2
<PAGE> 241
INVESTMENT RESTRICTIONS

Fundamental Investment Policies. The Fund and the Master
Portfolio are subject to the following investment restrictions, all of which
are fundamental policies. These restrictions cannot be changed, as to either
the Fund or the Master Portfolio without approval by the holders of a majority
(as defined by the 1940 Act) of the outstanding voting securities of the Fund
or the Master Portfolio, as appropriate. Whenever the Fund is requested to
vote on a fundamental policy of the Master Portfolio, the Fund will hold a
meeting of Fund shareholders and it will cast its votes as instructed by such
shareholders.

The Fund and the Master Portfolio may not:

(1) purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately after the
purchase and as a result thereof, the value of the Fund's investments in that
industry would be 25% or more of the current value of the Fund's total assets,
provided that there is no limitation with respect to investments in securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
and provided further, that the Fund may invest all its assets in a diversified,
open-end management investment company, or a series thereof, with substantially
the same investment objective, policies and restrictions as such Fund, without
regard to the limitations set forth in this paragraph (1);

(2) purchase or sell real estate or real estate limited
partnerships (other than securities secured by real estate or interests therein
or securities issued by companies that invest in real estate or interests
therein), commodities or commodity contracts, or interests in oil, gas, or
other mineral exploration or development programs;

(3) purchase securities on margin (except for short-term
credits necessary for the clearance of transactions) or make short sales of
securities;

(5) make investments for the purpose of exercising control or
management; provided that the Fund may invest all its assets in a diversified
open-end management company, or a series thereof, with substantially the same
investment objective, policies and restrictions as such Fund, without regard to
the limitations set forth in this paragraph (5);

3
<PAGE> 242
(6) issue senior securities except that the Fund may borrow
from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets);

(7) make loans of portfolio securities having a value that
exceeds 50% of the current value of its total assets, provided that, this
restriction does not apply to the purchase of fixed time deposits, repurchase
agreements, commercial paper and other types of debt instruments commonly sold
in a public or private offering; nor

(8) purchase securities of any issuer (except securities issued
by the U.S. Government, its agencies or instrumentalities ) if, as a result,
with respect to 75% of its total assets, more than 5% of the value of its total
assets would be invested in the securities of any one issuer or, with respect
to 100% of its total assets the Fund's ownership would be more than 10% of the
outstanding voting securities of such issuer; provided that the Fund may invest
all its assets in a diversified, open-end management investment company, or a
series thereof, with substantially the same investment objective, policies and
restrictions as such Fund, without regard to the limitations set forth in this
paragraph (8).

With respect to fundamental investment policy (7), the Fund and the Master
Portfolio do not intend to loan their portfolio securities during the coming
year.

Non-Fundamental Investment Policies. The Fund and the Master
Portfolio are subject to the following non- fundamental policies. These
restrictions may be changed by a vote of a majority of the Directors of the
Company or the Trustees of MIT, as the case may be, at any time.

The Fund and the Master Portfolio may not:

(1) purchase or retain securities of any issuer if the officers
or directors of the Fund or its investment adviser owning beneficially more
than one-half of one percent (0.5%) of the securities of the issuer together
owned beneficially more than 5% of such securities;

(2) purchase or sell real estate limited partnership interests;

(3) write, purchase or sell puts, calls or options or any
combination thereof, except to the extent described in the Prospectus and
except that the Fund may purchase securities with put rights in order to
maintain liquidity;

(4) invest in securities of issuers who, with their
predecessors, have been in existence less than three years, unless the
securities are fully guaranteed or insured by the U.S. Government if, by reason
thereof, the value of its aggregate investment in such securities will exceed
5% of its total assets;

4
<PAGE> 243
(5) purchase securities of any issuer (except securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) if, as
a result, more than 5% of the value of the Fund's total assets would be
invested in the securities of any one issuer; nor

(6) invest more than 15% of the Fund's net assets in illiquid
securities. For this purpose, illiquid securities include, among others, (a)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale, (b) fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, and (c) repurchase agreements not terminable within seven days.

In addition, as a matter of non-fundamental policy, the Fund may
invest in shares of other open-end, management investment companies, subject to
the limitations of Section 12(d)(1) of the Act, provided that any such
purchases will be limited to temporary investments in shares of unaffiliated
investment companies and the investment adviser will waive its advisory fees
for that portion of the Fund's assets so invested, except when such purchase is
part of a plan of merger, consolidation, reorganization or acquisition. The
Fund does not intend to invest more than 5% of its net assets in such
securities during the coming year. Notwithstanding any other investment policy
or limitation (whether or not fundamental), as a matter of fundamental policy,
the Fund may invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objective, policies and limitations as the Fund.

As a matter of non-fundamental policy, the Fund and the Master
Portfolio may each invest up to 25% of their respective net assets in
securities of foreign governmental issues that are denominated in and pay
interest in U.S. dollars.

MANAGEMENT

5
<PAGE> 244
<TABLE>
<S> <C> <C>
*R. Greg Feltus, 45 Director, Senior Vice President
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of Stephens
Sports Management
Inc.; and President of
Investor Brokerage
Insurance Inc.

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate Professor of Finance
of the School of Business and Accounting at
Wake Forest University since 1983.

Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
(appointed as of Junior College from 1967 to
September 6, 1996) 1971; Adjunct Professor of
Columbia University
Teachers College since
1976.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
</TABLE>

6
<PAGE> 245
<TABLE>
<S> <C> <C>
*J. Tucker Morse, 52 Director Private Investor; Real Estate
10 Legrae Street Developer; Chairman
Charleston, SC 29401 of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.

7
<PAGE> 246
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
---------- -------------
December 31, 1995 September 30, 1996
------------------ ------------------
Total Total
Aggregate Compensation from Aggregate Compensation from
Compensation Registrant Compensation Registrant
Name and Position from Registrant and Fund Complex from Registrant and Fund Complex
----------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director

</TABLE>

Directors of the Company are compensated annually by the Company
and by all the registrants in each fund complex they serve as indicated above
and also are reimbursed for all out-of-pocket expenses relating to attendance at
board meetings. The Company, Overland Express Funds, Inc., Stagecoach Trust,
Life & Annuity Trust and Master Investment Trust are considered to be members of
the same fund complex as such term is defined in Form N-1A under the 1940 Act
(the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master Investment
Portfolio, and Managed Series Investment

8
<PAGE> 247
Trust together form a separate fund complex (the "BGFA Fund Complex"). Each of
the Directors and Officers of the Company serves in the identical capacity as
directors and officers or as trustees and/or officers of each registered
open-end management investment company in both the Wells Fargo and BGFA Fund
Complexes, except for Joseph N. Hankin, who only serves the aforementioned
members of the Wells Fargo Fund Complex, and Zoe Ann Hines who, after September
6, 1996, only serves the aforementioned members of the BGFA Fund Complex. The
Directors are compensated by other companies and trusts within a fund complex
for their services as directors/trustees to such companies and trusts.
Currently the Directors do not receive any retirement benefits or deferred
compensation from the Company or any other member of each fund complex.

As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

MASTER/FEEDER STRUCTURE. The Fund seeks to achieve its investment
objective by investing all of its assets into the Capital Appreciation Master
Portfolio of MIT. The Fund and other entities investing in the Master
Portfolio are each liable for all obligations of the Master Portfolio. However,
the risk of the Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and MIT
itself is unable to meet its obligations. Accordingly, the Company's Board of
Directors believes that neither the Fund nor its shareholders will be adversely
affected by investing Fund assets in the Master Portfolio. However, if a mutual
fund or other investor withdraws its investment from the Master Portfolio, the
economic efficiencies (e.g., spreading fixed expenses among a larger asset
base) that the Company's Board believes may be available through investment in
the Master Portfolio may not be fully achieved. In addition, given the relative
novelty of the master/feeder structure, accounting or operational difficulties,
although unlikely, could arise. See "Management and Servicing Fees" for
additional description of the Fund's and Master Portfolio's expenses and
management.

9
<PAGE> 248
Fund receives no voting instructions will be voted in the same proportion as
the votes received from the other Fund shareholders.

Certain policies of the Master Portfolio which are non-fundamental
may be changed by vote of a majority of MIT's Trustees without interestholder
approval. If the Master Portfolio's investment objective or fundamental or non-
fundamental policies are changed, the Fund may elect to change its objective or
policies to correspond to those of the Master Portfolio. The Fund may also
elect to redeem its interests in the Master Portfolio and either seek a new
investment company with a matching objective in which to invest or retain its
own investment adviser to manage the Fund's portfolio in accordance with its
objective. In the latter case, the Fund's inability to find a substitute
investment company in which to invest or equivalent management services could
adversely affect shareholders' investments in the Fund. The Fund will provide
shareholders with 30 days' written notice prior to the implementation of any
change in the investment objective of the Fund or the Master Portfolio, to the
extent possible. See "Investment Objective and Policies" for additional
information regarding the Fund's and the Master Portfolio's investment
objectives and policies. Additional information regarding the officers and
Directors/Trustees of the Company and MIT is located in the Fund's SAI under
"Management."

INVESTMENT ADVISER. The Fund has not engaged an investment
adviser. The Master Portfolio (which has the same investment objective as the
Fund, and in which the Fund invests all its assets) is advised by Wells Fargo
Bank. The Advisory Contract provides that Wells Fargo Bank shall furnish to
the Master Portfolio investment guidance and policy direction in connection
with the daily portfolio management of the Master Portfolio. Pursuant to the
Advisory Contract, Wells Fargo Bank furnishes to the Board of Trustees periodic
reports on the investment strategy and performance of the Master Portfolio.

Wells Fargo Bank has agreed to provide to the Master Portfolio,
among other things, money market and fixed- income research, analysis and
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition, credit conditions and average
maturities of the portfolio of the Master Portfolio.

For the period begun February 21, 1996 and ended September 30,
1996, the Master Portfolio paid to Wells Fargo Bank $453,282 in advisory
fees. No fees were waived.

10
<PAGE> 249
Contract may be terminated on 60 days' written notice by either party and will
terminate automatically if assigned.

Wells Fargo Bank also serves as Custodian and Transfer and
Dividend Disbursing Agent for the Fund and the Master Portfolio. See
"Custodian and Transfer and Dividend Disbursing Agent."

ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained
Wells Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of
the Fund. In addition, MIT has retained Wells Fargo Bank as Administrator and
Stephens as Co-Administrator on behalf of the Master Portfolio. Under the
respective Administration and Co- Administration Agreements among Wells Fargo
Bank, Stephens and the Company and MIT, Wells Fargo Bank, Stephens shall
provide as administrative services, among other things: (i) general
supervision of the Fund's and the Master Portfolio's operations, including
coordination of the services performed by the investment adviser (in the case
of the Master Portfolio), transfer agent, custodian, shareholder servicing
agent(s), independent auditors and legal counsel, regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC and state securities commissions; and preparation of
proxy statements and shareholder reports for the Fund and the Master Portfolio;
and (ii) general supervision relative to the compilation of data required for
the preparation of periodic reports distributed to the Company's and MIT's
Officers, Directors and Trustees. Wells Fargo Bank and Stephens also furnish
office space and certain facilities required for conducting the Fund's and the
Master Portfolio's business together with ordinary clerical and bookkeeping
services. Stephens pays the compensation of MIT's and Company's
Directors/Trustees, Officers and employees who are affiliated with Stephens.
The Administrator and Co-Administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of the Fund.

For the period begun February 21, 1996 and ended September 30,
1996, the Fund paid to Stephens, the sole administrator during this period,
$3,829 in administration fees. Stephens was entitled to receive a fee, payable
monthly, at the annual rate of 0.03% of the Fund's average daily net assets.

SPONSOR AND DISTRIBUTOR. As discussed in the Fund's prospectus
under the heading "Management and Servicing Fees," Stephens serves as the Fund's
sponsor and distributor.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. The
following information supplements and should be read in conjunction with the
section of the Prospectus entitled "Custodian, Transfer and Dividend Disbursing
Agent." Wells Fargo Bank has been retained to act as Custodian and Transfer and
Dividend Disbursing Agent for the Fund and the Master Portfolio. The
Custodian, among other things, maintains a custody account or accounts in the
name of the Fund and the Master Portfolio; receives and delivers all assets for
the Fund and the Master Portfolio upon purchase and upon sale

11
<PAGE> 250
or maturity; collects and receives all income and other payments and
distributions on account of the assets of the Fund and the Master Portfolio and
pays all expenses of the Fund and the Master Portfolio. For its services as
custodian, Wells Fargo Bank is entitled to receive fees as follows: a net
asset charge at the annual rate of 0.0167%, payable monthly, plus specified
transaction charges. Wells Fargo Bank also will provide portfolio accounting
services under the Custody Agreement as follows: a monthly base fee of $2,000
plus a net asset fee at the annual rate of 0.070% of the first $50,000,000 of
the Fund's average daily net assets, 0.045% of the next $50,000,000, and 0.020%
of the average daily net assets in excess of $100,000,000.

For its services as transfer and dividend disbursing agent for the
Fund's Class A and B shares, Wells Fargo Bank is entitled to receive monthly
payments at the annual rate of 0.14% of the Fund's average daily net assets for
Class A and B shares. Under the prior transfer agency agreement for the Fund,
Wells Fargo Bank was entitled to receive monthly payments at the annual rate of
0.10% of the Fund's average daily net assets, regardless of Class, as well as
reimbursement for reasonable out-of-pocket expenses.

For the period begun February 21, 1996 and ended September 30,
1996, the Fund paid no custodial fees or transfer and dividend disbursing
agency fees to Wells Fargo Bank.

UNDERWRITING COMMISSIONS. For the years ended December 31, 1993
and 1994, the Company's distributor retained $26,215,173 and $5,415,227,
respectively in underwriting commissions (front-end sales loads and CDSCs, if
any) in connection with the purchase or redemption of Company shares. For the
years ended December 31, 1993 and 1994, Wells Fargo Securities Inc. ("WFSI"),
an affiliated broker-dealer of the Company, and its registered representatives
received $378,895 and $904,274, respectively, in underwriting commissions in
connection with the purchase or redemption of Company shares.

For the period ended September 30, 1996, the aggregate amount of
underwriting commissions on sales/redemptions of the Company's shares was
$2,917,738. Stephens retained $198,664 of such commissions. WFSI and its
registered representatives retained $2,583,027 and $136,047, respectively, of
such commissions.

DISTRIBUTION PLAN

The following information supplements and should be read in
conjunction with the Prospectus section entitled "Distribution Plans." As
indicated in the Prospectus, the Fund has adopted a distribution plan (a
"Plan") under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the
"Rule") for the Class A and B shares of the Fund. The Plan for the Class A
Shares and the Plan for the Class B Shares were each adopted by the Board of
Directors on November 15, 1995, including a majority of the Directors who were
not

12
<PAGE> 251
"interested persons" (as defined in the 1940 Act) of the Fund and who had no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Non-Interested Directors").

Under the Plan and pursuant to the Distribution Agreement, the
Fund may pay the Distributor, as reimbursement for distribution-related
expenses and compensation for distribution-related services, a monthly fee at
an annual rate of up to 0.10% of the average daily net assets attributable to
Class A Shares and up to 0.75% of the average daily net assets attributable to
the Class B Shares of the Fund. The actual fee payable to the Distributor is
determined, within such limits, from time to time by mutual agreement between
the Company and the Distributor and will not exceed the maximum sales charges
payable by mutual funds sold by members of the National Association of
Securities Dealers, Inc. ("NASD") under the NASD Rules of Fair Practice. The
Distributor may enter into selling agreements with one or more selling agents
under which such agents may receive compensation for distribution-related
services from the Distributor, including, but not limited to, commissions or
other payments to such agents based on the average daily net assets of Fund
shares attributable to them. The Distributor may retain any portion of the
total distribution fee payable thereunder to compensate it for
distribution-related services provided by it or to reimburse it for other
distribution-related expenses.

Each Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Non-Interested Directors. Agreements related to the Plans also must be
approved by such vote of the directors and the Non-Interested Directors. Such
Agreements will terminate automatically if assigned, and may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
outstanding voting securities of the relevant class of the Fund or by vote of a
majority of the Non-Interested Directors on not more than 60 days' written
notice. Each Plan may not be amended to increase materially the amounts
payable thereunder without the approval of a majority of the outstanding voting
securities of the relevant class of the Fund, and no material amendment to the
Plans may be made except by a majority of both the Directors of the Company and
the Non-Interested Directors.

Each Plan requires that the Company shall provide to the
Directors, and the directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Plan. The Rule also
requires that the selection and nomination of Directors who are not "interested
persons" of the Company be made by such disinterested directors.

For the period begun February 21, 1996 and ended September 30,
1996, the Fund's distributor received the following amounts of 12b-1 fees for
the specified purposes set forth below under each Plan.

<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Total Prospectus Brochures Underwriters
----- ---------- --------- ------------
<S> <C> <C> <C> <C>
Class A $ -0- $ -0- $ -0- N/A
</TABLE>

13
<PAGE> 252
<TABLE>
<S> <C> <C> <C> <C>
Class B $32,412 N/A N/A $32,412
</TABLE>

SERVICING PLAN

As indicated in the Fund's Prospectus, the Fund has adopted a
Servicing Plan ("Servicing Plan") with respect to its Class A and Class B
Shares. The Board of Directors adopted each Servicing Plan on November 15,
1995. The Board of Directors included a majority of the Directors who were not
"interested persons" (as defined in the Act) of the Fund and who had no direct
or indirect financial interest in the operation of the Servicing Plan or in any
agreement related to the Servicing Plan (the "Servicing Plan Non-Interested
Directors").

Under the Servicing Plan and pursuant to the Servicing Agreements
for the Class A Shares, the Fund may pay one or more servicing agents, as
compensation for performing certain services, a fee at an annual rate of up to
0.25% of the average daily net assets of the Fund attributable to its Class A
Shares. Under the Servicing Plan and pursuant to the Servicing Agreements for
the Class B Shares, the Fund may pay one or more servicing agents, as
compensation for performing certain services, a fee at an annual rate of up to
0.25% of the average daily net assets of the Fund attributable to the Class B
Shares. The actual fee payable to servicing agents is determined, within such
limits, from time to time by mutual agreement between the Company and each
servicing agent and will not exceed the maximum service fees payable by mutual
funds sold by members of the NASD under the NASD Rules of Fair Practice.

Each Servicing Plan will continue in effect from year to year if
such continuance is approved by a majority vote of both the Directors of the
Company and the Servicing Plan Non-Interested Directors. Any form of Servicing
Agreement related to the Servicing Plan also must be approved by such vote of
the Directors and the Servicing Plan Non- Interested Directors. Servicing
Agreements will terminate automatically if assigned, and may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Servicing Plan Non-Interested Directors. No material amendment to the
Servicing Plans may be made except by a majority of both the Directors of the
Company and the Servicing Plan Non-Interested Directors.

Each Servicing Plan requires that the Treasurer of the Company
shall provide to the Directors, and the Directors shall review, at least
quarterly, a written report of the amounts expended (and purposes therefor)
under the Servicing Plan.

For the period begun February 21, 1996 and ended September 30,
1996, the Fund paid no shareholder servicing fees to Wells Fargo Bank.

14
<PAGE> 253
PERFORMANCE CALCULATIONS

The following information supplements and should be read in
conjunction with the sections in the Prospectus entitled "Determination of Net
Asset Value" and "Performance Data."

As indicated in the Prospectus, the Fund may advertise certain
total return information computed in the manner described in the Prospectus.
As and to the extent required by the SEC, an average annual compound rate of
return ("T") will be computed by using the redeemable value at the end of a
specified period ("ERV") of a hypothetical initial investment ("P") over a
period of years ("n") according to the following formula: P(1+T)n = ERV. In
addition, as indicated in the Prospectus, the Fund also may, at times,
calculate total return based on net asset value per share (rather than the
public offering price), in which case the figures would not reflect the effect
of any sales charges that would have been paid by an investor, or based on the
assumption that a sales charge other than the maximum sales charge (reflecting
a Volume Discount) was assessed, provided that total return data derived
pursuant to the calculation described above also are presented.

The total return information presented below and advertised by the Fund
for the period prior to February 21, 1996, the date the Fund commenced
operations, is based upon the prior performance of the Strategic Growth Fund of
Overland Express Funds, Inc., (the "Predecessor Fund"). The performance
information is adjusted to reflect each class' current level of operating
expenses. The Class A and B Shares of the Fund track the performance of the
Predecessor Fund's Class A and D Shares, respectively.

Average Annual Total Return for the Applicable Period Ended September 30, 1996

<TABLE>
<CAPTION>
Inception(1) Inception Three Year Three Year One Year One Year
With Sales No Sales With Sales No Sales With Sales No Sales
Class Charge(2) Charge Charge Charge Charge Charge
----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
A 24.21% 25.76% 18.20% 20.04% 8.25% 13.36%
B 21.89% 22.09% 18.95% 19.18% 9.60% 12.60%
</TABLE>

(1) Both Classes of the Aggressive Growth Fund commenced operations on
February 21, 1996. The Predecessor Fund commenced operations on January
20, 1993 for its Class A Shares and July 1, 1993 for its Class D Shares.

(2) For all periods ended September 30, 1996, the term "Sales Charge" for the
Class A shares of the Fund means a front-end sales load of 4.50%, and for
Class B Shares means a maximum contingent deferred sales charge ("CDSC")
of 3.00%.

In addition to the above performance information, the Fund may
also advertise the cumulative total return of the Fund. Cumulative total
return is based on the overall

15
<PAGE> 254
percentage change in value of a hypothetical investment in the Fund, assuming
all Fund dividends and capital gain distributions are reinvested, without
reflecting the effect of any sales charge that would be paid by an investor,
and is not annualized.

Cumulative Total Return for the Applicable Period Ended September 30, 1996

<TABLE>
<CAPTION>
Inception(1) Inception Three Year Three Year
With Sales No Sales With Sales No Sales
Class Charge(2) Charge Charge Charge
----- ------ ------ ------ -------
<S> <C> <C> <C> <C>
A 123.45% 133.96% 65.12% 72.96%
B 90.31% 91.31% 68.30% 69.30%
</TABLE>

(2) For all periods ended September 30, 1996, the term "Sales Charge" for
the Class A shares of the Fund means a front-end sales load of 4.50%, and
for Class B Shares means a maximum contingent deferred sales charge
("CDSC") of 3.00%.

From time to time and only to the extent the comparison is
appropriate for a class of Shares of the Fund, the Company may quote
performance or price-earning ratios of a class of Shares of the Fund in
advertising and other types of literature as compared to the performance of the
Lehman Brothers Municipal Bond Index, 1-Year Treasury Bill Rate, S&P Index, the
Dow Jones Industrial Average, the Lehman Brothers 20+ Years Treasury Index, the
Lehman Brothers 5-7 Year Treasury Index, IBC/Donoghue's Money Fund Averages,
Real Estate Investment Averages (as reported by the National Association of
Real Estate Investment Trusts), Gold Investment Averages (provided by the World
Gold Council), Bank Averages (which is calculated from figures supplied by the
U.S. League of Savings Institutions based on effective annual rates of interest
on both passbook and certificate accounts), average annualized certificate of
deposit rates (from the Federal Reserve G-13 Statistical Releases or the Bank
Rate Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer
Price Index (as published by the U.S. Bureau of Labor Statistics), Ten Year
U.S. Government Bond Average, S&P's Corporate Bond Yield Averages, Schabacter
Investment Management Indices, Salomon Brothers High Grade Bond Index, Lehman
Brothers Long-Term High Quality Government/Corporate Bond Index, other managed
or unmanaged indices or performance data of bonds, stocks or government
securities (including data provided by Ibbotson Associates), or by other
services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices. The
performance of a class of shares of the Fund also may be compared to the
performance of other mutual funds having similar objectives. This comparative
performance could be expressed as a ranking prepared by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc.,

16
<PAGE> 255
Bloomberg Financial Markets or Morningstar, Inc., independent services which
monitor the performance of mutual funds. The performance of a class of shares
the Fund is calculated by relating net asset value per share at the beginning
of a stated period to the net asset value of the investment, assuming
reinvestment of all gains distributions and dividends paid, at the end of the
period. Any such comparisons may be useful to investors who wish to compare
the Fund's past performance with that of its competitors. Of course, past
performance cannot be a guarantee of future results. The Company also may
include, from time to time, a reference to certain marketing approaches of the
Distributor, including, for example, a reference to a potential shareholder
being contacted by a selected broker or dealer. General mutual fund statistics
provided by the Investment Company Institute may also be used.

In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."

The Company also may use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for a class of shares of the Fund: (i) the Consumer
Price Index may be used to assess the real rate of return from an investment in
a class of shares of the Fund; (ii) other government statistics, including, but
not limited to, The Survey of Current Business, may be used to illustrate
investment attributes of a class of shares of the Fund or the general economic,
business, investment, or financial environment in which the Fund operates;
(iii) the effect of tax-deferred compounding on the investment returns of a
class of shares of the Fund, or on returns in general, may be illustrated by
graphs, charts, etc., where such graphs or charts would compare, at various
points in time, the return from an investment in a class of shares of the Fund
(or returns in general) on a tax-deferred basis (assuming reinvestment of
capital gains and dividends and assuming one or more tax rates) with the return
on a taxable basis; and (iv) the sectors or industries in which the Fund or the
Master Portfolio invests may be compared to relevant indices of stocks or
surveys (e.g., S&P Industry Surveys) to evaluate the historical performance of
the Fund or the Master Portfolio or current or potential value with respect to
the particular industry or sector.

17
<PAGE> 256
for a particular investor. In addition, the assigned rating would be subject
to change, suspension or withdrawal as a result of changes in, or
unavailability of, information relating to the Fund or its investments. The
Company may compare the Fund's performance with other investments which are
assigned ratings by NRSROs. Any such comparisons may be useful to investors
who wish to compare the Fund's past performance with other rated investments.

The Company also may disclose in advertising and other types of
literature, information and statements the distribution rate on the shares of
each class of the Fund. Distribution rate, which may be annualized, is the
amount determined by dividing the dollar amount per share of the most recent
dividend by the most recent NAV or maximum offering price per share as of a
date specified in the sales literature. Distribution rate will be accompanied
by the standard 30-day yield as required by the SEC.

The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Fargo Investment Management
("WFIM"), a division of Wells Fargo Bank, is listed in the top 100 by
Institutional Investor magazine in its July 1996 survey "America's Top 300 Money
Managers". This survey ranks money managers in several asset categories. The
Company may also disclose in advertising and other types of sales literature the
assets and categories of assets under management by the Company's investment
adviser and the total amount of assets and mutual fund assets managed by Wells
Fargo Bank. As of December 31, 1996, Wells Fargo Bank and its affiliates
provided investment advisory services for approximately $54 billion of assets of
individuals, trusts, estates and institutions and $20 billion of mutual fund
assets.

18
<PAGE> 257
how to access the Information Site and open a Sweep Account. Advertising and
other literature may also disclose the procedures employed by Wells Fargo Bank
to secure information provided by investors, including disclosure and
discussion of the tools and services for accessing Electronic Channels. Such
advertising or other literature may include discussions of the advantages of
establishing and maintaining a Sweep Account through Electronic Channels and
testimonials from Wells Fargo Bank customers or employees and may also include
descriptions of locations where product demonstrations may occur. The Company
may also disclose the ranking of Wells Fargo Bank as one of the largest money
managers in the United States.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the Prospectus section entitled "Purchase of Shares." Net
asset value per share for each class of the Fund and net asset value per unit
of the Master Portfolio are each determined by the Custodian of the Fund on
each day the Exchange is open for trading as of the close of regular trading on
the Exchange, which is currently 4:00 p.m. Pacific time.

Securities of the Master Portfolio for which market quotations are
available are valued at latest prices. Any security for which the primary
market is an exchange is valued at the last sale price on such exchange on the
day of valuation or, if there was no sale on such day, the latest bid price
quoted on such day. In the case of other securities, including U.S. Government
securities but excluding money market instruments maturing in 60 days or less,
the valuations are based on latest quoted bid prices. Money market instruments
maturing in 60 days or less are valued at amortized cost. Prices may be
furnished by a reputable independent pricing service approved by the Board of
Trustees. Prices provided by an independent pricing service may be determined
without exclusive reliance on quoted prices and may take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. All other securities and other assets
of the Master Portfolio for which current market quotations are not readily
available are valued at fair value as determined in good faith by MIT's
Trustees and in accordance with procedures adopted by the Trustees.

Expenses and fees, including advisory fees, are accrued daily and
are taken into account for the purpose of determining the net asset value of
the Master Portfolio's interests and the Fund's shares.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

19
<PAGE> 258
Christmas Day (each a "Holiday"). When any Holiday falls on a weekend, the NYSE
typically is closed on the weekday immediately before or after such Holiday.

Payment for shares may, in the discretion of the adviser, be made
in the form of securities that are permissible investments for the Fund as
described in the Prospectus. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by
the Fund and that the Fund receives satisfactory assurances that (i) it will
have good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Fund may suspend the right of redemption
or postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to
reimburse the Fund for any losses sustained by reason of the failure of a
shareholders to make full payment for shares purchased or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to shares of the Fund as provided from time to time in the
Prospectus.

PORTFOLIO TRANSACTIONS

20
<PAGE> 259
rule adopted under the 1940 Act and in compliance with procedures adopted by
the Board of Trustees.

The Trust has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by MIT's Board of Trustees, Wells Fargo is responsible for
the Master Portfolio decisions and the placing of portfolio transactions. In
placing orders, it is the policy of the Trust to obtain the best overall terms
taking into account the dealer's general execution and operational facilities,
the type of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While Wells Fargo generally seeks
reasonably competitive spreads or commissions, the Master Portfolio will not
necessarily be paying the lowest spread or commission available.

In assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Master Portfolio to pay a broker/dealer
which furnishes brokerage and research services a higher commission than that
which might be charged by another broker/dealer for effecting the same
transaction, provided that Wells Fargo Bank determines in good faith that such
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker/dealer, viewed in terms of either the
particular transaction or the overall responsibilities of Wells Fargo Bank.
Such brokerage and research services might consist of reports and statistics
relating to specific companies or industries, general summaries of groups of
stocks or bonds and their comparative earnings and yields, or broad overviews
of the stock, bond, and government securities markets and the economy.

Supplementary research information so received is in addition to,
and not in lieu of, services required to be performed by Wells Fargo Bank and
does not reduce the advisory fees payable by the Master Portfolio. The Board of
Trustees will periodically review the commissions paid by the Master Portfolio
to consider whether the commissions paid over representative periods of time
appear to be reasonable in relation to the benefits inuring to the Master
Portfolio. It is possible that certain of the supplementary research or other
services received will primarily benefit one or more other investment companies
or other accounts for which investment discretion is exercised. Conversely,
the Master Portfolio may be the primary beneficiary of the research or services
received as a result of portfolio transactions effected for such other account
or investment company.

21
<PAGE> 260
particular transaction or its overall responsibilities with respect to the
accounts as to which it exercises investment discretion and that the services
provided by a broker provide an adviser with lawful and appropriate assistance
in the performance of its investment decision-making responsibilities."
Accordingly, the price to the Master Portfolio in any transaction may be less
favorable than that available from another broker/dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered.
Broker/dealers utilized by Wells Fargo Bank may furnish
statistical, research and other information or services which are deemed by
Wells Fargo Bank to be beneficial to the Master Portfolio's investment
programs. Research services received from brokers supplement Wells Fargo
Bank's own research and may include the following types of information:
statistical and background information on industry groups and individual
companies; forecasts and interpretations with respect to U.S. and foreign
economies, securities, markets, specific industry groups and individual
companies; information on political developments; portfolio management
strategies; performance information on securities and information concerning
prices of securities; and information supplied by specialized services to Wells
Fargo Bank and to MIT's Trustees with respect to the performance, investment
activities and fees and expenses of other mutual Funds. Such information may
be communicated electronically, orally or in written form. Research services
may also include the providing of equipment used to communicate research
information, the arranging of meetings with management of companies and the
providing of access to consultants who supply research information.

The outside research assistance is useful to Wells Fargo Bank since
the brokers utilized by Wells Fargo Bank as a group tend to follow a broader
universe of securities and other matters than the staff of Wells Fargo Bank can
follow. In addition, this research provides Wells Fargo Bank with a diverse
perspective on financial markets. Research services which are provided to
Wells Fargo Bank by brokers are available for the benefit of all accounts
managed or advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank
that this material is beneficial in supplementing their research and analysis;
and, therefore, it may benefit the Master Portfolio by improving the quality of
Wells Fargo Bank's investment advice. The advisory fees paid by the Master
Portfolio are not reduced because Wells Fargo Bank receives such services.

Securities of Regular Brokers or Dealers. As of September
30, 1996, the Fund owned no securities of its "regular brokers or dealers" or
their parents as defined in the Act.

On December 31, 1995, the Predecessor Fund to the Master Portfolio
owned securities of its "regular brokers or dealers or their parents", as
defined in the 1940 Act, as follows: $1,638,000 of Goldman Sachs & Co.
Government Repurchase Agreement.

Brokerage Commissions. The Fund and the Predecessor Fund paid
brokerage commissions as follows for the years ended December 31, 1994 and
1995, and the periods thereafter beginning January 1, 1996 and February 21,
1996, respectively.

22
<PAGE> 261
<TABLE>
<CAPTION>
Fund Dec. 31, 1994 Dec. 31, 1995 Feb. 20, 1996 Sept. 30, 1996
---- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Aggressive Growth N/A N/A N/A $194,498

Predecessor Fund $171,356 $190,359 N/A N/A
</TABLE>

Portfolio Turnover. Portfolio turnover generally involves some
expenses to the Master Portfolio, including brokerage commissions or dealer
mark-ups and other transaction costs on the sale of securities and the
reinvestment in other securities. A high portfolio turnover rate should not
result in the Master Portfolio paying substantially more brokerage commissions,
since most transactions in government securities and municipal securities are
effected on a principal basis. Portfolio turnover can generate short-term
capital gain tax consequences. The portfolio turnover rate will not be a
limiting factor when Wells Fargo Bank deems portfolio changes appropriate.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens,
the Company bears all costs of its operations, including the compensation of
its Directors who are not affiliated with Stephens or Wells Fargo Bank or any
of their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing prospectuses (except the expense of printing and mailing prospectuses
used for promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of the Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of the Fund's shares;
pricing services, and any extraordinary expenses. Expenses attributable to the
Fund are charged against Fund assets. General expenses of the Company are
allocated among all of the funds of the Company, including the Fund, in a
manner proportionate to the net assets of the Fund, on a transactional basis,
or on such other basis as the Company's Board of Directors deems equitable.

FEDERAL INCOME TAXES

In General. The following information supplements and should be
read in conjunction with the Prospectus sections entitled "Dividend and Capital
Gain

23
<PAGE> 262
Distributions" and "Taxes." The Prospectus of the Fund describes generally the
tax treatment of distributions by the Master Portfolio and the Fund. This
section of the SAI includes additional information concerning federal income
taxes.

Qualification as a regulated investment company under the Code
requires, among other things, that (a) the Fund derive at least 90% of its
annual gross income from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; (b) the Fund derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) the Fund diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of
the Fund's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government securities and the
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are determined to be engaged in the same or
similar trades or businesses. For purposes of complying with these
qualification requirements, the Fund will be deemed to own a proportionate
share of the Master Portfolio's assets. As a regulated investment company, the
Fund will not be subject to federal income tax on its net investment income and
net capital gains distributed to its shareholders, provided that it distributes
to its shareholders at least 90% its net investment income, including net
tax-exempt income, earned in each year. The Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

A 4% nondeductible excise tax will be imposed on the Fund to the
extent it does not meet certain minimum distribution requirements by the end of
each calendar year. The Fund will either actually or be deemed to distribute
all of its net investment income and net capital gains by the end of each
calendar year and, thus, expects not to be subject to the excise tax.

24
<PAGE> 263
The Fund seeks to qualify as a regulated investment company by
investing substantially all of its assets in the Master Portfolio. The Master
Portfolio will be treated as a non-publicly traded partnership rather than as a
regulated investment company or a corporation under the Code. As a
non-publicly traded partnership, any interest, dividends, gains and losses of
the Master Portfolio shall be deemed to have been "passed through" to the Fund
(and the Master Portfolio's other investors) in proportion to the Fund's
ownership interest in the Master Portfolio. Therefore, to the extent the
Master Portfolio were to accrue but not distribute any interest, dividends or
gains, the Fund would be deemed to have realized and recognized its
proportionate share of interest, dividends or gains without receipt of any
corresponding distribution. However, the Master Portfolio will seek to
minimize recognition by investors of interest, dividends, gains or losses
without a corresponding distribution.

Federal Income Tax Rates. As of the printing of this SAI, the
maximum individual tax rate applicable to ordinary income is 39.60% (marginal
rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains is 28.00%; and the maximum corporate tax rate applicable to
ordinary income and net capital gains is 35.00% (except that to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

25
<PAGE> 264
disallowed) any loss on the sale or exchange of that Fund share will be treated
as a long-term capital loss to the extent of the designated capital gain
distribution.

If a shareholder exchanges or otherwise disposes of Fund shares
within 90 days of having acquired such shares and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
on a new purchase of shares of the Fund or of a different regulated investment
company, the sales charge previously incurred acquiring the Fund's shares shall
not be taken into account (to the extent such previous sales charges do not
exceed the reduction in sales charges on the new purchase) for the purpose of
determining the amount of gain or loss on the disposition, but will be treated
as having been incurred in the acquisition of such other shares. Also, any
loss realized on a redemption or exchange of shares of the Fund will be
disallowed to the extent that substantially identical shares are reacquired
within the 61-day period beginning 30 days before and ending 30 days after the
shares are disposed of.

If an option written by the Master Portfolio lapses or is
terminated through a closing transaction, such as a repurchase by the Master
Portfolio of the option from its holder, the Master Portfolio will realize a
short-term capital gain or loss, depending on whether the premium income is
greater or less than the amount paid by the Master Portfolio in the closing
transaction. Some realized capital losses may be deferred if they result from
a position which is part of a "straddle," discussed below. If securities are
sold by the Master Portfolio pursuant to the exercise of a call option written
by it, the Master Portfolio will add the premium received to the sale price of
the securities delivered in determining the amount of gain or loss on the sale.
If securities are purchased by the Master Portfolio pursuant to the exercise of
a put option written by it, the Master Portfolio will subtract the premium
received from its cost basis in the securities purchased. The requirement that
the Fund derive less than 30% of its gross income from gains from the sale of
securities held for less than three months may limit the Master Portfolio's
ability to write options.

26
<PAGE> 265
will be deemed to have been sold at market value. Sixty percent (60%) of any
net gain or loss recognized on these deemed sales and sixty percent (60%) of
any net realized gain or loss from any actual sales, generally will be treated
as long-term capital gain or loss, and the remaining forty percent (40%) will
be treated as short-term capital gain or loss. Transactions that qualify as
designated hedges are excepted from the "marked to market" and "60%/40%" rules.
Currency transactions may be subject to Section 988 of the Code, under which
foreign currency gains or losses would generally be computed separately and
treated as ordinary income or losses. The Funds will attempt to monitor
Section 988 transactions to avoid an adverse tax impact.

27
<PAGE> 266
to U.S. withholding tax (at a rate of 30% or a lower treaty rate). Withholding
will not apply if a dividend paid by the Fund to a foreign shareholder is
"effectively connected" with a U.S. trade or business, in which case the
reporting and withholding requirements applicable to U.S. citizens, U.S.
residents or domestic corporations will apply. Distributions of net long-term
capital gains are not subject to tax withholding, but in the case of a foreign
shareholder who is a nonresident alien individual, such distributions
ordinarily will be subject to U.S. income tax at a rate of 30% if the
individual is physically present in the U.S. for more than 182 days during the
taxable year.

Backup Withholding. The Company may be required to withhold,
subject to certain exemptions, at a rate of 31% ("backup withholding") on
dividends, capital gain distributions, and redemption proceeds (including
proceeds from exchanges) paid or credited to an individual Fund shareholder,
unless a shareholder certifies that the Taxpayer Identification Number ("TIN")
provided is correct and that the shareholder is not subject to backup
withholding, or the IRS notifies the Company that the shareholder's TIN is
incorrect or the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by the IRS.

CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Fund, the Master
Portfolio and Management."

The Fund is one of the funds of the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of twenty-four other funds.

28
<PAGE> 267
Most of the Company's funds are authorized to issue multiple
classes of shares, one class generally subject to a front-end sales charge and,
in some cases, a class subject to a contingent-deferred sales charge, that are
offered to retail investors. Certain of the Company's funds also are
authorized to issue other classes of shares, which are sold primarily to
institutional investors. Each class of shares in a fund represents an equal,
proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state
securities registration fees, shareholder servicing fees or distribution fees
that may be paid under Rule 12b-1) that are allocated to a particular class.
Please contact Stagecoach Shareholder Services at 1-800-222-8222 if you would
like additional information about other funds or classes of shares offered.

The Fund is comprised of two classes of shares, Class A Shares and
Class B Shares. With respect to matters that affect one class but not another,
shareholders vote as a class; for example, the approval of a Plan. Subject to
the foregoing, on any matter submitted to a vote of shareholders, all shares
then entitled to vote will be voted separately by series unless otherwise
required by the Act, in which case all shares will be voted in the aggregate.
For example, a change in a series' fundamental investment policy affects only
one series and would be voted upon only by shareholders of the series and not
by shareholders of the Company's other series. Additionally, approval of an
advisory contract is a matter to be determined separately by each series.
Approval by the shareholders of one series is effective as to that series
whether or not sufficient votes are received from the shareholders of the other
series to approve the proposal as to those series. As used in the Prospectus
and in this SAI, the term "majority" when referring to approvals to be obtained
from shareholders of a class of the Fund, means the vote of the lesser of (i)
67% of the shares of such class the Fund represented at a meeting if the
holders of more than 50% of the outstanding shares such class of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of such class the Fund. The term "majority," when referring to the approvals
to be obtained from shareholders of the Company as a whole, means the vote of
the lesser of (i) 67% of the Company's shares represented at a meeting if the
holders of more than 50% of the Company's outstanding shares are present in
person or by proxy, or (ii) more than 50% of the Company's outstanding shares.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held.

The Company may dispense with an annual meeting of shareholders in
any year in which it is not required to elect directors under the 1940 Act.

Each share of a class of the Fund represents an equal proportional
interest in the Fund with each other share in the same class and is entitled to
such dividends and distributions out of the income earned on the assets
belonging to the Fund as are declared in the discretion of the Directors. In
the event of the liquidation or dissolution of the Company, shareholders of the
Fund are entitled to receive the assets attributable to the relevant class of
shares of the Fund that are available for distribution, and a distribution of
any general assets not attributable to a particular investment portfolio that
are available for

29
<PAGE> 268
distribution in such manner and on such basis as the Directors in their sole
discretion may determine.

Shareholders are not entitled to any preemptive rights. All
shares, when issued for the consideration described in the Prospectus, will be
fully paid and non-assessable by the Company.

The Declaration of Trust further provides that obligations of MIT
are not binding upon the Trustees individually but only upon the property of
MIT and that MITees will not be liable for any action or failure to act.
However, nothing in the Declaration of Trust protects a Trustee against any
liability to which the Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of the Trustee's office.

Set forth below is the name, address and share ownership of each
person known by the Company to have beneficial or record ownership of 5% or
more of a class of the Fund or 5% or more of the voting securities of the Fund
as a whole.

30
<PAGE> 269
5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
AGGRESSIVE Wells Fargo Bank Class A 62.05% 43.90%
GROWTH FUND P.O. Box 63015 Beneficially
San Francisco, CA 94163 Owned

Stephens Inc. 9.57% 6.80%
111 Center Street Class A
Little Rock, AR 72201 Record Holder
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).

OTHER

The Registration Statement of MIT and the Company, including the
Fund's Prospectus, the SAI and the exhibits filed therewith, may be examined at
the office of the SEC in Washington, D.C. Statements contained in the
Prospectus or the SAI as to the contents of any contract or other document
referred to herein or in the Prospectus are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent
auditors for the Company and MIT. KPMG Peat Marwick LLP provides audit
services, tax return preparation and assistance and consultation in connection
with review of certain SEC filings. KPMG Peat Marwick LLP's address is Three
Embarcadero Center, San Francisco, California 94111.

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal period ended September 30, 1996 for
the Capital Appreciation Master Portfolio of Master Investment Trust are hereby
incorporated by reference to the Company's Annual Reports as filed with the
SEC on December 9, 1996.

31
<PAGE> 270
independent auditors' report are attached to all SAIs delivered to current or
prospective shareholders.

32
<PAGE> 271
SAI APPENDIX

The following is a description of the ratings given by Moody's and
S&P to corporate bonds and commercial paper.

Corporate Bonds

Moody's: The four highest ratings for corporate bonds are "Aaa,"
"Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best quality"
and carry the smallest amount of investment risk. Bonds rated "Aa" are of
"high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1,
2 and 3 in each rating category from "Aa" through "Baa" in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by
S&P and have an extremely strong capacity to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity to pay interest and repay
principal" and differ "from the highest rated issued only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.

Corporate Commercial Paper

Moody's: The highest rating for corporate commercial paper is
"P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for repayment
of short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate commercial paper indicates
that the "degree of safety regarding timely payment is either overwhelming or
very strong."

33
<PAGE> 272
Commercial paper with "overwhelming safety characteristics" will be rated
"A-1+." Commercial paper with a strong capacity for timely payments on issues
will be rated "A-2."

34
<PAGE> 273
STAGECOACH FUNDS, INC.

Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

ARIZONA TAX-FREE FUND
BALANCED FUND
CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE INCOME FUND
EQUITY VALUE FUND
GOVERNMENT MONEY MARKET MUTUAL FUND
INTERMEDIATE BOND FUND
NATIONAL TAX-FREE FUND
OREGON TAX-FREE FUND
PRIME MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND

CLASS A AND CLASS B

-----------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series investment
company. This Statement of Additional Information ("SAI") contains additional
information about two classes of shares generally offered in eleven funds of
the Stagecoach Family of Funds (each, a "Fund" and collectively, the "Funds").
The ARIZONA TAX-FREE, CALIFORNIA TAX-FREE BOND, CALIFORNIA TAX-FREE INCOME,
NATIONAL TAX-FREE and OREGON TAX-FREE FUNDS (sometimes, collectively, the
"Tax-Free Funds"), the GOVERNMENT MONEY MARKET MUTUAL, PRIME MONEY MARKET
MUTUAL and TREASURY MONEY MARKET MUTUAL FUNDS (sometimes, collectively, the
"Money Market Funds") and the BALANCED, EQUITY VALUE and INTERMEDIATE BOND
FUNDS all offer Class A shares. In addition, Class B shares are offered by all
except the Money Market Funds and the California Tax- Free Income Fund. The
investment objective of each Fund is described in the applicable Prospectus
under "How the Funds Work -- Investment Objective(s) and Policies."

This SAI is not a Prospectus and should be read in conjunction with the
Prospectus applicable to each Fund, dated February 1, 1997. All terms used in
this SAI that are defined in the Prospectus for each Fund have the meanings
assigned in that Fund's Prospectus. A copy of the Prospectus for each Fund may
be obtained without charge by writing Stephens Inc. ("Stephens"), the Company's
sponsor, co-administrator and distributor, at 111 Center Street, Little Rock,
Arkansas 72201 or calling the Company's Transfer Agent at the telephone number
indicated above.

-----------------------------------
<PAGE> 274
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Additional Permitted Investment Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Special Considerations Affecting Arizona Municipal Obligations . . . . . . . . . . . . . . . . . . 30

Special Considerations Affecting California Municipal Obligations . . . . . . . . . . . . . . . . . 31

Special Considerations Affecting Oregon Municipal Obligations . . . . . . . . . . . . . . . . . . . 35

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Servicing Plans and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Additional Purchase and Redemption Information . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Tax-Free Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

</TABLE>

i
<PAGE> 275

GENERAL

Stagecoach Funds, Inc. (the "Company" and, at times, "Stagecoach") is an
open-end management investment company offering shares in separately managed
investment portfolios. The California Tax-Free Bond and California Tax-Free
Income Funds (sometimes referred to as the "California Funds") were originally
organized as funds of Stagecoach. All other Funds herein are sometimes
referred to as the "New Funds." The Arizona Tax-Free, Intermediate Bond,
National Tax- Free and Oregon Tax-Free Funds were originally organized as
investment portfolios of Westcore Trust ("Westcore") under the following names:
Arizona Intermediate Tax-Free, Bonds Plus, Quality Tax-Exempt Income, and
Oregon Tax-Exempt Funds, respectively. On October 1, 1995, each of these Funds
was reorganized as an investment portfolio of Pacifica Funds Trust ("Pacifica"
or the "predecessor Company"). The Balanced, Equity Value, and Government
Money Market Mutual Funds were originally organized as investment portfolios of
Pacifica under the following names: Balanced, Equity Value, and Government
Money Market Funds, respectively. The Prime Money Market Mutual Fund operated
as Pacific American Liquid Assets, Inc. from its commencement of operations on
April 30, 1981 until it was reorganized as a portfolio of Pacific American Fund
on October 1, 1985; on October 1, 1994, it was reorganized as the Pacific
American Money Market Portfolio of Pacifica; and, in July of 1995, it was
renamed the Pacifica Prime Money Market Fund. Prior to August 1, 1990, the
Treasury Money Market Mutual Fund was known as the Short-Term Government Fund
and invested in obligations issued or guaranteed by agencies and
instrumentalities of the U.S. Government in accordance with fundamental
policies that were then effective for the Fund. The Fund operated as a
portfolio of Pacific American Fund through October 1, 1994, when it was
reorganized as the Pacific American U.S. Treasury Portfolio, a portfolio of
Pacifica Funds Trust. In July 1995, the Fund was renamed the Pacifica Treasury
Money Market Fund.

On April 25, 1996, the Agreement and Plan of Reorganization of
Pacifica with Stagecoach and the creation of each predecessor portfolio as a
new fund of Stagecoach were approved by the Company's Board of Directors. On
May 17, 1996, the Agreement and Plan of Reorganization of Pacifica with the
Company was approved by Pacifica's Board of Trustees. The reorganization of
Pacifica with Stagecoach became effective on September 6, 1996 (the
"Reorganization"). Each of the following portfolios of Pacifica was
reorganized as the specified Stagecoach Fund:

1
<PAGE> 276
<TABLE>
<CAPTION>
PACIFICA FUNDS TRUST PORTFOLIO NAME STAGECOACH FUND NAME
----------------------------------- --------------------
<S> <C>
Pacifica Arizona Tax-Exempt Fund Arizona Tax-Free Fund
Pacifica Balanced Fund Balanced Fund
Pacifica Equity Value Equity Value Fund
Pacifica Government Money Market Fund Government Money Market Mutual Fund
Pacifica Intermediate Bond Fund Intermediate Bond Fund
Pacifica National Tax-Exempt Fund National Tax-Free Fund
Pacifica Oregon Tax-Exempt Fund Oregon Tax-Free Fund
Pacifica Prime Money Market Fund Prime Money Market Mutual Fund
Pacifica Treasury Money Market Fund Treasury Money Market Mutual Fund
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INVESTMENT RESTRICTIONS

The Funds are subject to the investment limitations enumerated below
which may be changed with respect to a particular Fund only by a vote of a
majority of the holders of such Fund's outstanding shares (see "Capital Stock"
below).

The Intermediate Bond Fund and the Arizona, National and Oregon
Tax-Free Funds may not:

1. Purchase or sell commodity contracts (including futures contracts
with respect to the Arizona Tax-Free and National Tax-Free Funds), or invest in
oil, gas or mineral exploration or development programs, except that each Fund,
to the extent appropriate to its investment objective, may purchase publicly
traded securities of companies engaging in whole or in part in such activities,
and provided that the Intermediate Bond and Oregon Tax-Free Funds may enter
into futures contracts and related options.

2. Purchase or sell real estate, except that each Fund may purchase
securities of issuers that deal in real estate and may purchase securities that
are secured by interests in real estate.

3. Purchase securities of companies for the purpose of exercising
control.

4. Acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization or
acquisition of assets or where otherwise permitted by the 1940 Act.

5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as a Fund might be deemed to be an
underwriter upon disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of obligations directly from the issuer thereof in accordance with
a Fund's investment objective, policies and limitations may be deemed to be
underwriting.

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6. Write or sell put options, call options, straddles, spreads, or
any combination thereof, except that the Oregon Tax-Free Fund may enter into
transactions in futures contracts and related options, and except that the
Intermediate Bond Fund may enter into transactions in options on securities,
futures contracts and options on futures contracts.

7. Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of the total assets at the time of
such borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 10% of the value of a Fund's total assets at
the time of such borrowing. None of these Funds will purchase securities while
its borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. Securities held in escrow or separate accounts in
connection with a Fund's investment practices described in this SAI or in its
Prospectus are not deemed to be pledged for purposes of this limitation.

The Intermediate Bond Fund may not:

1. Purchase securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities)
if, immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in the securities of such issuer, or more than
10% of the issuer's outstanding voting securities would be owned by the Fund or
the Company, except that up to 25% of the value of the Fund's total assets may
be invested without regard to these limitations.

2. Purchase any securities that would cause 25% or more of the Fund's
total assets at the time of purchase to be invested in the securities of one or
more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; (b) wholly owned finance companies will be considered to be
in the industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services, for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.

3. Make loans, except that the Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an
amount not exceeding 30% of its total assets.

4. Purchase securities on margin, make short sales of securities or
maintain a short position, except that (a) this investment limitation shall not
apply to the Fund's transactions in futures contracts and related options, and
(b) the Fund may obtain short-term credit as may be necessary for the clearance
of purchases and sales of portfolio securities.

As a matter of non-fundamental policy (which may be changed without
shareholder vote), the Intermediate Bond Fund may not (i) invest in mineral
leases and (ii) purchase, hold or deal in real estate limited partnerships.

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The Arizona, National and Oregon Tax-Free Funds may not:

1. Purchase securities on margin, make short sales of securities or
maintain a short position, except that the Funds may obtain short-term credit
as may be necessary for the clearance of purchases and sales of portfolio
securities, and except that this limitation shall not apply to the Oregon
Tax-Free Fund's transactions in futures contracts and related options.

2. Invest less than 80% of its net assets in securities the interest
on which is exempt from federal income tax, except during periods of unusual
market conditions. For purposes of this investment limitation, securities the
interest on which is treated as a specific tax preference item under the
federal alternative minimum tax are considered taxable.

3. Make loans, except that each Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies.

The Oregon Tax-Free Fund may not:

1. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, except that (a) up to 50% of the
value of the Fund's total assets may be invested without regard to this 5%
limitation provided that no more than 25% of the value of the Fund's total
assets are invested in the securities of any one issuer and (b) this 5%
limitation does not apply to securities issued or guaranteed by the U.S.
Government, its agencies, authorities, instrumentalities or political
subdivisions. For purposes of this limitation, a security is considered to be
issued by the governmental entity (or entities) whose assets and revenues back
the security, or, with respect to a private activity bond that is backed only
by the assets and revenues of a nongovernmental user, such nongovernmental
user. In certain circumstances, the guarantor of a guaranteed security may also
be considered to be an issuer in connection with such guarantee, except that a
guarantee of a security shall not be deemed to be a security issued by the
guarantor when the value of all securities issued and guaranteed by the
guarantor, and owned by the Fund, does not exceed 10% of the value of the
Fund's total assets.

2. Purchase any securities, except securities issued (as defined in
the preceding Investment Limitation) or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia
or any of their authorities, agencies, instrumentalities or political
subdivisions, which would cause 25% or more of the value of the Fund's total
assets at the time of purchase to be invested in the securities of issuers
conducting their principal business activities in the same industry.

The Arizona Tax-Free Fund may not:

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up to 50% of the value of the Fund's total assets may be invested without
regard to these limitations provided that no more than 25% of the value of the
Fund's total assets are invested in the securities of any one issuer and (b)
these limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is backed only by the assets and revenues of a
nongovernmental user, such nongovernmental user. In certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security shall not
be deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets.

The National Tax-Free Fund may not:

1. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the issuer's
outstanding voting securities would be owned by the Fund, except that (a) up to
50% of the value of the Fund's total assets may be invested without regard to
these limitations provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is backed only by the assets and revenues of a
nongovernmental user, such nongovernmental user. In certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security shall not
be deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets.

2. Purchase any securities that would cause 25% or more of the value
of its total assets at the time of purchase to be invested in municipal
obligations with similar characteristics (such as private activity bonds where
the payment of principal and interest is the ultimate responsibility of issuers
in the same industry, pollution control revenue bonds, housing finance agency
bonds or hospital bonds) or the securities of issuers conducting their
principal business activities in the same industry, provided that there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, the District of Columbia, and their respective agencies,
authorities, instrumentalities or political subdivisions.

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The California Tax-Free Income Fund may not:

(1) Purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately after the
purchase and as a result thereof, the value of the Fund's investments in that
industry would be 25% or more of the current value of the Fund's total assets,
provided that there is no limitation with respect to investments in (i)
municipal securities (for the purpose of this restriction, private activity
bonds and notes shall not be deemed municipal securities if the payments of
principal and interest on such bonds or notes is the ultimate responsibility of
non-governmental issuers), and (ii) obligations of the United States
Government, its agencies or instrumentalities.

(2) Purchase or sell real estate or real estate limited
partnerships (other than municipal obligations or other securities secured by
real estate or interests therein or securities issued by companies that invest
in real estate or interests therein), commodities or commodity contracts
(including futures contracts).

(3) Purchase securities on margin (except for short-term
credits necessary for the clearance of transactions) or make short sales of
securities.

(4) Underwrite securities of other issuers, except to the
extent that the purchase of municipal securities or other permitted investments
directly from the issuer thereof or from an underwriter for an issuer and the
later disposition of such securities in accordance with the Fund's investment
program may be deemed to be an underwriting.

(5) Make investments for the purpose of exercising control or
management.

(6) Issue senior securities, except that the Fund may borrow
from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 10% of the current value of its net assets, but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets.

(7) Write, purchase or sell puts, calls, options or any
combination thereof, except that the Fund may purchase securities with put
rights in order to maintain liquidity.

(8) Make loans of portfolio securities having a value that
exceeds 50% of the current value of its total assets provided that, for
purposes of this restriction, loans will not include the purchase of fixed time
deposits, repurchase agreements, commercial paper and other types of debt
instruments commonly sold in a public or private offering.

With respect to fundamental investment policy (8), the Fund does
not intend to loan its portfolio securities during the coming year.

The California Tax-Free Income Fund is subject to the following
non-fundamental policies (which may be changed without shareholder vote).

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(1) The Fund may not purchase or retain securities of any
issuer if the Officers or Directors of the Company or the investment adviser
owning beneficially more than one-half of one percent (0.5%) of the securities
of the issuer together own beneficially more than 5% of such securities.

(2) The Fund may not purchase interests, leases, or limited
partnership interests in oil, gas, or other mineral exploration or development
programs.

(3) The Fund may not purchase securities of issuers who, with
their predecessors, have been in existence less than three years, unless the
securities are fully guaranteed or insured by the U.S. Government, a state,
commonwealth, possession, territory, the District of Columbia or by an entity
in existence at least three years, or the securities are backed by the assets
and revenues of any of the foregoing if, by reason thereof, the value of its
aggregate investments in such securities will exceed 5% of its total assets.

(4) The Fund may not purchase securities of unseasoned issuers,
including their predecessors, which have been in operation for less than three
years, and equity securities of issuers which are not readily marketable if by
reason thereof the value of the Fund's aggregate investment in such classes of
securities will exceed 5% of its total assets.

(5) The Fund may invest not more than 5% of its net assets at
the time of purchase in warrants, and not more than 2% of its net assets in
warrants which are not listed on the New York or American Stock Exchange.

(6) The Fund will not invest more than 15% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.

(7) The Fund may invest in shares of other open-end, management
investment companies, subject to the limitations of Section 12(d)(1) of the
1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies that have a
fundamental investment policy of investing at least 80% of their net assets in
obligations that are exempt from federal income taxes and are not subject to
the federal alternative minimum tax. However, the Fund's investment adviser
will waive its advisory fees for that portion of the Fund's assets so invested,
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition. Notwithstanding any other investment policy or
limitation (whether or not fundamental), the Fund may invest all of its assets
in the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies and
limitations as the Fund.

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The California Tax-Free Bond Fund may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Fund's investments in that industry would
be 25% or more of the current value of the Fund's total assets, provided that
there is no limitation with respect to investments in (i) municipal securities
(for the purpose of this restriction, private activity bonds and notes shall
not be deemed municipal securities if the payments of principal and interest on
such bonds or notes is the ultimate responsibility of non-governmental issuers)
and (ii) obligations of the United States Government, its agencies or
instrumentalities;

(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions with regard to the Fund and except
for margin payments in connection with options, futures and options on futures
or make short sales of securities;

(5) make investments for the purpose of exercising control or
management;

(6) issue senior securities, except that the Fund may borrow from
banks up to 10% of the current value of its net assets for temporary purposes
only in order to meet redemptions, and these borrowings may be secured by the
pledge of up to 10% of the current value of its net assets (but investments may
not be purchased while any such outstanding borrowings exceed 5% of its net
assets); or

(7) write, purchase or sell puts, calls, options or any
combination thereof, except that the Fund may purchase securities with put
rights in order to maintain liquidity.

The California Tax-Free Bond Fund is subject to the following
non-fundamental policies (which may be changed without shareholder vote):

(1) The Fund may not purchase or retain securities of any issuer
if the officers or Directors of the Company or the investment adviser owning
beneficially more than one-half of one percent (0.5%) of the securities of the
issuer together owned beneficially more than 5% of such securities.

(2) The Fund may not purchase interests, leases, or limited
partnership interests in oil, gas, or other mineral exploration or development
programs.

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(3) The Fund may not purchase securities of issuers who, with
their predecessors, have been in existence less than three years, unless the
securities are fully guaranteed or insured by the U.S. Government, a state,
commonwealth, possession, territory, the District of Columbia or by an entity
in existence at least three years, or the securities are backed by the assets
and revenues of any of the foregoing if, by reason thereof, the value of its
aggregate investments in such securities will exceed 5% of its total assets.

(6) The Fund may not invest more than 10% of the current value
of its net assets in repurchase agreements maturing in more than seven days or
other illiquid securities (including restricted securities).

In addition, the Fund may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies. However, the
Fund's investment adviser will waive its advisory fees for that portion of the
Fund's assets so invested, except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition. These unaffiliated
investment companies must have a fundamental investment policy of investing at
least 80% of their net assets in obligations that are exempt from federal
income taxes and are not subject to the federal alternative minimum tax.

The Balanced, Equity Value and Government Money Market Mutual Funds,
except as indicated, may not:

1. With respect to the Government Money Market Mutual Fund, invest
more than 10% of the aggregate value of its total assets in investments that
are illiquid, or not readily marketable (including repurchase agreements having
maturities of more than seven calendar days, variable- and floating-rate demand
notes requiring receipt of principal note amount on more than seven days notice
and securities of foreign issuers that are not listed on a recognized domestic
or foreign securities exchange).

2. Borrow money or pledge or mortgage its assets, except that a Fund
may borrow from banks up to 10% of the current value of its total net assets
for temporary or emergency purposes and those borrowings may be secured by the
pledge of not more than 15% of the current value of its total net assets (but
investments may not be purchased by a Fund while any such borrowings exist).

3. Make loans, except loans of portfolio securities and except that a
Fund may enter into repurchase agreements with respect to its portfolio
securities and may purchase the types of debt instruments described in the
Prospectuses or the SAI. No Fund will invest in repurchase agreements maturing
in more than seven days (unless subject to a demand feature) if any such

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investment, together with any illiquid securities (including securities which
are subject to legal or contractual restrictions on resale) held by a Fund,
exceeds 10% of the value of its total assets.

4. Invest in companies for the purpose of exercising control or
management.

5. Knowingly purchase securities of other investment companies,
except (i) in connection with a merger, consolidation, acquisition, or
reorganization; and (ii) the Funds listed above except the Government Money
Market Mutual Fund may invest up to 10% of their net assets in shares of other
investment companies.

6. Invest in real property (including limited partnership interests),
commodities, commodity contracts, or oil, gas and other mineral resource,
exploration, development, lease or arbitrage transactions.

7. Acquire securities subject to restrictions on disposition imposed
by the Securities Act of 1933, if, immediately after and as a result of such
acquisition, the value of such restricted securities and all other illiquid
securities held by a Fund would exceed 10% of the value of the Fund's total
assets.

8. Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933.

9. Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.

10. Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.

11. Mortgage, pledge, or hypothecate any of its assets, except as
described in Investment Restriction No. 2.

12. Purchase or retain the securities of any issuer, if those
individual officers and Directors of the Company, its adviser, the sponsor, or
the distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer.

13. Invest more than 5% of its net assets in warrants which are
unattached to securities, included within that amount, no more than 2% of the
value of a Fund's net assets, may be warrants that are not listed on the New
York or American Stock Exchanges.

14. Write, purchase or sell puts, calls or combinations thereof,
except that all Funds listed above except the Government Money Market Mutual
Fund may purchase or sell puts and calls as otherwise described in the
Prospectus or SAI; however, no Fund will invest more than 5% of its total
assets in these classes of securities.

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15. Invest more than 5% of the current value of its total assets in
the securities of companies that, including predecessors, have a record of less
than three years' continuous operation.

The Prime Money Market Mutual and the Treasury Money Market Mutual
Funds may not:

1. Purchase common stocks, and with respect to the Treasury Money
Market Mutual Fund, voting securities, (with respect to the Prime Money Market
Mutual Fund including preferred stocks, warrants or other equity securities
and, with respect to the Treasury Money Market Mutual Fund, including state,
municipal or industrial revenue bonds) except for securities of other
investment companies.

2. Borrow money or issue senior securities, except that a Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of its total assets at the
time of such borrowing. Neither Fund will purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. As a matter of non-fundamental policy, each Fund
intends to limit its investments in reverse repurchase agreements to no more
than 20% of its total assets.

3. Mortgage, pledge, or hypothecate any assets, except in connection
with any such borrowing and in amounts not in excess of one-third of the value
of a Fund's total assets at the time of its borrowing. Securities held in
escrow or separate accounts in connection with a Fund's investment practices
are not deemed to be pledged for purposes of this investment restriction.

4. Purchase securities on margin, except for delayed delivery or
when-issued transactions or such short-term credits as are necessary for the
clearance of transactions; or make short sales of securities or, for the
Treasury Money Market Mutual Fund, maintain a short position.

5. Write put or call options.

6. Underwrite the securities of other issuers, except as a Fund may
be deemed to be an underwriter in connection with the purchase or sale of
portfolio instruments in accordance with its investment objective and portfolio
management policies.

7. Invest in companies for the purpose of exercising control.

8. Make loans, except that a Fund may purchase or hold debt
instruments in accordance with its investment objective and policies and may
enter into loans of portfolio securities and repurchase agreements.

9. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, acquisition of assets or
where otherwise permitted by the 1940 Act.

10. Lend its portfolio securities in excess of one-third of the value
of its total assets.

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As a non-fundamental policy (which may be changed without shareholder
vote), any loans of portfolio securities will be made according to guidelines
established by the SEC and the Company's Board of Directors, and the Fund will
maintain collateral of the borrower equal at all times to at least the current
market value of the securities loaned.

11. Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
(with respect to the Treasury Money Market Mutual Fund, such obligations only
include U.S. Treasury obligations) and repurchase agreements secured by such
obligations, if immediately after such purchase more than 5% of the value of a
Fund's total assets would be invested in such issuer, except that up to 25% of
the value of its total assets may be invested in any securities without regard
to this 5% limitation.

12. Purchase any securities that cause 25% or more of the value of a
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, provided that there is no limitation with respect to: (a) instruments
that are issued or guaranteed by the United States, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions; (b) with
respect to the Prime Money Market Mutual Fund, instruments issued or guaranteed
by U.S. banks and U.S. branches of foreign banks (provided that, with respect
to U.S. branches of foreign banks, such branches are subject to the same
regulations as domestic branches of U.S. banks and, with respect to foreign
branches of U.S. banks, the domestic parent is unconditionally liable in the
event that the foreign branch fails to pay on its instruments for any reason);
and (c) repurchase agreements secured by the instruments described in clause
(a) and, with respect to the Prime Money Market Mutual Fund, clause (b).

The Prime Money Market Mutual Fund may not:

Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil or gas interests, but this
restriction shall not prevent the Fund from investing directly or indirectly in
instruments secured by real estate or interests therein.

The Treasury Money Market Mutual Fund may not:

1. Purchase or sell real estate.

2. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs.

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15% (10% in the case of the Money Market Funds) of their net assets in illiquid
securities. Otherwise, a Fund may continue to hold a security even though it
causes the Fund to exceed a percentage limitation because of fluctuation in the
value of the Fund's assets.

In addition, in accordance with current SEC regulations, the Money
Market Funds intend, as a non-fundamental policy, to limit their respective
investments in the securities of any single issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements collateralized by such securities) to not more than
5% of the value of their respective total assets at the time of purchase,
except for 25% of the value of their respective total assets which may be
invested in any one issuer for a period of up to three business days.

The Company may make commitments more restrictive than the
restrictions listed above so as to permit the sale of Fund shares in certain
states. Should the Company determine that such a commitment is no longer in the
best interests of the Fund involved and its shareholders, the Company reserves
the right to revoke the commitment by terminating the sale of Fund shares in
the state involved.

Pursuant to state securities regulations, the Treasury Money Market
Mutual Fund has undertaken the following non-fundamental investment limitation:
the Fund will not purchase warrants, valued at the lower of cost or market, in
excess of 5% of the value of its net assets (included within that amount, but
not to exceed 2% of the value of the Fund's net assets, may be warrants that
are not listed on the New York or American Stock Exchanges) except that
warrants acquired by the Fund at any time in units or attached to securities
are not subject to this limitation. Investors should note, however, that
neither the Prime Money Market Mutual Fund nor the Treasury Money Market
Mutual Fund currently intends to purchase any warrants whatsoever, or to
acquire any put option that may be sold, transferred or assigned separately
from the underlying security.

For purposes of determining industry classifications of issuers,
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents, and utilities will be classified according to their
services (for example, gas, gas transmission, electric and gas, and electric
and telephone each will be considered a separate industry). In accordance with
the current views of the staff of the SEC and as a matter of nonfundamental
policy that may be changed without a vote of shareholders, a Fund will treat
all supranational organizations as a single industry and each foreign
government (and all of its agencies) as a separate industry.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

The Prospectuses discuss the investment objectives of the Funds and
the policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment

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policies and portfolio strategies that the Funds may utilize, and certain risks
attendant to such investments, policies and strategies.

U.S. Government Obligations. Each Fund may invest in various types of
U.S. Government obligations in accordance with the policies described in its
Prospectus. U.S. Government obligations include securities issued or
guaranteed as to principal and interest by the U.S. Government and supported by
the full faith and credit of the U.S. Treasury. U.S. Treasury obligations
differ mainly in the length of their maturity. Treasury bills, the most
frequently issued marketable government securities, have a maturity of up to
one year and are issued on a discount basis. U.S. Government obligations also
include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some
obligations of such agencies or instrumentalities of the U.S. Government are
supported by the full faith and credit of the United States or U.S. Treasury
guarantees; others, by the right of the issuer or guarantor to borrow from the
U.S. Treasury; still others by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality;
and others, only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
which agency or instrumentality may be privately owned. There can be no
assurance that the U.S. Government would provide financial support to its
agencies or instrumentalities (including government- sponsored enterprises)
where it is not obligated to do so. In addition, U.S. Government obligations
are subject to fluctuations in market value due to fluctuations in market
interest rates. As a general matter, the value of debt instruments, including
U.S. Government obligations, declines when market interest rates increase and
rises when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their
structure or contract terms. The Funds may invest in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Examples
of the types of U.S. Government obligations that may be held by the Funds
include U.S. Treasury bonds, notes and bills and the obligations of Federal
Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, Federal National Mortgage Association, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks and Maritime Administration.

Repurchase Agreements. Each New Fund may enter into repurchase
agreements wherein the seller of a security to the Fund agrees to repurchase
that security from the Fund at a mutually agreed-upon time and price that
involves the acquisition by a Fund of an underlying debt instrument, subject to
the seller's obligation to repurchase, and such Fund's obligation to resell,
the instrument at a fixed price usually not more than one week after its
purchase. The Fund's custodian has custody of, and holds in a segregated
account, securities acquired as collateral by a Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of the Securities
and Exchange Commission to be loans by the Fund. The Funds may enter into
repurchase agreements only with respect to securities of the type in which such
Fund may invest, including government securities and mortgage-related
securities, regardless of their remaining

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maturities, and requires that additional securities be deposited with the
custodian if the value of the securities purchased should decrease below resale
price. Wells Fargo Bank monitors on an ongoing basis the value of the
collateral to assure that it always equals or exceeds the repurchase price.
Certain costs may be incurred by a Fund in connection with the sale of the
underlying securities if the seller does not repurchase them in accordance with
the repurchase agreement. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the securities, disposition of the securities by
a Fund may be delayed or limited. While it does not presently appear possible
to eliminate all risks from these transactions (particularly the possibility of
a decline in the market value of the underlying securities, as well as delay
and costs to a Fund in connection with insolvency proceedings), it is the
policy of each Fund to limit repurchase agreements to selected creditworthy
securities dealers or domestic banks or other recognized financial
institutions. Each New Fund considers on an ongoing basis the creditworthiness
of the institutions with which it enters into repurchase agreements.

The Prime and Treasury Money Market Mutual Funds may engage in a
repurchase agreement with respect to any security in which they are authorized
to invest, including U.S. Treasury STRIPS, although the underlying security may
mature in more than thirteen months.

Bank Obligations. Each New Fund may invest in bank obligations,
including certificates of deposit, time deposits, bankers' acceptances and
other short-term obligations of domestic banks, foreign subsidiaries of
domestic banks, foreign branches of domestic banks, and domestic and foreign
branches of foreign banks, domestic savings and loan associations and other
banking institutions. With respect to such securities issued by foreign
branches of domestic banks, foreign subsidiaries of domestic banks, and
domestic and foreign branches of foreign banks, a Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. Such risks include possible future political and economic
developments, the possible imposition of foreign withholding taxes on interest
income payable on the securities, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities and
the possible seizure or nationalization of foreign deposits. In addition,
foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting
and recordkeeping standards than those applicable to domestic branches of U.S.
banks.

Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.

Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by a Fund will not benefit from insurance from the
Bank Insurance Fund or the Savings Association Insurance Fund administered by
the Federal Deposit Insurance Corporation. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of the bank and of the
drawer to pay the face

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amount of the instrument upon maturity. The other short-term obligations may
include uninsured, direct obligations, bearing fixed, floating- or
variable-interest rates.

Commercial Paper. The Funds may invest in commercial paper. Commercial
paper includes short-term unsecured promissory notes, variable rate demand
notes and variable rate master demand notes issued by domestic and foreign bank
holding companies, corporations and financial institutions as well as similar
taxable instruments issued by government agencies and instrumentalities.

Investment Company Securities. Each Fund may invest in securities
issued by other open-end management investment companies which principally
invest in securities of the type in which such Fund invests. Under the 1940
Act, a Fund's investment in such securities currently is limited to, subject to
certain exceptions, (i) 3% of the total voting stock of any one investment
company, (ii) 5% of such Fund's net assets with respect to any one investment
company and (iii) 10% of such Fund's net assets in the aggregate. Investments
in the securities of other investment companies generally will involve
duplication of advisory fees and certain other expenses and the investment
adviser will waive its advisory fees for that portion of the Fund's assets so
invested, except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition. The California Funds may invest in such
securities in accordance with their respective investment policies.

Floating- and Variable-Rate Obligations. The Funds may purchase
floating- and variable-rate obligations as described in the Prospectuses. Each
Fund may purchase floating- and variable-rate demand notes and bonds. For the
Money Market Funds, these obligations ordinarily have stated maturities in
excess of thirteen months, but permit the holder to demand payment of principal
at any time, or at specified intervals not exceeding thirteen months.
Variable-rate demand notes include master demand notes that are obligations
that permit a Fund to invest fluctuating amounts, which may change daily
without penalty, pursuant to direct arrangements between the Fund, as lender,
and the borrower. The interest rates on these notes may fluctuate from time to
time. The issuer of such obligations ordinarily has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of
days' notice to the holders of such obligations. The interest rate on a
floating-rate demand obligation is based on a known lending rate, such as a
bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable-rate demand obligation is adjusted
automatically at specified intervals. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by banks.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value. Accordingly, where
these obligations are not secured by letters of credit or other credit support
arrangements, a Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies and each Fund may invest in obligations
which are not so rated only if Wells Fargo Bank determines that at the time of
investment the obligations are of comparable quality to the other obligations
in which such Fund may invest. Wells Fargo Bank, on behalf of each Fund,

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considers on an ongoing basis the creditworthiness of the issuers of the
floating- and variable-rate demand obligations in such Fund's portfolio. No
Fund will invest more than 15% (10% for each of the Money Market Funds) of the
value of its total net assets in floating- or variable-rate demand obligations
whose demand feature is not exercisable within seven days. Such obligations
may be treated as liquid, provided that an active secondary market exists.

Floating- and variable-rate demand instruments acquired by the
Arizona, National and Oregon Tax-Free Funds may include participations in
municipal obligations purchased from and owned by financial institutions,
primarily banks. Participation interests provide these Funds with a specified
undivided interest (up to 100%) in the underlying obligation and the right to
demand payment of the unpaid principal balance plus accrued interest on the
participation interest from the institution upon a specified number of days'
notice, not to exceed thirty days. Each participation interest is backed by an
irrevocable letter of credit or guarantee of a bank that the adviser has
determined meets the prescribed quality standards for these Funds. The bank
typically retains fees out of the interest paid on the obligation for servicing
the obligation, providing the letter of credit and issuing the repurchase
commitment.

Loans of Portfolio Securities. In accordance with the policies
described in their Prospectuses, the Funds (except the Arizona, National and
Oregon Tax-Free Funds) may lend their portfolio securities to brokers, dealers
and financial institutions, provided: (1) the loan is secured continuously by
collateral consisting of U.S. Government securities or cash or letters of
credit maintained on a daily marked-to-market basis in an amount at least equal
to the current market value of the securities loaned; (2) the Funds may at any
time call the loan and obtain the return of the securities loaned within five
business days; (3) the Funds will receive any interest or dividends paid on the
loaned securities; and (4) the aggregate market value of securities loaned will
not at any time exceed one third of the total assets of a particular Fund. The
Treasury Money Market Mutual Fund does not currently intend to lend its
portfolio securities.

The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Funds may pay
reasonable finders, administrative and custodial fees. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral. In either case, a Fund could experience
delays in recovering securities or collateral or could lose all or part of the
value of the loaned securities. When a Fund lends its securities, it continues
to receive interest or dividends on the securities loaned and may
simultaneously earn interest on the collateral received from the borrower or
from the investment of cash collateral in readily marketable, high- quality,
short-term obligations. Although voting rights, or rights to consent, attendant
to securities on loan pass to the borrower, such loans may be called at any
time and will be called so that the securities may be voted by a Fund if a
material event affecting the investment is to occur.

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delivery and payment ordinarily take place a number of days after the date of
the commitment to purchase. A Fund will make commitments to purchase such
securities only with the intention of actually acquiring the securities, but
the Fund may sell these securities before the settlement date if it is deemed
advisable. The Fund will not accrue income in respect of a security purchased
on a forward commitment basis prior to its stated delivery date.

Securities purchased on a when-issued or forward commitment basis and
certain other securities held in a Fund's investment portfolio are subject to
changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose the relevant Fund to risk
because they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or forward commitment basis can involve
the additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself. A segregated account of each Fund consisting of cash or U.S.
Government securities or other high quality liquid debt securities at least
equal at all times to the amount of the when-issued or forward commitments will
be established and maintained at the Funds' custodian bank. Purchasing
securities on a forward commitment basis when a Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of such
Fund's total net assets and its net asset value per share. In addition,
because a Fund will set aside cash and other high quality liquid debt
securities as described above the liquidity of the Fund's investment portfolio
may decrease as the proportion of securities in the Fund's portfolio purchased
on a when-issued or forward commitment basis increases.

The value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their value, is taken into account when determining a Fund's net asset value
starting on the day the Fund agrees to purchase the securities. A Fund does not
earn interest on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When a Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets, and fluctuations in the value of
the underlying securities are not reflected in the Fund's net asset value as
long as the commitment remains in effect. The California Tax-Free Bond Fund
does not intend to invest more than 5% of its net assets in such securities
during the coming year.

Unrated Investments. The California Tax-Free Bond and California
Tax-Free Income Funds may purchase instruments that are not rated if, in the
opinion of Wells Fargo Bank, such obligations are of comparable quality to
other rated investments that are permitted to be purchased by such Fund. After
purchase, a security may cease to be rated or its rating may be reduced below
the minimum required for purchase by these Funds. Neither event will require a
sale of such security by the Funds. To the extent the ratings given by Moody's
or S&P may change as a result of changes in such organizations or their rating
systems, the Funds will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in the Fund's
Prospectus and in this SAI. The ratings of Moody's and S&P are more fully
described in the SAI Appendix.

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Letters of Credit. Certain of the debt obligations (including
municipal securities, certificates of participation, commercial paper and other
short-term obligations) which the California Tax-Free Bond and California Tax-
Free Income Funds may purchase may be backed by an unconditional and
irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies which, in the opinion of Wells Fargo Bank,
are of comparable quality to issuers of other permitted investments of the
Funds may be used for letter of credit-backed investments.

Pass-Through Obligations. Certain of the debt obligations which the
California Tax-Free Bond and California Tax-Free Income Funds may purchase may
be pass-through obligations that represent an ownership interest in a pool of
mortgages and the resultant cash flow from those mortgages. Payments by
homeowners on the loans in the pool flow through to certificate holders in
amounts sufficient to repay principal and to pay interest at the pass-through
rate. The stated maturities of pass-through obligations may be shortened by
unscheduled prepayments of principal on the underlying mortgages. Therefore,
it is not possible to predict accurately the average maturity of a particular
pass- through obligation. Variations in the maturities of pass-through
obligations will affect the yield of the Funds. Furthermore, as with any debt
obligation, fluctuations in interest rates will inversely affect the market
value of pass- through obligations. The Funds may invest in pass-through
obligations that are supported by the full faith and credit of the U.S.
Government (such as those issued by the Government National Mortgage
Association) or those that are guaranteed by an agency or instrumentality of
the U.S. Government (such as the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation) or bonds collateralized by any of the
foregoing.

Mortgage-Backed Securities. As stated in the Prospectuses, certain
Funds may invest in mortgage-backed securities, including those representing an
undivided ownership interest in a pool of mortgages, such as certificates of
the Government National Mortgage Association ("GNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate,
net of certain fees. The average life of a mortgage- backed security varies
with the underlying mortgage instruments, which generally have maximum
maturities of 40 years. The average life is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of prepayments, mortgage refinancings or foreclosure. Mortgage
prepayment rates are affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions. Such prepayments are passed through to the
registered holder with the regular monthly payments of principal and interest
and have the effect of reducing future payments.

There are risks inherent in the purchase of mortgage-backed
securities. For example, these securities are subject to a risk that default in
payment will occur on the underlying mortgages. In addition to default risk,
these securities are subject to the risk that prepayment on the underlying
mortgages will occur earlier or later or at a lessor or greater rate than
expected. To the extent that

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adviser's assumptions about prepayments are inaccurate, these securities may
expose the Funds, to significantly greater market risks than expected.

Asset-Backed Securities. To the extent described in the Prospectuses,
the Funds may purchase asset-backed securities, which are securities backed by
installment contracts, credit-card receivables or other assets. Asset-backed
securities represent interests in "pools" of assets in which payments of both
interest and principal on the securities are made monthly, thus in effect
"passing through" monthly payments made by the individual borrowers on the
assets that underlie the securities, net of any fees paid to the issuer or
guarantor of the securities. The average life of asset- backed securities
varies with the maturities of the underlying instruments and is likely to be
substantially less than the original maturity of the assets underlying the
securities as a result of prepayments. For this and other reasons, an
asset-backed security's stated maturity may be shortened, and the security's
total return may be difficult to predict precisely.

Municipal Obligations. Municipal obligations in which a Fund may
invest subject to the investment policies disclosed in its Prospectus include
debt obligations issued by governmental entities to obtain funds for various
public purposes, including the construction of a wide range of public
facilities, the refunding of outstanding obligations, the payment of general
operating expenses and the extension of loans to public institutions and
facilities.

The two principal classifications of municipal obligations that may be
held by a Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the issuer of the
facility being financed. A Fund's portfolio may also include "moral
obligation" securities, which are issued normally by special purpose public
authorities. If the issuer of moral obligation securities is unable to meet its
debt service obligations from current revenues, it may draw on a reserve fund,
the restoration of which is a moral commitment but not a legal obligation of
the state or municipality that created the issuer.

There are, of course, variations in the quality of municipal
obligations both within a particular classification and between
classifications, and the yields on municipal obligations depend upon a variety
of factors, including general money market conditions, the financial condition
of the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue.

Private activity bonds are issued to obtain funds to provide privately
operated housing facilities, pollution control facilities, convention or trade
show facilities, mass transit, airport, port or parking facilities and certain
local facilities for water supply, gas, electricity or sewage or solid waste
disposal. State and local governments are authorized in most states to issue
private activity bonds for such purposes in order to encourage corporations to
locate within their communities. Private activity bonds are in most cases
revenue securities and are not payable from the unrestricted revenues of the
issuer. Private activity bonds include industrial development bonds, which
are a specific type of revenue bond backed by the credit and security of a
private user. The credit

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quality of such bonds is usually directly related to the credit standing of the
corporate user of the facility involved. Private activity bonds issued by or
on behalf of public authorities to finance various privately operated
facilities are considered municipal obligations if the interest received
thereon is exempt from federal income tax but nevertheless subject to the
federal alternative minimum tax. Neither California Fund may invest 25% or
more of its assets in industrial development bonds. Assessment bonds, wherein
a specially created district or project area levies a tax (generally on its
taxable property) to pay for an improvement or project may be considered a
variant of either category. There are, of course, other variations in the
types of municipal bonds, both within a particular classification and between
classifications, depending on numerous factors. Some or all of these bonds may
be considered "private activity bonds" for federal income tax purposes.

The Tax-Free Funds may also purchase short-term General Obligation
Notes, Tax Anticipation Notes ("TANS"), Bond Anticipation Notes ("BANs"),
Revenue Anticipation Notes ("RANs"), Tax-Exempt Commercial Paper, Construction
Loan Notes and other forms of short-term tax-exempt loans. Such instruments are
issued with a short-term maturity in anticipation of the receipt of tax funds,
the proceeds of bond placements or other revenues, and are usually general
obligations of the issuer.

TANs. An uncertainty in a municipal issuer's capacity to raise taxes
as a result of such things as a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers mix
various tax proceeds into a general fund that is used to meet obligations other
than those of the outstanding TANs. Use of such a general fund to meet various
obligations could affect the likelihood of making payments on TANs.

BANs. The ability of a municipal issuer to meet its obligations on
its BANs is primarily dependent on the issuer's adequate access to the longer
term municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal of, and interest on, BANs.

As stated in the Prospectuses, the adviser, under the supervision of
the Board, makes determinations concerning the liquidity of a municipal lease
obligation based on all relevant factors. These factors may include, among
others: (1) the frequency of trades and quotes for the obligation; (2) the
number of dealers willing to purchase or sell the security and the number of
other potential buyers; (3) the willingness of dealers to undertake to make a
market in the security; and (4) the nature of the marketplace trades, including
the time needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer. In addition, the general credit quality of the
municipality and the essentiality to the municipality of the property covered
by the lease may be

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considered. In evaluating the credit quality of a municipal lease obligation,
the factors to be considered might include: (1) whether the lease can be
canceled; (2) what assurance there is that the assets represented by the lease
can be sold; (3) the strength of the lessee's general credit (e.g., its debt,
administrative, economic, and financial characteristics); (4) the likelihood
that the municipality will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to the operations
of the municipality (e.g., the potential for an "event of the
nonappropriation"); and (5) the legal recourse in the event of failure to
appropriate.

From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. For example, under federal tax legislation
enacted in 1986, interest on certain private activity bonds must be included in
an investor's alternative minimum taxable income, and corporate investors must
treat all tax-exempt interest as an item of tax preference. Moreover, with
respect to Arizona, California and Oregon obligations, the Funds cannot predict
what legislation, if any, may be proposed in the state legislature regarding
the state income tax status of interest on such obligations, or which
proposals, if any, might be enacted. Such proposals, while pending or if
enacted, might materially and adversely affect the availability of municipal
obligations generally, or Arizona, California and Oregon obligations,
specifically, for investment by a Fund and the liquidity and value of the
Fund's portfolio. In such an event, the Fund involved would re- evaluate its
investment objective and policies and consider possible changes in its
structure or possible dissolution.

Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds
nor the adviser will review the proceedings relating to the issuance of
municipal obligations or the basis for such opinions.

Certain of the municipal obligations held by a Fund may be insured as
to the timely payment of principal and interest. The insurance policies usually
are obtained by the issuer of the municipal obligation at the time of its
original issuance. In the event that the issuer defaults on interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance does not protect against
market fluctuations caused by changes in interest rates and other factors. The
Tax-Free Funds may, from time to time, invest more than 25% of their assets in
municipal obligations covered by insurance policies.

As stated in the Prospectus, the Intermediate Bond Fund may, when
deemed appropriate by the adviser in light of the Fund's investment objective,
invest in obligations issued by state and local governmental issuers. Dividends
paid by the Intermediate Bond Fund that are derived from interest of municipal
obligations would be taxable to the Fund's shareholders for federal income tax
purposes.

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outstanding securities, including those held in a Fund's portfolio, will
decline and (if purchased at par value) sell at a discount. If interests rates
fall, the values of outstanding securities will generally increase and (if
purchased at par value) sell at a premium. Changes in the value of municipal
securities held in the Fund's portfolio arising from these or other factors
will cause changes in the net asset value per share of the Fund.

Investments in Warrants. Although they have no present intention to
do so, the Balanced, Equity Value, California Tax-Free Bond and California
Tax-Free Income Funds may each invest up to 5% of its net assets at the time of
purchase in warrants (other than those that have been acquired in units or
attached to other securities), and not more than 2% of its net assets in
warrants which are not listed on the New York or American Stock Exchange.
Warrants represent rights to purchase securities at a specific price valid for
a specific period of time. The prices of warrants do not necessarily correlate
with the prices of the underlying securities. The Funds may only purchase
warrants on securities in which the Funds may invest directly.

Stand-By Commitments. The Arizona, National and Oregon Tax-Free Funds
may acquire stand-by commitments with respect to municipal obligations held by
such Funds. Under a stand-by commitment, a dealer or bank agrees to purchase
from a Fund, at the Fund's option, specified municipal obligations at a
specified price. The amount payable to a Fund upon its exercise of a stand-by
commitment is normally (i) the Fund's acquisition cost of the municipal
obligations (excluding any accrued interest that the Fund paid on their
acquisition), less any amortized market premium plus any amortized market or
original issue discount during the period the Fund owned the securities, plus
(ii) all interest accrued on the securities since the last interest payment
date during that period. Stand-by commitments may be sold, transferred or
assigned by a Fund only with the underlying instrument.

Each Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). Where a Fund pays any
consideration directly or indirectly for a stand-by commitment, its cost would
be reflected as unrealized depreciation for the period during which the
commitment was held by the Fund.

Each Fund intends to enter into stand-by commitments only with
dealers, banks and broker-dealers which, in the adviser's opinion, present
minimal credit risks. Each Fund's reliance upon the credit of these dealers,
banks and broker-dealers will be secured by the value of the underlying
municipal obligations that are subject to the commitment. In evaluating the
creditworthiness of the issuer of a stand-by commitment, the adviser will
review periodically the issuer's assets, liabilities, contingent claims and
other relevant financial information.

Each Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment will not affect the
valuation or assumed maturity of the underlying municipal obligations, which
will continue to be valued in accordance with the ordinary method of valuation

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employed by the Funds. Stand-by commitments acquired by a Fund will be valued
at zero in determining net asset value.

Foreign Securities. Because certain Funds may invest in securities
denominated in currencies other than the U.S. dollar and may temporarily hold
funds in bank deposits or other money market investments denominated in foreign
currencies, they may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. Changes in foreign currency exchange rates influence values within a
Fund from the perspective of U.S. investors. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned,
gains and losses realized on the sale of securities, and any net investment
income and gains to be distributed to shareholders by a Fund. The rate of
exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.

The Equity Value and Balanced Funds may enter into foreign currency
exchange contracts in order to protect against uncertainty in the level of
future foreign exchange rates. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are entered into the interbank market conducted between currency
traders (usually large commercial banks) and their customers. Forward foreign
currency exchange contracts may be bought or sold to protect a Fund against a
possible loss resulting from an adverse change in the relationship between
foreign currencies and the U.S. dollar, or between foreign currencies. Although
such contracts are intended to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such currency increase.

The Equity Value and Balanced Funds may also invest in ADRs. ADRs are
receipts issued by an American bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer. ADRs may be listed on a
national securities exchange or may trade in the over-the-counter market. ADR
prices are denominated in U.S. dollars, although the underlying security may be
denominated in a foreign currency. The underlying security may be subject to
foreign government taxes which could reduce the yield on such securities. Some
institutions issuing ADRs may not be sponsored by the issuer. A non-sponsored
depository may not provide the same shareholder information that a sponsored
depository may be required to provide under its contractual arrangement with
the issuer.

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in foreign securities and forward contracts may also be subject to withholding
and other taxes imposed by foreign governments. With respect to certain
foreign countries, there is also a possibility of expropriation or confiscatory
taxation, or diplomatic developments which could affect investments in those
countries.

Options Trading. Certain Funds may buy put and call options and write
covered call and secured put options. Options trading is a highly specialized
activity which entails greater than ordinary investment risk. Options may be
more volatile than the underlying instruments, and therefore, on a percentage
basis, an investment in options may be subject to greater fluctuation than an
investment in the underlying instruments themselves. The Intermediate Bond
Fund may purchase put and call options listed on a national securities exchange
and issued by the Options Clearing Corporation in an amount not exceeding 5% of
its net assets. Purchasing options is a specialized investment technique that
entails a substantial risk of a complete loss of the amounts paid as premiums
to the writer of the option.

The Funds may also write covered call and secured put options from
time to time as the adviser deems appropriate. By writing a covered call
option, a Fund forgoes the opportunity to profit from an increase in the market
of the underlying security above the exercise price except insofar as the
premium represents such a profit, and it is not able to sell the underlying
security until the option expires or is exercised or the Fund effects a closing
purchase transaction by purchasing an option of the same series. If a Fund
writes a secured put option, it assumes the risk of loss should the market
value of the underlying security decline below the exercise price of the
option. The aggregate value of the securities subject to options written by
the Intermediate Bond Fund will not exceed 25% of the value of its net assets.
The use of covered call options and securities put options will not be a
primary investment technique of the Intermediate Bond Fund, and they are
expected to be used infrequently. If the adviser is incorrect in its forecast
of market value or other factors when writing the foregoing options, the Fund
would be in a worse position than it would have been had the foregoing
investment techniques not been used.

A call option for a particular security gives the purchaser of the
option the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price at any time prior to the expiration of
the option, regardless of the market price of the security. The premium paid to
the writer is in consideration for undertaking the obligation under the option
contract. A put option for a particular security gives the purchaser the right
to sell the security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security.
Options on indices provide the holder with the right to make or receive a cash
settlement upon exercise of the option. With respect to options on indices, the
amount of the settlement equals the difference between the closing price of the
index at the time of exercise and the exercise price of the option expressed in
dollars, times a specified multiple.

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other liquid high grade debt obligations, in such amount are held in a
segregated account by the Fund's custodian) upon conversion or exchange of
other securities held by it. For a call option on an index, the option is
covered if a Fund maintains with its custodian a diversified portfolio of
securities comprising the index or liquid assets equal to the contract value. A
call option is also covered if a Fund holds a call on the same instrument or
index as the call written where the exercise price of the call held is (i)
equal to or less than the exercise price of the call written, or (ii) greater
than the exercise price of the call written provided the difference is
maintained by the Fund in liquid assets in a segregated account with its
custodian. The Funds will write put options only if they are "secured" by
liquid assets maintained in a segregated account by the Funds' custodian in an
amount not less than the exercise price of the option at all times during the
option period.

A Fund's obligation to sell an instrument subject to a covered call
option written by it, or to purchase an instrument subject to a secured put
option written by it, may be terminated prior to the expiration date of the
option by the Fund's execution of a closing purchase transaction, which is
effected by purchasing on an exchange an option of the same series (i.e., same
underlying instrument, exercise price and expiration date) as the option
previously written. Such a purchase does not result in the ownership of an
option. A closing purchase transaction is ordinarily effected to realize a
profit on an outstanding option, to prevent an underlying instrument from being
called, to permit the sale of the underlying instrument or to permit the
writing of a new option containing different terms on such underlying
instrument. The cost of such a liquidation purchase plus transaction costs may
be greater than the premium received upon the original option, in which event
the Fund will have incurred a loss in the transaction. There is no assurance
that a liquid secondary market will exist for any particular option. An option
writer, unable to effect a closing purchase transaction, will not be able to
sell the underlying instrument (in the case of a covered call option) or
liquidate the segregated account (in the case of a secured put option) until
the option expires or the optioned instrument or currency is delivered upon
exercise with the result that the writer in such circumstances will be subject
to the risk of market decline or appreciation in the instrument during such
period.

When a Fund purchases an option, the premium paid by it is recorded as
an asset of the Fund. When a Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by a Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of this asset or deferred credit will be
subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the current bid price. If an option
purchased by a Fund expires unexercised the Fund realizes a loss equal to the
premium paid. If a Fund enters into a closing sale transaction on an option
purchased by it, the Fund realizes a gain if the premium received by the Fund
on the closing transaction is more than the premium paid to purchase the
option, or a loss if it is less. If an option written by a Fund expires on the
stipulated expiration date or if a Fund enters into a closing purchase
transaction, it realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option is eliminated. If an option written by a
Fund is exercised, the proceeds of the sale are increased by the net premium
originally received and the Fund realizes a gain or loss.

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There are several risks associated with transactions in options. For
example, there are significant differences between the securities, currency and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In
addition, a liquid secondary market for particular options, whether traded
over-the-counter or on an exchange, may be absent for reasons that include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities or currencies; unusual or unforeseen circumstances may interrupt
normal operations on an exchange; the facilities of an exchange or the Options
Clearing Corporation may not be adequate at all times to handle current
trading value; or one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of
options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. A Fund is likely to
be unable to control losses by closing its position where a liquid secondary
market does not exist. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected events.

Stock Index Futures Contracts and Options on Stock Index Futures
Contracts The Equity Value and Balanced Funds may participate in stock index
futures contracts and options on stock index futures contracts. A futures
transaction involves a firm agreement to buy or sell a commodity or financial
instrument at a particular price on a specified future date, while an option
transaction generally involves a right, which may or may not be exercised, to
buy or sell a commodity of financial instrument at a particular price on a
specified future date. Futures contracts and options are standardized and
exchange-traded, where the exchange serves as the ultimate counterparty for all
contracts. Consequently, the only credit risk on futures contracts is the
creditworthiness of the exchange. Futures contracts, however, are subject to
market risk (i.e., exposure to adverse price changes).

A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount multiplied by the difference between the value of a specific stock index
at the close of the last trading day of the contract and the price at which the
agreement is made. As the aggregate market value of the stocks in the index
changes, the value of the index also changes. In the event that the index level
rises above the level at which the stock index futures contract was sold, the
seller of the stock index futures contract realizes a loss determined by the
difference between the two index levels at the time of expiration of the stock
index futures contract, and the purchaser realizes a gain in that amount. In
the event the index level falls below the level at which the stock index
futures contract was sold, the seller recognizes a gain determined by the
difference between the two index levels at the expiration of the stock index
futures contract, and the purchaser realizes a loss. Stock index futures
contracts expire on a fixed date, currently one to seven months from the date
of the contract, and are settled upon expiration of the contract.

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Stock index futures contracts may be purchased to protect a Fund
against an increase in the prices of stocks that the Fund intends to purchase.
If the Fund is unable to invest its cash (or cash equivalents) in stock in an
orderly fashion, the Fund may purchase a stock index futures contract to offset
any increase in the price of the stock. However, it is possible that the market
may decline instead, resulting in a loss on the stock index futures contract.
If the Fund then concludes not to invest in stock at that time, or if the price
of the securities to be purchased remains constant or increases, the Fund
realizes a loss on the stock index futures contract that is not offset by a
reduction in the price of securities purchased. The Funds also may buy or sell
stock index futures contracts to close out existing futures positions.

The Equity Value and Balanced Funds may also purchase put options on
stock index futures contracts. Sales of such options may also be made to close
out an open option position. The Funds may, for example, purchase a put option
on a particular stock index futures contract or stock index to protect against
a decline in the value of the common stocks it holds. If the stocks in the
index decline in value, the put should become more valuable and the Funds could
sell it to offset losses in the value of the common stocks. In this way, put
options may be used to achieve the same goals the Funds seek in selling futures
contracts. A put option on a stock index future gives the purchaser the right,
in return for a premium paid, to assume a short (i.e., the right to sell stock
index futures) position in a stock index futures contract at a specified
exercise price ("strike price") at any time during the period of the option. If
the option is exercised by the holder before the last trading date during the
option period, the holder receives the futures position, as well as any balance
in the futures margin account. If an option is exercised on the last trading
day prior to the expiration date of the option, the settlement is made entirely
in cash in an amount equal to the difference between the strike price and the
closing level of the relevant index on the expiration date.

Wells Fargo Bank expects that an increase or decrease in the index in
relation to the strike price level would normally correlate to an increase or
decrease (but not necessarily to the same extent) in the value of a Fund's
common stock portfolio against which the option was written. Thus, any loss in
the option transaction may be offset by an increase in the value of the common
stock portfolio to the extent changes in the index correlate to changes in the
value of that portfolio. The Funds may liquidate the put options they have
purchased by effecting a closing sale transaction rather than exercising the
option. This is accomplished by selling an option of the same series as the
option previously purchased. There is no guarantee that the Funds will be able
to effect the closing sale transaction. The Funds realize a gain from a closing
sale transaction if the price at which the transaction is effected exceeds the
premium paid to purchase the option and, if less, the Funds realize a loss.

Borrowing and Reverse Repurchase Agreements. Each Fund intends to
limit its borrowings (including reverse repurchase agreements) during the
current fiscal year to not more than 10% of its net assets. At the time a Fund
enters into a reverse repurchase agreement (an agreement under which the Fund
sells portfolio securities and agrees to repurchase them at an agreed-upon date
and price), it will place in a segregated custodial account liquid assets such
as U.S. Government securities or other liquid high-grade debt securities having
a value equal to or greater than the repurchase price (including accrued
interest) and will subsequently monitor the account to ensure that such value
is maintained. Reverse repurchase agreements involve the risk that the market
value

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of the securities sold by a Fund may decline below the price at which the Fund
is obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings under the 1940 Act.

Nationally Recognized Statistical Ratings Organizations. The ratings
of Moody's Investors Service, Inc., Standard & Poor's Ratings Group, Division
of McGraw Hill, Duff & Phelps Credit Rating Co., Fitch Investors Service, Inc.
Thomson Bank Watch and IBCA Inc. represent their opinions as to the quality of
debt securities. It should be emphasized, however, that ratings are general and
not absolute standards of quality, and debt securities with the same maturity,
interest rate and rating may have different yields while debt securities of the
same maturity and interest rate with different ratings may have the same yield.
Subsequent to purchase by a Fund, an issue of debt securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by a Fund. The adviser will consider such an event in determining
whether the Fund involved should continue to hold the obligation.

The payment of principal and interest on debt securities purchased by
the Funds depends upon the ability of the issuers to meet their obligations. An
issuer's obligations under its debt securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by federal or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or, in the case of governmental entities, upon the ability
of such entities to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest and principal of its debt securities
may be materially adversely affected by litigation or other conditions.
Further, it should also be, noted with respect to all municipal obligations
issued after August 15, 1986 (August 31, 1986 in the case of certain bonds),
the issuer must comply with certain rules formerly applicable only to
"industrial development bonds" which, if the issuer fails to observe them,
could cause interest on the municipal obligations to become taxable retroactive
to the date of issue.

Rule 144A. It is possible that unregistered securities, purchased by
the Prime Money Market Fund in reliance upon Rule 144A under the Securities Act
of 1933, could have the effect of increasing the level of the Fund's
illiquidity to the extent that qualified institutional buyers become, for a
period, uninterested in purchasing these securities.

SPECIAL CONSIDERATIONS AFFECTING ARIZONA MUNICIPAL OBLIGATIONS

The concentration of the Arizona Tax-Free Fund in securities issued by
governmental units of only one state exposes the Fund to risks greater than
those of a more diversified portfolio holding securities issued by governmental
units of different states and different regions of the country.

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renewal at the option of the State. Local governmental units in the State are
also authorized to incur indebtedness. The major source of financing for such
local government indebtedness is an ad valorem property tax. In addition, in
order to finance public projects, local governments in the State can issue
revenue bonds payable from the revenues of a utility or enterprise or from the
proceeds of an excise tax, or assessment bonds payable from special
assessments. Arizona local governments have also financed public projects
through leases which are subject to annual appropriation at the option of the
local government.

There is a statutory restriction on the amount of annual increases in
taxes that can be levied by the various taxing jurisdictions in the State
without voter approval. This restriction does not apply to taxes levied to pay
general obligation debt.

There are periodic attempts in the form of voter initiatives and
legislative proposals to further limit the amount of annual increases in taxes
that can be levied by the various taxing jurisdictions without voter approval,
or to restructure the State's revenue mix among sales, income, property and
other taxes. It is possible that if any such proposals were enacted, there
would be an adverse impact on State or local government financing. It is not
possible to predict whether any such proposals will be enacted in the future or
what would be their possible impact on state or local government financing.

Arizona is required by law to maintain a balanced budget. To achieve
this objective, the State has, at various times in the past, utilized a
combination of spending reductions or reductions in the rate of growth in
spending, and tax increases. In recent years, the State's fiscal situation has
improved even while tax reduction measures have been enacted each year since
1992. In 1992, Arizona voters passed a measure that requires a two-thirds vote
of the legislature to increase state revenue. Accordingly, it will be more
difficult to reverse tax reductions, which may adversely affect state fund
balances and fiscal conditions over time.

Arizona state government general fund revenue growth in fiscal year
1996 is forecast to increase just 4.1%, although growth would be projected at
10.9% but for legislative changes, principally an income tax reduction measure
enacted in 1995. The 6.8% adjusted projected increase in sales tax revenue,
adjusted for reductions resulting from legislative changes, reflects continued
strong economic growth in the state. With revenue growth outpacing increased
expenditures, the state general fund is projected to end fiscal year 1996 with
a total general fund balance of approximately $579 million. The amount of this
balance is approximately 12.5% of total general fund expenditures for fiscal
year 1996. Included in the total balance is a general fund ending balance of
approximately $347 million, and a budget stabilization ("rainy day") fund
balance of approximately $232 million.

The fiscal year 1997 budget adopted by the legislature assumes that
the total general fund balance carried forward from fiscal year 1996 will be
drawn down by approximately $230 million during the course of fiscal year 1997.
Based on this assumption, the total general fund balance at the end of fiscal
year 1997 should be lower than for fiscal year 1996.

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Additionally, the 1995 legislature enacted a $200 million income tax
reduction package, and the 1996 legislature enacted a $200 million property tax
reduction package. There may be additional legislative activity during 1997 in
the area of tax reform and school finance, and the 1998 general election ballot
may include one or more questions related to these issues and the State's tax
structure generally. The outcomes of any legislative actions or election
issues of this nature may adversely affect State fund balances and fiscal
conditions.

Arizona has a diversified economic base that is not dependent on any
single industry. Principal economic sectors include services, manufacturing,
mining, tourism, and the military. Agriculture, which was at one time a major
sector, now plays a much smaller role in the State's economy. For several
decades, the population of the State has grown at a substantially higher rate
than the population of the United States. While the State's economy flourished
during the early 80's, a substantial amount of overbuilding occurred, adversely
affecting Arizona-based financial institutions, many of which were placed under
the control of the Resolution Trust Corporation. Spillover effects produced
further weakening in the State's economy. The Arizona economy has begun to grow
again, albeit at a slower pace than experienced before the real estate
collapse. The North American Free Trade Agreement is generally viewed as
beneficial to the State. However, current and proposed reductions in federal
military expenditures may adversely affect the Arizona economy.

SPECIAL CONSIDERATIONS AFFECTING CALIFORNIA MUNICIPAL OBLIGATIONS

The California Economy and General Information. From mid-1990 to late
1993, the State suffered a recession with the worst economic, fiscal and budget
conditions since the 1930s. Construction, manufacturing (particularly related
to defense), exports and financial services, among others, were all severely
affected. Job losses had been the worst of any post-war recession.
Unemployment reached 10.1% in January 1994, but fell sharply to 7.7% in October
and November 1994, reflecting the state's recovery from the recession.

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expenditures exceeded revenues for four of the five fiscal years ending with
1991-92. Moreover, California accumulated and sustained a budget deficit in
its Special Fund for Economic Uncertainties ("SFEU") approaching $2.8 billion
at its peak at June 30, 1993.

The accumulated budget deficits during the early 1990's, together with
expenditures for school funding which are not reflected in the state's budget,
and reduction of available internal borrowable funds, combined to significantly
deplete the state's cash resources to pay its ongoing expenses. In order to
meet its cash needs, the state has had to rely for several years on a series of
external borrowings, including borrowings past the end of a fiscal year. Such
borrowings are expected to continue in future fiscal years. To meet its cash
flow needs in the 1995-96 fiscal year, California issued $2 billion of revenue
anticipation warrants which matured on June 28, 1996. Because of the state's
deteriorating budget and cash situation, the rating agencies reduced the
state's credit ratings between October 1991 and July 1994. Moody's Investors
Service lowered its rating from "Aa" to "A1," Standard & Poor's Ratings Group
lowered its rating from "AAA" to "A" and termed its outlook as "stable," and
Fitch Investors Service lowered its rating from "AA" to "A."
However, since the start of 1994, California's economy has been
recovering steadily. Employment has grown in excess of 500,000 during 1994 and
1995, and is expected to continue to grow in 1996. Because of the improving
economy and the California's fiscal austerity, the state has had operating
surpluses for its past four consecutive fiscal years through 1996-97 and has
forecast a balanced 1996-97 fiscal year budget. In addition, the SFEU was
projected to have a small negative balance of approximately $70 million as of
June 30, 1996, all but eliminating the accumulated budget deficit of the early
1990's, and a modest reserve of $305 million, as of June 30, 1997. For these
and other reasons, Standard & Poors upgraded its rating of California municipal
obligations back to "A+" on July 30, 1996.

Local Governments. On December 6, 1994, Orange County, California
became the largest municipality in the United States to file for protection
under the Federal Bankruptcy laws. The filing stemmed from approximately $1.7
billion in losses suffered by the county's investment pool because of
investments in high risk "derivative" securities. In September 1995,
California's legislature approved legislation permitting the county to use for
bankruptcy recovery $820 million over 20 years in sales taxes previously
earmarked for highways, transit, and development. In June 1996, the county
completed an $880 million bond offering secured by real property owned by the
county. In June 1996, the county emerged from bankruptcy.

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obligations with respect to either Orange County or Los Angeles County, the
state may be required to intervene and provide funding if the counties cannot
maintain certain programs because of insufficient resources.

The SFEU is funded with General Fund revenues and was established to
protect California from unforeseen revenue reductions and/or unanticipated
expenditure increases. Amounts in the SFEU may be transferred by the state's
Controller to meet cash needs of the General Fund. The Controller is required
to return moneys so transferred without payment of interest as soon as there
are sufficient moneys in the General Fund. Any appropriation made from the
SFEU is deemed an appropriation from the General Fund, for budgeting and
accounting purposes. For year-end reporting purposes, the Controller is
required to add the balance in the SFEU to the balance in the General Fund so
as to show the total moneys then available for General Fund purposes.

Inter-fund borrowing has been used for several years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June 30,
1996, the General Fund had outstanding loans from the SFEU and other Special
Funds of approximately $1.5 billion.

Changes in California Constitutional and Other Laws. In 1978,
California voters approved an amendment to the California Constitution known as
"Proposition 13," which added Article XIIIA to the California Constitution.
Article XIIIA limits ad valorem taxes on real property and restricts the
ability of taxing authorities to increase real property taxes. However,
legislation passed subsequent to Proposition 13 provided for the redistribution
of California's General Fund surplus to local agencies, the reallocation of
revenues to local agencies and the assumption of certain local obligations by
the state so as to assist California municipal issuers to raise revenue to pay
their bond obligations. It is unknown whether additional revenue
redistribution legislation will be enacted in the future and whether, if
enacted, such legislation will provide sufficient revenue for such California
issuers to pay their obligations. California is also subject to another
Constitutional Amendment, Article XIIIB, which may have an adverse impact on
California state and municipal issuers. Article XIIIB restricts the state from
spending certain appropriations in excess of an appropriation's limit imposed
for each state and local government entity. If revenues exceed such
appropriation's limit, such revenues must be returned either as revisions in
the tax rates or fee schedules.

In 1988, California voters approved "Proposition 98," which amended
Article XIIIB and Article XVI of the state's Constitution. Proposition 98 (as
modified by "Proposition 111," which

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was enacted in 1990), changed state funding of public education below the
university level and the operation of the state's appropriations limit,
primarily by guaranteeing K-14 schools a minimum share of General Fund
revenues. In 1986, California voters approved "Proposition 62," which provided
in part that any tax for general governmental purposes imposed by a local
government be approved by a two-thirds vote of the governmental entity's
legislative body and by a majority of its electorate and that any special tax
imposed by a local government be approved by a two-thirds vote of the
electorate. In September 1995, the California Supreme Court upheld the
constitutionality of Proposition 62, creating uncertainty as to the legality of
certain local taxes enacted by nonchartered cities in California without voter
approval.

Other Information. Certain debt obligations held by the California
Tax-Free Funds may be obligations payable solely from lease payments on real or
personal property leased to the state, cities, counties or their various public
entities. California law provides that a lessor may not be required to make
payments during any period that it is denied use and occupancy of the property
in proportion to such loss. Moreover, the lessor only agrees to appropriate
funding for lease payments in its annual budget for each fiscal year. In case
of a default under the lease, the only remedy available against the lessor is
that of reletting the property; no acceleration of lease payments is permitted.
Each of these factors presents a risk that the lease financing obligations held
by a California Tax-Free Fund would not be paid in a timely manner.

Certain debt obligations held by the California Tax-Free Funds may be
obligations payable solely from the revenues of health care institutions. The
method of reimbursement for indigent care, California's selective contracting
with health care providers for such care and selective contracting by health
insurers for care of its beneficiaries now in effect under California and
federal law may adversely affect these revenues and, consequently, payment on
those debt obligations.

There can be no assurance that general economic difficulties or the
financial circumstances of California or its towns and cities will not
adversely affect the market value of California municipal securities or the
ability of obligors to continue to make payments on such securities.

* * *

The taxable securities market is a broader and more liquid market with
a greater number of investors, issuers and market makers than the market for
municipal securities. The more limited marketability of municipal securities
may make it difficult in certain circumstances to dispose of large investments
advantageously.

SPECIAL CONSIDERATIONS AFFECTING OREGON MUNICIPAL OBLIGATIONS

The concentration of the Oregon Tax-Free Fund in Oregon obligations
raises additional considerations for investors in that portfolio, as discussed
below.

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State Bonds and Revenues

As of September 1, 1996, $3.64 billion in general obligation bonds
issued by the State of Oregon and its agencies and instrumentalities were
outstanding, including $125.1 million in general obligation bonds supported by
the budget for the State's general fund and $3.52 billion of self-supporting
general obligation bonds. The State's self- supporting general obligation bonds
include $2.90 billion of State veteran's bonds, which, in the event of poor
economic conditions resulting in an increased number of mortgage defaults,
could cease to be self-supporting. All of the existing and outstanding general
obligation bonds of the State have been issued under specific State
constitutional provisions that authorize the issuance of such bonds and provide
authority for ad valorem taxation to pay the principal of and interest on such
bonds. With the exception of the veteran's bonds, for which no more than two
mills on each dollar valuation may be levied to pay principal and interest, the
authority of the State to tax property for the payment of its general
obligation bonds is unlimited. Since at least 1950, the State has not imposed
ad valorem tax for the payment of any of its obligations because other
revenues, including those generated by the self-supporting bonds, have been
sufficient.

In addition to general obligation bonds, various State statutes
authorize the issuance of State revenue bonds and certificates of
participation. These limited obligations of the State or its agencies or
instrumentalities may be payable from a specific project or source, including
lease rentals. The State is not authorized to impose ad valorem taxes on
property for the payment of principal and interest on these bonds, so they are
more sensitive to changes in the economy. There can be no assurance that future
economic problems will not adversely affect the market value of Oregon
obligations held by the Fund or the ability of the respective obligors (both
private and governmental) to make required payments on such obligations.

Oregon does not have a sales tax. As a result, State tax revenues are
particularly sensitive to economic recessions. The principal sources of State
tax revenues are personal income and corporate income taxes. In the
legislatively adopted budget for the 1995-97 biennium, approximately 96.6% of
the State's revenues for the 1995-97 biennium were projected to come from
combined income taxes, insurance taxes, gift and inheritance taxes, and
cigarette and tobacco taxes. Since 1983 State revenues have improved
substantially, and in recent years the State has granted tax refunds because of
budget surpluses, as required by statute. The State's September 1, 1996
economic and revenue forecast predicts that State General Fund revenues for the
1995-97 biennium will exceed the legislatively approved budget forecast by
approximately $331.6 million (or 4.8%).

The Economy

Oregon's economy is projected to maintain a substantial portion of its
momentum through the end of 1997. Oregon remains one of the fastest growing
states in the country. High technology manufacturing and the service sector
are the primary engines driving the State economy. Despite the positive
overall tone at year end, there were definite signs of slowing in the
construction and the national/international semiconductor industry.

35
<PAGE> 310
The Oregon economy appears to have ample momentum to continue growing
through 1997, though the pace is likely to be slower than the previous two-year
period. Expansion of the State's semiconductor industry and its suppliers will
likely remain the key engine driving growth in the State. Rising wages and a
continuing flow of new residents are expected to generate jobs in the State's
service and trade sectors. The primary factors likely to slow growth over the
next two years are dwindling supply of skilled labor and flattening of the
construction boom.

Oregon's income, employment and population are expected to increase
faster than the country as a whole over the 1995 to 2003 period as they have
since 1987. However, job growth is expected to slow in 1996 and 1997. The
State's population is projected to grow by 13.5 percent between 1995 and 2003,
a gain of 422,000 people.

Oregon has successfully restructured from an economy highly dependent
on the timber industry to one in which high technology manufacturing and
services also play a prominent role. The fundamentals appear to be in place
for the State to continue growing faster than the overall U.S. economy through
2001. Despite the generally favorable long-term outlook, rising housing and
labor costs are expected to begin pushing the State's growth rate back toward
the national average. Moreover, the State's growing dependence on the
semiconductor industry is likely to lead to some unstable conditions as the
industry expands and contracts in response to national and international
pressures.

Recent Environmental Developments

In 1991 and 1992, in response to concerns over diminishing salmon
runs, three populations of Snake River salmon were placed on the Endangered
Species list. More recently, the National Marine Fisheries Service and the U.S.
Fish and Wildlife Service have commenced status reviews of hundreds of
additional salmon and trout populations in the Columbia Basin and throughout
Western Oregon. The Snake River salmon listings have already had substantial
economic impacts, primarily through increased electricity rates and related
impacts on rate-sensitive industries such as the aluminum industry. Efforts to
protect salmon and steelhead populations may eventually affect a wide variety
of industrial, recreational and land use activities, with corresponding impacts
on long-term economic growth; however, the magnitude and extent of any future
environmental action is impossible to predict at this time. The State's
economic forecasts do not address the potential impact of endangered species
problems on Oregon's economy.

Recent Developments Affecting Government Revenues.

Ballot Measure 5. Article XI, section 11b of the Oregon Constitution,
adopted by Oregon's voters in November 1990 ("Ballot Measure 5"), imposes an
aggregate limit on the rate of property taxes, including ad valorem taxes, that
may be levied against any real or personal property. The limit is subject to
certain exceptions and is being phased in over a five-year period. Beginning
with the tax year that starts on July 1, 1996, the final year of the phase-in
period, not more than $15 per $1,000 of real market value can be levied against
any piece of property. Of this amount, $5 may be used for public education, and
the remaining $10 may be used for general governmental purposes.

36
<PAGE> 311
The limitations of Ballot Measure 5 do not apply to taxes imposed to
pay the principal of and interest on bonded indebtedness authorized by a
specific provision of the State Constitution. Therefore, the ability of the
State to levy taxes to service its constitutionally authorized general
obligation bonds is not subject to the limit. In addition, because the State
currently receives its revenues from sources other than property taxes, Ballot
Measure 5 has not directly affected State revenues.

The tax limitations of Ballot Measure 5 do not apply to user fees,
licenses, excise or income taxes and incurred charges for local improvements.
Since 1990 local governments have begun to rely more heavily on such fees and
taxes to finance certain services and improvements.

Ballot Measure 5 has controlled the growth of local property tax
revenues since its adoption. Although the growth in local property valuations
during the period 1991 to 1995 has somewhat mitigated the potential impacts of
Ballot Measure 5, revenues of local government units in Oregon have generally
been adversely affected by the adoption of Ballot Measure 5. This appears to
be particularly true with respect to school districts operating revenues.

Ballot Measure 5 required the State to replace a substantial portion
of the lost revenues of local school districts through the end of fiscal year
1995-96. Although this obligation has now expired, the extent of revenue loss
perceived to have been incurred by local school districts indicates that the
State may continue to provide significant revenue relief to these governmental
units. In addition, the provisions of the initiative known as Ballot Measure
47, as defined and discussed below, is expected to also result in the State
making further financial assistance available to certain units of local
government as a result of further restrictions and limitations placed upon the
ability of units of local government to generate revenues through Oregon's
system of ad valorem property taxation.

Ballot Measure 47. At the November 5, 1996 general election, the
voters of the State of Oregon approved a constitutional amendment creating new
sections 11g, 11h, 11i and 11j within Article XI of the Oregon Constitution.
The initiative proposing these amendments was commonly referred to as "Ballot
Measure 47" or "Cut and Cap."

Ballot Measure 47 will generally reduce the revenues of local
governments available from ad valorem property taxes starting on July 1, 1997.
For fiscal year 1997-98, the amount of tax which may be collected from each
property subject to taxation is limited to the lesser of the amount due for
fiscal year 1995-96 reduced by ten percent (10%) or the amount due for fiscal
year 1994-95. Future increases in annual ad valorem property taxes which can
be collected from each property subject to taxation are limited to three
percent (3%) unless certain exceptions apply. Ballot Measure 47 also contains
provisions limiting local governments' ability to shift activities previously
funded in whole or in part from ad valorem property tax revenues to a user fee
or other form of non-ad valorem property tax basis. One of the exceptions is
for taxes levied to pay bonded indebtedness which has been approved by the
voters in accordance with certain specific and new guidelines contained in
Ballot Measure 47.

37
<PAGE> 312
By its terms, Ballot Measure 47 does not affect the revenues of
governmental units which do not rely upon the collection of ad valorem property
taxes, such as the State, or governmental operations which are supported solely
from user fees and charges, such as many municipal utilities. However, its
revenue reducing provisions are expected to create new financial burdens on the
State revenue resources as well as on the revenue resources of units of
government which levy and collect ad valorem property taxes. Such burdens are
expected to arise, at least in part, from the potential need for the State to
assist units of local government adversely affected by the implementation of
Ballot Measure 47. Although the actual impact of Ballot Measure 47 on a
particular unit of local government cannot presently be determined because the
methodology for applying its provisions to individual properties has not yet
been established, it is anticipated that the general fund operations of many
local government units will be materially adversely affected by its revenue
reduction and revenue growth limiting provisions.

The Initiative Process. The Oregon Constitution reserves to the people
of the State initiative and referendum power pursuant to which measures
designed to amend the State Constitution or enact legislation, can be placed on
the statewide general election ballot for consideration by the voters.
"Referendum" generally means measures referred to the electors by a legislative
body such as the State Legislative Assembly or the governing body of a city,
county or other political subdivision, while "initiative" generally means a
measure placed before the voters as a result of a petition circulated by one or
more private citizens.

Any person may file a proposed initiative with the Oregon Secretary of
State's office. The Oregon Attorney General is required by law to draft a
proposed ballot title for the initiative, and interested parties may submit
comments on the legal sufficiency of the proposed ballot title and on whether
the proposed initiative complies with a "one subject only" rule for initiative
measures. After considering any public comments, the Attorney General must
either certify or revise the draft ballot title. In general, any elector who
timely submitted written comments on the draft ballot title may petition the
Oregon Supreme Court seeking a revision of the certified ballot title.

To have an initiative placed on a general election ballot, the
proponents of the proposed initiative must submit to the Secretary of State
initiative petitions signed by a number of qualified voters equal to a
specified percentage of the total number of votes cast for all candidates for
governor in the most recent gubernatorial election. The initiative petition
must be filed with the Secretary of State not less than four months prior to
the general election at which the proposed measure is to be voted. State law
permits persons circulating initiative petition to pay money to persons
obtaining signatures for the petition.

Over the past decade Oregon has witnessed increasing activity in the
number of initiative petitions that have qualified for the statewide general
election. As of December 1, 1996, no initiatives had qualified to be placed on
the November 1998 general election ballot. In recent years, a number of
initiatives involving the fiscal operations of the State were proposed and
placed on the ballot. Several of these initiatives have been approved by the
voters and have had or will have a significant impact on the fiscal operations
of the State and local governments. See "Recent Developments Affecting
Government Revenues - Ballot Measure 5 and Measure 47." Other

38
<PAGE> 313
initiatives, had they been approved by the voters, also may have had
significant impacts on the fiscal operations of the State.

It is difficult to predict with certainty either the likelihood of a
proposed initiative measure obtaining the required number of valid initiative
petition signatures or the likelihood of an initiative that has acquired the
necessary number of valid signatures being approved by the voters. There can be
no assurance that additional initiatives that will have a material adverse
impact on the financial condition of the State or units of local government or
the State's or units of local government's ability to collect the revenues
required to repay their general obligation bonds, revenue bonds or other
obligations will not be proposed, placed on the ballot, or be approved by the
voters.

Judicial challenges seeking interpretations and clarifications of the
scope and application of Ballot Measure 5 continue to be filed. It is
anticipated that the passage of Measure 47 will also require substantial
judicial interpretation of its meaning and application. If it is judicially
determined that certain statutes adopted by the Oregon legislature to implement
Ballot Measure 5 or statutes expected to be adopted relating to Measure 47 do
not adequately implement the restrictions contained in that measure, local
governments may have to seek new funding sources for certain items which have
been traditionally financed in part through the issuance of voter approved ad
valorem tax supported indebtedness.

The Oregon Bond Market. There is a relatively small active market for
municipal bonds of Oregon issuers other than the general obligations of the
State itself, and the market price of such other bonds may therefore be
volatile. If the Oregon Tax-Free Fund were forced to sell a large volume of
Oregon Obligations owned by it for any reason, such as to meet redemption
requests for a large number of its shares, there is a risk that the large sale
itself would adversely affect the value of the Oregon Tax-Free Fund's
portfolio.

MANAGEMENT

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Funds and
Management." The principal occupations during the past five years of the
Directors and principal executive Officer of the Company are listed below. The
address of each, unless otherwise indicated, is 111 Center Street, Little Rock,
Arkansas 72201. Directors deemed to be "interested persons" of the Company
for purposes of the 1940 Act are indicated by an asterisk.

*R. Greg Feltus, 45 Director, Senior Vice President
</TABLE>

39
<PAGE> 314
<TABLE>
<S> <C> <C>
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of Stephens
Sports Management
Inc.; and President of
Investor Brokerage
Insurance Inc.

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate
Professor of Finance
of the School of
Business and
Accounting at Wake Forest
University since 1983.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

*J. Tucker Morse, 52 Director Private Investor; Real Estate
10 Legrae Street Developer; Chairman
Charleston, SC 29401 of Renaissance
Properties Ltd.;
President of Morse
</TABLE>

40
<PAGE> 315
<TABLE>
<S> <C> <C>
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.

41
<PAGE> 316
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
--------------------------------- ----------------------------------
December 31, 1995 September 30, 1996
--------------------------------- ----------------------------------
Total Total
Aggregate Compensation Aggregate Compensation
Compensation from Registrant Compensation from Registrant
from and Fund from and Fund
Name and Position Registrant Complex Registrant Complex
----------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company and
by all the registrants in each fund complex they serve as indicated above and
also are reimbursed for all out-of-pocket expenses relating to attendance at
board meetings. The Company, Overland Express Funds, Inc., Stagecoach Trust,
Life & Annuity Trust and Master Investment Trust are considered to be members
of the same fund complex as such term is defined in Form N-1A under the 1940
Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and

42
<PAGE> 317
Managed Series Investment Trust together form a separate fund complex (the
"BGFA Fund Complex"). Each of the Directors and Officers of the Company serves
in the identical capacity as directors and officers or as trustees and/or
officers of each registered open-end management investment company in both the
Wells Fargo and BGFA Fund Complexes, except for Joseph N. Hankin, who only
serves the aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann
Hines who, after September 6, 1996, only serves the aforementioned members of
the BGFA Fund Complex. The Directors are compensated by other companies and
trusts within a fund complex for their services as directors/trustees to such
companies and trusts. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or any other member of each
fund complex.

As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.

INVESTMENT ADVISER. The Funds are advised by Wells Fargo Bank
pursuant to an advisory contract for each Fund under which Wells Fargo Bank has
agreed to furnish investment guidance and policy direction in connection with
the daily portfolio management of the Fund. The Company's Board of Directors
approved advisory contracts with Wells Fargo Bank on behalf of each Fund.
Pursuant to the advisory contracts, Wells Fargo Bank also has agreed to furnish
to the Board of Directors periodic reports on the investment strategy and
performance of each Fund.

Wells Fargo Bank has agreed to provide to the Funds, among other
things, money market and fixed-income research, analysis and statistical and
economic data and information concerning interest-rate and security market
trends, portfolio composition, credit conditions and, average maturities of
each Fund. As compensation for its advisory services, Well Fargo Bank is
entitled to receive a monthly fee at the annual rates indicated below, of the
average daily value of each Fund's net assets during the preceding month.

<TABLE>
<CAPTION>
Annual Rate
Fund Name (as percentage of net assets)
--------- -----------------------------
<S> <C> <C>
o Arizona Tax-Free 0.50%
o Balanced 0.60%
o California Tax-Free Bond 0.50%
o California Tax-Free Income 0.50%
o Equity Value 0.50%
o Government Money Market Mutual 0.25%
o Intermediate Bond 0.50%
o National Tax-Free 0.50%
o Oregon Tax-Free 0.50%
o Prime Money Market Mutual 0.25%
o Treasury Money Market Mutual 0.25%
</TABLE>

43
<PAGE> 318
The advisory contracts continue in effect for more than two years
provided the continuance is approved annually (i) by the holders of a majority
of a Fund's outstanding voting securities or (ii) by the Company's Board of
Directors and by a majority of the Directors of the Company who are not parties
to the advisory contracts or "interested persons" (as defined in the 1940 Act)
of any such party. The advisory contracts may be terminated on 60 days'
written notice by either party and will terminate automatically if assigned.

For the period ended September 30, 1996, and the years ended December 31,
1995, 1994 and 1993, the California Funds paid to Wells Fargo Bank the advisory
fees indicated below and Wells Fargo Bank waived the indicated amounts:

<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995 December 31, 1994 December 31, 1993
------------------ ----------------- ----------------- -----------------
Fees Fees Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived Paid Waived
---- ---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California Tax-Free $1,202,280 $-0- $1,542,893 -0- $368,134 $1,728,107 $2,157,487 -0-
Bond
California Tax-Free $ 281,991 $18,321 $ 236,632 $31,013 -0- $ 279,496 $ 38,402 $ 122,967
Income
</TABLE>

Prior to the Reorganization on September 6, 1996, Wells Fargo Investment
Management, Inc. ("WFIM") and its predecessor, First Interstate Capital
Management, Inc. ("FICM") served as adviser to the predecessor portfolios of
Pacifica. As of the date of the Reorganization, Wells Fargo Bank became the
adviser to the New Funds. For the fiscal year ended September 30, 1996 the
Funds paid the advisory fees indicated below and the indicated amounts were
waived. These amounts include advisory fees paid by the predecessor portfolios
to FICM/WFIM prior to September 6, 1996.

Investment Advisory Fees

<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1996
------------------------------------
Fund Fees Paid Fees Waived
----- --------- -----------
<S> <C> <C>
o Arizona Tax-Free $ 22,457 $ 98,300
o Balanced $ 750,323 $ 4,608
o Equity Value $1,378,145 $-0-
o Government Money Market Mutual $ 274,640 $-0-
o Intermediate Bond $ 227,965 $ 39,513
o National Tax-Free $- 0- $ 67,463
o Oregon Tax-Free $ 173,249 $ 57,377
o Prime Money Market Mutual $1,845,269 $1,553,968
o Treasury Money Market Mutual $2,442,922 $2,073,426
</TABLE>

44
<PAGE> 319
September 30, 1995, May 31, 1995 and May 31, 1994, the prior advisers for these
Funds were entitled to receive advisory fees from the Funds at the same annual
rates as those that were in effect for WFIM. For these periods, the prior
advisers were entitled to receive the following amounts in advisory fees:

Investment Advisory Fees

<TABLE>
<CAPTION>
Period Ended Period Ended Period Ended
Fund Sept. 30, 1995* May 31, 1995 May 31,1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $41,159 $124,904 $128,905
Intermediate Bond $94,698 $275,948 $318,000
National Tax-Free $24,173 $ 67,845 $ 57,059
Oregon Tax-Free $84,999 $256,430 $269,574
</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

For the periods ended September 30, 1995, May 31, 1995 and May 31,
1994, the prior advisers for the predecessors of the Arizona Tax-Free,
Intermediate Bond, National Tax-Free and Oregon Tax-Free Funds waived advisory
fees and reimbursed expenses in the following amounts:

Investment Advisory Fees Waived
and Expenses Reimbursed by Adviser

<TABLE>
<CAPTION>
Period Ended Period Ended Period Ended
Fund Sept. 30, 1995* May 31, 1995 May 31, 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $66,373 $166,803 $172,383
Intermediate Bond $ 0 $ 0 $ 0
National Tax-Free $68,667 $145,244 $141,590
Oregon Tax-Free $43,995 $84,770 $104,948
</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

Prior to March 18, 1994, the adviser for the Balanced, Equity Value
and Government Money Market Mutual Funds was San Diego Financial Capital
Management, Inc. ("San Diego Financial"), which was a wholly owned subsidiary
of San Diego Trust & Savings Bank ("San Diego Trust"), which in turn was a
wholly owned subsidiary of San Diego Financial Corporation ("SDFC"). On that
date, SDFC merged into First Interstate Bancorp and San Diego Trust merged into
First Interstate Bank of California ("FICAL"). As a result of these
transactions, San Diego Financial became an indirect wholly-owned subsidiary of
FICAL. On January 12, 1995, San Diego Financial merged into First Interstate
Investment Services, Inc., a direct wholly-owned subsidiary of FICAL, which has
since changed its name to First Interstate Capital Management, Inc.

45
<PAGE> 320
During the fiscal years ended September 30, 1995 and September 30,
1994, the adviser (and prior adviser, as the case may be) was entitled to
receive advisory fees from the Balanced, Equity Value and Government Money
Market Mutual Funds at the same annual rates as those currently in effect. For
such fiscal years, the adviser (and prior adviser, as the case may be) was
entitled to receive the following amounts in advisory fees:

Investment Advisory Fees

<TABLE>
<CAPTION>
Year Ended Year Ended
Fund Sept. 30, 1995 Sept. 30, 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Balanced $579,850 $683,626
Equity Value $992,870 $953,400
Government Money Market $383,269 $442,842
</TABLE>

During the fiscal years ended September 30, 1995 and September 30,
1994, the adviser (or prior adviser, as the case may be) waived advisory fees
and reimbursed expenses for the Balanced, Equity Value and Government Money
Market Mutual Funds in the following amounts:

Investment Advisory Fees Waived
and Expenses Reimbursed by Adviser

<TABLE>
<CAPTION>
Year Ended Year Ended
Fund Sept. 30, 1995 Sept. 30, 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Balanced $0 $0
Equity Value $0 $0
Government Money Market $0 $0
</TABLE>

During the fiscal year ended September 30, 1995, the six-month period
ended September 30, 1994 and the fiscal year ended March 31, 1994, the advisory
fees paid to the adviser by the predecessor portfolios of the Prime Money
Market Mutual Fund and the Treasury Money Market Mutual Fund were as follows:

Investment Advisory Fees Paid*

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 March 31, 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Money Market Mutual $ 693,315 $330,715 $737,811
Treasury Money Market Mutual $1,160,424 $454,029 $900,919
</TABLE>

*These amounts reflect voluntary fee waivers and expense reimbursements
by the adviser. Prior to October 1, 1994, all of these fees were, in turn,
paid by the adviser to its affiliates which served as sub-investment advisors
during the periods indicated.

46
<PAGE> 321
ADMINISTRATOR AND CO-ADMINISTRATOR . The Company has retained Wells
Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of each
Fund. The Administration Agreement between Wells Fargo and each Fund, and the
Co- Administration Agreement among Wells Fargo, Stephens and each Fund, state
that Wells Fargo and Stephens shall provide as administrative services, among
other things: (i) general supervision of the operation of each Fund, including
coordination of the services performed by the Fund's investment adviser,
transfer agent, custodian, shareholder servicing agent(s), independent public
accountants and legal counsel, regulatory compliance, including the compilation
of information for documents such as reports to, and filings with, the SEC and
state securities commissions; and preparation of proxy statements and
shareholder reports for the Fund; and (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports
distributed to the Company's officers and Board of Directors. Wells Fargo Bank
and Stephens also furnish office space and certain facilities required for
conducting the business of each Fund together with ordinary clerical and
bookkeeping services. Stephens pays the compensation of the Company's
Directors, officers and employees who are affiliated with Stephens. The
Administrator and Co-Administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of each Fund.

For the period ended September 30, 1996, and the fiscal years ended
December 31, 1995, 1994 and 1993, the California Funds paid the following
dollar amounts of administrative fees to Stephens who, as sole administrator to
the Funds for these periods, was entitled to receive a fee, payable monthly, at
the annual rate of 0.03% of each Fund's average daily net assets:

Administration Fees

<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Dec. 31, Dec. 31,
Fund 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
California Tax-Free Bond $73,687 $93,013 $126,570 $130,939
California Tax-Free Income $18,371 $16,793 $ 0 $ 9,912
</TABLE>

Prior to September 6, 1996, the administrator of the Pacifica
predecessor portfolios (Furman Selz LLC) provided management and administrative
services necessary for the operation of such Funds, pursuant to an
Administrative Services Contract. For these services, the former administrator
was entitled to receive a fee, payable monthly, at the annual rate of 0.15% of
the average daily net assets of the predecessors of all such Funds except the
Prime Money Market Mutual and Treasury Money Market Mutual Funds (which were
administered until April 22, and April 15, 1996, respectively, by the Dreyfus
Corporation), at the annual rate of 0.10% of each such Fund's average daily net
assets. The tables reflect the net amounts paid (after waivers) for
administrative services by the Funds to Stephens as sole administrator to the
Funds for the period begun September 6, 1996 and ended September 30, 1996,
during which Stephens was entitled to receive a fee, payable monthly, at the
annual rate of 0.05% of each Fund's average daily net assets. The table also
reflects the net administration fees paid to the respective former
administrators of the predecessor portfolios during the period begun October 1,
1995 and ended September 5, 1996.

47
<PAGE> 322
Administration Fees
<TABLE>
<CAPTION>
Year Ended
Fund September 30, 1996
----- ------------------
<S> <C>
o Arizona Tax-Free $ 24,636
o Balanced $ 130,709
o Equity Value $ 240,273
o Government Money Market Mutual $ 120,179
o Intermediate Bond $ 55,482
o National Tax-Free $ 14,138
o Oregon Tax-Free $ 49,627
o Prime Money Market Mutual $ 1,230,872
o Treasury Money Market Mutual $ 1,745,759
</TABLE>

Prior to October 1, 1995, ALPS Mutual Funds Service, Inc. ("ALPS")
served as the administrator for the Arizona Tax-Free, Intermediate Bond,
National Tax-Free and Oregon Tax-Free Funds. For its administration services,
ALPS was entitled to receive the following amounts for the fiscal periods ended
September 30, 1995, May 31, 1995 and May 31, 1994:

Administration Fees

<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
FUND Sept. 30, 1995* May 31, 1995 May 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $4,116 $12,490 $12,890
Intermediate Bond $9,470 $27,595 $31,800
National Tax-Free $2,417 $ 6,785 $ 5,706
Oregon Tax-Free $8,500 $25,643 $26,957
</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

For the fiscal periods ended September 30, 1995, May 31, 1995 and May
31, 1994, ALPS waived administration fees for the Arizona Tax-Free,
Intermediate Bond, National Tax-Free and Oregon Tax-Free Funds in the following
amounts:

Administration Fees Waived

<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
FUND Sept. 30, 1995* May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $0 $ 0 $ 0
Intermediate Bond $0 $ 0 $ 0
National Tax-Free $0 $2,018 $4,210
Oregon Tax-Free $0 $ 0 $ 0
</TABLE>

48
<PAGE> 323
* The Funds changed their fiscal year from May 31 to September 30.

During the fiscal years ended September 30, 1995 and September 30,
1994, Furman Selz was entitled to receive administration services fees from the
Balanced, Equity Value, and Government Money Market Mutual Funds in the
following amounts:

Administration Fees

<TABLE>
<CAPTION>
Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Balanced $193,283 $227,896
Equity Value $330,957 $317,992
Government Money Market Mutual $255,512 $295,228
</TABLE>

For the fiscal years ended September 30, 1995 and September 30, 1994,
Furman Selz waived administration fees for the Balanced, Equity Value, and
Government Money Market Mutual Funds in the following amounts:

Administration Fees Waived

<TABLE>
<CAPTION>
Year Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Balanced $19,328 $22,808
Equity Value $33,096 $31,972
Government Money Market Mutual $25,550 $29,523
</TABLE>

During the fiscal year ended September 30, 1995, the six-month period ended
September 30, 1994 and the fiscal year ended March 31, 1994, the administration
fees paid to the Dreyfus Corporation by the Prime Money Market Mutual Fund and
the Treasury Money Market Mutual Fund were as follows:
Administration Fees

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Mar. 31, 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Money Market Mutual $577,763 $275,596 $614,901
Treasury Money Market Mutual $921,886 $347,499 $690,137
</TABLE>

SPONSOR AND DISTRIBUTOR. As discussed in each Fund's Prospectus under
the heading "Management and Servicing Fees," Stephens serves as each Fund's
sponsor and distributor.

49
<PAGE> 324
SHAREHOLDER SERVICING AGENT. As discussed in each Fund's Prospectus
under the heading "Shareholder Servicing Agent," the Funds approved Servicing
Plans and have entered into related shareholder servicing agreements with
financial institutions, including Wells Fargo Bank. For providing these
services, a Servicing Agent is entitled to a fee from the applicable Fund, not
to exceed 0.25% (and with respect to the California Funds, not to exceed 30%),
on an annualized basis, of the average daily net assets of the class of shares
owned of record or beneficially by the customers of the Servicing Agent during
the period for which payment is being made. The Servicing Plans and related
shareholder servicing agreements were approved by the Company's Board of
Directors and provide that a Fund shall not be obligated to make any payments
under such Plans or related Agreements that exceed the maximum amounts payable
under Article III, Section 26 of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (NASD).

The dollar amounts of shareholder servicing fees paid by each
California Fund to Wells Fargo Bank or its affiliates for the fiscal year ended
December 31, 1995 and the period ended September 30, 1996 were as follows:

Shareholder Servicing Fees

<TABLE>
<CAPTION>
Fund Dec. 31, 1995 Sept. 30, 1996(1)
---- ------------- --------------
<S> <C> <C>
California Tax-Free Bond
Class A $59,642 $ 88,029
Class B $ 0 $ 11,130

California Tax-Free Income $ 0 $ 0
</TABLE>

- -----------
(1) After waivers and reimbursements.

For the period begun October 1, 1995 and ended September 5, 1996, and
under similar service agreements, payments were made to First Intestate Bancorp
for the following funds, except that for the same period, and under similar
service agreements with certain institutions, including affiliates of FICM,
payments were made to various institutions for the Prime Money Market Mutual
Fund and the Treasury Money Market Mutual Fund. For the period begun September
6, 1996 and ended September 30, 1996, shareholder servicing fees were paid to
Wells Fargo Bank or its affiliates. The indicated classes of each Fund paid
the following shareholder servicing fees for the year ended September 30, 1996:

<TABLE>
<CAPTION>
Shareholder Servicing Fees(1)
-----------------------------
Year Ended
Fund September 30, 1996
----- ------------------
<S> <C> <C>
Arizona Tax-Free Class A $ 429
Class B N/A

Balanced Class A $76,743
</TABLE>

50
<PAGE> 325

<TABLE>
<S> <C> <C>
Class B N/A

Equity Value Class A $ 36,350
Class B N/A

Government Money Market Mutual $155,369

Intermediate Bond Class A $ 379
Class B N/A

National Tax-Free Class A $-0-
Class B N/A

Oregon Tax-Free Class A $ 49,136
Class B N/A

Prime Money Market Mutual Class A $801,388

Treasury Money Market Mutual Class A $153,899
</TABLE>

___________
(1) After waivers and reimbursements.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo
Bank has been retained to act as custodian and transfer and dividend disbursing
agent for the Funds, pursuant to a Custody Agreement and an Agency Agreement
with the Company on behalf of the Funds. The custodian, among other things,
maintains a custody account or accounts in the name of a Fund, receives and
delivers all assets for the Fund upon purchase and upon sale or maturity,
collects and receives all income and other payments and distributions on
account of the assets of the Fund and pays all expenses of the Fund. For its
services as custodian, Wells Fargo Bank is entitled to receive fees as follows:
a net asset charge at the annual rate of 0.0167%, payable monthly, plus
specified transaction charges. Wells Fargo Bank also will provide portfolio
accounting services under the Custody Agreement as follows: a monthly base fee
of $2,000 plus a net asset fee at the annual rate of 0.070% of the first
$50,000,000 of a Fund's average daily net assets, 0.045% of the next
$50,000,000, and 0.020% of the average daily net assets in excess of
$100,000,000.

For its services as transfer and dividend disbursing agent for the
Class A and B shares of the Funds, Wells Fargo Bank is entitled to receive
monthly payments at the annual rate of 0.14% of the average daily net assets of
the Class A and B shares of the Non-Money Market Funds, and 0.10% of the average
daily net assets of the Class A shares of the Money Market Funds.

Under the prior transfer agency agreement for the California Funds,
Wells Fargo Bank was entitled to receive a per account fee plus transaction
fees and out-of-pocket related costs with a minimum of $3,000 per month per
Fund, unless net assets of the Fund were under $20 million. For as long as a
California Fund's assets remained under $20 million, the Fund was not charged
any transfer agency fees.

For the year ended December 31, 1995 and the period ended September
30, 1996, the California Tax-Free Bond and California Tax-Free Income Funds did
not pay any custody or transfer and dividend disbursing agency fees to Wells
Fargo Bank.

Under the prior transfer agency agreement for the New Funds, Wells
Fargo Bank was entitled to receive monthly payments at the annual rate of 0.07%
of the average daily net assets of each Class of the Non-Money Market New Funds
and 0.07% of the average daily net assets of the Class A shares of the Money
Market Funds, as well as reimbursement for all reasonable out-of-pocket
expenses. Furman Selz acted as transfer agent for the predecessor portfolios.
Pacifica compensated Furman Selz for providing personnel and facilities to
perform transfer agency related services for Pacifica at a rate intended to
represent the cost of providing such services.

51
<PAGE> 326
FICAL, located at 707 Wilshire Blvd., Los Angeles, California 90017,
acted as custodian of the predecessor portfolios of Pacifica, but played no
role in making decisions as to the purchase or sale of portfolio securities for
the predecessor portfolios. FICAL was entitled to receive a fee from Pacifica,
computed daily and payable monthly, at the annual rate of 0.021% of the first
$5 billion in aggregate average daily net assets of the Funds; 0.0175% of the
next $5 billion in aggregate average daily net assets of the Funds; and 0.015%
of the aggregate average daily net assets of the Funds in excess of $10
billion.

For the period begun October 1, 1995 and ended September 5, 1996 the
custody fees for FICAL, and for the period begun September 6, 1996 and ended
September 30, 1996 the custody fees for Wells Fargo Bank, were paid as follows:

Custody Fees(1)
<TABLE>
<CAPTION>
Fiscal Year Ended
Fund September 30, 1996
----- ------------------
<S> <C> <C>
o Arizona Tax-Free -0-
o Balanced -0-
o Equity Value $ 40,035
o Government Money Market Mutual $ 18,315
o Intermediate Bond -0-
o National Tax-Free -0-
o Oregon Tax-Free -0-
o Prime Money Market Mutual $ 73,023
o Treasury Money Market Mutual $ 252,183
</TABLE>

- ---------

(1) After waivers and reimbursements.

UNDERWRITING COMMISSIONS. For the years ended December 31, 1993 and
1994, the Company's distributor retained $26,215,173 and $5,415,227,
respectively in underwriting commissions (front-end sales loads and CDSCs, if
any) in connection with the purchase or redemption of Company shares. For the
years ended December 31, 1993 and 1994, Wells Fargo Securities Inc. ("WFSI"),
an affiliated broker-dealer of the Company, and its registered representatives
received $378,895 and $904,274, respectively, in underwriting commissions in
connection with the purchase or redemption of Company shares.

For the period ended September 30, 1996, the aggregate amount of
underwriting commissions on sales/redemptions of the Company's shares was
$2,917,738. Stephens retained $198,664 of such commissions. WFSI and its
registered representatives retained $2,583,027 and $136,047, respectively, of
such commissions.

52
<PAGE> 327
For the period begun October 1, 1995 and ended September 5, 1996 with
respect to the predecessor funds, the aggregate amount of underwriting
commissions on sales/redemptions of Pacifica's shares was $150,771. Pacifica
Funds Distributor Inc. ("PFD"), retained $18,139 and its registered
representatives retained $132,632 of such commissions.

DISTRIBUTION PLANS

Stephens (the "Distributor"), at 111 Center Street, Little Rock,
Arkansas 72201, serves as sponsor, co- administrator and distributor for the
Funds. The following information supplements and should be read in conjunction
with the Prospectus under "Distribution Plans." As indicated in each Fund's
Prospectus, each Fund has adopted a distribution plan (a "Plan") under Section
12(b) of the 1940 Act and Rule 12b-1 thereunder (the "Rule") for each class of
its shares. The Plans for the Class A shares and Class B shares of the Funds,
as the case may be, were adopted by the Company's Board of Directors, including
a majority of the Directors who were not "interested persons" (as defined in
the 1940 Act) of the Funds and who had no direct or indirect financial interest
in the operation of the Plans or in any agreement related to the Plans (the
"Non-Interested Directors").

Under the Plans and pursuant to the Distribution Agreement, the Funds
may pay the Distributor as compensation for distribution-related activities
and services provided and related expenses incurred, a monthly fee at an annual
rate up to 0.05% of the average daily net assets of the Intermediate Bond Fund,
Tax-Free Funds and Money Market Funds and 0.10% of the average daily net assets
of the Balanced and Equity Value Funds, attributable to Class A shares; 0.75%
of the average daily net assets of the Arizona, National and Oregon Tax-Free
Funds, Intermediate Bond, Balanced and Equity Value Funds and 70% of the
average daily net assets of the California Tax-Free Bond Fund, attributable to
Class B shares.

The actual fee payable to the Distributor is determined, within such
limits, from time to time by mutual agreement between the Company and the
Distributor and will not exceed the maximum sales charges payable by mutual
funds sold by members of the NASD under the NASD Rules of Fair Practice. The
Distributor may enter into selling agreements with one or more selling agents
(which may include Wells Fargo Bank and its affiliates) under which such agents
may receive compensation for distribution-related services from the
Distributor, including, but not limited to, commissions or other payments to
such agents based on the average daily net assets of Fund shares attributable
to their customers. The Distributor may retain any portion of the total
distribution fee payable thereunder to compensate it for distribution-related
services provided by it or to reimburse it for other distribution-related
expenses.

Pursuant to Rule 12b-1, a distribution plan must be initially approved
(and reapproved annually thereafter) by the Board of Directors, including a
majority of the Non-Interested Directors of the Company. Agreements related
to the Plans also must be approved by such vote of the Directors and
Non-Interested Directors. Selling agreements will terminate automatically if
assigned and may be terminated at any time, without payment of any penalty, by
a vote of a majority of the outstanding voting securities of the relevant class
of a Fund or by vote of a

53
<PAGE> 328
majority of the Non-Interested Directors on not more than 60 days' written
notice. Each Plan may not be amended to increase materially the amounts
payable thereunder without the approval of a majority of the outstanding voting
securities of the relevant class of a Fund, and no material amendment to the
Plans may be made except by a majority of both the Directors of the Company and
the Non-Interested Directors.

Each Plan requires the Company to provide the Directors, and the
Directors to review, at least quarterly, a written report of the amounts
expended (and purposes therefor) under such Plan. The Rule also requires that
the selection and nomination the Non-Interested Directors of the Company be
made by such non-interested directors.

Wells Fargo Bank, an interested person (as that term is defined in
Section 2(a)(19) of the 1940 Act) of the Company, acts as a selling agent for
the Funds' Class A and B shares pursuant to selling agreements with Stephens
authorized under the Plans. As a selling agent, Wells Fargo Bank has an
indirect financial interest in the operation of the Plans. The Board of
Directors has concluded that the Plans are reasonably likely to benefit the
Funds and their shareholders because the Plans authorize the relationships with
selling agents, including Wells Fargo Bank, that have previously developed
distribution channels and relationships with the retail customers that the
Class A and B shares of the Funds are designed to serve. These relationships
and distribution channels are believed by the Board to provide potential for
increased Fund assets and ultimately corresponding economic efficiencies (i.e.,
lower per-share transaction costs and fixed expenses) that are generated by
increased assets under management.

For the nine-month period ended September 30, 1996, the California Funds'
distributor received the following amounts of 12b-1 fees for the specified
purposes set forth below under each Fund's Plan.

<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Fund Total Prospectus Brochures Underwriters
---- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
California Tax-Free Bond
Class A $ 37,156 $ 1,810 $35,346 N/A
Class B $181,578 N/A N/A $181,578
California Tax-Free Income $ 11,584 $ 55 $11,528 N/A
</TABLE>

For the year ended December 31, 1995, the California Funds'
distributor received the following amounts of 12b-1 fees for the specified
purposes set forth below under each Fund's Plan.

<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Fund Total Prospectus Brochures Underwriters
---- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
California Tax-Free Bond
Class A $110,033 $24,390 $85,643 N/A
Class B $ 82,030 N/A N/A $82,030
California Tax-Free Income $ 13,063 $10,246 $2,817 N/A
</TABLE>

54
<PAGE> 329
For the year ended December 31, 1995 and the period ended September
30, 1996, WFSI and its registered representatives received no compensation
under each California Fund's Plans.

With regard to the New Funds, for the year ended September 30, 1996,
the distributor received the following amounts of 12b-1 fees for expense
reimbursement under each Fund's Plan for Class A shares.

Fund Total
---- -----
<S> <C>
Arizona Tax-Free Class A $20,752

Balanced Class A $82,632

Equity Value Class A $58,241

Government Money Market Mutual Class A $29,161

Intermediate Bond Class A $ -0-

National Tax-Free Class A $ 146

Oregon Tax-Free Class A $ 1,013

Prime Money Market Mutual Class A $62,301

Treasury Money Market Mutual Class A $13,064
</TABLE>

For the period begun September 6, 1996 and ended September 30, 1996,
the distributor received compensation in the amount of $36 from the Arizona
Tax-Free Fund, and no compensation from the remaining New Funds with class B
shares, under each such Funds's Plan for Class B shares.

Prior to September 6, 1996, PFD, a subsidiary of Furman Selz, served
as principal underwriter for the shares of the predecessor portfolios pursuant
to a Distribution Contract as of October 1, 1995. The figures in the table
above reflect amounts paid to PFD through September 5, 1996 and amounts paid to
Stephens from September 6 to September 30, 1996. Prior to October 1, 1995,
ALPS served as the distributor to the predecessor portfolios of the
Intermediate Bond Fund and the Arizona, National and Oregon Tax-Free Funds.
ALPS was not entitled to any compensation for its services as distributor for
these portfolios.

Under a distribution plan adopted for the predecessor portfolios'
Investor shares, PFD was entitled to be paid directly or reimbursed monthly in
amounts described in the Prospectuses for costs and expenses of marketing the
Investor shares of the predecessor portfolios of the Equity Value, Intermediate
Bond and Arizona, National and Oregon Tax-Free Funds. Under a separate
distribution plan for the Money Market Funds, Pacifica, on behalf of the
predecessor portfolios paid

55
<PAGE> 330
directly or reimbursed PFD monthly in amounts described in the Prospectus for
costs and expenses of marketing their shares.

During the fiscal year ended September 30, 1995, the predecessor
portfolios of the following Funds reimbursed PFD, pursuant to their predecessor
plans, in the following amounts:

<TABLE>
<CAPTION>
Equity Value Balanced Government
Distribution Plan Reimbursements Fund Fund Money Market Mutual Fund
- -------------------------------- ---- ---- ------------------------
<S> <C> <C> <C>
Advertising and Promotional Materials $ 10,769 $ 3,303 $74,215
Printing and mailing of financial statements
and Prospectus to other than current $ 7,068 $ 6,177 $ 6,448
shareholders
Compensation to underwriters 0 0 0
Compensation to broker/dealers 0 0 0
Compensation to sales personnel 0 0 0
Financing charges 0 0 0
Total $ 17,837 $ 9,480 $ 80,663
</TABLE>

SERVICING PLANS AND AGREEMENTS

The Company's Board of Directors adopted a shareholder servicing
agreement for each Fund and a servicing plan (collectively, with the
shareholder servicing agreement, the "Servicing Plans") with respect to each
class of New Fund shares and with respect to Class B shares for the California
Tax-Free Bond Fund. The Board of Directors included a majority of the
Directors who were not "interested persons" (as defined in the Act) of each
Fund and who had no direct or indirect financial interest in the operation of
the Servicing Plan or in any agreement related to the Servicing Plan (the
"Servicing Plan Non-Interested Directors").

Under the Servicing Plan and pursuant to the shareholder servicing
agreements for the Class A or B shares, a Fund may pay one or more servicing
agents, as compensation for performing certain services, a fee at an annual
rate of up to 0.25% of the average daily net assets of the New Funds' Class A
or B shares, and 0.30% of the average daily net assets of the California
Tax-Free Bond Fund's Class B shares, attributable to the servicing agent's
customers. The actual fee payable to servicing agents is determined, within
such limits, from time to time by mutual agreement between the Company and each
servicing agent and will not exceed the maximum service fees payable by mutual
funds sold by members of the NASD under the NASD Rules of Fair Practice.

56
<PAGE> 331
Servicing Plan Non-Interested Directors. No material amendment to the
Servicing Plans may be made except by a majority of both the Directors of the
Company and the Servicing Plan Non-Interested Directors.

Each Servicing Plan requires that the administrator shall provide to
the Directors, and the Directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Servicing
Plan.

PERFORMANCE CALCULATIONS

The following information supplements and should be read in
conjunction with the sections in each Prospectus entitled "Determination of Net
Asset Value" and "Performance Data."

TOTAL RETURN: The Funds may advertise certain total return information
computed in the manner described in the Prospectus. As and to the extent
required by the SEC, an average annual compound rate of return ("T") is
computed by using the redeemable value at the end of a specified period ("ERV")
of a hypothetical initial investment ("P") over a period of years ("n")
according to the following formula: P(1+T)n = ERV. In addition, as indicated
in each Prospectus, each Fund also may, at times, calculate total return based
on net asset value per share (rather than the public offering price), in which
case the figures would not reflect the effect of any sales charges that would
have been paid by an investor, or based on the assumption that a sales charge
other than the maximum sales charge (reflecting a Volume Discount) was
assessed, provided that total return data derived pursuant to the calculation
described above also are presented.

57
<PAGE> 332
Average Annual Total Return - For The Applicable Period Ended September 30,
19961
<TABLE>
<CAPTION>
Inception(2) Inception(2) Five Year Five Year Three Year Three Year One Year One Year
With No With No With No With No
Fund Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C>
Arizona Tax-
Free(3)
Class A 5.17% 6.23% N/A N/A 2.24% 3.83% -1.02% 3.60%
Class B 5.06% 5.06% N/A N/A 2.31% 2.63% -0.90% 2.10%
Balanced(4)
Class A 9.77% 10.58% 9.31% 10.32% 6.09% 7.74% 5.52% 10.51%
Class B 6.62% 6.62% .30% 9.30% 6.29% 6.59% 5.59% 8.59%
California
Tax-Free
Bond
Class A 6.22% 7.25% N/A N/A 2.22% 3.80% 1.52% 6.28%
Class B 9.16% 10.23% N/A N/A N/A N/A 2.57% 5.56%
California
Tax-Free
Income
Class A 3.75% 4.57% N/A N/A 2.63% 3.68% 0.71% 3.86%
Equity
Value(4)
Class A 11.89% 12.71% 13.38% 14.42% 11.00% 12.71% 9.09% 14.27%
Class B 11.67% 11.67% 13.29% 3.29% 11.10% 11.37% 8.86% 11.86%
Government
Money Market
Mutual
Class A4 N/A 5.41% N/A 3.98% N/A 4.37% N/A 4.75%
Intermediate
Bond(3)
Class A 7.58% 8.18% 5.66% 6.64% 2.64% 4.24% -0.57% 4.15%
Class B 7.31% 7.31% 5.78% 5.78% 3.07% 3.38% 0.24% 3.24%
National Tax-
Free(3)
Class A 3.69% 5.00% N/A N/A 2.15% 3.73% -0.64% 4.03%
Class B 3.95% 4.19% N/A N/A 2.61% 2.93% 0.13% 3.13%
Oregon Tax-
Free(3)
Class A 6.48% 7.08% 5.37% 6.34% 1.99% 3.56% 0.31% 5.03%
Class B 6.33% 6.33% 5.61% 5.61% 2.53% 2.84% 1.30% 4.30%

Prime Money
Market
Mutual(5)
Class A N/A 5.09% N/A N/A N/A N/A N/A 5.09%
Treasury
Money Market
Mutual(5)
Class A N/A 4.95% N/A N/A N/A N/A N/A 4.95%
</TABLE>

58
<PAGE> 333
(1) The term "Sales Charge" for the Class A shares of the California
Tax-Free Income Fund means a front-end sales load of 3.00%. For the
Class A shares of the California Tax-Free Bond Fund, the Arizona,
National and Oregon Tax-Frees Funds, the Equity Value, Balanced and
Intermediate Bond Funds, the term "Sales Charge" means a front- end
sales load of 4.50%. There are no sales charges for the Government,
Prime and Treasury Money Market Mutual Funds. For all Class B shares
the term "Sales Charge" means the maximum applicable contingent
deferred sales charge ("CDSC") as described in the respective Fund's
Prospectus.

(2) Each Fund or its predecessor commenced operations as follows:
California Tax-Free Income - November 18, 1992; California Tax- Free
Bond Class A - January 1, 1992, Class B - January 1, 1995; Arizona
Tax-Free - March 2, 1992; National Tax-Free - January 15, 1993;
Intermediate Bond and Oregon Tax-Free - June 1, 1988; Equity Value
and Balanced - July 2, 1990; Government Mone y Market Mutual - April
26, 1988; Prime Money Market Mutual and Treasury Money Market Mutual -
October 1, 1995.

(3) Historical performance for each class of the Arizona, National and
Oregon Tax-Free Funds and the Intermediate Bond Fund has been
calculated using returns produced by their predecessor funds of
Westcore and Pacifica for the applicable periods. Class A performance
reflects Pacifica Fund Class A and Westcore Fund performance. Class B
performance also reflects such performance but has been adjusted to
reflect Class B share expense levels as of the Class B shares'
inception date of September 6, 1996.

(4) Historical performance for each class of the Balanced, Equity Value
and Government Money Market Mutual Funds has been calculated using
returns produced by their respective predecessor funds of Pacifica.
Class A performance reflects Pacifica Fund Class A performance. Class
B performance also reflects such performance but has been adjusted to
reflect Class B share expense levels as of the inception date of
September 6, 1996.

(5) Historical performance for each class of the Prime and Treasury Money
Market Mutual Funds has been calculated using returns produced by
their respective predecessor funds of Pacifica. Class A performance
reflects Pacifica Fund Investor Class performance. Class B
performance also reflects such performance but has been adjusted to
reflect Class B share expense levels as of the inception date of
September 6, 1996.

59
<PAGE> 334
Cumulative Total Return - For The Applicable Period Ended September 30, 19961
<TABLE>
<CAPTION>
Inception(2) Inception(2) Five Year Five Year Three Year Three Year
With No With No With No
Sales Sales Sales Sales Sales Sales
Fund Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C>
Arizona
Tax-Free(3)
Class A 25.98% 31.90% N/A N/A 6.88% 11.94%
Class B 25.40% 25.40% N/A N/A 7.10% 8.10%
Balanced(4)
Class A 79.07% 87.49% 56.03% 63.40% 19.42% 25.06%
Class B 77.54% 77.54% 56.03% 56.03% 20.09% 21.09%
California
Tax-Free
Bond
Class A 33.20% 39.46% N/A N/A 6.82% 11.82%
Class B 16.59% 18.59% N/A N/A N/A N/A
California
Tax-Free
Income 15.34% 18.92% N/A N/A 8.10% 11.44%
Class A
Equity
Value(4)
Class A 101.81% 111.29% 87.34% 96.13% 36.76% 43.20%
Class B 99.35% 99.35% 86.64% 86.64% 37.15% 38.15%
Government(4)
Money
Market
Mutual
Class A N/A 56.01% N/A 21.54% N/A 13.70%
Intermediate
e Bond(3)
Class A 83.87% 92.57% 31.68% 37.89% 8.15% 13.27%
Class B 80.06% 80.06% 32.41% 32.41% 9.50% 10.50%
National
Tax-Free(3)
Class A 14.20% 19.60% N/A N/A 6.58% 11.60%
Class B 15.26% 16.26% N/A N/A 8.04% 9.04%
Oregon Tax-
Free(3)
Class A 68.80% 76.79% 29.87% 35.98% 6.09% 11.07%
Class B 66.83% 66.83% 31.35% 31.35% 7.77% 8.77%
Prime Money
Market
Mutual(5)
Class A N/A 5.09% N/A N/A N/A N/A
Treasury
Money
Market
Mutual(5)
Class A N/A 4.95% N/A N/A N/A N/A
</TABLE>

60
<PAGE> 335
(1) For all periods ended September 30, 1996, the term "Sales Charges" for
shares of the California Tax-Free Income Fund means a front-end sales
load of 3.00%, and for the Class A shares of the California Tax-Free
Bond Fund, the Arizona, National and Oregon Tax-Frees Funds, the
Equity Value, Balanced and Intermediate Bond Funds, the term "Sales
Charge" means a front-end sales load of 4.50%. There are no sales
charges for the Government, Prime and Treasury Money Market Mutual
Funds. For all Class B shares the term "Sales Charge" means the
maximum applicable contingent deferred sales charge ("CDSC") as
described in the respective Fund's Prospectus.

(4) Historical performance for each class of the Balanced, Equity Value
and Government Money Market Mutual Funds has been calculated using
returns produced by their respective predecessor funds of Pacfica.
Class A performance reflects Pacifica Fund Class A performance. Class
B performance also reflects such performance but has been adjusted to
reflect Class B share expense levels as of the inception date of
September 6, 1996.

YIELD CALCULATIONS: The Funds may, from time to time, include their
yields, tax-equivalent yields (if applicable) and average annual total returns
in advertisements or reports to shareholders or prospective investors.
Quotations of yield for the Intermediate Bond Fund and the Tax-Free Funds is
based on the investment income per share earned during a particular 30-day
period, less expenses accrued during a period ("net investment income") and is
computed by dividing net investment income by the maximum offering price per
share on the last day of the period, according to the following formula:
<TABLE>
<S> <C> <C>
(6)
YIELD - 2[(a - b + 1) -1]
-----
cd
</TABLE>

where a = dividends and interest earned during the period, b =
expenses accrued for the period (net of any reimbursements), c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and d = the maximum offering price per share on the last day
of the period. The net investment income of the California Tax-Free Bond Fund
includes actual interest income, plus or minus amortized purchase discount
(which may include original issue discount) or premium, less accrued expenses.
Realized and unrealized gains and losses on portfolio securities are not
included in the California Tax-Free Bond Fund's net investment

61
<PAGE> 336
income. For purposes of sales literature, yield on each class of shares of the
Bond Fund also may be calculated on the basis of the net asset value per share
rather than the public offering price, provided that the yield data derived
pursuant to the calculation described above also are presented.

Quotations of tax-equivalent yield for a Tax-Free Fund are calculated according
to the following formula:

<TABLE>
<S> <C> <C>
TAX EQUIVALENT YIELD = ( E ) + t
-----
1 - p
</TABLE>

E = Tax-exempt yield
p = stated income tax rate
t = taxable yield

The tax-equivalent yield for the California Funds also is computed by
dividing that portion of the yield of the Fund which is tax-exempt by one minus
a stated income tax rate and adding the product to that portion, if any, of the
yield of the Fund that is not tax-exempt.

EFFECTIVE YIELD: Current yields for the Money Market Funds are based
on the change in the value of a hypothetical investment (exclusive of capital
changes) over a particular seven-day period, less a pro-rata share of each
Fund's expenses accrued over that period (the "base period"), and stated as a
percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized by multiplying by 365/7,
with the resulting yield figure carried to at least the nearest hundredth of
one percent. "Effective yield" for the Money Market Funds assumes that all
dividends received during an annual period have been reinvested. Calculation of
"effective yield" begins with the same "base period return" used in the
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:

Effective Yield = [(Base Period Return +1)365/7]-1.

Yield For The Applicable Period Ended September 30, 1996(1)
<TABLE>
<CAPTION>
Thirty-Day Tax- Seven-Day Seven-Day
Thirty-Day Yield Equivalent Yield(2) Yield Effective Yield
---------------- ---------------------- --------------- ---------------
After Before After Before
Fund Waiver Waiver Waiver Waiver No Sales Charge No Sales Charge
---- ------ ------ ------ ------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
California Tax-Free Bond
Class A 4.69% 4.35% 8.72% 8.09% N/A N/A
Class B 4.21% 3.87% 7.83% 7.20% N/A N/A

California Tax-Free Income
Class A 4.85% 3.90% 9.02% 7.25% N/A N/A

Intermediate Bond
Class A 7.36% N/A 13.69% N/A 5.81% N/A
Class B N/A N/A N/A N/A N/A
</TABLE>

62
<PAGE> 337
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arizona Tax-Free Fund
Class A 4.66% N/A 8.17% N/A 4.66% N/A
Class B N/A N/A N/A N/A 2.87% N/A

Oregon Tax-Free Fund
Class A 4.62% N/A 8.41% N/A 4.91% N/A
Class B N/A N/A N/A N/A N/A N/A

National Tax-Free Fund
Class A 4.82% N/A N/A N/A 4.33% N/A
Class B N/A N/A N/A N/A N/A N/A

Govt. Money Market Mutual
Class A 4.50% N/A 7.45% N/A 4.64% 5.45%

Prime Money Market Mutual
Class A 5.07% N/A 8.39% N/A 4.99% 5.11%

Treasury Money Market Mutual
Class A 4.82% N/A 7.98 N/A 4.80% 4.91%
</TABLE>

- -------------------

(1) "After Waiver" figures reflect any reimbursed expenses throughout the
period. The yield of the predecessor portfolios' shares through September 5,
1996 is also reflected.

(2) Based on a combined federal and state income tax rate of 46.24% for
each of the California Tax-Free Bond and Income Funds, and 45.04% and 42.98%
for the Oregon Tax-Free Fund and the Arizona Tax-Free Fund, respectively, and a
federal income tax rate of 28.00% for the National Tax-Free Fund and the
Intermediate Bond Fund.

Quotations of yield and total return reflect only the performance of a
hypothetical investment in a Fund or class of shares during the particular time
period shown. Yield and total return vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.

In connection with communicating its yields or total return to current
or prospective shareholders, these figures may also be compared to the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.

63
<PAGE> 338
the World Gold Council), Bank Averages (which is calculated from figures
supplied by the U.S. League of Savings Institutions based on effective annual
rates of interest on both passbook and certificate accounts), average
annualized certificate of deposit rates (from the federal Reserve G-13
Statistical Releases or the Bank Rate Monitor), the Salomon One Year Treasury
Benchmark Index, the Consumer Price Index (as published by the U.S. Bureau of
Labor Statistics), Ten Year U.S. Government Bond Average, S&P's Corporate Bond
Yield Averages, Schabacter Investment Management Indices, Salomon Brothers High
Grade Bond Index, Lehman Brothers Long-Term High Quality Government/Corporate
Bond Index, other managed or unmanaged indices or performance data of bonds,
stocks or government securities (including data provided by Ibbotson
Associates), or by other services, companies, publications or persons who
monitor mutual funds on overall performance or other criteria. The S&P Index
and the Dow Jones Industrial Average are unmanaged indices of selected common
stock prices.

The performance of a Fund or a class of shares also may be compared to
the performance of other mutual funds having similar objectives. This
comparative performance could be expressed as a ranking prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Bloomberg
Financial Markets or Morningstar, Inc., independent services that monitor the
performance of mutual funds. Any such comparisons may be useful to investors
who wish to compare a Fund's past performance with that of its competitors. Of
course, past performance cannot be a guarantee of future results. The Company
also may include, from time to time, a reference to certain marketing
approaches of the Distributor, including, for example, a reference to a
potential shareholder being contacted by a selected broker or dealer. General
mutual fund statistics provided by the Investment Company Institute may also be
used.

In addition, the Company also may use, in advertisements and other
types of literature, information and statements showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth. The Company also may include in
advertising and other types of literature information and other data from
reports and studies prepared by the Tax Foundation, including information
regarding federal and state tax levels and the related "Tax Freedom Day."

The Company also may use the following information in advertisements
and other types of literature, only to the extent the information is
appropriate for a class of shares of a Fund: (i) the Consumer Price Index may
be used to assess the real rate of return from an investment in a class of
shares of a Fund; (ii) other government statistics, including, but not limited
to, The Survey of Current Business, may be used to illustrate investment
attributes of a Fund or a class of shares or the general economic, business,
investment, or financial environment in which the Fund operates; (iii) the
effect of tax-deferred compounding on the investment returns of a Fund or a
class of shares, or on returns in general, may be illustrated by graphs,
charts, etc., where such graphs or charts would compare, at various points in
time, the return from an investment in a Fund or a class of shares (or returns
in general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the return on a taxable
basis; and (iv) the sectors or industries in which a Fund invests may be
compared to relevant indices of stocks or surveys (e.g., S&P Industry Surveys)
to evaluate the historical performance of the Fund or a class or current or
potential value with respect to the particular industry or sector.

64
<PAGE> 339
The Company also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as S&P or Moody's. Such rating
would assess the creditworthiness of the investments held by a Fund. The
assigned rating would not be a recommendation to purchase, sell or hold any
class of a Fund's shares since the rating would not comment on the market price
of a Fund's shares or the suitability of a Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating to a Fund or its investments. The Company may compare a Fund's
performance with other investments that are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare a Fund's past
performance with other rated investments.

From time to time the Company may reprint, reference or otherwise use
material from magazines, newsletters, newspapers and books including, but not
limited to the Wall Street Journal, Money Magazine, Barrons, Kiplingers,
Business Week, Fortune, Forbes, the San Francisco Chronicle, the San Jose
Mercury News, The New York Times, the Los Angeles Times, the Boston Globe, the
Washington Post, the Chicago Sun-Times, Investor Business Daily, Worth, Bank
Investor, American Banker, Smart Money, the 100 Best Mutual Funds (Adams
Publishing), Morningstar or Value Line.

The Company also may disclose in sales literature, the distribution
rate on the shares of a Fund or a class of shares. Distribution rate, which
may be annualized, is the amount determined by dividing the dollar amount per
share of the most recent dividend by the most recent NAV or maximum offering
price per share as of a date specified in the sales literature. Distribution
rate will be accompanied by the standard 30-day yield as required by the SEC.

The Company also may disclose in advertising and other types of sales
literature the assets and categories of assets under management by the
Company's investment adviser and the total amount of assets and mutual fund
assets managed by Wells Fargo Bank. As of December 31, 1996, Wells Fargo Bank
and its affiliates provided investment Advisory services for approximately $54
billion of assets of individuals, trusts, estates and institutions and $20
billion of mutual fund assets.

65
<PAGE> 340
through Electronic Channels. Advertising and other literature may disclose
that Wells Fargo Bank may maintain Web sites, pages or other information sites
accessible through Electronic Channels (an "Information Site") and may describe
the contents and features of the Information Site and instruct investors on how
to access the Information Site and open a Sweep Account. Advertising and other
literature may also disclose the procedures employed by Wells Fargo Bank to
secure information provided by investors, including disclosure and discussion
of the tools and services for accessing Electronic Channels. Such advertising
or other literature may include discussions of the advantages of establishing
and maintaining a Sweep Account through Electronic Channels and testimonials
from Wells Fargo Bank customers or employees and may also include descriptions
of locations where product demonstrations may occur. The Company may also
disclose the ranking of Wells Fargo Bank as one of the largest money managers
in the United States.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the Prospectus section under "Purchase of shares." Net asset
value per share or class of shares of a non-money market Fund is determined by
the Funds' Custodian on each day the Exchange is open for trading as of the
close of regular trading on the Exchange, which is currently 1:00 p.m. Pacific
time.

Securities of a Fund for which market quotations are available are
valued at latest prices. Any security for which the primary market is an
exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the latest bid price quoted on
such day. In the case of other securities, including U.S. Government
securities but excluding money market instruments maturing in 60 days or less,
the valuations are based on latest quoted bid prices. Money market instruments
maturing in 60 days or less are valued at amortized cost. The assets of a
Fund, other than money market instruments or debt securities maturing in 60
days or less, are valued at latest quoted bid prices. Prices may be furnished
by a reputable independent pricing service approved by the Company's Board of
Directors. Prices provided by an independent pricing service may be determined
without exclusive reliance on quoted prices and may take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. All other securities and other assets
of a Fund for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Company's Board of
Directors and in accordance with procedures adopted by the Directors.

Expenses and fees, including advisory fees, are accrued daily and are
taken into account for the purpose of determining the net asset value of a
Fund's shares.

Net asset value per share or class of shares of a Money Market Fund is
determined as of 12:00 noon and 1:00 p.m. Pacific time on each Business Day as
described in the Prospectus.

66
<PAGE> 341
The Money Market Funds' instruments are valued on the basis of
amortized cost. This technique involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price a Money Market Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of a Money Market Fund computed as described above may tend to be higher
than a like computation made by a fund with identical investments utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its instruments. Thus, if the use of amortized cost by a Money Market
Fund resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in a Money Market Fund would be able to obtain a somewhat
higher yield than would result from investment in a fund utilizing solely
market values and existing investors in a Money Market Fund would receive less
investment income. The converse would apply in a period of rising interest
rates.

The valuation of each Money Market Funds' instruments, based upon
their amortized cost and the concomitant maintenance by each Fund of a net
asset value of $1.00, is permitted in accordance with Rule 2a-7 under the Act,
pursuant to which a Money Market Fund must adhere to certain conditions. Each
Money Market Fund must maintain a dollar- weighted average maturity of 90 days
or less, purchase only instruments having remaining maturities of 397 days
(thirteen months) or less, and invest only in securities that are determined to
present minimal credit risks pursuant to guidelines adopted by the Directors or
the adviser under guidelines approved by the Directors. Instruments having
variable or floating interest rates or demand features may be deemed to have
remaining maturities as follows: (a) a government security with a variable rate
of interest readjusted no less frequently than every thirteen months may be
deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (b) an instrument with a variable rate of
interest, the principal amount of which is scheduled on the face of the
instrument to be paid in thirteen months or less, may be deemed to have a
maturity equal to the period remaining until the next readjustment of the
interest rate; (c) an instrument with a variable rate of interest that is
subject to a demand feature may be deemed to have a maturity equal to the
longer of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand; (d) an instrument with a floating rate of interest that is subject to a
demand feature may be deemed to have a maturity equal to the period remaining
until the principal amount can be recovered through demand; and (e) a
repurchase agreement may be deemed to have a maturity equal to the period
remaining until the date on which the repurchase of the underlying securities
is scheduled to occur or, where no date is specified but the agreement is
subject to demand, the notice period applicable to a demand for the repurchase
of the securities.

67
<PAGE> 342
corrective action as they regard as necessary and appropriate, which may
include selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding
dividends; redeeming shares in kind or without monetary or other consideration;
or establishing a net asset value per share by using available market
quotations. It is the intention of the Money Market Funds to maintain a per
share net asset value of $1.00, but there can be no assurance that each Fund
will do so.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Non-Money Market Funds may be purchased on any day the
Funds are open for business. The Funds are open for business each day the NYSE
is open for trading (a "Business Day"). Currently, the NYSE is closed on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day (each a "Holiday"). When any Holiday
falls on a weekend, the NYSE typically is closed on the weekday immediately
before or after such Holiday.

Shares of the Money Market Funds may be purchased on any day the Funds
are open for business, provided Wells Fargo Bank also is open for business (for
Money Market Funds, a "Business Day"). Currently, Wells Fargo Bank is closed on
New Year's Day, Presidents' Day, Martin Luther King's Birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and
Christmas Day (for Money Market Funds, each, a "Holiday"). When any Holiday
falls on a weekend, the Fund typically is closed on the weekday immediately
before or after such Holiday.

Payment for shares may, in the discretion of the adviser, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Funds will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by a
Fund and that such Fund receives satisfactory assurances that (i) it will have
good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares

68
<PAGE> 343
involuntarily or make payment for redemption in securities or other property if
it appears appropriate to do so in light of the Company's responsibilities
under the 1940 Act.

In addition, the Company may redeem shares involuntarily to reimburse
the Funds for any losses sustained by reason of the failure of a shareholders
to make full payment for shares purchased or to collect any charge relating to
a transaction effected for the benefit of a shareholder which is applicable to
shares of a Fund as provided from time to time in the Prospectus.

PORTFOLIO TRANSACTIONS

The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Company's Board of Directors, Wells Fargo Bank is
responsible for the Funds' portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Company to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Funds do not
necessarily pay the lowest spread or commission available.

Purchase and sale orders of the securities held by the Funds may
be combined with those of other accounts that Wells Fargo Bank manages, and for
which it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When Wells Fargo Bank determines that a
particular security should be bought or sold for a Fund and other accounts
managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate those
transactions among the participants equitably.

Except in the case of equity securities purchased by the Balanced
and Equity Value Funds, purchases and sales of securities usually are principal
transactions. Portfolio securities normally are purchased or sold from or to
dealers serving as market makers for the securities at a net price. The Funds
also purchase portfolio securities in underwritten offerings and may purchase
securities directly from the issuer. Generally, money market securities, ARMs
and CMOs are traded on a net basis and do not involve brokerage commissions.
The cost of executing a Fund's portfolio securities transactions consists
primarily of dealer spreads and underwriting commissions. Under the 1940 Act,
persons affiliated with the Company are prohibited from dealing with the
Company as a principal in the purchase and sale of securities unless an
exemptive order allowing such transactions is obtained from the SEC or an
exemption is otherwise available.

The Tax-Free Funds may purchase municipal obligations from
underwriting syndicates of which Stephens, Wells Fargo Bank or their affiliates
is a member under certain conditions in accordance with the provisions of a
rule adopted under the 1940 Act and in compliance with procedures adopted by
the Board of Directors.

69
<PAGE> 344
For the Balanced and Equity Value Funds, purchases and sales of
equity securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Orders may be directed to
any broker including, to the extent and in the manner permitted by applicable
law, Stephens or Wells Fargo Securities Inc. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. No Fund will deal with Stephens, Wells Fargo Bank or
their affiliates in any transaction in which any of them acts as principal
without an exemptive order from the SEC or unless an exemption is otherwise
available.

In assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Balanced and Equity Value Funds to pay a
broker/dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker/dealer for
effecting the same transaction, provided that Wells Fargo Bank determines in
good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker/dealer, viewed in terms
of either the particular transaction or the overall responsibilities of Wells
Fargo Bank. Such brokerage and research services might consist of reports and
statistics relating to specific companies or industries, general summaries of
groups of stocks or bonds and their comparative earnings and yields, or broad
overviews of the stock, bond, and government securities markets and the
economy.

Supplementary research information so received is in addition to,
and not in lieu of, services required to be performed by Wells Fargo Bank and
does not reduce the advisory fees payable by the Funds. The Board of Directors
will periodically review the commissions paid by the Funds to consider whether
the commissions paid over representative periods of time appear to be
reasonable in relation to the benefits inuring to the Funds. It is possible
that certain of the supplementary research or other services received will
primarily benefit one or more other investment companies or other accounts for
which investment discretion is exercised. Conversely, the Funds may be the
primary beneficiary of the research or services received as a result of
portfolio transactions effected for such other account or investment company.

70
<PAGE> 345
and that the services provided by a broker provide an adviser with lawful and
appropriate assistance in the performance of its investment decision-making
responsibilities." Accordingly, the price to a Fund in any transaction may be
less favorable than that available from another broker/dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered.

The outside research assistance is useful to Wells Fargo Bank since
the brokers utilized by Wells Fargo Bank as a group tend to follow a broader
universe of securities and other matters than the staff of Wells Fargo Bank can
follow. In addition, this research provides Wells Fargo Bank with a diverse
perspective on financial markets. Research services which are provided to
Wells Fargo Bank by brokers are available for the benefit of all accounts
managed or advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank
that this material is beneficial in supplementing their research and analysis;
and, therefore, it may benefit the Funds by improving the quality of Wells
Fargo Bank's investment advice. The advisory fees paid by the Funds are not
reduced because Wells Fargo Bank receives such services.

Brokerage Commissions. During the years ended December 31, 1993, 1994
and 1995 and the period ended September 30, 1996, the California Funds did not
pay any brokerage commissions on portfolio transactions. During the fiscal
periods ended September 30, 1996, September 30, 1995, May 31, 1995 and May 31,
1994, the predecessor portfolios of the Intermediate Bond Fund and the Arizona,
National and Oregon Tax-Free Funds did not pay any brokerage commissions,
because all of their portfolio transactions occurred in the over-the-counter
market.

Subject to the general supervision and approval of the Board of
Directors, the adviser makes decisions with respect to and places orders for
all purchases and sales of securities for the Prime and Treasury Money Market
Mutual Funds. Securities are generally purchased and sold either directly from
the issuer or from dealers who specialize in money market instruments. Such
purchases are usually effected as principal transactions and therefore do not
involve the payment of brokerage commissions.

71
<PAGE> 346
During the years ended September 30, 1996, September 30, 1995 and
September 30, 1994, the predecessor portfolio of the Government Money Market
Mutual Fund did not pay any brokerage commissions, because all of its portfolio
transactions occurred in the over-the-counter market. During the same time
periods, the Equity Value and Balanced Funds paid the following amounts in
brokerage commissions:

Brokerage Commissions Paid

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Value Fund $575,504 $619,124 $247,218
Balanced Fund $254,191 $197,751 $104,835
</TABLE>

During the time periods stated above, no brokerage commissions were
paid by the Funds to an affiliated broker.

Securities of Regular Broker/Dealers. The Funds may from time to time
purchase securities issued by their regular broker/dealers. As of September 30,
1996, the Funds owned securities of their "regular brokers or dealers" or their
parents as defined in the Act, as follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
- -------------------------------------------------------------------------------
<S> <C> <C>
o Arizona Tax-Free $-0- N/A
o Balanced $ 720,000 Goldman Sachs & Co.
o California Tax-Free Bond $-0- N/A
o California Tax-Free Income $-0- N/A
o Equity Value $ 5,800,000 Goldman Sachs & Co.
o Govt. Money Market Mutual $ 2,277,000 Goldman Sachs & Co.
o Intermediate Bond $ 984,000 Goldman Sachs & Co.
o National Tax-Free $-0- N/A
o Oregon Tax-Free $-0- N/A
o Prime Money Market Mutual $ 166,369,000 Goldman Sachs & Co.
o Treasury Money Market Mutual $ 225,975,000 Goldman Sachs & Co.
o Treasury Money Market Mutual $ 230,000,000 HSBC Securities
o Treasury Money Market Mutual $ 225,000,000 JP Morgan Securities
o Treasury Money Market Mutual $ 230,000,000 Morgan Stanley
</TABLE>

As of December 31, 1995, the California Funds did not own any
securities of their "regular brokers or dealers" or their parents, as defined
in the Act. Furman Selz, the administrator to the predecessor portfolios, did
not report in their N-SAR for the fiscal year ended September 30, 1995, that
any of the Funds held securities of their regular broker/dealers or of their
parents that derive more than 15% of gross revenues from securities-related
activities.

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<PAGE> 347
Portfolio Turnover Rate. Changes may be made in the portfolios
consistent with the investment objectives and policies of the Funds whenever
such changes are believed to be in the best interests of the Funds and their
shareholders. The portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities by the average monthly value of
the Fund's portfolio securities. For purposes of this calculation, portfolio
securities exclude all securities having a maturity when purchased of one year
or less. Portfolio turnover generally involves some expenses to the Funds,
including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and the reinvestment in other securities. Portfolio
turnover also can generate short-term capital gain tax consequences. Portfolio
turnover rate is not a limiting factor when Wells Fargo Bank deems portfolio
changes appropriate.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens, the
Company bears all costs of its operations, including the compensation of its
Directors who are not affiliated with Stephens or Wells Fargo Bank or any of
their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing Prospectuses (except the expense of printing and mailing Prospectuses
used for promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of a Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of a Fund's shares;
pricing services, and any extraordinary expenses. Expenses attributable to a
Fund are charged against a Fund assets. General expenses of the Company are
allocated among all of the funds of the Company, including a Fund, in a manner
proportionate to the net assets of each Fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.

TAXES

In General. The following information supplements and should be read
in conjunction with Prospectus sections entitled "Dividend and Capital Gain
Distributions" and "Taxes." The Prospectus of the Funds describes generally
the tax treatment of distributions by the Funds. This section of the SAI
includes additional information concerning federal income taxes.

73
<PAGE> 348
the Fund, rather than to the Company as a whole. In addition, net capital
gains, net investment income, and operating expenses will be determined
separately for each Fund.

Qualification as a regulated investment company under the Code
requires, among other things, that (a) each Fund derive at least 90% of its
annual gross income from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; (b) each Fund derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) each Fund diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of
each Fund's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government obligations and
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are determined to be engaged in the
same or similar trades or businesses. As a regulated investment company, each
Fund will not be subject to federal income tax on its net investment income and
net capital gains distributed to its shareholders, provided that it distributes
to its shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. Each Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

A 4% nondeductible excise tax will be imposed on each Fund (other than
to the extent of the Fund's tax-exempt income) to the extent it does not meet
certain minimum distribution requirements by the end of each calendar year.
Each Fund will either actually or be deemed to distribute all of its net
investment income and net capital gains by the end of each calendar year and,
thus, expects not to be subject to the excise tax.

Income and dividends received by each Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Although in some circumstances a regulated
investment company can elect to "pass through" foreign tax credits to its
shareholders, each Fund does not expect to be eligible to make such an
election.

Corporate shareholders of a Fund may be eligible for the
dividends-received deduction on dividends distributed out of the Fund's net
investment income attributable to dividends received from domestic
corporations, which, if received directly by the corporate shareholder, would
qualify for such deduction. In order to qualify for the dividends-received
deduction, a corporate shareholder must hold the Fund shares paying the
dividends upon which the deduction is based for at least 46 days.

74
<PAGE> 349
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

Capital Gain Distributions. To the extent that each Fund recognizes
long-term capital gains, such gains will be distributed at least annually and
these distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares. Such distributions
will be designated as capital gain distributions in a written notice mailed by
the Fund to the shareholders not later than 60 days after the close of the
Fund's taxable year.

Other Distributions. With respect to the Money Market Funds, although
dividends will be declared daily based on the Fund's daily earnings, for
federal income tax purposes, the Fund's earnings and profits will be determined
at the end of each taxable year and will be allocated pro rata over the entire
year. For federal income tax purposes, only amounts paid out of earnings and
profits will qualify as dividends. Thus, if during a taxable year a Money
Market Fund's declared dividends (as declared daily throughout the year) exceed
the Fund's net income (as determined at the end of the year), only that portion
of the year's distributions which equals the year's earnings and profits will
be deemed to have constituted a dividend. It is expected that each Money
Market Fund's net income, on an annual basis, will equal the dividends declared
during the year.

Disposition of Fund Shares. If a shareholder receives a designated
capital gain distribution (to be treated by the shareholder as a long-term
capital gain) with respect to any Fund share and such Fund share is held for
six months or less, then (unless otherwise disallowed) any loss on the sale or
exchange of that Fund share will be treated as a long-term capital loss to the
extent of the designated capital gain distribution. In addition, any loss
realized by a shareholder upon the sale or redemption of Fund shares held less
than six months is disallowed to the extent of any exempt-interest dividends
received thereon by the shareholder. These rules shall not apply, however, to
losses incurred under a periodic redemption plan.

If a shareholder exchanges or otherwise disposes of Fund shares within
90 days of having acquired such shares and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or of a different regulated investment company,
the sales charge previously incurred acquiring the Fund's shares shall not be
taken into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are reacquired within the 61-day
period beginning 30 days before and ending 30 days after the shares are
disposed of.

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<PAGE> 350
Taxation of Fund Investments. Gains or losses on sales of portfolio
securities by a Fund will generally be long-term capital gains or losses if the
securities have been held by it for more than one year, except in certain cases
such as where the Fund acquires a put or writes a call thereon. Gains
recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by the Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Fund held the debt obligation. Other
gains or losses on the sale of portfolio securities will be short-term capital
gains or losses.

If an option written by a Fund lapses or is terminated through a
closing transaction, such as a repurchase by the Fund of the option from its
holder, the Fund will realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction. Some realized capital losses may be deferred if
they result from a position which is part of a "straddle," discussed below. If
securities are sold by a Fund pursuant to the exercise of a call option written
by it, the Fund will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on the sale. If
securities are purchased by a Fund pursuant to the exercise of a put option
written by it, the Fund will subtract the premium received from its cost basis
in the securities purchased. The requirement that a Fund derive less than 30%
of its gross income from gains from the sale of securities held for less than
three months may limit the Fund's ability to write options.

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<PAGE> 351
elections with respect to "mixed straddles." Depending upon which election is
made, if any, the results with respect to the regulated investment company may
differ. Generally, to the extent the straddle rules apply to positions
established by the regulated investment company, losses realized by the
regulated investment company may be deferred to the extent of unrealized gain
in any offsetting positions. Moreover, as a result of the straddle and the
conversion transaction rules, short-term capital loss on straddle positions may
be recharacterized as long-term capital loss, and long-term capital gain may be
characterized as short-term capital gain or ordinary income.

If a Fund purchases shares in a "passive foreign investment company"
("PFIC"), the Fund may be subject to federal income tax and an interest charge
imposed by the IRS upon certain distributions from the PFIC or the Fund's
disposition of PFIC shares. If the Fund invests in a PFIC, the Fund intends to
make an available election to mark-to- market its interest in PFIC shares.
Under the election, the Fund will be treated as recognizing at the end of each
taxable year the excess, if any, of the fair market value of its interest in
PFIC shares over its basis in such shares. Although such excess will be
taxable to the Fund as ordinary income notwithstanding any distributions by the
PFIC, the Fund will not be subject to federal income tax or the interest charge
with respect to its interest in the PFIC.

Foreign Shareholders. Under the Code, distributions of net investment
income by a Fund to a nonresident alien individual, nonresident alien fiduciary
of a trust or estate, foreign corporation, or foreign partnership (a "foreign
shareholder") will be subject to U.S. withholding tax (at a rate of 30% or a
lower treaty rate). Withholding will not apply if a dividend paid by a Fund to
a foreign shareholder is "effectively connected" with a U.S. trade or business,
in which case the reporting and withholding requirements applicable to U.S.
citizens, U.S. residents or domestic corporations will apply. Distributions of
net long-term capital gains are not subject to tax withholding, but in the case
of a foreign shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a rate of 30% if
the individual is physically present in the U.S. for more than 182 days during
the taxable year.

Backup Withholding. The Company may be required to withhold, subject
to certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (including redemptions in
kind and proceeds from exchanges) paid or credited to an individual Fund
shareholder, unless a shareholder certifies that the Taxpayer Identification
Number ("TIN") provided is correct and that the shareholder is not subject to
backup withholding, or the IRS notifies the Company that the shareholder's TIN
is incorrect or the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by the IRS.

77
<PAGE> 352
by a Tax Free Fund with respect to any taxable year that constitutes
exempt-interest dividends will be the same for all shareholders receiving
dividends during such year. Long-term and/or short-term capital gain
distributions will not constitute exempt-interest dividends and will be taxed
as capital gain or ordinary income dividends, respectively. The exemption of
interest income derived from investments in tax-exempt obligations for federal
income tax purposes may not result in a similar exemption under the laws of a
particular state or local taxing authority.

Not later than 60 days after the close of its taxable year, a Tax-Free
Fund will notify its shareholders of the portion of the dividends paid with
respect to such taxable year which constitutes exempt-interest dividends. The
aggregate amount of dividends so designated cannot exceed the excess of the
amount of interest excludable from gross income under Section 103 of the Code
received by the Fund during the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code. Finally, interest on
indebtedness incurred to purchase or carry shares of a Tax-Free Fund will not
be deductible to the extent that the Fund's distributions are exempt from
federal income tax.

In addition, the federal alternative minimum tax ("AMT") rules ensure
that at least a minimum amount of tax is paid by taxpayers who obtain
significant benefit from certain tax deductions and exemptions. Some of these
deductions and exemptions have been designated "tax preference items" which
must be added back to taxable income for purposes of calculating AMT. Among
the tax preference items is tax-exempt interest from "private activity bonds"
issued after August 7, 1986. To the extent that a Tax-Free Fund invests in
private activity bonds, its shareholders who pay AMT will be required to report
that portion of Fund dividends attributable to income from the bonds as a tax
preference item in determining their AMT. Shareholders will be notified of the
tax status of distributions made by the Fund. Persons who may be "substantial
users" (or "related persons" of substantial users) of facilities financed by
private activity bonds should consult their tax advisors before purchasing
shares in a Tax-Free Fund. Furthermore, shareholders will not be permitted to
deduct any of their share of a Tax-Free Fund's expenses in computing their AMT.
With respect to a corporate shareholder of such Funds, exempt-interest
dividends paid by a Fund is included in the corporate shareholder's "adjusted
current earnings" as part of its AMT calculation, and may also affect its
federal "environmental tax" liability. As of the printing of this SAI,
individuals are subject to an AMT at a maximum rate of 28% and corporations at
a maximum rate of 20%. Shareholders with questions or concerns about AMT
should consult their tax advisors.

Shares of a Tax-Free Fund would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans and IRAs since such plans and accounts
are generally tax-exempt and, therefore, would not benefit from the exempt
status of dividends from such Funds. Such dividends would be ultimately
taxable to the beneficiaries when distributed to them.

Other Matters. Investors should be aware that the investments to be
made by the Funds may involve sophisticated tax rules that may result in income
or gain recognition by the Funds without corresponding current cash receipts.
Although the Funds will seek to avoid significant noncash income, such noncash
income could be recognized by the Funds, in which case the

78
<PAGE> 353
Funds may distribute cash derived from other sources in order to meet the
minimum distribution requirements described above.

The foregoing discussion and the discussions in the Prospectus address
only some of the federal tax considerations generally affecting investments in
a Fund. Each investor is urged to consult his or her tax advisor regarding
specific questions as to federal, state or local taxes and foreign taxes.

CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Funds and
Management."

The Funds are eleven of the funds of the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of fourteen other funds.

With respect to matters that affect one class of a Fund's shares but
not another, shareholders vote as a class; for example, the approval of a Plan.
Subject to the foregoing, on any matter submitted to a vote of shareholders,
all shares then entitled to vote are voted separately by series unless
otherwise required by the Act, in which case all shares are voted in the
aggregate. For example, a change in a series' fundamental investment policy
affects only one series and are voted upon only by shareholders of the series
and not by shareholders of the Company's other series. Additionally, approval
of an advisory contract is a matter to be determined separately by each series.
Approval by the shareholders of one series is effective as to that series
whether or not sufficient votes are received from the shareholders of the other
series to approve the proposal as to those series. As used in the Prospectus
and in this SAI, the term "majority" when referring to approvals to be obtained
from shareholders of a class of a Fund, means the vote of the lesser of (i) 67%
of the shares of such class of the Fund represented at a meeting if the holders
of more than 50% of the outstanding shares of such class of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of such class of the Fund. The term "majority," when referring to the
approvals to be obtained from shareholders of the Company as a whole, means the
vote of the lesser of (i) 67% of the Company's shares represented at a meeting
if the holders of more than 50% of the Company's outstanding shares are present
in person or by proxy, or (ii) more than 50% of the Company's outstanding
shares. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held. The Company may dispense with an
annual meeting of shareholders in any year in which it is not required to elect
directors under the 1940 Act.

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<PAGE> 354
distribution of any general assets not attributable to a particular investment
portfolio that are available for distribution in such manner and on such basis
as the Directors in their sole discretion may determine.

Shares have no preemptive rights or subscription. All shares, when
issued for the consideration described in the Prospectus, are fully paid and
non-assessable by the Company.

Set forth below is the name, address and share ownership of each
person known by the Company to have beneficial or record ownership of 5% or
more of a class of a Fund or 5% or more of the voting securities of a Fund as a
whole. As of January 2, 1997, no shareholders were known by the Company to own
5% or more of the outstanding Class A or B shares of the California Funds.

5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ ----- -------
<S> <C> <C> <C> <C>
ARIZONA TAX- Stephens Inc. Class A; 16.43% 4.80%
FREE FUND 111 Center Street Benefically Owned
Little Rock , AR 72201

Stephens Inc. Class B 100.00% N/A
111 Center Street Beneficially Owned
Little Rock , AR 72201

BALANCED FUND Stephens Inc. Class A 61.71% 21.20%
111 Center Street Beneficially Owned
Little Rock , AR 72201

Stephens Inc. Class B 98.95% N/A
111 Center Street Beneficially Owned
Little Rock , AR 72201

EQUITY VALUE Stephens Inc. Class A 56.14% 4.90%
FUND 111 Center Street Beneficially Owned
Little Rock , AR 72201

Stephens Inc. Class B 9.51% N/A
P.O. Box 34127 Beneficially Owned
Little Rock , AR 72201 for Acct. 76809054

Stephens Inc. Class B 5.80% N/A
P.O. Box 34127 Beneficially Owned
Little Rock , AR 72201 for Acct. 76892939

Vladimir Sirota Class B 36.11% N/A
P.O. Box 46399 [Record Holder]
Los Angeles, CA 90046

Stephens Inc. Class B 5.45% N/A
P.O. Box 34127 Beneficially Owned
Little Rock , AR 72201 for Acct. 77190754

Stephens Inc. Class B 5.45% N/A
P.O. Box 34127 Beneficially Owned
Little Rock , AR 72201 for Acct. 77190768

</TABLE>

80
<PAGE> 355
<TABLE>
<S> <C> <C> <C> <C>
Stephens Inc. Class B 10.97% N/A
P.O. Box 34127 Beneficially Owned
Little Rock , AR 72201 for Acct. 77539283

GOVERNMENT First Interstate Bank Class A 31.03% 31.03%
MONEY MARKET (Trustee) [Record Holder]
MUTUAL FUND Choicemaster
Attn: Mutual Funds
A88-4
P.O. Box 9800
Calabasas, CA 91372

First Interstate Bank Class A 51.26% 51.26%
of California [Record Holder]
Attn: Fund Accounting
ATM Desk
26610 W. Agoura Road
Calabasas, CA 91302

INTERMEDIATE Stephens Inc. Class A 55.11% N/A
BOND FUND 111 Center Street Beneficially Owned
Little Rock, AR
72201

D.S. Christopher / Class A 5.06% N/A
Ruth Christopher [Record Holder]
(Trustees) Inasmuch
Trust
7995 Willowcreek Dr.
Beaumont, TX 77707

Stephens Inc. Class B 9.41% N/A
P.O. Box 34127 Beneficially Owned
Little Rock, AR for Acct. 76888942
72203

Stephens Inc. Class B 9.35% N/A
P.O. Box 34127 Beneficially Owned
Little Rock, AR for
72203 Acct. 77085456
5.60% N/A
Stephens Inc. Class B
P.O. Box 34127 Beneficially Owned
Little Rock, AR for
72203 Acct. 77138803 75.16% N/A

Vladimir Sirota Class B
P.O. Box 46393 [Record Holder]
Los Angeles, CA
90046

NATIONAL TAX- Stephens Inc. Class A 14.95% 5.80%
FREE FUND 111 Center Street Beneficially Owned
Little Rock, AR
72203

Byrne Family Trust #2 Class A 7.47% N/A
9011 W. Little York [Record Holder]
Houston, TX 7704_

Stephens Inc. Class B 100.00% N/A
111 Center Street Beneficially Owned
Little Rock, AR
72201

OREGON TAX Stephens Inc. Class A 14.04% 11.30%
-FREE FUND 111 Center Street Beneficially Owned
Little Rock, AR
72201

Stephens Inc. Class B 28.70% N/A
P.O. Box 34127 Beneficially Owned
Little Rock, AR for Acct. 763442051
72203

</TABLE>

81
<PAGE> 356
<TABLE>
<S> <C> <C> <C> <C>
Stephens Inc. Class B 57.07% N/A
P.O. Box 34127 Beneficially Owned
Little Rock, AR for Acct. 76291546
72203

Stephens Inc. Class B 14.15% N/A
P.O. Box 34127 Beneficially Owned
Little Rock, AR for Acct. 77565917
72203

PRIME Virg & Co Class A 96.65% 18.40%
MONEY MARKET Attn: MF Dept A88-4 [Record Holder]
MUTUAL FUND P.O. Box 9800
Calabasas, CA 91372

TREASURY Virg & Co. Class A 92.34% N/A
MONEY MARKET Attn: MF Dept. A88-4 [Record Holder]
MUTUAL FUND P.O. Box 9800
Calabasas, CA 91372
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more that 25% of the voting securities of a
fund is presumed to "control" such fund. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more that 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).

OTHER INFORMATION

This Registration Statement, including the Prospectus for each Fund,
the SAI and the exhibits filed therewith, may be examined at the office of the
SEC in Washington, D.C. Statements contained in a Prospectus or the SAI as to
the contents of any contract or other document referred to herein or in the
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP serves as the independent auditors for the
Company. KPMG Peat Marwick LLP provides audit services, tax return preparation
and assistance and consultation in connection with review of certain SEC
filings. KPMG Peat Marwick LLP's address is Three Embarcadero Center, San
Francisco, California 94111.

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<PAGE> 357
FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the Funds for the fiscal year ended September
30, 1996 are hereby incorporated by reference to the Company's Annual Reports
as filed with the SEC on December 9, 1996. The Company's Annual Reports may be
obtained by calling 1-800-222-8222. The portfolio of investments, audited
financial statements and independent auditors' report are attached to all SAIs
delivered to current or prospective shareholders.

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<PAGE> 358

SAI APPENDIX

The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.

Corporate and Municipal Bonds

Moody's: The four highest ratings for corporate and municipal bonds
are "Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the
"best quality" and carry the smallest amount of investment risk. Bonds rated
"Aa" are of "high quality by all standards," but margins of protection or other
elements make long-term risks appear somewhat greater than "Aaa" rated bonds.
Bonds rated "A" possess many favorable investment attributes and are considered
to be upper medium grade obligations. Bonds rated "Baa" are considered to be
medium grade obligations; interest payments and principal security appear
adequate for the present, but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds
have speculative characteristics as well. Moody's applies numerical modifiers:
1, 2 and 3 in each rating category from "Aa" through "Baa" in its rating
system. The modifier 1 indicates that the security ranks in the higher end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate and municipal bonds are
"AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings
assigned by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded as having an "adequate capacity" to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of
a plus or minus sign to show relative standing within the category.

Municipal Notes

A-1
<PAGE> 359
S&P: The "SP-1" rating reflects a "very strong or strong capacity to
pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.

Corporate and Municipal Commercial Paper

Moody's: The highest rating for corporate and municipal commercial
paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for
repayment of short-term promissory obligations." Issuers rated "P-2" (Prime-2)
"have a strong capacity for repayment of short-term promissory obligations,"
but earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate and municipal commercial paper
indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."

2
<PAGE> 360
STAGECOACH FUNDS, INC.

Telephone: 1-800-260-5969

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

MONEY MARKET TRUST

-------------------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
additional information about shares offered in one of the funds of the
Stagecoach Family of Funds -- MONEY MARKET TRUST (the "Fund"). The Fund offers
a single class of shares. The investment objective of the Fund is described in
its prospectus under "How the Fund Works -- Investment Objective and Policies."

This SAI is not a prospectus and should be read in conjunction with
the Fund's prospectus also dated February 1, 1997, as may be revised from time
to time (the "Prospectus"). All terms used in this SAI that are defined in the
Prospectus have the meanings assigned in the Prospectus. A copy of the
Prospectus may be obtained without charge by writing Stephens Inc.
("Stephens"), the Company's sponsor, co-administrator and distributor, at 111
Center Street, Little Rock, Arkansas 72201 or calling the Company's Transfer
Agent at the telephone number indicated above.

-------------------------------------------
<PAGE> 361
TABLE OF CONTENTS

Page

<TABLE>
<S> <C>
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . 1

Additional Permitted Investment Activities . . . . . . . . . . . 2

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Servicing Plans . . . . . . . . . . . . . . . . . . . . . . . . . 14

Performance Calculations . . . . . . . . . . . . . . . . . . . . 14

Determination of Net Asset Value . . . . . . . . . . . . . . . . 18

Additional Purchase and Redemption Information . . . . . . . . . 20

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . 21

Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Federal Income Tax . . . . . . . . . . . . . . . . . . . . . . . 23

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Other Information . . . . . . . . . . . . . . . . . . . . . . . . 28

Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 28

Financial Information . . . . . . . . . . . . . . . . . . . . . . 28

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

i
<PAGE> 362
GENERAL

Prior to the Reorganization (defined below), the Fund was an investment
portfolio (the "Predecessor Portfolio") of the predecessor company, Pacifica
Funds Trust ("Pacifica"), an open-end management investment company. Pacifica
was organized on July 17, 1984 under the name "Fund Source." Pacifica changed
its name to "Pacifica Funds Trust" on February 9, 1993. The Fund originally
commenced operations on September 17, 1990 as a separate investment portfolio
of Westcore Trust called the "Prime Money Market Fund." On October 1, 1995, the
Fund was reorganized as a portfolio of Pacifica.

On April 25, 1996, the Agreement and Plan of Reorganization and the
creation of the Predecessor Portfolio as a new fund of the Company were
approved by the Company's Board of Directors. On May 17, 1996, the
Reorganization was approved by Pacifica's Board of Trustees. The
Reorganization of Pacifica with Stagecoach became effective on September 6,
1996 (the "Reorganization"). The Predecessor Portfolio of Pacifica was
reorganized as the Company's Money Market Trust.

INVESTMENT RESTRICTIONS

Fundamental Investment Policies. In addition to the investment limitations
disclosed in the Prospectus, the Fund is subject to the following investment
limitations which may be changed only by a vote of the holders of a majority of
the outstanding shares of the Fund (as defined in "Other Information").

The Fund may not:

1. Purchase securities of any one issuer, other than obligations
of the U.S. Government, its agencies or instrumentalities, if immediately after
such purchase more than 5% of the value of the Fund's total assets would be
invested in such issuer, except that up to 25% of the value of the Fund's total
assets may be invested without regard to such 5% limitation.

2. Purchase or sell real estate, except that the Fund may, to the
extent appropriate to its investment objective, purchase securities issued by
companies which invest in real estate or interests therein.

3. Purchase securities on margin, make short sales of securities
or maintain a short position.

4. Underwrite the securities of other issuers.

5. Purchase or sell commodity contracts (including futures
contracts), or invest in oil, gas or mineral exploration or
development programs.

1
<PAGE> 363

6. Buy common stocks or voting securities, or state, municipal or
industrial revenue bonds.

7. Write or purchase put or call options.

In order to permit the sale of the Fund's shares in certain states, the
Company may make commitments with respect to the Fund that are more restrictive
than the investment policies listed above and in the Prospectus. Should the
Company determine that the commitments made to permit the sale of the Fund's
shares in any state are no longer in the best interests of the Fund, it will
revoke the commitment by terminating sales of the Fund's shares in the state
involved.

The Fund is not permitted to engage in securities lending in accordance
with a fundamental policy prohibiting loans as described in the prospectus. In
the event that this fundamental policy is changed, the Fund has a
nonfundamental operating policy to engage in securities lending only in
compliance with the requirements and limitations of the Securities and Exchange
Commission (the "SEC") and in compliance with blue sky regulations.

If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
the Fund's investments will not constitute a violation of such limitation,
however, the Fund will not at any time hold more than 10% of its net assets in
illiquid securities. Otherwise, the Fund may continue to hold a security even
though it causes the Fund to exceed a percentage limitation because of
fluctuation in the value of the Fund's assets.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

The Prospectus discusses the investment objective of the Fund and the
policies to be employed to achieve that objective. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Fund may invest, the investment policies and portfolio
strategies that the Fund may utilize, and certain risks attendant to such
investments, policies and strategies.

General. The assets of the Fund consist only of obligations maturing
within thirteen months from the date of acquisition (as determined in
accordance with the regulations of the SEC), and the dollar-weighted average
maturity of the Fund may not exceed 90 days.

The securities in which the Fund may invest will not yield as high a level
of current income as may be achieved from securities with less liquidity and
less safety. There can be no assurance that the Fund's investment objective
will be realized as described in the Prospectus.

2
<PAGE> 364
Subsequent to its purchase by the Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Directors or the Adviser, pursuant to
guidelines established by the Board, will consider such an event in determining
whether the Fund should continue to hold the security in accordance with the
interests of the Fund and applicable regulations of the SEC.

Subject to the general supervision and approval of the Board of Directors,
the Adviser makes decisions with respect to and places orders for all purchases
and sales of securities for the Fund. Securities are generally purchased and
sold either directly from the issuer or from dealers who specialize in money
market instruments. Such purchases are usually effected as principal
transactions and therefore do not involve the payment of brokerage commissions.

Repurchase Agreements. The Fund may engage in a repurchase agreement
with respect to any security in which the Fund is authorized to invest,
including U.S. Treasury STRIPS, although the underlying security may mature in
more than thirteen months. The Fund may enter into repurchase agreements
wherein the seller of a security to the Fund agrees to repurchase that security
from the Fund at a mutually agreed-upon time and price which involve the
acquisition by the Fund of an underlying debt instrument, subject to the
seller's obligation to repurchase, and the Fund's obligation to resell, the
instrument at a fixed price usually not more than one week after its purchase.
The Fund's custodian has custody of, and holds in a segregated account,
securities acquired as collateral by the Fund under a repurchase agreement.
Repurchase agreements are considered by the staff of the Securities and
Exchange Commission to be loans by the Fund. The Fund may enter into
repurchase agreements only with respect to securities of the type in which the
Fund may invest, including government securities and mortgage-related
securities, regardless of their remaining maturities, and requires that
additional securities be deposited with the custodian if the value of the
securities purchased should decrease below resale price. Wells Fargo Bank
monitors on an ongoing basis the value of the collateral to assure that it
always equals or exceeds the repurchase price. Certain costs may be incurred
by the Fund in connection with the sale of the underlying securities if the
seller does not repurchase them in accordance with the repurchase agreement.
In addition, if bankruptcy proceedings are commenced with respect to the seller
of the securities, disposition of the securities by the Fund may be delayed or
limited. While it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility of a decline in the
market value of the underlying securities, as well as delay and costs to the
Fund in connection with insolvency proceedings), it is the policy of the Fund
to limit repurchase agreements to selected creditworthy securities dealers or
domestic banks or other recognized financial institutions. The Fund considers
on an ongoing basis the creditworthiness of the institutions with which it
enters into repurchase agreements. Repurchase agreements are considered to be
loans by the Fund under the Investment Company Act of 1940 (the "1940 Act").

Reverse Repurchase Agreements. The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements with financial
institutions such as banks and

3
<PAGE> 365
broker-dealers in accordance with the investment limitations described in the
Prospectus. Pursuant to such an agreement, the Fund would sell portfolio
securities and agree to repurchase them at a mutually agreed upon date and
price. The Fund intends to enter into reverse repurchase agreements to avoid
otherwise having to sell securities during unfavorable market conditions in
order to meet redemptions. At the time the Fund enters into a reverse
repurchase agreement, it will place in a segregated custodial account liquid
assets such as U.S. Government securities or other liquid high-quality debt
securities having a value equal to or greater than the repurchase price
(including accrued interest) and will subsequently monitor the account to
ensure that such equivalent value is maintained. Reverse repurchase agreements
involve the risk that the market value of the securities sold by the Fund may
decline below the price of the securities the Fund is obligated to repurchase.
Reverse repurchase agreements are considered to be borrowings by the Fund under
the 1940 Act.

Floating and Variable-Rate Obligations. The Fund may purchase floating- and
variable-rate obligations as described in the prospectuses. The Fund may
purchase floating- and variable-rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of thirteen months,
but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding thirteen months. Variable rate demand notes
include master demand notes which are obligations that permit the Fund to
invest fluctuating amounts, which may change daily without penalty, pursuant to
direct arrangements between the Fund, as lender, and the borrower. The
interest rates on these notes fluctuate from time to time. The issuer of such
obligations ordinarily has a corresponding right, after a given period, to
prepay in its discretion the outstanding principal amount of the obligations
plus accrued interest upon a specified number of days' notice to the holders of
such obligations. The interest rate on a floating-rate demand obligation is
based on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Accordingly, where these obligations are
not secured by letters of credit or other credit support arrangements, the
Fund's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. Such obligations frequently are not rated by
credit rating agencies and each Fund may invest in obligations which are not so
rated only if Wells Fargo Bank determines that at the time of investment the
obligations are of comparable quality to the other obligations in which the
Fund may invest. Wells Fargo Bank, on behalf of the Fund, considers on an
ongoing basis the creditworthiness of the issuers of the floating- and
variable-rate demand obligations in such Fund's portfolio. The Fund will not
invest more than 10% of the value of its total net assets in floating- or
variable-rate demand obligations whose demand feature is not exercisable within
seven days. Such obligations may be treated as liquid, provided that an active
secondary market exists.

4
<PAGE> 366
Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions. The Fund may purchase securities on a when-issued or forward
commitment (sometimes called a delayed-delivery) basis, which means that the
price is fixed at the time of commitment, but delivery and payment ordinarily
take place a number of days after the date of the commitment to purchase. The
Fund will make commitments to purchase such securities only with the intention
of actually acquiring the securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. The Fund will not accrue
income in respect of a security purchased on a forward commitment basis prior
to its stated delivery date.

Securities purchased on a when-issued or forward commitment basis and
certain other securities held in the Fund's investment portfolio are subject to
changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose the relevant Fund to risk
because they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or forward commitment basis can involve
the additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself. A segregated account of the Fund consisting of cash or U.S. Government
securities or other high quality liquid debt securities at least equal at all
times to the amount of the when-issued or forward commitments will be
established and maintained at the Fund's custodian bank. Purchasing securities
on a forward commitment basis when the Fund is fully or almost fully invested
may result in greater potential fluctuation in the value of the Fund's total
net assets and its net asset value per share. In addition, because the Fund
will set aside cash and other high quality liquid debt securities as described
above the liquidity of the Fund's investment portfolio may decrease as the
proportion of securities in the Fund's portfolio purchased on a when-issued or
forward commitment basis increases.

The value of the securities underlying a when-issued purchase or a forward
commitment to purchase securities, and any subsequent fluctuations in their
value, is taken into account when determining the Fund's net asset value
starting on the day the Fund agrees to purchase the securities. The Fund does
not earn interest on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When the Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets, and fluctuations in the value of
the underlying securities are not reflected in the Fund's net asset value as
long as the commitment remains in effect.

Rule 144A. It is possible that unregistered securities purchased by the
Fund in reliance upon Rule 144A under the Securities Act of 1933, could have
the effect of increasing the level of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a period, uninterested in purchasing
these securities.

5
<PAGE> 367
MANAGEMENT

The following information supplements and should be read in conjunction
with the section in the prospectus entitled "The Fund and Management." The
principal occupations during the past five years of the Directors and principal
executive Officer of the Company are listed below. The address of each, unless
otherwise indicated, is 111 Center Street, Little Rock, Arkansas 72201.
Directors deemed to be "interested persons" of the Company for purposes of the
1940 Act are indicated by an asterisk.

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate Professor of Finance
of the School of Business and Accounting at
Wake Forest University since 1983.
</TABLE>

6
<PAGE> 368
<TABLE>
<S> <C> <C>
Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
Junior College from 1967 to
1971; Adjunct Professor of
Columbia University
Teachers College since
1976.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

7
<PAGE> 369
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
---------- -------------
December 31, 1995 September 30, 1996
------------------ ------------------
Aggregate Total Compensation Aggregate Total Compensation
Compensation from Registrant Compensation from Registrant
Name and Position from Registrant and Fund Complex from Registrant and Fund Complex
- ----------------- --------------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company and by all
the registrants in each fund complex they serve as indicated above and also are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. The Company, Overland Express Funds, Inc., Stagecoach Trust, Life &
Annuity Trust and Master Investment Trust are considered to be members of the
same fund complex as such term is defined in Form N-1A under the 1940 Act (the
"Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master Investment
Portfolio, and Managed Series Investment

8
<PAGE> 370
Trust together form a separate fund complex (the "BGFA Fund Complex"). Each of
the Directors and Officers of the Company serves in the identical capacity as
directors and officers or as trustees and/or officers of each registered
open-end management investment company in both the Wells Fargo and BGFA Fund
Complexes, except for Joseph N. Hankin, who only serves the aforementioned
members of the Wells Fargo Fund Complex, and Zoe Ann Hines who, after September
6, 1996, only serves the aforementioned members of the BGFA Fund Complex. The
Directors are compensated by other companies and trusts within a fund complex
for their services as directors/trustees to such companies and trusts.
Currently the Directors do not receive any retirement benefits or deferred
compensation from the Company or any other member of each fund complex.

As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.

INVESTMENT ADVISER. The Fund is advised by Wells Fargo Bank pursuant to an
advisory contract under which Wells Fargo Bank has agreed to furnish investment
guidance and policy direction in connection with the daily portfolio management
of the Fund. On behalf of the Fund, the Company's Board of Directors approved
the advisory contract with Wells Fargo Bank for an initial two-year period.
Pursuant to the advisory contract, Wells Fargo Bank also has agreed to furnish
to the Board of Directors periodic reports on the investment strategy and
performance of the Fund.

Wells Fargo Bank has agreed to provide to the Fund, among other things,
money market and fixed-income research, analysis and statistical and economic
data and information concerning interest-rate and security market trends,
portfolio composition, credit conditions and, average maturity of the Fund. As
compensation for its advisory services, Well Fargo Bank is entitled to receive
a monthly fee at the annual rate of 0.25%.

Prior to the Reorganization, Wells Fargo Investment Management, Inc.
("WFIM") and its predecessor, First Interstate Capital Management, Inc.
("FICM") served as adviser to the Predecessor Portfolios of Pacifica. As of
the date of the Reorganization (September 6, 1996), Wells Fargo Bank became the
adviser to the Fund. For the year ended September 30, 1996 the Fund paid to
FICM, WFIM and Wells Fargo Bank, the advisory fees indicated below and the
indicated amount was waived:

<TABLE>
<CAPTION>
Year Ended September 30, 19961
-----------------------------

Fees Paid Fees Waived
--------- -----------
<S> <C> <C> <C>
o Money Market Trust $151,546 $2,021,955
</TABLE>

(1) For the period begun October 1, 1995 and ended March 31, 1996 the
Predecessor Portfolio paid advisory fees to FICM, for the period begun April 1,
1996 and ended September 5, 1996 the Predecessor Portfolio paid advisory fees
to WFIM, and for the period begun September 6, 1996 and ended September 30,
1996 the Fund paid advisory fees to Wells Fargo Bank, and each such investment
adviser waived varying amounts of such fees. The advisory fees did not change
from investment adviser to investment adviser during the year ended September
30, 1996, and were as follows: computed daily and paid monthly, at an annual
rate of

9
<PAGE> 371
0.30% of the first $500 million of the average daily net assets of the Fund,
0.25% of the next $500 million of the Fund's average daily net assets, and
0.20% of the Fund's average daily net assets in excess of $1 billion.

The advisory contract continues in effect for more than two years provided
the continuance is approved annually (i) by the holders of a majority of the
Fund's outstanding voting securities or (ii) by the Company's Board of
Directors and by a majority of the Directors of the Company who are not parties
to the advisory contracts or "interested persons" (as defined in the 1940 Act)
of any such party. The advisory contracts may be terminated on 60 days'
written notice by either party and will terminate automatically if assigned.

Prior to October 1, 1995, First Interstate of Oregon, N.A. (the
"Predecessor Adviser") served as the investment adviser to the Fund. For the
four-month period ended September 30, 1995, and fiscal years ended May 31,
1995, 1994 and 1993, the Predecessor Adviser was entitled to receive and waived
or reimbursed advisory fees paid by the Fund as follows:

Investment Advisory Fees
<TABLE>
<CAPTION>
Fees Waived and
Fiscal Period Fees Earned Expenses Reimbursed
- ------------- ------------ -------------------
<S> <C> <C>
Four-Month Period Ended
September 30, 1995 $662,983 $662,983

Year Ended May 31, 1995 $1,932,733 $2,120,794

Year Ended May 31, 1994 $1,193,856 $1,104,228

Year Ended May 31, 1993 $570,505 $387,505
</TABLE>

The advisory contracts and administration agreement for the Fund provide
that if, in any fiscal year, the total expenses of the Fund incurred by, or
allocated to, the Fund (excluding taxes, interest, brokerage commissions and
other portfolio transaction expenses, expenditures that are capitalized in
accordance with generally accepted accounting principles, extraordinary
expenses and amounts accrued or paid under the Plan but including the fees
provided for in the applicable advisory contract and the administration
agreement) exceed the most restrictive expense limitation applicable to the
Fund imposed by the securities laws or regulations of the states in which the
Fund's shares are registered for sale, Wells Fargo Bank and Stephens shall
waive their fees proportionately under the advisory contract and the
administration agreement, respectively, for the Fund for the fiscal year to the
extent of the excess or reimburse the excess, but only to the extent of their
respective fees. The advisory contracts and the administration agreement for
the Fund further provide that the Fund's total expenses shall be reviewed
monthly so that, to the extent the annualized expenses for such month exceed
the most restrictive applicable annual expense limitation, the monthly fees
under the contract and the agreement shall be reduced

10
<PAGE> 372
as necessary. Currently, California is the only state imposing limitations on
Fund expenses. Those expense limitations are 2-1/2 percent of the first $30
million of a Fund's average net assets, 2 percent of the next $70 million and
1-1/2 percent of a Fund's remaining average net assets.

Expenses incurred in the organization and operation of the Fund, including
taxes, interest, penalties, brokerage and other fees and commissions, if any,
fees and expenses of Directors, SEC fees and related expenses, state Blue Sky
qualification fees, advisory fees, administration fees, charges of custodians,
costs of transfer and dividend disbursing agents, certain insurance premiums,
outside auditing and legal expenses, costs of maintenance of Company existence,
costs of independent pricing services, investor services, preparation and
printing of prospectuses for regulatory purposes and for distribution to
shareholders, shareholders' reports and shareholders' meetings, and
extraordinary expenses, are borne by the Fund.

Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, (a)
prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 (the "Holding Company Act") or any bank or non-bank
affiliate thereof from sponsoring, organizing, or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from underwriting securities, but (b) do not
prohibit such a bank holding company or affiliate generally from acting as
investment adviser, transfer agent, or custodian to such an investment company,
or from purchasing shares of such a company as agent for and upon the order of
a customer. In some states, banks or other institutions through which
transactions in Fund shares are effected, may be required to register as
dealers pursuant to state law.

ADMINISTRATOR AND CO-ADMINISTRATOR . The Company has retained Wells
Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of the
Fund. The Administration Agreement between Wells Fargo Bank and the Fund, and
the Co- Administration Agreement among Wells Fargo Bank, Stephens and the Fund,
state that Wells Fargo and Stephens shall provide as administrative services,
among other things: (i) general supervision of the operation of the Fund,
including coordination of the services performed by the Fund's investment
adviser, transfer agent, custodian, shareholder servicing agent(s), independent
public accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions; and preparation of proxy statements
and shareholder reports for the Fund; and (ii) general supervision relative to
the compilation of data required for the preparation of periodic reports
distributed to the Company's officers and Board of Directors. Wells Fargo Bank
and Stephens also furnish office space and certain facilities required for
conducting the business of the Fund together with ordinary clerical and
bookkeeping services. Stephens pays the compensation of the Company's
Directors, officers and employees who are affiliated with Stephens. The
Administrator and Co-Administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of the Fund.

11
<PAGE> 373
Prior to September 6, 1996, the administrator of the Pacifica Predecessor
Portfolio (Furman Selz LLC) provided management and administrative services
necessary for the operation of such Funds, pursuant to an Administrative
Services Contract. For these services, the former administrator was entitled to
receive a fee, payable monthly, at the annual rate of 0.15% of the average
daily net assets of the Predecessor Portfolio. For the period from September
6, 1996 to September 30, 1996, Stephens served as the Fund's sole administrator
and was entitled to receive a fee, payable monthly, at the annual rate of 0.05%
of the Fund's average daily net assets.

The net administrative fee (after waivers) paid to Furman Selz LLC and
Stephens during the year ended September 30, 1996, was $715,853.

Prior to October 1, 1995, ALPS Mutual Funds Services, Inc. ("ALPS") served
as the administrator to the Fund. For the four-month period ended September 30,
1995 and the fiscal years ended May 31, 1995 and 1994, ALPS received
administrative fees from the Fund as follows:

<TABLE>
<CAPTION>
Four-Month Period Ended Year Ended Year Ended
Sept. 30, 1995 May 31, 1995 May 31, 1994
-------------- ------------ ------------
<S> <C> <C>
$132,597 $387,803 $241,778
</TABLE>

SPONSOR AND DISTRIBUTOR. As discussed in the Fund's prospectus under the
heading "Management and Servicing Fees," Stephens serves as the Fund's sponsor
and distributor.

Prior to September 6, 1996, Pacifica had retained Pacifica Funds
Distributor, Inc., a subsidiary of Furman Selz, to serve as principal
underwriter for the shares of the Fund pursuant to a Distribution Contract. The
Distribution Contract provided that the distributor was not entitled to any
payments from the Fund for its distribution services.

Prior to October 1, 1995, ALPS served as distributor for the Fund. ALPS was
not entitled to any compensation for its services as distributor.

SHAREHOLDER SERVICING AGENT. As discussed in the Fund's prospectus under
the heading "Shareholder Servicing Agent," the Fund approved a Servicing Plan
and has entered into related shareholder servicing agreements with financial
institutions, including Wells Fargo Bank. For providing these services, a
Servicing Agent is entitled to receive a fee from the Fund, not to exceed 0.20%
on an annualized basis, of the average daily net assets of the shares owned of
record or beneficially by the customers of the Servicing Agent during the
period for which payment is being made. The Servicing Plan and related
shareholder servicing agreements were approved by the Company's Board of
Directors and provide that the Fund shall not be obligated to make any payments
under such Plan or related Agreements that exceed the maximum amounts payable
under Article III, Section 26 of the Conduct Rules of the National Association
of Securities Dealers, Inc. ("NASD Rules").

12
<PAGE> 374
For the year ended September 30, 1996, the Fund paid no shareholder
servicing fees to First Interstate Bancorp or Wells Fargo Bank or its
affiliates pursuant to the Plan.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank
has been retained to act as custodian and transfer and dividend disbursing
agent for the Fund, pursuant to a Custody Agreement and an Agency Agreement
with the Company on behalf of the Fund. The custodian, among other things,
maintains a custody account or accounts in the name of the Fund, receives and
delivers all assets for the Fund upon purchase and upon sale or maturity,
collects and receives all income and other payments and distributions on
account of the assets of the Fund and pays all expenses of the Fund. For its
services as custodian, Wells Fargo Bank is entitled to receive fees as follows:
a net asset charge at the annual rate of 0.0167%, payable monthly, plus
specified transaction charges. Wells Fargo Bank also will provide portfolio
accounting services under the Custody Agreement as follows: a monthly base fee
of $2,000 plus a net asset fee at the annual rate of 0.070% of the first
$50,000,000 of a Fund's average daily net assets, 0.045% of the next
$50,000,000, and 0.020% of the average daily net assets in excess of
$100,000,000.

Prior to April 1, 1996, FICAL acted as custodian of the Predecessor
Portfolio, but played no role in making decisions as to the purchase or sale of
portfolio securities for the Predecessor Portfolio. FICAL was entitled to
receive a fee from Pacifica, computed daily and payable monthly, at the annual
rate of 0.02% of the first $5 billion in aggregate average daily net assets of
the Fund; 0.0175% of the next $5 billion in aggregate average daily net assets
of the Fund; and 0.015% of the aggregate average daily net assets of the Fund
in excess of $10 billion, as well as certain transaction charges.

For the year ended September 30, 1996, the Fund paid no custody fees to
FICAL or Wells Fargo Bank.

For its services as transfer and dividend disbursing agent for the Fund,
Wells Fargo Bank is entitled to receive monthly payments at the annual rate of
0.02% of the Fund's average daily net assets. Under the prior agency agreement
for the Fund, Wells Fargo Bank was entitled to receive monthly payments at the
annual rate of 0.04% of the Fund's average daily net assets, and reimbursement
for any reasonable out-of-pocket expenses. Prior to the Reorganization,
Furman Selz acted as transfer agent for the Predecessor Portfolio. Pacifica
compensated Furman Selz for providing personnel and facilities to perform
transfer agency related services for Pacifica at a rate intended to represent
the cost of providing such services. For the year ended September 30, 1996,
the Fund paid no transfer and dividend disbursing agency fees to Wells Fargo
Bank.

UNDERWRITING COMMISSIONS. The Fund does not charge any front-end sales
loads or contingent deferred sales charges in connection with the purchase and
redemption of its shares, and therefore pays no underwriting commissions to the
Distributor.

13
<PAGE> 375
SERVICING PLANS

As indicated in the prospectus, the Company's Board of Directors, adopted a
Servicing Plan ("Servicing Plan") and related form of Shareholder Servicing
Agreements with respect to the Fund. The Board of Directors included a
majority of the Directors who were not "interested persons" (as defined in the
Act) of the Fund and who had no direct or indirect financial interest in the
operation of the Servicing Plan or in any agreement related to the Servicing
Plan (the "Servicing Plan Non-Interested Directors").

Under the Servicing Plan and pursuant to the shareholder servicing
agreements, the Fund may pay one or more servicing agents, as compensation for
performing certain services, a fee at an annual rate of up to 0.20% of the
average daily net assets of the Fund's shares attributable to the servicing
agent's customers. The actual fee payable to servicing agents is determined,
within such limits, from time to time by mutual agreement between the Company
and each servicing agent and will not exceed the maximum service fees payable
by mutual funds sold by members of the NASD under the NASD Rules.

The Servicing Plan continues in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Servicing Plan Non-Interested Directors. Any form of servicing
agreement related to the Servicing Plan also must be approved by such vote of
the Directors and the Servicing Plan Non-Interested Directors. Servicing
agreements may be terminated at any time, without payment of any penalty, by
vote of a majority of the Servicing Plan Non-Interested Directors. No material
amendment to the Servicing Plans may be made except by a majority of both the
Directors of the Company and the Servicing Plan Non-Interested Directors.

The Servicing Plan requires that the administrator shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Servicing Plan.

PERFORMANCE CALCULATIONS

The following information supplements and should be read in conjunction
with the sections in each prospectus entitled "Determination of Net Asset
Value" and "Performance Data."

The Fund may, from time to time, include its yield or effective yield in
advertisements or reports to shareholders or prospective investors.

"Yield" for the Fund will be based on the change in the value of a
hypothetical investment (exclusive of capital changes) over a particular
seven-day period, less a pro-rata share of the Fund's expenses accrued over
that period (the "base period"), and stated as a percentage of the investment
at the start of the base period (the "base period return"). The

14
<PAGE> 376
base period return is then annualized by multiplying by 365/7, with the
resulting yield figure carried to at least the nearest hundredth of one
percent.

"Effective Yield" for the Fund assumes that all dividends received during
an annual period have been reinvested. Calculation of "effective yield" begins
with the same "base period return" used in the calculation of yield, which is
then annualized to reflect weekly compounding pursuant to the following
formula:

Effective Yield = [(Base Period Return +1)365/7]-1.

Yield For The Applicable Period Ended September 30, 19961

<TABLE>
<CAPTION>
Seven-Day Yield Seven-Day Effective Yield
--------------- -------------------------
<S> <C>
5.30% 5.44%
- ------------------------------------
</TABLE>
(1) The Fund does not assess sales charges.

Yield information may be useful in reviewing the Fund's performance and for
providing a basis for comparison with other investment alternatives. However,
yields fluctuate, unlike investments which pay a fixed yield for a stated
period of time. Yields for the Fund are calculated on the same basis as other
money market funds as required by applicable regulations. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.

Quotations of yield reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Yield varies
based on changes in market conditions and the level of a Fund's expenses, and
no reported performance figure should be considered an indication of
performance which may be expected in the future.

Investors should recognize that in periods of declining interest rates, the
Fund's yields will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates, the Fund's yields will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new money to
the Fund from the continuous sale of its shares will likely be invested in
instruments producing lower yields than the balance of the Fund, thereby
reducing the current yields of the Fund. In periods of rising interest rates,
the opposite can be expected to occur.

In connection with communicating its yields to current or prospective
shareholders, these figures may also be compared to the performance of other
mutual funds tracked by mutual fund rating services or to unmanaged indices
which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.

From time to time and only to the extent the comparison is appropriate for
the Fund, the Company may quote performance or price-earning ratios in
advertising and other types of

15
<PAGE> 377
literature as compared with the performance of the Lehman Brothers Municipal
Bond Index, 1-Year Treasury Bill Rate, S&P Index, the Dow Jones Industrial
Average, the Lehman Brothers 20+ Years Treasury Index, the Lehman Brothers 5-7
Year Treasury Index, IBC/Donoghue's Money Fund Averages, Real Estate Investment
Averages (as reported by the National Association of Real Estate Investment
Trusts), Gold Investment Averages (provided by the World Gold Council), Bank
Averages (which is calculated from figures supplied by the U.S. League of
Savings Institutions based on effective annual rates of interest on both
passbook and certificate accounts), average annualized certificate of deposit
rates (from the federal Reserve G-13 Statistical Releases or the Bank Rate
Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer Price
Index (as published by the U.S. Bureau of Labor Statistics), Ten Year U.S.
Government Bond Average, S&P's Corporate Bond Yield Averages, Schabacter
Investment Management Indices, Salomon Brothers High Grade Bond Index, Lehman
Brothers Long-Term High Quality Government/Corporate Bond Index, other managed
or unmanaged indices or performance data of bonds, stocks or government
securities (including data provided by Ibbotson Associates), or by other
services, companies, publications or persons who monitor mutual funds on
overall performance or other criteria. The S&P Index and the Dow Jones
Industrial Average are unmanaged indices of selected common stock prices.

The performance of the Fund also may be compared to the performance of
other mutual funds having similar objectives. This comparative performance
could be expressed as a ranking prepared by Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc., Bloomberg Financial Markets or Morningstar,
Inc., independent services that monitor the performance of mutual funds. Any
such comparisons may be useful to investors who wish to compare the Fund's past
performance with that of its competitors. Of course, past performance cannot
be a guarantee of future results. The Company also may include, from time to
time, a reference to certain marketing approaches of the Distributor,
including, for example, a reference to a potential shareholder being contacted
by a selected broker or dealer. General mutual fund statistics provided by the
Investment Company Institute may also be used.

In addition, the Company also may use, in advertisements and other types of
literature, information and statements showing that bank savings accounts offer
a guaranteed return of principal and a fixed rate of interest, but no
opportunity for capital growth. The Company also may include in advertising
and other types of literature information and other data from reports and
studies prepared by the Tax Foundation, including information regarding federal
and state tax levels and the related "Tax Freedom Day."

16
<PAGE> 378
returns in general, may be illustrated by graphs, charts, etc., where such
graphs or charts would compare, at various points in time, the return from an
investment in the Fund or a class of shares (or returns in general) on a
tax-deferred basis (assuming reinvestment of capital gains and dividends and
assuming one or more tax rates) with the return on a taxable basis; and (iv)
the sectors or industries in which the Fund invests may be compared to relevant
indices of stocks or surveys (e.g., S&P Industry Surveys) to evaluate the
historical performance of the Fund or current or potential value with respect
to the particular industry or sector.

The Company also may discuss in advertising and other types of literature
that the Fund has been assigned a rating by a nationally recognized statistical
rating organization ("NRSRO"), such as S&P or Moody's. Such rating would
assess the creditworthiness of the investments held by the Fund. The assigned
rating would not be a recommendation to purchase, sell or hold any class of the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of the Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating to the Fund or its investments. The Company may compare the Fund's
performance with other investments that are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare the Fund's past
performance with other rated investments.

From time to time the Company may reprint, reference or otherwise use
material from magazines, newsletters, newspapers and books including, but not
limited to the Wall Street Journal, Money Magazine, Barrons, Kiplingers,
Business Week, Fortune, Forbes, the San Francisco Chronicle, the San Jose
Mercury News, The New York Times, the Los Angeles Times, the Boston Globe, the
Washington Post, the Chicago Sun-Times, Investor Business Daily, Worth, Bank
Investor, American Banker, Smart Money, the 100 Best Mutual Funds (Adams
Publishing), Morningstar or Value Line.

The Company also may disclose in sales literature, the distribution rate on
the Fund's shares. Distribution rate, which may be annualized, is the amount
determined by dividing the dollar amount per share of the most recent dividend
by the most recent NAV or maximum offering price per share as of a date
specified in the sales literature. Distribution rate will be accompanied by
the standard 30-day yield as required by the SEC.

17
<PAGE> 379
December 31, 1996, Wells Fargo Bank and its affiliates provided investment
advisory services for approximately $54 billion of assets of individuals,
trusts, estates and institutions and $20 billion of mutual fund assets.

The Company may disclose in advertising and other types of literature that
investors can open and maintain Sweep Accounts over the Internet or through
other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available
to investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the
first major bank to offer an on-line application for a mutual fund account that
can be filled out completely through Electronic Channels. Advertising and
other literature may disclose that Wells Fargo Bank may maintain Web sites,
pages or other information sites accessible through Electronic Channels (an
"Information Site") and may describe the contents and features of the
Information Site and instruct investors on how to access the Information Site
and open a Sweep Account. Advertising and other literature may also disclose
the procedures employed by Wells Fargo Bank to secure information provided by
investors, including disclosure and discussion of the tools and services for
accessing Electronic Channels. Such advertising or other literature may
include discussions of the advantages of establishing and maintaining a Sweep
Account through Electronic Channels and testimonials from Wells Fargo Bank
customers or employees and may also include descriptions of locations where
product demonstrations may occur. The Company may also disclose the ranking of
Wells Fargo Bank as one of the largest money managers in the United States.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in conjunction
with the prospectus section under "Purchase of Shares."

Expenses and fees, including advisory fees, are accrued daily and are taken
into account for the purpose of determining the net asset value of a Fund's
shares.

Net asset value per share for the Fund is determined as of 12:00 noon
Pacific time on each Business Day as described in the prospectus.

The Fund's instruments are valued on the basis of amortized cost. This
technique involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than
the price a Fund would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on Fund shares computed as described
above may tend to be higher than a like computation made by a fund with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for

18
<PAGE> 380
all of its instruments. Thus, if the use of amortized cost by the Fund resulted
in a lower aggregate portfolio value on a particular day, a prospective
investor in the Fund would be able to obtain a somewhat higher yield than would
result from investment in a fund utilizing solely market values and existing
investors in the Fund would receive less investment income. The converse would
apply in a period of rising interest rates.

The valuation of the Fund's instruments, based upon their amortized cost
and the concomitant maintenance by the Fund of a net asset value of $1.00, is
permitted in accordance with Rule 2a-7 under the Act, pursuant to which the
Fund must adhere to certain conditions. The Fund must maintain a
dollar-weighted average maturity of 90 days or less, purchase only instruments
having remaining maturities of 397 days (thirteen months) or less, and invest
only in securities that are determined to present minimal credit risks pursuant
to guidelines adopted by the Directors or the adviser under guidelines approved
by the Directors. Instruments having variable or floating interest rates or
demand features may be deemed to have remaining maturities as follows: (a) a
government security with a variable rate of interest readjusted no less
frequently than every thirteen months may be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate; (b) an
instrument with a variable rate of interest, the principal amount of which is
scheduled on the face of the instrument to be paid in thirteen months or less,
may be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (c) an instrument with a variable rate of
interest that is subject to a demand feature may be deemed to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand; (d) an instrument with a floating rate of interest
that is subject to a demand feature may be deemed to have a maturity equal to
the period remaining until the principal amount can be recovered through
demand; and (e) a repurchase agreement may be deemed to have a maturity equal
to the period remaining until the date on which the repurchase of the
underlying securities is scheduled to occur or, where no date is specified but
the agreement is subject to demand, the notice period applicable to a demand
for the repurchase of the securities.

The Company's Board of Directors has established valuation procedures
designed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions. Such procedures
include the determination, at such intervals as the Directors deem appropriate,
of the extent to which the Fund's NAV as calculated by using available market
quotations deviates from $1.00 per share, such deviation may result in material
dilution or other unfair results to existing shareholders or investors. In the
event the Directors determine that such a material deviation exists, they have
agreed to take such corrective action as they regard as necessary and
appropriate, which may include selling portfolio instruments prior to maturity
to realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; redeeming shares in kind or without monetary or other
consideration; or establishing a net asset value per share by using available
market quotations. It is the intention of the Fund to maintain a per share net
asset value of $1.00, but there can be no assurance that the Fund will do so.

19
<PAGE> 381
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Fund shares may be purchased on any day the Fund is open (a "Business
Day"). The Fund is open on any day that either the New York Stock Exchange or
Wells Fargo Bank is open. Currently the holidays observed by both the New York
Stock Exchange and Wells Fargo Bank are New Year's Day, Presidents' Day, Martin
Luther King's Birthday, Memorial Day, Independence Day, Labor Day, Columbus
Day, Veterans Day, Thanksgiving Day and Christmas Day (each, a "Holiday"). When
any Holiday falls on a weekend, the Fund typically is closed on the weekday
immediately before or after such Holiday.

Payment for shares may, in the discretion of the adviser, be made in the
form of securities that are permissible investments for the Fund as described
in the Prospectus. For further information about this form of payment please
contact Stephens. In connection with an in-kind securities payment, the Fund
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Fund and that the
Fund receives satisfactory assurances that (i) it will have good and marketable
title to the securities received by it; (ii) that the securities are in proper
form for transfer to the Fund; and (iii) adequate information will be provided
concerning the basis and other matters relating to the securities.

Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

PORTFOLIO TRANSACTIONS

The Company has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by the

20
<PAGE> 382
Company's Board of Directors, Wells Fargo Bank is responsible for the Fund's
portfolio decisions and the placing of portfolio transactions. In placing
orders, it is the policy of the Company to obtain the best results taking into
account the dealer's general execution and operational facilities, the type of
transaction involved and other factors such as the dealer's risk in positioning
the securities involved. While Wells Fargo Bank generally seeks reasonably
competitive spreads or commissions, the Fund will not necessarily be paying the
lowest spread or commission available.

Purchase and sale orders of the securities held by the Fund may be combined
with those of other accounts that Wells Fargo Bank manages, and for which it
has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When Wells Fargo Bank determines that a
particular security should be bought or sold for the Fund and other accounts
managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate those
transactions among the participants equitably.

Purchases and sales of securities usually are principal transactions.
Portfolio securities normally are purchased or sold from or to dealers serving
as market makers for the securities at a net price. The Fund also purchases
portfolio securities in underwritten offerings and may purchase securities
directly from the issuer. Generally, municipal obligations and taxable money
market securities are traded on a net basis and do not involve brokerage
commissions. The cost of executing the Fund's portfolio securities
transactions consists primarily of dealer spreads and underwriting commissions.
Under the 1940 Act, persons affiliated with the Company are prohibited from
dealing with the Company as a principal in the purchase and sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC
or an exemption is otherwise available.

The Fund may purchase certain obligations from underwriting syndicates of
which Stephens or Wells Fargo Bank is a member under certain conditions in
accordance with the provisions of a rule adopted under the 1940 Act and in
compliance with procedures adopted by the Board of Directors.

Wells Fargo Bank, as the Fund's investment adviser, may, in circumstances
in which two or more dealers are in a position to offer comparable results for
a Fund portfolio transaction, give preference to a dealer that has provided
statistical or other research services to Wells Fargo Bank. By allocating
transactions in this manner, Wells Fargo Bank is able to supplement its
research and analysis with the views and information of securities firms.
Information so received is in addition to, and not in lieu of, the services
required to be performed by Wells Fargo Bank under the advisory contracts, and
the expenses of Wells Fargo Bank are not necessarily reduced as a result of the
receipt of this supplemental research information. Furthermore, research
services furnished by dealers through which Wells Fargo Bank places securities
transactions for the Fund may be used by Wells Fargo Bank in servicing its
other accounts, and not all of these services may be used by Wells Fargo Bank
in connection with advising the Funds.

21
<PAGE> 383
Consistent with the Rules of Fair Practice of the NASD, and subject to
seeking the most favorable price and execution available and such other
policies as the Directors may determine, the adviser may consider sales of Fund
shares as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.

Brokerage Commissions. Subject to the general supervision and approval
of the Board of Directors, the adviser makes decisions with respect to and
places orders for all purchases and sales of securities for the Fund.
Securities are generally purchased and sold either directly from the issuer or
from dealers who specialize in money market instruments. Such purchases are
usually effected as principal transactions and therefore do not involve the
payment of brokerage commissions.

During the fiscal periods ended September 30 ,1996, September 30, 1995,
May 31, 1995, and May 31, 1994, the Fund and the Predecessor Portfolio did not
pay any brokerage commissions, because all of its portfolio transactions
occurred in the over-the-counter market.

Securities of Regular Broker Dealers. The Fund may from time to time
purchase securities issued by its regular broker/dealers. As of September 30,
1996, the Fund owned securities of its "regular brokers or dealers" or their
parents as defined in the Act, as follows:
<TABLE>
<CAPTION>
AMOUNT REGULAR BROKER/DEALER
------ ---------------------
<S> <C>
$263,865,000 Goldman Sachs & Co.
</TABLE>

Prior to October 1, 1995, ALPS Mutual Funds Services, Inc. ("ALPS") served
as administrator/distributor for the Fund, and reported no holdings of
securities by the Fund of its regular broker/dealers or of their parents that
derive more than 15% of gross revenues from securities-related activities.

Portfolio Turnover Rate. The portfolio turnover rate is not a limiting
factor when Wells Fargo Bank deems portfolio changes appropriate. Because the
Fund's portfolio consists of securities with relatively short-term maturities,
it can expect to experience high portfolio turnovers. A high portfolio
turnover rate should not adversely affect the Fund, however, because portfolio
transactions ordinarily will be made directly with principals on a net basis
and, consequently, the Fund usually will not incur brokerage expenses.

FUND EXPENSES

22
<PAGE> 384
shareholder servicing and administration fees; payments pursuant to any Plan;
interest charges; taxes; fees and expenses of its independent accountants,
legal counsel, transfer agent and dividend disbursing agent; expenses of
redeeming shares; expenses of preparing and printing prospectuses (except the
expense of printing and mailing prospectuses used for promotional purposes,
unless otherwise payable pursuant to a Plan), shareholders' reports, notices,
proxy statements and reports to regulatory agencies; insurance premiums and
certain expenses relating to insurance coverage; trade association membership
dues; brokerage and other expenses connected with the execution of portfolio
transactions; fees and expenses of its custodian, including those for keeping
books and accounts and calculating the NAV per share of the Fund; expenses of
shareholders' meetings; expenses relating to the issuance, registration and
qualification of the Fund's shares; pricing services, and any extraordinary
expenses. Expenses attributable to the Fund are charged against Fund assets.
General expenses of the Company are allocated among all of the funds of the
Company, including the Fund, in a manner proportionate to the net assets of the
Fund, on a transactional basis, or on such other basis as the Company's Board
of Directors deems equitable.

FEDERAL INCOME TAX

In General. The following information supplements and should be read in
conjunction with the Prospectus sections entitled "Dividend and Capital Gain
Distributions" and "Taxes." The Prospectus describes generally the tax
treatment of distributions by the Fund. This section of the SAI includes
additional information concerning federal income taxes.

The Company intends to qualify the Fund as a regulated investment company
under Subchapter M of the Code as long as such qualification is in the best
interest of the Fund's shareholders. The Fund will be treated as a separate
entity for tax purposes and thus the provisions of the Code applicable to
regulated investment companies will generally be applied to the Fund, rather
than to the Company as a whole. In addition, net capital gains, net investment
income, and operating expenses will be determined separately for the Fund.

23
<PAGE> 385
businesses. As a regulated investment company, the Fund will not be subject to
federal income tax on its net investment income and net capital gains
distributed to its shareholders, provided that it distributes to its
shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. The Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

A 4% nondeductible excise tax will be imposed on the Fund (other than to the
extent of the Fund's tax-exempt income) to the extent it does not meet certain
minimum distribution requirements by the end of each calendar year. The Fund
will either actually or be deemed to distribute all of its net investment
income and net capital gains by the end of each calendar year and, thus,
expects not to be subject to the excise tax.

Federal Income Tax Rates. As of the printing of this SAI, the maximum
individual tax rate applicable to ordinary income is 39.60% (marginal rates may
be higher for some individuals due to phase out of exemptions and elimination
of deductions); the maximum individual marginal tax rate applicable to net
capital gains is 28.00%; the maximum corporate tax rate applicable to ordinary
income and net capital gains is 35.00% (except that to eliminate the benefit of
lower marginal corporate income tax rates, corporations which have taxable
income in excess of $100,000 for a taxable year will be required to pay an
additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

Capital Gain Distributions. To the extent that the Fund recognizes
long-term capital gains, such gains will be distributed at least annually and
these distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares. Such distributions
will be designated as capital gain distributions in a written notice mailed by
the Fund to the shareholders not later than 60 days after the close of the
Fund's taxable year.

Other Distributions. Although dividends will be declared daily based on the
Fund's daily earnings, for federal income tax purposes, the Fund's earnings and
profits will be determined at the end of each taxable year and will be
allocated pro rata over the entire year. For federal income tax purposes, only
amounts paid out of earnings and profits will qualify as dividends. Thus, if
during a taxable year the Fund's declared dividends (as declared daily
throughout the year) exceed the Fund's net income (as determined at the end of
the year), only that portion of the year's distributions which equals the
year's earnings and profits will be deemed to have constituted a dividend. It
is expected that the Fund's net income, on an annual basis, will equal the
dividends declared during the year.

Disposition of Fund Shares. If a shareholder receives a designated capital
gain distribution (to be treated by the shareholder as a long-term capital
gain) with respect to any

24
<PAGE> 386
Fund share and such Fund share is held for six months or less, then (unless
otherwise disallowed) any loss on the sale or exchange of that Fund share will
be treated as a long-term capital loss to the extent of the designated capital
gain distribution. In addition, any loss realized by a shareholder upon the
sale or redemption of Fund shares held less than six months is disallowed to
the extent of any exempt-interest dividends received thereon by the
shareholder. These rules shall not apply, however, to losses incurred under a
periodic redemption plan.

Taxation of Fund Investments. Gains or losses on sales of portfolio
securities by the Fund will generally be long- term capital gains or losses if
the securities have been held by it for more than one year, except in certain
cases such as where the Fund acquires a put or writes a call thereon. Gains
recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by the Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Fund held the debt obligation. Other
gains or losses on the sale of portfolio securities will be short-term capital
gains or losses.

25
<PAGE> 387
credited to an individual Fund shareholder, unless a shareholder certifies that
the Taxpayer Identification Number ("TIN") provided is correct and that the
shareholder is not subject to backup withholding, or the IRS notifies the
Company that the shareholder's TIN is incorrect or the shareholder is subject
to backup withholding. Such tax withheld does not constitute any additional
tax imposed on the shareholder, and may be claimed as a tax payment on the
shareholder's federal income tax return. An investor must provide a valid TIN
upon opening or reopening an account. Failure to furnish a valid TIN to the
Company could subject the investor to penalties imposed by the IRS.

Other Matters. Investors should be aware that the investments to be made by
the Fund may involve sophisticated tax rules that may result in income or gain
recognition by the Fund without corresponding current cash receipts. Although
the Fund will seek to avoid significant noncash income, such noncash income
could be recognized by the Fund, in which case the Fund may distribute cash
derived from other sources in order to meet the minimum distribution
requirements described above.

The foregoing discussion and the discussions in the Prospectus address only
some of the federal tax considerations generally affecting investments in the
Fund. Each investor is urged to consult his or her tax advisor regarding
specific questions as to federal, state or local taxes and foreign taxes.

CAPITAL STOCK

The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "The Funds and Management."

The Fund is one of the Stagecoach Family of funds. The Company was
organized as a Maryland corporation on September 9, 1991 and currently offers
shares of twenty-four other funds.

The Fund offers one class of shares. Most of the Company's funds are
authorized to issue multiple classes of shares, one class generally subject to
a front-end sales charge and, in some cases, a class subject to a contingent-
deferred sales charge, that are offered to retail investors. Certain of the
Company's funds also are authorized to issue other classes of shares, which are
sold primarily to institutional investors. Each class of shares in a fund
represents an equal, proportionate interest in a fund with other shares of the
same class. Shareholders of each class bear their pro rata portion of the
fund's operating expenses, except for certain class-specific expenses (e.g.,
any state securities registration fees, shareholder servicing fees or
distribution fees that may be paid under Rule 12b-1) that are allocated to a
particular class. Please contact Stagecoach Shareholder Services at
1-800-222-8222 if you would like additional information about other funds or
classes of shares offered.

26
<PAGE> 388
Pacifica was a Massachusetts business trust established under a Declaration
of Trust dated July 17, 1984, consisting of series of separately managed
portfolios. The capitalization of Pacifica consisted solely of an unlimited
number of shares of beneficial interest with a par value of $0.001 each.

Voting. On any matter submitted to a vote of shareholders, all shares then
entitled to vote are voted separately by series unless otherwise required by
the Act, in which case all shares are voted in the aggregate. For example, a
change in a series' fundamental investment policy affects only one series and
are voted upon only by shareholders of the series and not by shareholders of
the Company's other series. Additionally, approval of an advisory contract is
a matter to be determined separately by each series. Approval by the
shareholders of one series is effective as to that series whether or not
sufficient votes are received from the shareholders of the other series to
approve the proposal as to those series. As used in the prospectus and in this
SAI, the term "majority" when referring to approvals to be obtained from
shareholders of the Fund, means the vote of the lesser of (i) 67% of the Fund
shares represented at a meeting if the holders of more than 50% of the
outstanding Fund shares are present in person or by proxy, or (ii) more than
50% of the outstanding shares of the Fund. The term "majority," when
referring to the approvals to be obtained from shareholders of the Company as a
whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares. Shareholders are entitled to one vote for
each full share held and fractional votes for fractional shares held. The
Company may dispense with an annual meeting of shareholders in any year in
which it is not required to elect directors under the 1940 Act.

Each Fund share represents an equal proportional interest in the Fund with
each other share and is entitled to such dividends and distributions out of the
income earned on the assets belonging to the Fund as are declared in the
discretion of the Directors. In the event of the liquidation or dissolution of
the Company, shareholders of the Fund are entitled to receive the assets
attributable to the Fund that are available for distribution, and a
distribution of any general assets not attributable to a particular investment
portfolio that are available for distribution in such manner and on such basis
as the Directors in their sole discretion may determine.

Shares have no preemptive rights or subscription. All shares, when issued
for the consideration described in the prospectus, are fully paid and
non-assessable by the Company.

27
<PAGE> 389
5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
Percentage Percentage
Name and Address Class; Type of Ownership of Class of Fund
---------------- ------------------------ -------- -------
<S> <C> <C> <C>
Virg & Co. Record Holder 100% 100%
Attn: MF Dept. A88-4
P.O. Box 9800
Calabasas, CA 91372
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund) or is identified as the holder of
record or more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class.

OTHER

This Registration Statement, including the prospectus for each Fund, the
SAI and the exhibits filed therewith, may be examined at the office of the SEC
in Washington, D.C. Statements contained in a prospectus or the SAI as to the
contents of any contract or other document referred to herein or in the
prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent auditors for the
Company. KPMG Peat Marwick LLP provides audit services, tax return preparation
and assistance and consultation in connection with review of certain SEC
filings. KPMG Peat Marwick LLP's address is Three Embarcadero Center, San
Francisco, California 94111.

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and independent
auditors' reports for the Company's fiscal period ended September 30, 1996 are
hereby incorporated by reference to the Company's Annual Report as filed with
the SEC on or about December 9, 1996. The Company's annual report may be
obtained by calling 1-800-222-8222.

28
<PAGE> 390
SAI APPENDIX

The following is a description of the ratings given by Moody's and S&P to
corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.

Corporate and Municipal Bonds

Moody's: The four highest ratings for corporate and municipal bonds are
"Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest amount of investment risk. Bonds rated "Aa"
are of "high quality by all standards," but margins of protection or other
elements make long-term risks appear somewhat greater than "Aaa" rated bonds.
Bonds rated "A" possess many favorable investment attributes and are considered
to be upper medium grade obligations. Bonds rated "Baa" are considered to be
medium grade obligations; interest payments and principal security appear
adequate for the present, but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds
have speculative characteristics as well. Moody's applies numerical modifiers:
1, 2 and 3 in each rating category from "Aa" through "Baa" in its rating
system. The modifier 1 indicates that the security ranks in the higher end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate and municipal bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by
S&P and have an extremely strong capacity to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity to pay interest and repay
principal" and differ "from the highest rated issued only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.

Municipal Notes

A-1
<PAGE> 391
group." Notes rated "MIG 3" or "VMIG 3" are of "favorable quality," with all
security elements accounted for, but lacking the strength of the preceding
grades.

S&P: The "SP-1" rating reflects a "very strong or strong capacity to pay
principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.

Corporate and Municipal Commercial Paper

Moody's: The highest rating for corporate and municipal commercial paper
is "P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for
repayment of short-term promissory obligations." Issuers rated "P-2" (Prime-2)
"have a strong capacity for repayment of short-term promissory obligations,"
but earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate and municipal commercial paper
indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."

A-2
<PAGE> 392

STAGECOACH FUNDS, INC.

Telephone: 1-800-260-5969

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

PRIME MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND

SERVICE CLASS

--------------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about two of the funds in the Stagecoach Family of Funds -- the
PRIME MONEY MARKET MUTUAL FUND and the TREASURY MONEY MARKET MUTUAL FUND (each
a "Fund" and collectively, the "Funds"). The Funds offer three classes of
shares -- Class A, Institutional and Service shares. This SAI relates only to
the Service class of shares ("Service Class shares") of the Funds. The
investment objective of each Fund is described in its Prospectus under the
section entitled "How the Funds Work -- Investment Objectives and Policies."

This SAI is not a prospectus and should be read in conjunction
with each Fund's Prospectus dated February 1, 1997. All terms used in this SAI
that are defined in the Prospectus for each Fund will have the meanings
assigned in that Fund's Prospectus. A copy of the Prospectus for each Fund may
be obtained without charge by writing Stephens Inc. ("Stephens"), the
Company's sponsor, co-administrator and distributor, at 111 Center Street,
Little Rock, Arkansas 72201 or calling the Transfer Agent at the telephone
number indicated above.

----------------------------------
<PAGE> 393
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 1

Additional Permitted Investment Activities . . . . . . . . . . . . . . 5

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Servicing Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . 16

Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . 19

Additional Purchase and Redemption Information . . . . . . . . . . . . 20

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . 21

Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Federal Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 29

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . 29

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

</TABLE>

i
<PAGE> 394

GENERAL

Stagecoach Funds, Inc. (the "Company" and, at times, "Stagecoach") is
an open-end management investment company offering shares in separately managed
investment portfolios. The Prime Money Market Mutual Fund operated as Pacific
American Liquid Assets, Inc. from commencement of operations on April 30, 1981
until it was reorganized as a portfolio of Pacific American Fund on October 1,
1985; on October 1, 1994, it was reorganized as the Pacific American Money
Market Portfolio of Pacifica; and, in July of 1995, it was renamed the Pacifica
Prime Money Market Fund. Prior to August 1, 1990, the Treasury Money Market
Mutual Fund was known as the Short-Term Government Fund and invested in
obligations issued or guaranteed by agencies and instrumentalities of the U.S.
Government in accordance with fundamental policies that were then effective for
the Fund. The Fund operated as a portfolio of Pacific American Fund through
October 1, 1994, when it was reorganized as the Pacific American U.S. Treasury
Portfolio, a portfolio of Pacifica Funds Trust. In July 1995, the Fund was
renamed the Pacifica Treasury Money Market Fund.

On April 25, 1996, the Agreement and Plan of Reorganization of
Pacifica with Stagecoach, and the creation of each Fund as a new fund of
Stagecoach were approved by the Company's Board of Directors. On May 17, 1996,
the Agreement and Plan of Reorganization of Pacifica with Stagecoach was
approved by Pacifica's Board of Trustees. The Reorganization of Pacifica with
Stagecoach became effective on September 6, 1996 (the "Reorganization"). Each
of the following portfolios of Pacifica was reorganized as the specified
Stagecoach Fund:

PACIFICA FUNDS TRUST PORTFOLIO NAME STAGECOACH FUND NAME
- ----------------------------------- --------------------

Pacifica Prime Money Market Fund Prime Money Market Mutual Fund

Pacifica Treasury Money Market Fund Treasury Money Market Mutual Fund

INVESTMENT RESTRICTIONS

The Prospectuses summarize certain fundamental investment restrictions
that have been adopted for the Funds. All of the Funds' restrictions are
stated in full herein and cannot be changed with respect to a Fund without
approval by the holders of a majority, as defined in the 1940 Act, of the
Fund's outstanding voting shares.

Fundamental Investment Policies.

The Funds are subject to the following investment restrictions, all of
which are fundamental policies, unless expressly indicated otherwise.

1
<PAGE> 395
The Funds may not:

5. Write put or call options.

7. Invest in companies for the purpose of exercising control.

9. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, acquisition of assets or
where otherwise permitted by the 1940 Act.

10. Lend its portfolio securities in excess of one-third of the
value of its total assets.

As a non-fundamental policy, any loans of portfolio securities will be
made according to guidelines established by the SEC and the Company's Board of
Directors, including maintenance of

2
<PAGE> 396
collateral of the borrower equal at all times to at least the current market
value of the securities loaned.

The Prime Money Market Mutual Fund may not:

The Treasury Money Market Mutual Fund may not:

1. Purchase or sell real estate.

2. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs.

If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of a Fund's investments will not constitute a violation of such
limitation, except that any borrowing by a Fund that exceeds the fundamental
investment limitations stated above must be reduced to meet such limitations
within the period required by the 1940 Act (currently three days) and the Funds
will not at any time hold more than 15% of their net assets in illiquid
securities. Otherwise, a Fund may continue to hold a security even though it
causes the Fund to exceed a percentage limitation because of fluctuation in the
value of the Fund's assets.

3
<PAGE> 397
In addition, in accordance with current SEC regulations, the Funds
intend, as a non-fundamental policy, to limit their respective investments in
the securities of any single issuer (other than securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and repurchase
agreements collateralized by such securities) to not more than 5% of the value
of their respective total assets at the time of purchase, except for 25% of the
value of their respective total assets which may be invested in any one issuer
for a period of up to three business days.

Pursuant to state securities regulations, the Treasury Money Market
Mutual Fund has undertaken the following non-fundamental investment limitation:
the Fund will not purchase warrants, valued at the lower of cost or market, in
excess of 5% of the value of its net assets (included within that amount, but
not to exceed 2% of the value of the Fund's net assets, may be warrants that
are not listed on the New York or American Stock Exchanges) except that
warrants acquired by the Fund at any time in units or attached to securities
are not subject to this limitation. Investors should note, however, that
neither Fund currently intends to purchase any warrants whatsoever, or to
acquire any put option that may be sold, transferred or assigned separately
from the underlying security.

As a non-fundamental investment policy: each Fund currently intends to
limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made:
(i) not more than 5% of the value of the Fund's total assets will be invested
in the securities of any one investment company; (ii) not more than 10% of the
value of its total assets will be invested in the aggregate in securities of
investment companies as a group; and (iii) not more than 3% of the outstanding
voting securities of any one investment company will be owned by a Fund or by
the Company as a whole.

4
<PAGE> 398
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

A description of the securities in which each of the Funds may invest
is set forth in their Prospectuses, to which reference is hereby made.
Additional information about these instruments follows.

Loans of Portfolio Securities. The Prime Money Market Mutual Fund may
lend its securities to brokers, dealers and financial institutions, provided
(1) the loan is secured continuously by collateral consisting of cash, U.S.
Treasury securities, or other U.S. Government securities or a letter of credit
which is marked to market daily to ensure that each loan is fully
collateralized at all times; (2) the Fund may at any time call the loan and
obtain the return of the securities loaned within five business days; (3) the
Fund will receive any interest or dividends paid on the securities loaned; and
(4) the aggregate market value of securities loaned will not at any time exceed
one-third of the total assets of the Fund. The Fund may earn income in
connection with securities loans either through the reinvestment of the cash
collateral or the payment of fees by the borrower. The Treasury Money Market
Mutual Fund does not currently intend to lend its portfolio securities.

Repurchase Agreements. Each Fund may engage in a repurchase agreement
with respect to any security in which that Fund is authorized to invest,
including U.S. Treasury STRIPS, although the underlying security may mature in
more than thirteen months. Each Fund may enter into repurchase agreements
wherein the seller of a security to the Fund agrees to repurchase that security
from the Fund at a mutually agreed-upon time and price that involves the
acquisition by a Fund of an underlying debt instrument, subject to the seller's
obligation to repurchase, and such Fund's obligation to resell, the instrument
at a fixed price usually not more than one week after its purchase. The Fund's
custodian has custody of, and holds in a segregated account, securities
acquired as collateral by a Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the SEC to be loans by the Fund. The
Funds may enter into repurchase agreements only with respect to securities of
the type in which such Fund may invest, including government securities and
mortgage-related securities, regardless of their remaining maturities, and
requires that additional securities be deposited with the custodian if the
value of the securities purchased should decrease below resale price. Wells
Fargo Bank monitors on an ongoing basis the value of the collateral to assure
that it always equals or exceeds the repurchase price. Certain costs may be
incurred by a Fund in connection with the sale of the underlying securities if
the seller does not repurchase them in accordance with the repurchase
agreement. In addition, if bankruptcy proceedings are commenced with respect
to the seller of the securities, disposition of the securities by a Fund may be
delayed or limited. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delay and costs to a
Fund in connection with insolvency proceedings), it is the policy of each Fund
to limit repurchase agreements to selected creditworthy securities dealers or
domestic banks or other recognized financial institutions. Each Fund considers
on an ongoing basis the creditworthiness of the institutions with which it
enters into repurchase agreements. Repurchase agreements are considered to be
loans by a Fund under the Investment Company Act of 1940 (the "1940 Act").

5
<PAGE> 399
Floating- and Variable-Rate Obligations. The Funds may purchase
floating- and variable-rate obligations as described in the prospectuses. Each
Fund may purchase floating- and variable-rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of thirteen months,
but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding thirteen months. Variable rate demand notes
include master demand notes that are obligations that permit a Fund to invest
fluctuating amounts, which may change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The interest rates
on these notes fluctuate from time to time. The issuer of such obligations
ordinarily has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. The interest rate on a floating- rate demand obligation is based
on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, a Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by credit rating agencies
and each Fund may invest in obligations which are not so rated only if Wells
Fargo Bank determines that at the time of investment the obligations are of
comparable quality to the other obligations in which such Fund may invest. Wells
Fargo Bank, on behalf of each Fund, considers on an ongoing basis the
creditworthiness of the issuers of the floating- and variable-rate demand
obligations in such Fund's portfolio. No Fund will invest more than 10% of the
value of its total net assets in floating- or variable-rate demand obligations
whose demand feature is not exercisable within seven days. Such obligations may
be treated as liquid, provided that an active secondary market exists.

Forward Commitments, When-Issued Purchases and Delayed-Delivery
Transactions. Each Fund may purchase securities on a when-issued or forward
commitment (sometimes called a delayed-delivery) basis, which means that the
price is fixed at the time of commitment, but delivery and payment ordinarily
take place a number of days after the date of the commitment to purchase. A
Fund will make commitments to purchase such securities only with the intention
of actually acquiring the securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. The Fund will not accrue
income in respect of a security purchased on a forward commitment basis prior
to its stated delivery date.

6
<PAGE> 400
such fluctuations prior to their actual delivery. Purchasing securities on a
when-issued or forward commitment basis can involve the additional risk that
the yield available in the market when the delivery takes place actually may be
higher than that obtained in the transaction itself. A segregated account of
each Fund consisting of cash or U.S. Government obligations or other high
quality liquid debt securities at least equal at all times to the amount of the
when-issued or forward commitments will be established and maintained at the
Funds' custodian bank. Purchasing securities on a forward commitment basis
when a Fund is fully or almost fully invested may result in greater potential
fluctuation in the value of such Fund's total net assets and its net asset
value per share. In addition, because a Fund will set aside cash and other
high quality liquid debt securities as described above the liquidity of the
Fund's investment portfolio may decrease as the proportion of securities in the
Fund's portfolio purchased on a when-issued or forward commitment basis
increases.

Rule 144A. It is possible that unregistered securities, purchased by
the Prime Money Market Mutual Fund in reliance upon Rule 144A under the
Securities Act of 1933, could have the effect of increasing the level of the
Fund's illiquidity to the extent that qualified institutional buyers become, for
a period, uninterested in purchasing these securities.

General. The assets of each of the Funds consist only of obligations
maturing within thirteen months from the date of acquisition (as determined in
accordance with the regulations of the SEC), and the dollar-weighted average
maturity of each Fund may not exceed 90 days.

The securities in which each Fund may invest will not yield as high a
level of current income as may be achieved from securities with less liquidity
and less safety. There can be no assurance that each Fund's investment
objective will be realized as described in the Funds' Prospectuses.

Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Directors or the Adviser, pursuant to
guidelines established by the Board, will consider such an event in determining
whether the Fund involved should continue to hold the security in accordance
with the interests of the Fund and applicable regulations of the SEC.

7
<PAGE> 401
MANAGEMENT

The following information supplements and should be read in conjunction
with the section in the prospectus entitled "The Funds and Management." The
principal occupations during the past five years of the Directors and principal
executive Officer of the Company are listed below. The address of each, unless
otherwise indicated, is 111 Center Street, Little Rock, Arkansas 72201.
Directors deemed to be "interested persons" of the Company for purposes of the
1940 Act are indicated by an asterisk.

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate Professor of Finance
of the School of Business and Accounting at
Wake Forest University since 1983.
</TABLE>

8
<PAGE> 402
<TABLE>
<S> <C> <C>
Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
(appointed as of Junior College from 1967 to
September 6, 1996) 1971; Adjunct Professor of
Columbia University
Teachers College since
1976.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

9
<PAGE> 403
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
---------- -------------
December 31, 1995 September 30, 1996
------------------ ------------------
Total
Aggregate Total Compensation Aggregate Compensation from
Compensation from Registrant Compensation Registrant
Name and Position from Registrant and Fund Complex from Registrant and Fund Complex
----------------- --------------- ------------------ --------------- -----------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $ 9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $ 9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

10
<PAGE> 404
Each of the Directors and Officers of the Company serves in the identical
capacity as directors and officers or as trustees and/or officers of each
registered open-end management investment company in both the Wells Fargo and
BGFA Fund Complexes, except for Joseph N. Hankin, who only serves the
aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann Hines who,
after September 6, 1996, only serves the aforementioned members of the BGFA
Fund Complex. The Directors are compensated by other companies and trusts
within a fund complex for their services as directors/trustees to such
companies and trusts. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or any other member of each
fund complex.

As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.

INVESTMENT ADVISER. The Funds are advised by Wells Fargo Bank pursuant
to an advisory contract for each Fund under which Wells Fargo Bank has agreed
to furnish investment guidance and policy direction in connection with the
daily portfolio management of the Fund. On behalf of each Fund, the Company's
Board of Directors approved the advisory contracts with Wells Fargo Bank on
April 25, 1996, for an initial two-year period. Pursuant to the advisory
contracts, Wells Fargo Bank also has agreed to furnish to the Board of
Directors periodic reports on the investment strategy and performance of each
Fund.

Wells Fargo Bank has agreed to provide to the Funds, among other
things, money market and fixed-income research, analysis and statistical and
economic data and information concerning interest-rate and security market
trends, portfolio composition, credit conditions and, average maturities of each
Fund. As compensation for its advisory services, Well Fargo Bank is entitled to
receive a monthly fee at the annual rates of 0.25% of the average daily value of
each Fund's net assets during the preceding month.

The advisory contracts continue in effect for more than two years
provided the continuance is approved annually (i) by the holders of a majority
of a Fund's outstanding voting securities or (ii) by the Company's Board of
Directors and by a majority of the Directors of the Company who are not parties
to the advisory contracts or "interested persons" (as defined in the 1940 Act)
of any such party. The advisory contracts may be terminated on 60 days'
written notice by either party and will terminate automatically if assigned.

Prior to the Reorganization on September 6, 1996, Wells Fargo
Investment Management, Inc. ("WFIM") and its predecessor, First Interstate
Capital Management, Inc. ("FICM") served as adviser to the predecessor
portfolios of Pacifica. As of the date of the Reorganization, Wells Fargo Bank
became the adviser to the Funds. For the period begun April 1, 1996 and ended
September 5, 1996 the predecessor portfolios paid to WFIM, and for the period
begun September 6, 1996 and ended September 30, 1996 the Funds paid to Wells
Fargo Bank, the advisory fees indicated below and the indicated amounts were
waived:

11
<PAGE> 405
Investment Advisory Fees

<TABLE>
<CAPTION>
Fiscal Year Ended
September 30, 1996
-------------------

Fund Fees Paid Fees Waived
---- --------- -----------
<S> <C> <C> <C>
o Prime Money Market Mutual $1,845,269 $1,553,968

o Treasury Money Market Mutual $2,442,922 $2,073,426
</TABLE>

During the fiscal year ended September 30, 1995, the six-month period
ended September 30, 1994 and the fiscal year ended March 31, 1994, the advisory
fees paid to the former adviser by the predecessor portfolios of the Prime
Money Market Mutual Fund and the Treasury Money Market Mutual Fund were as
follows:

Investment Advisory Fees Paid*

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Mar. 31, 1994
---- -------------- -------------- -------------
<S> <C> <C> <C>
Prime Money Market Mutual $ 693,315 $330,715 $737,811
Treasury Money Market Mutual $1,160,424 $454,029 $900,919
</TABLE>

*These amounts reflect voluntary fee waivers and expense reimbursements
by the adviser. Prior to October 1, 1994, all of these fees were, in turn,
paid by the adviser to its affiliates which served as investment sub-advisers
during the periods indicated.

ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained Wells
Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of each
Fund. The Administration Agreement between Wells Fargo and each Fund, and the
Co- Administration Agreement among Wells Fargo, Stephens and each Fund, state
that Wells Fargo and Stephens shall provide as administrative services, among
other things: (i) general supervision of the operation of each Fund, including
coordination of the services performed by the Fund's investment adviser,
transfer agent, custodian, shareholder servicing agent(s), independent public
accountants and legal counsel, regulatory compliance, including the compilation
of information for documents such as reports to, and filings with, the SEC and
state securities commissions; and preparation of proxy statements and
shareholder reports for each Fund; and (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Company's officers and Board of Directors. Wells Fargo Bank and Stephens
also furnish office space and certain facilities required for conducting the
business of each Fund together with ordinary clerical and bookkeeping services.
Stephens pays the compensation of the Company's Directors, officers and
employees who are affiliated with Stephens. The Administrator and
Co-Administrator are entitled to receive a monthly fee of 0.04% and 0.02%,
respectively, of the average daily net assets of each Fund.

12
<PAGE> 406
From April to September 5, 1996, the administrator of the Pacifica
predecessor portfolios (Furman Selz LLC) provided management and administrative
services necessary for the operation of such Funds, pursuant to an
Administrative Services Contract. For these services, Furman Selz LLC was
entitled to receive a fee, payable monthly, at the annual rate of 0.15% of the
average daily net assets of the Predecessor Funds. The predecessor portfolios
of the Prime Money Market Mutual and Treasury Money Market Mutual Funds were
administered through April 21, and April 14, 1996, respectively, by the Dreyfus
Corporation, at the annual rate of 0.10% of each such Fund's average daily net
assets. For the period from September 6, 1996 to September 30, 1996, Stephens
served as each such Fund's sole administrator and was entitled to receive a
fee, payable monthly, at the annual rate of 0.05% of each such Fund's average
daily net assets. The following table reflects the administration fees which
the respective administrators of the Funds and their predecessor portfolios
were paid during the fiscal year ended September 30, 1996:

<TABLE>
<CAPTION>
Administration Fees
-------------------
Fiscal Year Ended
Fund September 30, 1996
----- ------------------
<S> <C> <C>
o Prime Money Market Mutual $1,230,872
o Treasury Money Market Mutual $1,745,759
</TABLE>

During the fiscal year ended September 30, 1995, the six-month period ended
September 30, 1994 and the fiscal year ended March 31, 1994, the administration
fees paid to Dreyfus by the predecessors of the Prime Money Market Mutual Fund
and the Treasury Money Market Mutual Fund were as follows:
<TABLE>
<CAPTION>
Administration Fees
-------------------

Year Ended Period Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 Mar. 31, 1994
---- -------------- -------------- -------------
<S> <C> <C> <C>
Prime Money Market Mutual $577,763 $275,596 $614,901
Treasury Money Market Mutual $921,886 $347,499 $690,137
</TABLE>

SPONSOR AND DISTRIBUTOR. As discussed in each Fund's prospectus under
the heading "Management and Servicing Fees," Stephens serves as each Fund's
sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in each Fund's Prospectus
under the heading "Shareholder Servicing Agent," the Funds approved Servicing
Plans and have entered into related Shareholder Servicing Agreements with
financial institutions, including Wells Fargo Bank. For providing these
services, a Servicing Agent is entitled to a fee from the applicable Fund, not
to exceed 0.20%, on an annualized basis, of the average daily net assets of the
Service Class shares owned of record or beneficially by the customers of the
Servicing Agent during the period for which payment is being made. The
Servicing Plans and related form of shareholder servicing

13
<PAGE> 407
agreement were approved by the Company's Board of Directors on April 25, 1996
and provide that a Fund shall not be obligated to make any payments under such
Plans or related Agreements that exceed the maximum amounts payable under
Article III, Section 26 of the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD Rules").

For the period begun October 1, 1995 and ended September 5, 1996, under
similar service agreements with certain institutions, including affiliates of
FICM, shareholder servicing fees have been paid to various institutions for the
Funds as indicated below. For the period begun September 6, 1996 and ended
September 30, 1996, such fees were paid to Wells Fargo Bank or its affiliates.
The Service Class shares of the Funds paid shareholder servicing fees (after
waivers) for the fiscal year ended September 30, 1996 as indicated below:

<TABLE>
<CAPTION>
Shareholder Servicing Fees--
Service Class
----------------------------
Fiscal Year Ended
Fund September 30, 1996
----- ------------------
<S> <C> <C>
o Prime Money Market Mutual $1,355,940
o Treasury Money Market Mutual $2,490,845
</TABLE>

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank
has been retained to act as custodian and transfer and dividend disbursing
agent for the Funds, pursuant to a Custody Agreement and an Agency Agreement
with the Company on behalf of the Funds. The custodian, among other things,
maintains a custody account or accounts in the name of a Fund, receives and
delivers all assets for the Fund upon purchase and upon sale or maturity,
collects and receives all income and other payments and distributions on
account of the assets of the Fund and pays all expenses of the Fund. For its
services as custodian, Wells Fargo Bank is entitled to receive fees as follows:
a net asset charge at the annual rate of 0.0167%, payable monthly, plus
specified transaction charges. Wells Fargo Bank also will provide portfolio
accounting services under the Custody Agreement as follows: a monthly base fee
of $2,000 plus a net asset fee at the annual rate of 0.070% of the first
$50,000,000 of a Fund's average daily net assets, 0.045% of the next
$50,000,000, and 0.020% of the average daily net assets in excess of
$100,000,000.

FICAL, located at 707 Wilshire Blvd., Los Angeles, California 90017,
acted as custodian of the predecessor portfolios of Pacifica, but played no
role in making decisions as to the purchase or sale of portfolio securities for
the predecessor portfolios. FICAL was entitled to receive a fee from Pacifica,
computed daily and payable monthly, at the annual rate of 0.021% of the first
$5 billion in aggregate average daily net assets of the Funds; 0.0175% of the
next $5 billion in aggregate average daily net assets of the Funds; and 0.015%
of the aggregate average daily net assets of the Funds in excess of $10
billion.

14
<PAGE> 408
For the period begun October 1, 1995 and ended September 5, 1996 the
custody fees paid to FICAL, and for the period begun September 6, 1996 and
ended September 30, 1996 the custody fees paid to Wells Fargo Bank are both
reflected in the following table:

<TABLE>
<CAPTION>
Custody Fees
------------
Fiscal Year Ended
Fund September 30, 1996
---- ------------------
<S> <C> <C>
o Prime Money Market Mutual $ 73,023(1)
o Treasury Money Market Mutual $252,183
</TABLE>

- ---------------------------------------
(1) This amount reflects fee waivers.

For its services as transfer and dividend disbursing agent for the
Service Class shares of the Funds, Wells Fargo Bank is entitled to receive
monthly payments at the annual rate of 0.02% of the average daily net assets of
each Fund. Under the prior transfer agency agreement for the Service Class
shares of the Funds, Wells Fargo Bank was entitled to receive monthly payments
at the annual rate of 0.04% of the average daily net assets of the Service
Class shares of each Fund. Furman Selz acted as transfer agent for the
predecessor portfolios. Pacifica compensated Furman Selz for providing personnel
and facilities to perform transfer agency related services for Pacifica at a
rate intended to represent the cost of providing such services.

UNDERWRITING COMMISSIONS. The Service Class of each Fund does not
charge any front-end sales loads or contingent deferred sales charges in
connection with the purchase and redemption of its shares, and therefore pays no
underwriting commissions to the Distributor.

SERVICING PLANS

As indicated in each Fund's Prospectus, the Company's Board of
Directors, on behalf of each Fund, adopted a Servicing Plan ("Servicing Plan")
on April 25, 1996, with respect to each class of the Funds' shares. The Board
of Directors included a majority of the Directors who were not "interested
persons" (as defined in the Act) of each Fund and who had no direct or indirect
financial interest in the operation of the Servicing Plan or in any agreement
related to the Servicing Plan (the "Servicing Plan Non-Interested Directors").

Under the Servicing Plan and pursuant to the shareholder servicing
agreements for the Service Class shares, each Fund may pay one or more
servicing agents, as compensation for performing certain services, a fee at an
annual rate of up to 0.20% of the average daily net assets of the Fund's
Service Class shares attributable to the servicing agent's customers. The
actual fee payable to servicing agents is determined, within such limits, from
time to time by mutual agreement between the Company and each servicing agent
and will not exceed the maximum service fees payable by mutual funds sold by
members of the NASD under the NASD Rules.

Each Servicing Plan continues in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Servicing Plan Non-Interested

15
<PAGE> 409
Directors. Any form of servicing agreement related to the Servicing Plan also
must be approved by such vote of the Directors and the Servicing Plan
Non-Interested Directors. Servicing agreements may be terminated at any time,
without payment of any penalty, by vote of a majority of the Servicing Plan
Non-Interested Directors. No material amendment to the Servicing Plans may be
made except by a majority of both the Directors of the Company and the
Servicing Plan Non-Interested Directors.

Each Servicing Plan requires that the administrator shall provide to
the Directors, and the Directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Servicing Plan.

PERFORMANCE CALCULATIONS

The following information supplements and should be read in conjunction
with the sections in each Prospectus entitled "Determination of Net Asset
Value" and "Performance Data."

The "yields" and "effective yields" of each Fund described in the
Prospectuses are calculated according to formulas prescribed by the SEC. The
standardized seven-day yields for the respective classes of shares of a Fund
are computed separately for each class by determining the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account in the
Fund having a balance of one share at the beginning of the period, dividing the
net change in account value by the value of the account at the beginning of the
base period to obtain the base period return, and multiplying the base period
return by (365/7). The net change in the value of an account in each Fund
includes the value of additional shares purchased with dividends from the
original share, and dividends declared on both the original share and any such
additional shares, and all fees, other than non-recurring account or sales
charges, that are charged to all shareholder accounts in proportion to the
length of the base period and the Fund's average account size. The capital
changes to be excluded from the calculation of the net change in account value
are realized gains and losses from the sale of securities and unrealized
appreciation and depreciation. The effective annualized yields for a Fund are
also computed separately for each class by compounding the unannualized base
period return (calculated as above) by adding 1 to the base period return,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from
the result. The fees which may be imposed by Banks for cash management services
in connection with investments in shares of the Funds are not reflected in the
Funds' yields, and any such fees, if charged, will reduce the actual return
received by Customers for their investments.

16
<PAGE> 410
<TABLE>
<CAPTION>
Yield For The Applicable Period Ended September 30, 1996

Fund Seven-Day Yield Seven-Day Effective Yield
---- --------------- --------------------------
<S> <C> <C>
Prime Money Market Mutual 5.09% 5.22%
Treasury Money Market Mutual 4.90% 5.02%
</TABLE>

Yield information may be useful in reviewing the Funds' performance and
for providing a basis for comparison with other investment alternatives.
However, yields fluctuate, unlike investments which pay a fixed yield for a
stated period of time. Yields for the Funds are calculated on the same basis as
other money market funds as required by applicable regulations. Investors
should give consideration to the quality and maturity of the portfolio
securities of the respective investment companies when comparing investment
alternatives.

Investors should recognize that in periods of declining interest rates,
the Funds' yields will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, the Funds' yields will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Funds from the continuous sale of their shares will likely be
invested in instruments producing lower yields than the balance of the Funds,
thereby reducing the current yields of the Funds. In periods of rising interest
rates, the opposite can be expected to occur.

From time to time and only to the extent the comparison is appropriate
for a Fund or a class of shares, the Company may quote performance or
price-earning ratios in advertising and other types of literature as compared
with the performance of the Lehman Brothers Municipal Bond Index, 1-Year
Treasury Bill Rate, S&P Index, the Dow Jones Industrial Average, the Lehman
Brothers 20+ Years Treasury Index, the Lehman Brothers 5-7 Year Treasury Index,
IBC/Donoghue's Money Fund Averages, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by the World Gold Council), Bank Averages (which
is calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), average annualized certificate of deposit rates (from the federal
Reserve G-13 Statistical Releases or the Bank Rate Monitor), the Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), Ten Year U.S. Government Bond Average, S&P's
Corporate Bond Yield Averages, Schabacter Investment Management Indices,
Salomon Brothers High Grade Bond Index, Lehman Brothers Long-Term High Quality
Government/Corporate Bond Index, other managed or unmanaged indices or
performance data of bonds, stocks or government securities (including data
provided by Ibbotson Associates), or by other services, companies, publications
or persons who monitor mutual funds on overall performance or other criteria.
The S&P Index and the Dow Jones Industrial Average are unmanaged indices of
selected common stock prices.

17
<PAGE> 411
Bloomberg Financial Markets or Morningstar, Inc., independent services that
monitor the performance of mutual funds. Any such comparisons may be useful to
investors who wish to compare a Fund's past performance with that of its
competitors. Of course, past performance cannot be a guarantee of future
results. The Company also may include, from time to time, a reference to
certain marketing approaches of the Distributor, including, for example, a
reference to a potential shareholder being contacted by a selected broker or
dealer. General mutual fund statistics provided by the Investment Company
Institute may also be used.

The Company also may use the following information in advertisements
and other types of literature, only to the extent the information is appropriate
for a class of shares of a Fund: (i) the Consumer Price Index may be used to
assess the real rate of return from an investment in a class of shares of a
Fund; (ii) other government statistics, including, but not limited to, The
Survey of Current Business, may be used to illustrate investment attributes of a
Fund or a class of shares or the general economic, business, investment, or
financial environment in which the Fund operates; (iii) the effect of
tax-deferred compounding on the investment returns of a Fund or a class of
shares, or on returns in general, may be illustrated by graphs, charts, etc.,
where such graphs or charts would compare, at various points in time, the return
from an investment in a Fund or a class of shares (or returns in general) on a
tax-deferred basis (assuming reinvestment of capital gains and dividends and
assuming one or more tax rates) with the return on a taxable basis; and (iv) the
sectors or industries in which a Fund invests may be compared to relevant
indices of stocks or surveys (e.g., S&P Industry Surveys) to evaluate the
historical performance of the Fund or a class or current or potential value with
respect to the particular industry or sector.

The Company also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as S&P or Moody's. Such rating
would assess the creditworthiness of the investments held by a Fund. The
assigned rating would not be a recommendation to purchase, sell or hold any
class of a Fund's shares since the rating would not comment on the market price
of a Fund's shares or the suitability of a Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information relating
to a Fund or its investments. The Company may compare a Fund's performance with
other investments that are assigned ratings by NRSROs. Any such comparisons may
be useful to investors who wish to compare a Fund's past performance with other
rated investments.

18
<PAGE> 412
Globe, the Washington Post, the Chicago Sun-Times, Investor Business Daily,
Worth, Bank Investor, American Banker, Smart Money, the 100 Best Mutual Funds
(Adams Publishing), Morningstar or Value Line.

The Company also may disclose in sales literature, the distribution
rate on the shares of a Fund or a class of shares. Distribution rate, which may
be annualized, is the amount determined by dividing the dollar amount per share
of the most recent dividend by the most recent NAV or maximum offering price per
share as of a date specified in the sales literature. Distribution rate will be
accompanied by the standard 30-day yield as required by the SEC.

The Company may also disclose in advertising and other types of sales
literature the assets and categories of assets under management by the
Company's investment adviser and the total amount of assets and mutual fund
assets managed by Wells Fargo Bank. As of December 31, 1996, Wells Fargo Bank
and its affiliates provided investment advisory services for approximately $54
billion of assets of individuals, trusts, estates and institutions and $20
billion of mutual fund assets.

The Company may disclose in advertising and other types of literature
that investors can open and maintain Sweep Accounts over the Internet or through
other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available to
investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the first
major bank to offer an on-line application for a mutual fund account that can be
filled out completely through Electronic Channels. Advertising and other
literature may disclose that Wells Fargo Bank may maintain Web sites, pages or
other information sites accessible through Electronic Channels (an "Information
Site") and may describe the contents and features of the Information Site and
instruct investors on how to access the Information Site and open a Sweep
Account. Advertising and other literature may also disclose the procedures
employed by Wells Fargo Bank to secure information provided by investors,
including disclosure and discussion of the tools and services for accessing
Electronic Channels. Such advertising or other literature may include
discussions of the advantages of establishing and maintaining a Sweep Account
through Electronic Channels and testimonials from Wells Fargo Bank customers or
employees and may also include descriptions of locations where product
demonstrations may occur. The Company may also disclose the ranking of Wells
Fargo Bank as one of the largest money managers in the United States.

19
<PAGE> 413
DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in conjunction
with the Prospectus section under "Purchase of Shares."

Expenses and fees, including advisory fees, are accrued daily and are
taken into account for the purpose of determining the net asset value of a
Fund's shares.

Net asset value per share for a class of shares is determined as of
12:00 noon Pacific time and 1:00 p.m. Pacific time on each Business Day as
described in the Prospectus.

The Funds' instruments are valued on the basis of amortized cost. This
technique involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than
the price a Fund would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on shares of a Fund computed as
described above may tend to be higher than a like computation made by a fund
with identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its instruments. Thus, if the
use of amortized cost by a Fund resulted in a lower aggregate portfolio value
on a particular day, a prospective investor in a Fund would be able to obtain a
somewhat higher yield than would result from investment in a fund utilizing
solely market values and existing investors in a Fund would receive less
investment income. The converse would apply in a period of rising interest
rates.

The valuation of each Funds' instruments, based upon their amortized
cost and the concomitant maintenance by each Fund of a net asset value of $1.00,
is permitted in accordance with Rule 2a-7 under the Act, pursuant to which a
Fund must adhere to certain conditions. Each Fund must maintain a
dollar-weighted average maturity of 90 days or less, purchase only instruments
having remaining maturities of 397 days (thirteen months) or less, and invest
only in securities that are determined to present minimal credit risks pursuant
to guidelines adopted by the Directors or the adviser under guidelines approved
by the Directors. Instruments having variable or floating interest rates or
demand features may be deemed to have remaining maturities as follows: (a) a
government security with a variable rate of interest readjusted no less
frequently than every thirteen months may be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate; (b) an
instrument with a variable rate of interest, the principal amount of which is
scheduled on the face of the instrument to be paid in thirteen months or less,
may be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (c) an instrument with a variable rate of
interest that is subject to a demand feature may be deemed to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand; (d) an instrument with a floating rate of interest
that is subject to a demand feature may be deemed to have a maturity equal to
the period remaining until the principal amount can be recovered through demand;
and (e) a repurchase agreement may be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the underlying
securities is

20
<PAGE> 414
scheduled to occur or, where no date is specified but the agreement is subject
to demand, the notice period applicable to a demand for the repurchase of the
securities.

The Company's Board of Directors has established valuation procedures
designed to stabilize, to the extent reasonably possible, each Fund's price per
share as computed for the purpose of sales and redemptions. Such procedures
include the determination, at such intervals as the Directors deem appropriate,
of the extent to which each such Fund's NAV as calculated by using available
market quotations deviates from $1.00 per share, such deviation may result in
material dilution or other unfair results to existing shareholders or
investors. In the event the Directors determine that such a material
deviation exists, they have agreed to take such corrective action as they
regard as necessary and appropriate, which may include selling portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding dividends; redeeming shares in kind or
without monetary or other consideration; or establishing a net asset value per
share by using available market quotations. It is the intention of the Money
Market Funds to maintain a per share net asset value of $1.00, but there can be
no assurance that each Fund will do so.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Service Class shares of the Funds may be purchased on any day the
Funds are open for business, provided Wells Fargo Bank also is open for business
(a "Business Day"). Currently, Wells Fargo Bank is closed on New Year's Day,
President's Day, Martin Luther King Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day (each a
"Holiday"). When any Holiday falls on a weekend, the Funds are typically closed
on the weekday immediately before or after such Holiday.

Payment for shares may, in the discretion of the adviser, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Funds will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by a
Fund and that such Fund receives satisfactory assurances that (i) it will have
good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company
may also redeem shares

21
<PAGE> 415
involuntarily or make payment for redemption in securities or other property if
it appears appropriate to do so in light of the Company's responsibilities
under the 1940 Act.

In addition, the Company may redeem shares involuntarily to reimburse
the Funds for any losses sustained by reason of the failure of a shareholders to
make full payment for shares purchased or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
shares of a Fund as provided from time to time in the Prospectus.

PORTFOLIO TRANSACTIONS

The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Company's Board of Directors, Wells Fargo Bank is
responsible for the Funds' portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Company to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Funds will
not necessarily be paying the lowest spread or commission available.

Purchase and sale orders of the securities held by the Funds may be
combined with those of other accounts that Wells Fargo Bank manages, and for
which it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When Wells Fargo Bank determines that a
particular security should be bought or sold for a Fund and other accounts
managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate those
transactions among the participants equitably.

Purchases and sales of securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. The
Funds also will purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, municipal obligations
and taxable money market securities are traded on a net basis and do not
involve brokerage commissions. The cost of executing a Fund's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the
Company are prohibited from dealing with the Company as a principal in the
purchase and sale of securities unless an exemptive order allowing such
transactions is obtained from the SEC or an exemption is otherwise available.

22
<PAGE> 416
Wells Fargo Bank, as the investment adviser of each Fund, may, in
circumstances in which two or more dealers are in a position to offer
comparable results for a Fund portfolio transaction, give preference to a
dealer that has provided statistical or other research services to Wells Fargo
Bank. By allocating transactions in this manner, Wells Fargo Bank is able to
supplement its research and analysis with the views and information of
securities firms. Information so received will be in addition to, and not in
lieu of, the services required to be performed by Wells Fargo Bank under the
Advisory Contracts, and the expenses of Wells Fargo Bank will not necessarily
be reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by dealers through which
Wells Fargo Bank places securities transactions for each Fund may be used by
Wells Fargo Bank in servicing its other accounts, and not all of these services
may be used by Wells Fargo Bank in connection with advising such Fund.

Consistent with the Rules of Fair Practice of the NASD, and subject to
seeking the most favorable price and execution available and such other
policies as the Directors may determine, the adviser may consider sales of
shares of the Funds as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds.

Brokerage Commissions. Subject to the general supervision and
approval of the Board of Directors, the adviser makes decisions with respect to
and places orders for all purchases and sales of securities for the Funds.
Securities are generally purchased and sold either directly from the issuer or
from dealers who specialize in money market instruments. Such purchases are
usually effected as principal transactions and therefore do not involve the
payment of brokerage commissions.

Securities of Regular Broker Dealers. The Funds may from time to time
purchase securities issued by their regular dealers. As of September 30, 1996,
the Funds owned securities of their "regular brokers or dealers" or their
parents as defined in the Act, as follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
---- ------ ---------------------
<S> <C> <C> <C>
o Prime Money Market Mutual $166,369,000 Goldman Sachs & Co.
o Treasury Money Market Mutual $225,975,000 Goldman Sachs & Co.
o Treasury Money Market Mutual $230,000,000 HSBC Securities
o Treasury Money Market Mutual $225,000,000 JP Morgan Securities
o Treasury Money Market Mutual $230,000,000 Morgan Stanley
</TABLE>

At September 30, 1995, the Predecessor Funds held securities issued by
Goldman Sachs & Co., J.P. Morgan Securities, Inc., Salomon Brothers Inc., and
HSBC Securities Inc., valued at $159,111,345, $200,000,000, $126,043,763 and
$160,000,000, respectively.

Portfolio Turnover. The portfolio turnover rate is not a limiting
factor when Wells Fargo Bank deems portfolio changes appropriate. Because the
Funds' portfolios consist of securities with relatively short-term maturities,
the Funds can expect to experience high portfolio turnovers.

23
<PAGE> 417
A high portfolio turnover rate should not adversely affect such Funds, however,
because portfolio transactions ordinarily will be made directly with principals
on a net basis and, consequently, the Funds usually will not incur brokerage
expenses.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens, the
Company bears all costs of its operations, including the compensation of its
Directors who are not affiliated with Stephens or Wells Fargo Bank or any of
their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing prospectuses (except the expense of printing and mailing prospectuses
used for promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of a Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of a Fund's shares;
pricing services, and any extraordinary expenses. Expenses attributable to a
Fund are charged against Fund assets. General expenses of the Company are
allocated among all of the funds of the Company, including the Funds, in a
manner proportionate to the net assets of each Fund, on a transactional basis,
or on such other basis as the Company's Board of Directors deems equitable.

FEDERAL INCOME TAX

In General. The following information supplements and should be read
in conjunction with the applicable Prospectus sections entitled "Dividend and
Capital Gain Distributions" and "Taxes." The applicable Prospectus of the
Funds describes generally the tax treatment of distributions by the Funds.
This section of the SAI includes additional information concerning federal
income taxes.

The Company intends to qualify the Funds as a regulated investment
company under Subchapter M of the Code as long as such qualification is in the
best interest of the Funds' shareholders. Each Fund will be treated as a
separate entity for tax purposes and thus the provisions of the Code applicable
to regulated investment companies will generally be applied to each Fund,
rather than to the Company as a whole. In addition, net capital gains, net
investment income, and operating expenses will be determined separately for
each Fund.

24
<PAGE> 418
from the sale or other disposition of securities or options thereon held for
less than three months; and (c) each Fund diversify its holdings so that, at
the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, government securities and
other securities limited in respect of any one issuer to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its assets is invested
in the securities of any one issuer (other than U.S. Government securities and
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are determined to be engaged in the
same or similar trades or businesses. As a regulated investment company, each
Fund will not be subject to federal income tax on its net investment income and
net capital gains distributed to its shareholders, provided that it distributes
to its shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. Each Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

A 4% nondeductible excise tax will be imposed on each Fund (other than
to the extent of the Fund's tax-exempt income) to the extent it does not meet
certain minimum distribution requirements by the end of each calendar year.
Each Fund will either actually or be deemed to distribute all of its net
investment income and net capital gains by the end of each calendar year and,
thus, expects not to be subject to the excise tax.

Federal Income Tax Rates. As of the printing of this SAI, the maximum
individual tax rate applicable to ordinary income is 39.60% (marginal rates may
be higher for some individuals due to phase out of exemptions and elimination
of deductions); the maximum individual marginal tax rate applicable to net
capital gains is 28.00%; the maximum corporate tax rate applicable to ordinary
income and net capital gains is 35.00% (except that to eliminate the benefit of
lower marginal corporate income tax rates, corporations which have taxable
income in excess of $100,000 for a taxable year will be required to pay an
additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

25
<PAGE> 419
throughout the year) exceed the Fund's net income (as determined at the end of
the year), only that portion of the year's distributions which equals the
year's earnings and profits will be deemed to have constituted a dividend. It
is expected that the Fund's net income, on an annual basis, will equal the
dividends declared during the year.

Disposition of Fund Shares. If a shareholder receives a designated
capital gain distribution (to be treated by the shareholder as a long-term
capital gain) with respect to any Fund share and such Fund share is held for
six months or less, then (unless otherwise disallowed) any loss on the sale or
exchange of that Fund share will be treated as a long-term capital loss to the
extent of the designated capital gain distribution. In addition, any loss
realized by a shareholder upon the sale or redemption of Fund shares held less
than six months is disallowed to the extent of any exempt-interest dividends
received thereon by the shareholder. These rules shall not apply, however, to
losses incurred under a periodic redemption plan.

If a shareholder exchanges or otherwise disposes of Fund shares within
90 days of having acquired such shares and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or of a different regulated investment company,
the sales charge previously incurred acquiring the Fund's shares shall not be
taken into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of a Fund will be disallowed to the
extent that substantially identical shares are reacquired within the 61-day
period beginning 30 days before and ending 30 days after the shares are
disposed of.

Taxation of Fund Investments. Gains or losses on sales of portfolio
securities by each Fund will generally be long-term capital gains or losses if
the securities have been held by it for more than one year, except in certain
cases such as where the Fund acquires a put or writes a call thereon. Gains
recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by a Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Fund held the debt obligation. Other
gains or losses on the sale of portfolio securities will be short-term capital
gains or losses.

Foreign Shareholders. Under the Code, distributions of net investment
income by a Fund to a nonresident alien individual, nonresident alien fiduciary
of a trust or estate, foreign corporation, or foreign partnership (a "foreign
shareholder") will be subject to U.S. withholding tax (at a rate of 30% or a
lower treaty rate). Withholding will not apply if a dividend paid by a Fund to
a foreign shareholder is "effectively connected" with a U.S. trade or business,
in which case the reporting and withholding requirements applicable to U.S.
citizens, U.S. residents or domestic corporations will apply. Distributions of
net long-term capital gains are not subject to tax withholding, but in the case
of a foreign shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a rate of 30% if
the individual is physically present in the U.S. for more than 182 days during
the taxable year.

26
<PAGE> 420
Backup Withholding. The Company may be required to withhold, subject
to certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (including proceeds from
exchanges) paid or credited to an individual Fund shareholder, unless a
shareholder certifies that the Taxpayer Identification Number ("TIN") provided
is correct and that the shareholder is not subject to backup withholding, or
the IRS notifies the Company that the shareholder's TIN is incorrect or the
shareholder is subject to backup withholding. Such tax withheld does not
constitute any additional tax imposed on the shareholder, and may be claimed as
a tax payment on the shareholder's federal income tax return. An investor must
provide a valid TIN upon opening or reopening an account. Failure to furnish a
valid TIN to the Company could subject the investor to penalties imposed by the
IRS.

Other Matters. Investors should be aware that the investments to be
made by a Fund may involve sophisticated tax rules that may result in income or
gain recognition by the Fund without corresponding current cash receipts.
Although each Fund will seek to avoid significant noncash income, such noncash
income could be recognized by the Fund, in which case the Fund may distribute
cash derived from other sources in order to meet the minimum distribution
requirements described above.

CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Funds and
Management."

The Funds are two of the funds of the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9,1991 and
currently offers shares of twenty-three other funds.

Each Fund offers three classes of shares. Most of the Company's
funds are authorized to issue multiple classes of shares, one class generally
subject to a front-end sales charge and, in some cases, a class subject to a
contingent-deferred sales charge, that are offered to retail investors.
Certain of the Company's funds also are authorized to issue other classes of
shares, which are sold primarily to institutional investors. Each class of
shares in a fund represents an equal, proportionate interest in a fund with
other shares of the same class. Shareholders of each class bear their pro rata
portion of the fund's operating expenses, except for certain class-specific
expenses (e.g., any state securities registration fees, shareholder servicing
fees or distribution fees that may be paid under Rule 12b-1) that are allocated
to a particular class. Please contact Stagecoach Shareholder Services at
1-800-222-8222 if you would like additional information about other funds or
classes of shares offered.

27
<PAGE> 421
Voting Rights. With respect to matters that affect one class of a
Fund's shares but not another, shareholders vote as a class; for example, the
approval of a Plan. Subject to the foregoing, on any matter submitted to a
vote of shareholders, all shares then entitled to vote are voted separately by
series unless otherwise required by the Act, in which case all shares are voted
in the aggregate. For example, a change in a series' fundamental investment
policy affects only one series and are voted upon only by shareholders of the
series and not by shareholders of the Company's other series. Additionally,
approval of an advisory contract is a matter to be determined separately by
each series. Approval by the shareholders of one series is effective as to
that series whether or not sufficient votes are received from the shareholders
of the other series to approve the proposal as to those series. As used in the
Prospectus and in this SAI, the term "majority" when referring to approvals to
be obtained from shareholders of a class of a Fund, means the vote of the
lesser of (i) 67% of the shares of such class of the Fund represented at a
meeting if the holders of more than 50% of the outstanding shares of such class
of the Fund are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of such class of the Fund. The term "majority," when
referring to the approvals to be obtained from shareholders of the Company as a
whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares. Shareholders are entitled to one vote for
each full share held and fractional votes for fractional shares held. The
Company may dispense with an annual meeting of shareholders in any year in
which it is not required to elect directors under the 1940 Act.

Each share of a class of a Fund represents an equal proportional
interest in the Fund with each other share in the same class and is entitled to
such dividends and distributions out of the income earned on the assets
belonging to the Fund as are declared in the discretion of the Directors. In
the event of the liquidation or dissolution of the Company, shareholders of a
Fund or class are entitled to receive the assets attributable to the Fund or
class that are available for distribution, and a distribution of any general
assets not attributable to a particular investment portfolio that are available
for distribution in such manner and on such basis as the Directors in their
sole discretion may determine.

Shares have no preemptive rights or subscription. All shares, when
issued for the consideration described in the Prospectus, are fully paid and
non-assessable by the Company.

Pacifica was a Massachusetts business trust established under a
Declaration of Trust dated July 17, 1984, consisting of series of separately
managed portfolios which are described in this SAI. Prior to February 9, 1993
the name of Pacifica was Fund Source. This SAI relates only to the Service
Class shares of two of those portfolios -- the Prime Money Market Mutual Fund
and the Treasury Money Market Mutual Fund. The capitalization of Pacifica
consisted solely of an unlimited number of shares of beneficial interest with a
par value of $0.001 each.

Set forth below is the name, address and share ownership of each person
known by the Company to have as of December 31, 1996 beneficial or record
ownership of 5% or more of a class of each Fund or 5% or more of the voting
securities of each Fund as a whole

28
<PAGE> 422
5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
CLASS; TYPE OF PERCENTAGE PERCENTAGE OF
FUND NAME AND ADDRESS OWNERSHIP OF CLASS PORTFOLIO
- ---- ---------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PRIME MONEY Virg & Co. Service Class 99.48% 49.10%
MARKET FUND Attn: MF Dept. A88-4 [Record Holder]
P.O. Box 9800
Calabasas, CA 91372

TREASURY MONEY Virg & Co. Service Class 98.91% 65.90%
MARKET FUND Attn: MF Dept. A88-4 [Record Holder]
P.O. Box 9800
Calabasas, CA 91372
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).

OTHER

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP has been selected as the independent auditors
for the Company. KPMG Peat Marwick LLP provides audit services, tax return
preparation and assistance and consultation in connection with review of
certain SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero
Center, San Francisco, California 94111.

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the year ended September 30, 1996 are
incorporated by reference to the Company's

29
<PAGE> 423
Annual Report as filed with the SEC on December 9, 1996. The Company's Annual
Report may be obtained by calling 1-800- 222-8222. The portfolio of
investments, audited financial statements and independent auditors' report are
attached to all SAIs delivered to current or prospective shareholders.

30
<PAGE> 424
SAI APPENDIX

The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.

Corporate and Municipal Bonds

Moody's: The four highest ratings for corporate and municipal bonds
are "Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the
"best quality" and carry the smallest amount of investment risk. Bonds rated
"Aa" are of "high quality by all standards," but margins of protection or other
elements make long-term risks appear somewhat greater than "Aaa" rated bonds.
Bonds rated "A" possess many favorable investment attributes and are considered
to be upper medium grade obligations. Bonds rated "Baa" are considered to be
medium grade obligations; interest payments and principal security appear
adequate for the present, but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds
have speculative characteristics as well. Moody's applies numerical modifiers:
1, 2 and 3 in each rating category from "Aa" through "Baa" in its rating
system. The modifier 1 indicates that the security ranks in the higher end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate and municipal bonds are
"AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings
assigned by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded as having an "adequate capacity" to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of
a plus or minus sign to show relative standing within the category.

Municipal Notes

A-1
<PAGE> 425
S&P: The "SP-1" rating reflects a "very strong or strong capacity to
pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.

Corporate and Municipal Commercial Paper

Moody's: The highest rating for corporate and municipal commercial
paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for
repayment of short-term promissory obligations." Issuers rated "P-2" (Prime-2)
"have a strong capacity for repayment of short-term promissory obligations,"
but earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate and municipal commercial paper
indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."

A-2
<PAGE> 426
STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

MONEY MARKET MUTUAL FUND - CLASS S

---------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about CLASS S SHARES of the MONEY MARKET MUTUAL FUND. The Money
Market Mutual Fund also offers Class A and Institutional Class shares. The
investment objective of the Fund is described in its Prospectus under the
section entitled "How the Fund Works -- Investment Objectives and Policies."

Class S shares are available only to qualified business investors
who purchase such shares through a Managed Sweep Account offered by Wells Fargo
Bank, N.A. ("Wells Fargo Bank"). A Managed Sweep Account combines a non-
interest bearing Wells Fargo Bank deposit account with a daily sweep of
transaction account balances to or from the Fund.

This SAI is not a prospectus and should be read in conjunction
with the Fund's current Prospectus dated February 1, 1997. All terms used in
this SAI that are defined in the Prospectus for the Fund will have the meanings
assigned in the Prospectus. A copy of the Prospectus for the Fund may be
obtained without charge by writing Stephens Inc., the Company's sponsor,
administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201 or by calling the Transfer Agent at the telephone number indicated above.

---------------------------
<PAGE> 427
TABLE OF CONTENTS

<TABLE>
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . 3

Additional Permitted Investment Activities . . . . . . . . . . 5

Management . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . 12

Performance Calculations . . . . . . . . . . . . . . . . . . . 13

Determination of Net Asset Value . . . . . . . . . . . . . . . 16

Additional Purchase and Redemption Information . . . . . . . . 17

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . 18

Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 20

Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . 20

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . 23

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Independent Auditors . . . . . . . . . . . . . . . . . . . . . 25

Financial Information . . . . . . . . . . . . . . . . . . . . . 25

SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . A-1

Financial Statements . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

2
<PAGE> 428

INVESTMENT RESTRICTIONS

The Fund is subject to the following investment restrictions, all
of which are fundamental policies.

The Fund may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of the Fund's investments in that industry would
be 25% or more of the current value of the Fund's total assets, provided that
there is no limitation with respect to investments in (i) obligations of the
United States Government, its agencies or instrumentalities, and (ii)
obligations of domestic banks (for the purpose of this restriction, domestic
bank obligations do not include obligations of U.S. branches of foreign banks
or obligations of foreign branches of U.S. banks);

(2) purchase or sell real estate or real estate limited
partnerships (other than money market securities or securities secured by real
estate or interests therein or securities issued by companies that invest in
real estate or interests therein), commodities or commodity contracts
(including futures contracts);

(3) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions) or make short sales of securities;

(5) make investments for the purpose of exercising control or
management;

(7) write, purchase or sell puts, calls, options or any
combination thereof, and write, purchase or sell warrants, except that all
Funds may purchase securities with put rights in order to maintain liquidity.

In addition, the Money Market Mutual Fund may not make loans of
portfolio securities or other assets, except that loans for purposes of this
restriction will not include the

3
<PAGE> 429
purchase of fixed time deposits, repurchase agreements, commercial paper and
other short-term obligations, and other types of debt instruments commonly sold
in public or private offerings.

The Fund is subject to the following non-fundamental policies:

(1) The Fund may not purchase or retain securities of any issuer
if the officers or directors of the Company or the investment adviser owning
beneficially more than one-half of one percent (0.5%) of the securities of the
issuer together owned beneficially more than 5% of such securities.

(2) The Fund may not purchase interests, leases, or limited
partnership interests in oil, gas, or other mineral exploration or development
programs.

(3) The Fund may not purchase or sell real estate limited
partnership interests.

(4) The Fund may not purchase securities of issuers who, with
their predecessors, have been in existence less than three years, unless the
securities are fully guaranteed or insured by the U.S. Government, a state,
commonwealth, possession, territory, the District of Columbia or by an entity
in existence at least three years, or the securities are backed by the assets
and revenues of any of the foregoing if, by reason thereof, the value of its
aggregate investments in such securities will exceed 5% of its total assets.

(5) The Fund may not purchase securities of unseasoned issuers,
including their predecessors, which have been in operation for less than three
years, and equity securities of issuers which are not readily marketable if by
reason thereof the value of such Fund's aggregate investment in such classes of
securities will exceed 5% of its total assets.

(6) The Fund may not invest more than 10% of the current value
of its net assets in securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale and
fixed time deposits that are subject to withdrawal penalties and that have
maturities of more than seven days.

4
<PAGE> 430
issuer; the Fund would have no more than 5% of its total assets in "Second Tier
Securities" (as defined in Rule 2a-7); and the Fund would have no more than the
greater of $1 million or 1% of its total assets in Second Tier Securities of
any one issuer.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

Unrated Investments. The Fund may purchase instruments that are
not rated if, in the opinion of Wells Fargo Bank, such obligations are of
comparable quality to other rated investments that are permitted to be
purchased by the Fund. The Fund may purchase unrated instruments only if they
are purchased in accordance with the procedures adopted by the Company's Board
of Directors in accordance with Rule 2a-7 under the 1940 Act. After purchase
by the Fund, a security may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Fund. Neither event will
require a sale of such security by the Fund, provided that, when a security
ceases to be rated, the Company's Board of Directors determines that such
security presents minimal credit risks and, provided further that, when a
security rating is downgraded below the eligible quality for investment or no
longer presents minimal credit risks, the Board finds that the sale of such
security would not be in the Funds' best interest. To the extent the ratings
given by Moody's or S&P may change as a result of changes in such organizations
or their rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in the Prospectus and in this SAI. The ratings of Moody's and S&P are more
fully described in the SAI Appendix.

Foreign Obligations. Investments in foreign obligations involve
certain considerations that are not typically associated with investing in
domestic obligations. There may be less publicly available information about a
foreign issuer than about a domestic issuer. Foreign issuers also are not
generally subject to uniform accounting, auditing and financial reporting
standards or governmental supervision comparable to those applicable to
domestic issuers. In addition, with respect to certain foreign countries,
taxes may be withheld at the source under foreign income tax laws, and there is
a possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries. The Fund may
invest up to 25% of its assets in foreign obligations.

5
<PAGE> 431
Municipal Bonds. The Money Market Mutual Fund may invest in
municipal bonds. As discussed in the Prospectus, the two principal
classifications of municipal bonds are "general obligation" and "revenue"
bonds. Municipal bonds are debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public
facilities such as bridges, highways, housing, hospitals, mass transportation,
schools, streets, and water and sewer works. Other purposes for which
municipal bonds may be issued include the refunding of outstanding obligations
and obtaining funds for general operating expenses or to loan to other public
institutions and facilities. Industrial development bonds are a specific type
of revenue bond backed by the credit and security of a private user. Certain
types of industrial development bonds are issued by or on behalf of public
authorities to obtain funds to provide privately-operated housing facilities,
sports facilities, convention or trade show facilities, airport, mass transit,
port or parking facilities, air or water pollution control facilities and
certain local facilities for water supply, gas, electricity, or sewage or solid
waste disposal. Assessment bonds, wherein a specially created district or
project area levies a tax (generally on its taxable property) to pay for an
improvement or project may be considered a variant of either category. There
are, of course, other variations in the types of municipal bonds, both within a
particular classification and between classifications, depending on numerous
factors.

TANs. An uncertainty in a municipal issuer's capacity to raise
taxes as a result of such things as a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers mix
various tax proceeds into a general fund that is used to meet obligations other
than those of the outstanding TANs. Use of such a general fund to meet various
obligations could affect the likelihood of making payments on TANs.

6
<PAGE> 432
of outstanding securities, including those held in the Fund's portfolio, will
decline and (if purchased at par value) sell at a discount. If interests rates
fall, the values of outstanding securities will generally increase and (if
purchased at par value) sell at a premium. Changes in the value of municipal
securities held in the Fund's portfolio arising from these or other factors
will cause changes in the net asset value per share of the Fund.

MANAGEMENT

7
<PAGE> 433
<TABLE>
<S> <C> <C>
Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
(appointed as of September 6, 1996) Junior College from 1967 to
1971; Adjunct Professor of
Columbia University
Teachers College since
1976.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

8
<PAGE> 434
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, 1995 September 30, 1996
----------------------------- ---------------------------------
Total Total
Aggregate Compensation Aggregate Compensation
Compensation from Registrant Compensation from Registrant
from and Fund from and Fund
Name and Position Registrant Complex Registrant Complex
----------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company and
by all the registrants in each fund complex they serve as indicated above and
also are reimbursed for all out-of-pocket expenses relating to attendance at
board meetings. The Company, Overland Express Funds, Inc., Stagecoach Trust,
Life & Annuity Trust and Master Investment Trust are considered to be members
of the same fund complex as such term is defined in Form N-1A under the 1940
Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment Trust together form a
separate fund complex (the "BGFA Fund Complex"). Each of the Directors and
Officers of the Company serves in the identical capacity as

9
<PAGE> 435
directors and officers or as trustees and/or officers of each registered
open-end management investment company in both the Wells Fargo and BGFA Fund
Complexes, except for Joseph N. Hankin, who only serves the aforementioned
members of the Wells Fargo Fund Complex, and Zoe Ann Hines who, after September
6, 1996, only serves the aforementioned members of the BGFA Fund Complex. The
Directors are compensated by other companies and trusts within a fund complex
for their services as directors/trustees to such companies and trusts.
Currently the Directors do not receive any retirement benefits or deferred
compensation from the Company or any other member of each fund complex.

As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

INVESTMENT ADVISER. The Fund is advised by Wells Fargo Bank
pursuant to an Advisory Contract approved by the Board of Directors on October
22, 1991, and by the initial shareholder of the Fund on December 2, 1991. The
Advisory Contract for the Fund provides that Wells Fargo Bank shall furnish to
the Fund investment guidance and policy direction in connection with the daily
portfolio management of the Fund. Pursuant to the Advisory Contract, Wells
Fargo Bank furnishes to the Company's Board of Directors periodic reports on
the investment strategy and performance of the Fund.

Wells Fargo Bank has agreed to provide the Fund with, among other
things, money market security and fixed- income research, analysis and
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition, credit conditions and average
maturities of the Fund's portfolio.

The Advisory Contract will continue in effect for more than two
years provided the continuance is approved annually (i) by the holders of a
majority of the Fund's outstanding voting securities or by the Company's Board
of Directors and (ii) by a majority of the Directors of the Company who are not
parties to the Advisory Contract or "interested persons" (as defined in the
1940 Act) of any such party. The Advisory Contracts may be terminated on 60
days' written notice by either party and will terminate automatically if
assigned.

For the years ended December 31, 1993, 1994 and 1995, and for the
period ended September 30, 1996, the Fund paid advisory fees to Wells Fargo
Bank as indicated below and Wells Fargo Bank waived the indicated amounts:

<TABLE>
<CAPTION>
December 31, 1993 December 31, 1994 December 31, 1995 September 30, 1996
----------------- ----------------- ----------------- ------------------
Fees Fees Fees Fees Fees Fees Fees Fees
Paid Waived Paid Waived Paid Waived Paid Waived
---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
$1,285,690 $0 $2,073,686 $2,008,946 $12,729,506 $0 $11,593,678 $0
</TABLE>

10
<PAGE> 436
Agreement among Wells Fargo, Stephens and the Fund, state that Wells Fargo and
Stephens shall provide as administrative services, among other things: (i)
general supervision of the operation of the Fund, including coordination of the
services performed by the Fund's investment adviser, transfer agent, custodian,
shareholder servicing agent(s), independent public accountants and legal
counsel, regulatory compliance, including the compilation of information for
documents such as reports to, and filings with, the SEC and state securities
commissions; and preparation of proxy statements and shareholder reports for
the Fund; and (ii) general supervision relative to the compilation of data
required for the preparation of periodic reports distributed to the Company's
officers and Board of Directors. Wells Fargo Bank and Stephens also furnish
office space and certain facilities required for conducting the business of the
Fund together with ordinary clerical and bookkeeping services. Stephens pays
the compensation of the Company's Directors, officers and employees who are
affiliated with Stephens. The Administrator and Co-Administrator are entitled
to receive a monthly fee of 0.04% and 0.02% respectively, of the average daily
net assets of the Fund.

For the years ended December 31, 1993, 1994 and 1995, and the
period ended September 30, 1996, the Fund paid administrative fees to Stephens,
the sole administrator during these periods, the following dollar amounts,
based on a monthly fee at the annual rate of 0.03% of the Fund's average daily
net assets:

<TABLE>
<CAPTION>
December 31, 1993 December 31, 1994 December 31, 1995 September 30, 1996
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C>
$96,535 $306,209 $954,713 $872,577
</TABLE>

SPONSOR AND DISTRIBUTOR. As discussed in the Fund's prospectus
under the heading "Management and Servicing Fees," Stephens serves as the
Fund's sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in the Fund's
prospectus under the heading "Shareholder Servicing Agent," Wells Fargo Bank
acts as the shareholder servicing agent ("Agent") for Class S shares of the
Fund pursuant to a Shareholder Services Agreement (the "Agreement") and the
related Servicing Plan. Wells Fargo Bank, as agent, has agreed to perform
certain shareholder liaison services such as answering shareholder inquiries
regarding account status and history, and the manner in which purchases,
exchanges and redemptions of Fund shares may be made. For services provided
pursuant to the Servicing Plan, the Company may pay each Shareholder Servicing
Agent a monthly fee at the annual rate of up to 0.25% of the average daily
value of Class S shares of the Fund beneficially owned by customers of the
Shareholder Servicing Agent.

The dollar amount of shareholder servicing fees paid by the Fund
to Wells Fargo Bank or its affiliates for the year ended December 31, 1995 and
the period ended September 30, 1996, were as follows:

<TABLE>
<CAPTION>
December 31, 1995 September 30, 1996(1)
----------------- ---------------------
<S> <C>
$8,542,616 $7,594,481
</TABLE>

- ---------
(1) This amount includes shareholder servicing fees paid by other classes of
the Fund and reflects fee waivers.

11
<PAGE> 437

For its services as transfer and dividend disbursing agent for the
Class S shares of the Fund, Wells Fargo Bank is entitled to receive monthly
payments at the annual rate of 0.10% of the average daily net assets of the
Fund's Class S shares. Under the prior transfer agency agreement, Wells Fargo
Bank was entitled to receive a per account fee plus transaction fees and
out-of-pocket related costs with a minimum of $3,000, unless net assets of the
Fund were under $20 million. For as long as the Fund's assets remained under
$20 million, the Fund was not charged any transfer agency fees.

For the year ended December 31, 1995 and the period ended
September 30, 1996, the Fund did not pay any custody fees or transfer or
dividend disbursing agency fees to Wells Fargo Bank.

UNDERWRITING COMMISSIONS. The Fund's Class S does not charge any
front-end sales loads or contingent deferred sales charges in connection with
the purchase and redemption of its shares, and therefore pays no underwriting
commissions to the Distributor.

DISTRIBUTION PLAN

The Fund has adopted distribution plans (a "Plan") under Section
12(b) of the 1940 Act and Rule 12b-1 thereunder as described in the Prospectus.
The Plan for the Class S shares of the Money Market Mutual Fund was adopted by
the Company's Board of Directors, including a majority of the Directors who
were not "interested persons" (as defined in the 1940 Act) of the Fund and who
had no direct or indirect financial interest in the operation of the Plan or in
any agreement related to the Plan (the "Qualified Directors") on May 2, 1995.

Under the Plan for the Class S Shares of the Money Market Mutual
Fund, the Fund may defray all or part of the cost of preparing and printing
prospectuses and other promotional materials and of delivering prospectuses and
those materials to prospective Fund shareholders by paying on an annual basis
up to 0.75% of the average daily net assets of the Class S Shares. The Class S
Plan provides for reimbursement of actual expenses and payment of compensation
to the Distributor and Selling Agents for sales support services. In addition,
the Plan contemplates that to the extent any fees payable pursuant to a
Shareholder Servicing Agreement are deemed to be for distribution-related
services, rather than shareholder services, such payments are approved and
payable pursuant to such Plan.

The Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Qualified Directors. Any Agreements related to the Plan also must be
approved by the Majority vote of the Directors and the Qualified Directors.
Such agreements may be terminated at any time without penalty by a vote of a
majority of the outstanding voting securities of the Class S shares of the
Fund. The Plan may not be amended to increase materially the amounts payable
thereunder without the

12
<PAGE> 438
approval of a majority of the outstanding securities of the Class S shares of
the Fund. No material amendment to the Plan may be made except by the approval
of a majority of both the Directors of the Company and the Qualified Directors.
The Plan requires that the Treasurer of the Company shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Plan. The Rule also
requires that the selection and nomination of Directors who are not "interested
persons" of the Company be made by such disinterested Directors.

For the year ended December 31, 1995, and the period ended
September 30, 1996, the Fund's distributor received the following amounts of
12b-1 fees for the specified purposes set forth below under the Fund's Plan for
Class S shares.

<TABLE>
<CAPTION>
Printing &
Money Market Mutual Fund Mailing Marketing Compensation to
Class S Total Prospectus Brochures Underwriters
------- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
December 31, 1995 $2,215,338 N/A N/A $2,215,338
September 30, 1996 $3,587,118 N/A N/A $3,587,118
</TABLE>

For the year ended December 31, 1995, and the period ended
September 30, 1996, WFSI and its registered representatives received no
compensation under the Fund's Plan.

PERFORMANCE CALCULATIONS

YIELD: As indicated in its Prospectuses, the Money Market Mutual
Fund may advertise certain yield information with respect to each Class of
shares. Current yield with respect to each Class of shares of the Money Market
Mutual Fund will be calculated based on the net changes, exclusive of capital
changes, over a seven-day period, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7) with the resulting yield figure
carried to at least the nearest hundredth of one percent.

Effective Yield: Current yield for the Fund is based on the
change in the value of a hypothetical investment (exclusive of capital changes)
over a particular seven-day period, less a pro-rata share of the Fund's
expenses accrued over that period (the "base period"), and stated as a
percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized by multiplying by 365/7,
with the resulting yield figure carried to at least the nearest hundredth of
one percent. "Effective yield" for the Fund assumes that all dividends received
during an annual period have been reinvested. Calculation of "effective yield"
begins with the same "base period return" used in the calculation of yield,
which is then annualized to reflect weekly compounding pursuant to the
following formula:

13
<PAGE> 439
Effective Yield = [(Base Period Return +1)365/7]-1.

Yield for the period ended September 30, 1996

<TABLE>
<CAPTION>
Money Market Mutual Fund Seven-Day Yield Seven-Day Effective Yield
------------------------ --------------- --------------------------
<S> <C> <C>
Class S 4.18% 4.27%
</TABLE>

The yield for the Class S shares of the Money Market Mutual Fund
will fluctuate from time to time, unlike bank deposits or other investments
that pay a fixed yield for a stated period of time, and does not provide a
basis for determining future yields since it is based on historical data.
Yield is a function of portfolio quality, composition, maturity and market
conditions as well as the expenses allocated to the Fund.

Yield information for Class S shares of the Fund may be useful in
reviewing the performance of the Fund and for providing a basis for comparison
with investment alternatives. The yield of Class S shares of the Fund however,
may not be comparable to the yields from investment alternatives because of
differences in the foregoing variables and differences in the methods used to
value portfolio securities, compute expenses and calculate yield.

In addition, investors should recognize that changes in net asset
value of Class S shares of the Money Market Mutual Fund will affect the yield
for any specified period, and such changes should be considered together with
the yield in ascertaining the total return to shareholders for the period.
Yield information for the Fund may be useful in reviewing the performance of
the Fund and for providing a basis for comparison with investment alternatives.
The yield of the Fund, however, may not be comparable to the yields from
investment alternatives because of differences in the foregoing variables and
differences in the methods used to value portfolio securities, compute expenses
and calculate yield.

From time to time and only to the extent the comparison is
appropriate for the Fund or a Class of shares of the Fund, the Company may
quote the performance or price-earning ratio of the Fund or Class of shares of
the Fund in advertising and other types of literature as compared to the
performance of the S&P Index, the Dow Jones Industrial Average, the Lehman
Brothers 20+ Treasury Index, the Lehman Brothers 5-7 Year Treasury Index,
Donoghue's Money Fund Averages, Real Estate Investment Averages (as reported by
the National Association of Real Estate Investment Trusts), Gold Investment
Averages (provided by World Gold Council), Bank Averages (which are calculated
from figures supplied by the U.S. League of Savings Institutions based on
effective annual rates of interest on both passbook and certificate accounts),
average annualized certificate of deposit rates (from the Federal Reserve G-13
Statistical Releases or the Bank Rate Monitor), the Salomon One Year Treasury
Benchmark Index, the Consumer Price Index (as published by the U.S. Bureau of
Labor Statistics), other managed or unmanaged indices or performance data of
bonds, municipal securities, stocks or government securities (including data
provided by Ibbotson Associates), or by other services, companies,

14
<PAGE> 440
publications or persons who monitor mutual funds on overall performance or
other criteria. The S&P Index and the Dow Jones Industrial Average are
unmanaged indices of selected common stock prices. The performance of the
Money Market Mutual Fund also may be compared to those of other mutual funds
having similar objectives. This comparative performance could be expressed as
a ranking prepared by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Bloomberg Financial Markets or Morningstar, Inc.,
independent services which monitor the performance of mutual funds. The Money
Market Mutual Fund's performance will be calculated by relating net asset value
per share at the beginning of a stated period to the net asset value of the
investment, assuming reinvestment of all gains distributions and dividends
paid, at the end of the period. The Money Market Mutual Fund's comparative
performance will be based on a comparison of yields, as described above, or
total return, as reported by Lipper, Survey Publications, Donoghue or
Morningstar, Inc.

Any such comparisons may be useful to investors who wish to
compare past performance of each Class of the Money Market Mutual Fund with
that of competitors. Of course, past performance cannot be a guarantee of
future results. The Company also may include, from time to time, a reference
to certain marketing approaches of the Distributor, including, for example, a
reference to a potential shareholder being contacted by a selected broker or
dealer. General mutual fund statistics provided by the Investment Company
Institute may also be used.

The Company also may use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for the Fund: (i) the Consumer Price Index may be
used to assess the real rate of return from an investment in the Fund; (ii)
other government statistics, including, but not limited to, The Survey of
Current Business, may be used to illustrate investment attributes of the Fund
or the general economic, business, investment, or financial environment in
which the Fund operates; (iii) the effect of tax-deferred compounding on the
investment returns of the Fund, or on returns in general, may be illustrated by
graphs, charts, etc., where such graphs or charts would compare, at various
points in time, the return from an investment in the Fund (or returns in
general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the return on a taxable
basis; and (iv) the sectors or industries in which the Fund invests may be
compared to relevant indices of stocks or surveys (e.g., S&P Industry Surveys)
to evaluate the Fund's historical performance or current or potential value
with respect to the particular industry or sector.

In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank,
and its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."

15
<PAGE> 441
The Company also may discuss in advertising and other types of
literature that the Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as Standard & Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by the Fund. The assigned rating would not be a recommendation to
purchase, sell or hold the Fund's shares since the rating would not comment on
the market price of the Fund's shares or the suitability of the Fund for a
particular investor. In addition, the assigned rating would be subject to
change, suspension or withdrawal as a result of changes in, or unavailability
of, information relating to the Fund or its investments. The Company may
compare the Fund's performance with other investments which are assigned
ratings by NRSROs. Any such comparisons may be useful to investors who wish to
compare the Fund's past performance with other rated investments.

From time to time, the Fund may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for Stagecoach Funds, provides
various services to its customers that are also shareholders of the Fund.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability of
combined Wells Fargo Bank and Stagecoach Funds account statements." The Company
also may disclose, in advertising and other types of literature, information and
statements that Wells Fargo Investment Management ("WIFM"), a division of Wells
Fargo Bank, is listed in the top 100 by Institutional Investor magazine in its
July 1996 survey "America's Top 300 Money Managers". This survey ranks money
managers in several asset categories. The Company may also disclose in
advertising and other types of sales literature the assets and categories of
assets under management by a fund's investment adviser or sub-adviser and the
total amount of assets and mutual fund assets managed by Wells Fargo Bank. As
of December 31, 1996, Wells Fargo Bank and its affiliates provided investment
advisory services for approximately $54 billion of assets of individual, trusts,
estates and institutions and $20 billion of mutual fund assets.

The Company also may discuss in advertising and other types of
literature the features, terms and conditions of Wells Fargo Bank accounts
through which investments in the Money Market Mutual Fund may be made via a
"sweep" arrangement, including, without limitation, the Managed Sweep Account,
Money Market Checking Account and Money Market Access Account (collectively,
the "Sweep Accounts"). Such advertisements and other literature may include,
without limitation, discussions of such terms and conditions as the minimum
deposit required to open a Sweep Account, a description of the yield earned on
shares of the Money Market Mutual Fund through a Sweep Account, a description
of any monthly or other service charge on a Sweep Account and any minimum
required balance to waive such service charges, any overdraft protection plan
offered in connection with a Sweep Account, a description of any ATM or check
privileges offered in connection with a Sweep Account and any other terms,
conditions, features or plans offered in connection with a Sweep Account. Such
advertising or other literature may also include a discussion of the advantages
of establishing and maintaining a Sweep Account, and may include statements
from customers as to the reasons why such customers have established and
maintained a Sweep Account.

16
<PAGE> 442
DETERMINATION OF NET ASSET VALUE

Net asset value per Class S share for the Fund is determined by
the Custodian on each Business Day, as described in the Prospectus.

As indicated under "Investing In The Fund -- Share Value" in the
Prospectus the Fund uses the amortized cost method to determine the value of
its portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The
amortized cost method involves valuing a security at its cost and amortizing
any discount or premium over the period until maturity, regardless of the
impact of fluctuating interest rates on the market value of the security.
While this method provides certainty in valuation, it may result in periods
during which the value, as determined by amortized cost, is higher or lower
than the price that the Fund would receive if the security were sold. During
these periods the yield to a shareholder may differ somewhat from that which
could be obtained from a similar fund that uses a method of valuation based
upon market prices. Thus, during periods of declining interest rates, if the
use of the amortized cost method resulted in a lower value of the Fund's
portfolio on a particular day, a prospective investor in the Fund would be able
to obtain a somewhat higher yield than would result from investment in a fund
using solely market values, and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.

Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, a fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase securities having remaining maturities
(as defined in Rule 2a-7) of thirteen months or less and invest only in those
high-quality securities that are determined by the Board of Directors to
present minimal credit risks. The maturity of an instrument is generally
deemed to be the period remaining until the date when the principal amount
thereof is due or the date on which the instrument is to be redeemed. However,
Rule 2a-7 provides that the maturity of an instrument may be deemed shorter in
the case of certain instruments, including certain variable and floating rate
instruments subject to demand features. Pursuant to the Rule, the Board of
Directors is required to establish procedures designed to stabilize, to the
extent reasonably possible, the Fund's price per share as computed for the
purpose of sales and redemptions at $1.00. Such procedures include review of
the Fund's portfolio holdings by the Board of Directors, at such intervals as
it may deem appropriate, to determine whether the Fund's net asset value
calculated by using available market quotations deviates from $1.00 per share
based on amortized cost. The extent of any deviation will be examined by the
Board of Directors. If such deviation exceeds 1/2 of 1%, the Board will
promptly consider what action, if any, will be initiated. In the event the
Board determines that a deviation exists that may result in material dilution
or other unfair results to investors or existing shareholders, the Board will
take such corrective action as it regards as necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity, withholding
dividends or establishing a net asset value per share by using available market
quotations.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Fund may be purchased on any day the Fund is open (a
"Business Day"). The Fund is open on any day that either the New York Stock
Exchange or Wells Fargo Bank is open. Currently, the holidays observed by both
the New York Stock Exchange and Wells Fargo

17
<PAGE> 443
Bank are New Year's Day, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day (each, a "Holiday").

Payment for shares may, in the discretion of the adviser, be made in
the form of securities that are permissible investments for the Fund as
described in the Prospectus. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by
the Fund and that the Fund receives satisfactory assurances that (i) it will
have good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Fund may suspend the right of redemption
or postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to
reimburse the Fund for any losses sustained by reason of the failure of a
shareholders to make full payment for shares purchased or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to shares of the Fund as provided from time to time in the
Prospectus.
PORTFOLIO TRANSACTIONS

The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Company's Board of Directors, Wells Fargo Bank is
responsible for the Fund's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Company to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Fund will
not necessarily be paying the lowest spread or commission available.

Purchase and sale orders of the securities held by the Fund may be
combined with those of other accounts that Wells Fargo Bank manages, and for
which it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When Wells Fargo Bank determines that a
particular security should be bought or sold for the Fund and other

18
<PAGE> 444
accounts managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate
those transactions among the participants equitably.

Purchases and sales of securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. The
Fund also will purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, municipal obligations
and taxable money market securities are traded on a net basis and do not
involve brokerage commissions. The cost of executing the Fund's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the
Company are prohibited from dealing with the Company as a principal in the
purchase and sale of securities unless an exemptive order allowing such
transactions is obtained from the SEC or an exemption is otherwise available.

The Fund may purchase municipal obligations from underwriting
syndicates of which Stephens or Wells Fargo Bank is a member under certain
conditions in accordance with the provisions of a rule adopted under the 1940
Act and in compliance with procedures adopted by the Board of Directors.

Wells Fargo Bank, as investment adviser of the Fund, may, in
circumstances in which two or more dealers are in a position to offer
comparable results for a portfolio transaction, give preference to a dealer
that has provided statistical or other research services to Wells Fargo Bank.
By allocating transactions in this manner, Wells Fargo Bank is able to
supplement its research and analysis with the views and information of
securities firms. Information so received will be in addition to, and not in
lieu of, the services required to be performed by Wells Fargo Bank under the
Advisory Contract, and the expenses of Wells Fargo Bank will not necessarily be
reduced as a result of the receipt of this supplemental research information.
Furthermore, research services furnished by dealers through which Wells Fargo
Bank places securities transactions for the Fund may be used by Wells Fargo
Bank in servicing its other accounts, and not all of these services may be used
by Wells Fargo Bank in connection with advising the Fund.

Brokerage Commission. For the year ended December 31, 1995 and
period ended September 30, 1996, the Fund did not pay any brokerage commissions
on portfolio transactions.

Securities of Regular Broker/Dealers. As of December 31, 1995,
the Money Market Mutual Fund owned securities of its "regular brokers or
dealers", or their parents, as defined in the Act, as follows: $125,955,000 of
Goldman Sachs & Co. debt securities. As of September 30, 1996, the Fund owned
securities of its "regular brokers or dealers" or their parents as defined in
the Act, as follows:
<TABLE>
<CAPTION>
Amount Regular Broker/Dealer
------ ---------------------
<S> <C>
$202,778,000 Goldman Sachs & Co.
</TABLE>

Portfolio Turnover. The portfolio turnover rate is not a limiting
factor when Wells Fargo Bank deems portfolio changes appropriate. Because the
portfolio of the Money Market Mutual Fund consist of securities with relatively
short-term maturities, the Fund can expect to

19
<PAGE> 445
experience high portfolio turnovers. A high portfolio turnover rate should not
adversely affect the Fund, however, because portfolio transactions ordinarily
will be made directly with principals on a net basis and, consequently, the
Fund usually will not incur brokerage expenses.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens,
the Company bears all costs of its operations, including the compensation of
its Directors who are not affiliated with Stephens or Wells Fargo Bank or any
of their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent auditors, legal counsel, transfer agent and dividend disbursing
agent; expenses of redeeming shares; expenses of preparing and printing
prospectuses (except the expense of printing and mailing prospectuses used for
promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of the Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of the Fund's shares;
pricing services, and any extraordinary expenses. Expenses attributable to the
Money Market Mutual Fund are charged against the Fund's assets. General
expenses of the Company are allocated among all of the funds of the Company,
including the Fund, in a manner proportionate to the net assets of each Fund,
on a transactional basis, or on such other basis as the Company's Board of
Directors deems equitable.

FEDERAL INCOME TAXES

The Prospectus describes generally the tax treatment of
distributions by the Fund. This section of the SAI includes additional
information concerning federal income taxes.

Qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended, (the "Code") requires, among other
things, that (a) at least 90% of the Fund's annual gross income be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of securities or options thereon; (b) the Fund
derives less than 30% of its gross income from gains from the sale or other
disposition of securities or options thereon held for less than three months;
and (c) the Fund diversifies its holdings so that, at the end of each quarter
of the taxable year, (i) at least 50% of the market value of the Fund's assets
is represented by cash, government securities and other securities limited in
respect of any one issuer to an amount not greater than 5% of the Fund's assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government securities and the securities of other
regulated investment companies), or of two or more issuers which the Fund
controls and which are determined to be engaged in the same or similar trades
or businesses

20
<PAGE> 446
or related trades or businesses. As a regulated investment company, the Money
Market Mutual Fund will not be subject to federal income tax on its net
investment income and net capital gains distributed to its shareholders,
provided that it distributes to its stockholders at least 90% of its net
investment income and tax-exempt income earned in each year.

Generally, dividends and distributions of capital gains are
taxable to shareholders when they are received. However, dividends and
distributions of capital gains declared payable as of a record date in October,
November or December of any calendar year are deemed under the Code to have
been received by the shareholders on December 31 of that calendar year if the
dividend is actually paid in the following January. Such dividends will,
accordingly, be taxable to the recipient shareholders in the year in which the
record date falls. In addition, a 4% nondeductible excise tax will be imposed
on the Money Market Mutual Fund to the extent it does not meet certain minimum
distribution requirements by the end of each calendar year. The Fund will
either distribute, or be deemed to distribute, all of its net investment income
and net capital gains by the end of the calendar year and, thus, expects not to
be subject to the excise tax.

Income and dividends received by the Fund from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Because not more than 50% of the value of the
total assets of the Fund is expected to consist of securities of foreign
issuers, the Fund will not be eligible to elect to "pass through" foreign tax
credits to shareholders. Gains or losses on sales of portfolio securities by
the Fund will generally be long-term capital gains or losses if the securities
sold have been held by it for more than one year, except in certain cases where
the Fund acquires a put thereon. Gain recognized on the disposition of a debt
obligation (including tax-exempt obligations purchased after April 30, 1993)
purchased by the Fund at a market discount (generally, at a price less than its
principal amount) will be treated as ordinary income to the extent of the
portion of the market discount which accrued during the period of time the Fund
held the debt obligation. Other gains or losses on the sale of securities will
be short-term capital gains or losses. To the extent that the Fund recognizes
long-term capital gains, such gains will be distributed at least annually.
Such distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares. Such distributions
will be designated as a capital gain distributions in a written notice mailed
by the Fund to the shareholders not later than 60 days after the close of the
Fund's taxable year.

If a shareholder receives such a designated capital gain
distribution (to be treated by the shareholder as a long-term capital gain)
with respect to any Fund share and such Fund share is held for six months or
less, then (unless otherwise disallowed) any loss on the sale or exchange of
that Fund share will be treated as a long-term capital loss to the extent of
the designated and capital gain distribution. In addition, any loss realized
by a shareholder upon the sale or redemption of Fund shares held less than six
months is disallowed to the extent of any exempt-interest dividends received
thereon by the shareholder. These rules shall not apply, however, to losses
incurred under a periodic redemption plan.

21
<PAGE> 447
As of the printing of this SAI, the maximum individual marginal
tax rate applicable to ordinary income is 39.60% (marginal rates may be higher
for some individuals due to the phase-out of exemptions and elimination of
deductions), the maximum individual rate applicable to net realized capital
gains is 28.00%; and the maximum corporate tax rate applicable to ordinary
income and net realized capital gains is 35.00%. However, to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of income tax of up to $100,000.

If a shareholder exchanges or otherwise disposes of shares of the
Money Market Mutual Fund within 90 days of having acquired such shares, and if,
as a result of having acquired those shares, the shareholder subsequently pays
a reduced sales charge for shares of the Fund, or of a different fund, the
sales charge previously incurred acquiring the Fund's shares shall not be taken
into account (to the extent such previous sales charges do not exceed the
reduction in sales charges) for the purpose of determining the amount of gain
or loss on the exchange, but will be treated as having been incurred in the
acquisition of such other shares.

Also, any loss realized on a redemption or exchange of Fund shares
will be disallowed to the extent that substantially identical shares are
reacquired within the 61-day period beginning 30 days before and ending 30 days
after the shares are disposed of.

If, in the opinion of the Fund, ownership of its shares has or may
become concentrated to an extent that could cause the Fund to be deemed a
personal holding company within the meaning of the Code, the Fund may require
the redemption of shares or reject any order for the purchase of shares in an
effort to prevent such concentration.

Foreign Shareholders. Under the Code, distributions of net
investment income by the Money Market Mutual Fund to a nonresident alien
individual, nonresident alien fiduciary of a trust or estate, foreign
corporation, or foreign partnership (a "foreign shareholder") will be subject
to U.S. withholding tax (at a rate of 30% or a lower treaty rate). Withholding
will not apply if a dividend paid by the Fund to a foreign shareholder is
"effectively connected" with a U.S. trade or business, in which case the
reporting and withholding requirements applicable to U.S. citizens, U.S.
residents or domestic corporations will apply. Distributions of net long-term
capital gains are not subject to tax withholding, but in the case of a foreign
shareholder who is a nonresident alien individual, such distributions
ordinarily will be subject to U.S. income tax at a rate of 30% if the
individual is physically present in the U.S. for more than 182 days during the
taxable year.

Other Matters. It is expected that the net income of the Money
Market Mutual Fund will be a positive amount at the time of each determination
thereof. If, however, the net income of the Fund determined at any time is a
negative amount (which could occur, for instance, upon nonpayment of interest
and/or principal by an issuer of a security held by the Fund), the Fund would,
pursuant to SEC rules, first offset the negative amount with respect to each
shareholder account from the dividends declared during the month with respect
to each such account. If, and

22
<PAGE> 448
to the extent that, such negative amount exceeds such declared dividends at the
end of the month, the Fund will reduce the number of its outstanding shares by
treating each shareholder as having contributed to the capital of the Fund that
number of full and fractional shares in the account of such shareholder which
represents the shareholder's proportion of the amount of such excess. Each
shareholder will be deemed to have agreed to such contribution in these
circumstances by investing in the Money Market Mutual Fund.

Although dividends will be declared daily with respect to the Fund
based on the Fund's daily earnings, for federal income tax purposes, the Fund's
earnings and profits will be determined at the end of each taxable year and
will be allocated pro rata over the entire year. For federal income tax
purposes, only amounts paid out of earnings and profits will qualify as
dividends. Thus, if during a taxable year the Fund's declared dividends (as
declared daily throughout the year) exceed the Fund's net income (as determined
at the end of the year), only that portion of the year's distributions which
equals the year's earnings and profits will be deemed to have constituted a
dividend. If during the year, the Fund had reduced the number of shares, as
described above, due to such a shortfall, shareholders who had redeemed shares
prior to such reduction could be deemed to have realized a capital gain to the
extent of the reduction, while shareholders redeeming shares after the
reduction could be deemed to have realized a capital loss to the extent of the
reduction. It is expected that the Fund's net income, on an annual basis, will
equal the dividends declared during the year.

CAPITAL STOCK

The Fund is one of the funds of the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of twenty-four other funds.

Most of the Company's funds are authorized to issue multiple
classes of shares, one class generally subject to a front-end sales charge and,
in some cases, a class subject to a contingent-deferred sales charge, that are
offered to retail investors. Certain of the Company's funds also are
authorized to issue other classes of shares, which are sold primarily to
institutional investors. Each class of shares in a fund represents an equal,
proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state
securities registration fees, shareholder servicing fees or distribution fees
that may be paid under Rule 12b-1) that are allocated to a particular class.
Please contact Stagecoach Shareholder Services at 1-800-222-8222 if you would
like additional information about other funds or classes of shares offered.

The Money Market Mutual Fund is comprised of three classes of
shares, Class A, Class S and Institutional Class shares. With respect to
matters affecting one Class, but not another, shareholders of each of the Fund
vote as a Class. For example, approval of a distribution plan is voted on only
by members of the Class affected by the plan. Subject to the foregoing, all
shares of the Fund have equal voting rights. In situations where voting by
series is required by law or where the matter involved only affects one series,
shares of the Fund will be

23
<PAGE> 449
voted by series. For example, a change in a Fund's fundamental investment
policy would be voted upon only by shareholders of the Fund involved.
Additionally, approval of an advisory contract is a matter to be determined
separately by Fund. Approval by the shareholders of one Fund is effective as
to that Fund whether or not sufficient votes are received from the shareholders
of the other investment portfolios to approve the proposal as to those
investment portfolios. As used in the Prospectus of the Money Market Mutual
Fund, and in this SAI, the term "majority," when referring to approvals to be
obtained from shareholders of a Class of shares of the Fund means the vote of
the lesser of (i) 67% of the shares of the respective Class of the Fund
represented at a meeting if the holders of more than 50% of the outstanding
shares of such Class of the Fund are present in person or by proxy, or (ii)
more than 50% of the outstanding shares of such Class of the Fund. As used in
the Prospectus of the Fund and in this SAI, the term "majority," when referring
to approvals to be obtained from shareholders of the Fund, means the vote of
the lesser of (i) 67% of the shares of a Fund represented at a meeting if the
holders of more than 50% of the outstanding shares of the Fund are present in
person or by proxy, or (ii) more than 50% of the outstanding shares of a Fund.
The term "majority," when referring to the approvals to be obtained from
shareholders of the Company as a whole, means the vote of the lesser of (i) 67%
of the Company's shares represented at a meeting if the holders of more than
50% of the Company's outstanding shares are present in person or by proxy, or
(ii) more than 50% of the Company's outstanding shares. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held.

Each share of the Fund represents an equal proportional interest
in the Fund with each other share and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of the Directors. In the event of the
liquidation or dissolution of the Company, shareholders of the Fund are
entitled to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular investment portfolio that are available for distribution in such
manner and on such basis as the Directors in their sole discretion may
determine.

Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Company.

Set forth below the name, address and share ownership of each
person known by the Company to have beneficial or record ownership of 5% or
more of a class of the Fund or 5% or more of the voting securities of the Fund
as a whole.

24
<PAGE> 450
5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
MONEY MARKET MUTUAL Wells Fargo Bank Class S 100.00% 14.60%
P.O. Box 7066 Beneficially Owned
San Francisco, CA
94120
</TABLE>

OTHER

The Registration Statement, including the Prospectus of the Fund,
the SAI and the exhibits filed therewith, may be examined at the office of the
SEC in Washington, D.C. Statements contained in the Prospectus or the SAI of
each Fund as to the contents of any contract or other document are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.

INDEPENDENT AUDITORS

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the Money Market Mutual Fund contained in the
Company's Annual Report for the period ended September 30, 1996, as filed with
the SEC on December 9, 1996, are hereby incorporated by reference into this
SAI. The portfolio of investments, audited financial statements and
independent auditors' report for the Fund is attached to all SAIs delivered to
current or prospective shareholders.

25
<PAGE> 451
SAI APPENDIX

The following is a description of the ratings given by Moody's and
S&P to corporate and municipal bonds, municipal notes, and corporate and
municipal commercial paper.

Corporate and Municipal Bonds

Municipal Notes

A-1
<PAGE> 452
"VMIG 3" are of "favorable quality," with all security elements accounted for,
but lacking the strength of the preceding grades.

Corporate and Municipal Commercial Paper

Moody's: The highest rating for corporate and municipal
commercial paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior
capacity for repayment of short-term promissory obligations." Issuers rated
"P-2" (Prime- 2) "have a strong capacity for repayment of short-term promissory
obligations," but earnings trends, while sound, will be subject to more
variation.

Corporate Notes

A-2
<PAGE> 453
STAGECOACH FUNDS, INC.

Telephone: (800) 260-5969

STATEMENT OF ADDITIONAL INFORMATION

Dated February 1, 1997

SMALL CAP FUND

INSTITUTIONAL CLASS

----------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about one of the Company's series -- the SMALL CAP FUND (the
"Fund"). This SAI relates only to the Institutional Class Shares offered by
the Fund. The investment objective of the Fund is described in the Prospectus
under the heading "Investment Objective and Policies." The Fund seeks to
achieve its investment objective by investing all of its assets in the Small
Cap Master Portfolio (at times, the "Master Portfolio") of Master Investment
Trust ("MIT"), which has the same investment objective as the Fund. The Fund
may withdraw its investment in the Small Cap Master Portfolio at any time.

This SAI is not a Prospectus and should be read in conjunction
with the Fund's Prospectus, dated February 1, 1997. All terms used in this SAI
that are defined in the Prospectus have the meanings assigned in the
Prospectus. A copy of the Prospectus may be obtained without charge by writing
Stephens Inc. ("Stephens"), the Company's sponsor, co-administrator and
distributor, at 111 Center Street, Little Rock, Arkansas 72201, or calling the
Transfer Agent at the telephone number indicated above.

----------------------------------
<PAGE> 454
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Servicing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Determination of Net Asset Value.... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Additional Purchase and Redemption Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Fund Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Federal Income Tax... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

i
<PAGE> 455
INVESTMENT RESTRICTIONS

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "Investment Objective
and Policies."

Fundamental Investment Policies. The Fund and Master Portfolio
are subject to the following investment restrictions, all of which are
fundamental policies. These restrictions cannot be changed, as to either the
Fund or the Master Portfolio, without approval by the holders of a majority (as
defined by the 1940 Act) of the outstanding voting securities of the Fund or
the Master Portfolio, as appropriate. Whenever the Fund is requested to vote
on a fundamental policy of the Master Portfolio, the Fund will hold a meeting
of Fund shareholders and it will cast its votes as instructed by such
shareholders.

The Fund and the Master Portfolio may not:

(1) purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately after the
purchase and as a result thereof, the value of the Fund's investments in that
industry would equal or exceed 25% of the current value of the Fund's total
assets, provided that there is no limitation with respect to investments in
securities issued or guaranteed by the United States Government, its agencies
or instrumentalities; and provided further, that the Fund may invest all its
assets in a diversified, open-end management investment company, or a series
thereof, with substantially the same investment objective, policies and
restrictions as such Fund, without regard to the limitations set forth in this
paragraph (1);

(3) purchase securities on margin (except for short-term
credits necessary for the clearance of transactions) or make short sales of
securities;

1
<PAGE> 456
(6) issue senior securities, except that the Fund may borrow
from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets);

The Fund and the Master Portfolio may not:

(2) purchase or sell real estate limited partnership interests;

2
<PAGE> 457
(5) invest more than 15% of the Fund's net assets in illiquid
securities. For this purpose, illiquid securities include, among others, (a)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale, (b) fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, and (c) repurchase agreements not terminable within seven days;

(7) Invest more than 25% of their respective net assets in
securities of foreign governmental and foreign private issues that are
denominated in and pay interest in U.S. dollars.

MANAGEMENT

3
<PAGE> 458
<TABLE>
<S> <C> <C>
Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate Professor of Finance
of the School of Business and Accounting at
Wake Forest University since 1983.

Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
(appointed as of September 16, 1996) Junior College from 1967 to
1971; Adjunct Professor of
Columbia University
Teachers College since
1976.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

4
<PAGE> 459
<TABLE>
<S> <C> <C>
Richard H. Blank, Jr., 40 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary and Director of Stephens
Treasurer Sports Management
Inc.; and Director of
Capo Inc.
</TABLE>

5
<PAGE> 460
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
---------- -------------
December 31, 1995 September 30, 1996
------------------ ------------------
Aggregate Total Compensation Aggregate Total Compensation
Compensation from Registrant Compensation from Registrant
Name and Position from Registrant and Fund Complex from Registrant and Fund Complex
- ----------------- --------------- ------------------ --------------- -------------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company
and by all the registrants in each fund complex they serve as indicated above
and also are reimbursed for all out-of-pocket expenses relating to attendance
at board meetings. The Company, Overland Express Funds, Inc., Stagecoach
Trust, Life & Annuity Trust and Master Investment Trust are considered to be
members of the same fund complex as such term is defined in Form N-1A under the
1940 Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and

6
<PAGE> 461
Managed Series Investment Trust together form a separate fund complex (the
"BGFA Fund Complex"). Each of the Directors and Officers of the Company serves
in the identical capacity as directors and officers or as Trustees and/or
officers of each registered open-end management investment company in both the
Wells Fargo and BGFA Fund Complexes, except for Joseph N. Hankin, who only
serves the aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann
Hines who, after September 6, 1996, only serves the aforementioned members of
the BGFA Fund Complex. The Directors are compensated by other companies and
Trusts within a fund complex for their services as directors/Trustees to such
companies and Trusts. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or any other member of each
fund complex.

As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

MASTER/FEEDER STRUCTURE. The Fund seeks to achieve its investment
objective by investing all of its assets in the Small Cap Master Portfolio of
MIT. The Fund and other entities investing in the Master Portfolio are each
liable for all obligations of the Master Portfolio. However, the risk of the
Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and MIT itself is
unable to meet its obligations. Accordingly, the Company's Board of Directors
believes that neither the Fund nor its shareholders will be adversely affected
by investing Fund assets in the Master Portfolio. However, if a mutual fund or
other investor withdraws its investment from the Master Portfolio, the economic
efficiencies (e.g., spreading fixed expenses among a larger asset base) that
the Company's Board believes may be available through investment in the Master
Portfolio may not be fully achieved. In addition, given the relative novelty of
the master/feeder structure, accounting or operational difficulties, although
unlikely, could arise. See "Management and Servicing Fees" for additional
description of the Fund's and Master Portfolio's expenses and management.

7
<PAGE> 462
Certain policies of the Master Portfolio which are non-fundamental
may be changed by vote of a majority of MIT's Trustees without interestholder
approval. If the Master Portfolio's investment objective or fundamental or non-
fundamental policies are changed, the Fund may elect to change its objective or
policies to correspond to those of the Master Portfolio. The Fund may also
elect to redeem its interests in the Master Portfolio and either seek a new
investment company with a matching objective in which to invest or retain its
own investment adviser to manage the Fund's portfolio in accordance with its
objective. In the latter case, the Fund's inability to find a substitute
investment company in which to invest or equivalent management services could
adversely affect shareholders' investments in the Fund. The Fund will provide
shareholders with 30 days' written notice prior to the implementation of any
change in the investment objective of the Fund or the Master Portfolio, to the
extent possible. See "Investment Objective and Policies" for additional
information regarding the Fund's and the Master Portfolio's investment
objectives and policies. Additional information regarding the officers and
Directors/Trustees of the Company and MIT is located in the Fund's SAI under
"Management."

INVESTMENT ADVISER. The Fund has not engaged an investment
adviser. The Master Portfolio (which has the same investment objective as the
Fund, and in which the Fund invests all its assets) is advised by Wells Fargo
Bank. The Advisory Contract provides that Wells Fargo Bank shall furnish to
the Master Portfolio investment guidance and policy direction in connection
with the daily portfolio management of the Master Portfolio. Pursuant to the
Advisory Contract, Wells Fargo Bank furnishes to the Board of Trustees of MIT
periodic reports on the investment strategy and performance of the Master
Portfolio. For its services as investment adviser to the Master Portfolio,
Wells Fargo Bank is entitled to receive a monthly fee at the annual rate of
0.60% of the Master Portfolio's average daily net assets.

For the period begun September 16, 1996 (commencement of
operations) and ended September 30, 1996, the Master Portfolio paid $6,129
in advisory fees to Wells Fargo Bank. No fees were waived.

8
<PAGE> 463
behalf of the Master Portfolio. Under the respective Administration and
Co-Administration Agreements among Wells Fargo Bank, Stephens and the Company
and MIT, Wells Fargo Bank, Stephens shall provide as administrative services,
among other things: (i) general supervision of the Fund's and the Master
Portfolio's operations, including coordination of the services performed by the
investment adviser (in the case of the Master Portfolio), transfer agent,
custodian, shareholder servicing agent(s), independent auditors and legal
counsel, regulatory compliance, including the compilation of information for
documents such as reports to, and filings with, the SEC and state securities
commissions; and preparation of proxy statements and shareholder reports for
the Fund and the Master Portfolio; and (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports
distributed to the Company's and MIT's Officers, Directors and Trustees. Wells
Fargo Bank and Stephens also furnish office space and certain facilities
required for conducting the Fund's and the Master Portfolio's business together
with ordinary clerical and bookkeeping services. Stephens pays the
compensation of MIT's and the Company's Directors/Trustees, Officers and
employees who are affiliated with Stephens. The Administrator and
Co-Administrator are entitled to receive a monthly fee of 0.04% and 0.02%,
respectively, of the average daily net assets of the Fund.

SPONSOR AND DISTRIBUTOR. As discussed in the Fund's Prospectus
under the heading "Management and Servicing Fees," Stephens serves as the Fund's
sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in the Fund's
Prospectus under the heading "Shareholder Servicing Agent," the Fund has
entered into a shareholder servicing agreement with Wells Fargo Bank. The
Institutional Class shares of the Fund paid $2,460 in shareholder servicing
fees to Wells Fargo Bank or its affiliates for the period ended September 30,
1996.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo
Bank has been retained to act as custodian and transfer and dividend disbursing
agent for the Fund and the Master Portfolio. The custodian, among other
things, maintains a custody account or accounts in the name of the Fund and the
Master Portfolio, receives and delivers all assets for the Fund and the Master
Portfolio upon purchase and upon sale or maturity, collects and receives all
income and other payments and distributions on account of the assets of the
Fund and the Master Portfolio and pays all expenses of the Fund and the Master
Portfolio. For its services as custodian, Wells Fargo Bank is entitled to
receive fees as follows: a net asset charge at the annual rate of 0.0167%,
payable monthly, plus specified transaction charges. Wells Fargo Bank also
will provide portfolio accounting services under the Custody Agreement as
follows: a monthly base fee of $2,000 plus a net asset fee at the annual rate
of 0.070% of the first $50,000,000 of the Fund's average daily net assets,
0.045% of the next $50,000,000, and 0.020% of the average daily net assets in
excess of $100,000,000.

9
<PAGE> 464
For the period begun September 16, 1996 and ended September 30,
1996, the Fund did not pay any custody fees to Wells Fargo Bank.

For its services as transfer and dividend disbursing agent for the
Institutional Class shares of the Fund, Wells Fargo Bank is entitled to
receive monthly payments at the annual rate of 0.06% of the average daily net
assets of the Fund's Institutional Class shares. Under the prior transfer
agency agreement for the Fund, Wells Fargo Bank was entitled to receive monthly
payments at the annual rate of 0.07% of the Fund's average daily assets,
regardless of Class, as well as reimbursement for all reasonable out-of-pocket
expenses.

For the period begun September 16, 1996 and ended September 30,
1996, the Fund paid Wells Fargo Bank $617 (after waivers) in transfer and
dividend disbursing agency fees.

UNDERWRITING COMMISSIONS. The Institutional Class of the Fund
does not charge any front-end sales loads or contingent deferred sales charges
in connection with the purchase and redemption of its shares, and therefore
pays no underwriting commissions to the Distributor.

SERVICING PLAN

Under the Servicing Plan and pursuant to the shareholder servicing
agreements for the Institutional Class Shares, the Fund may pay one or more
servicing agents, as compensation for performing certain services, a fee at an
annual rate of up to 0.25% of the average daily net assets of the Fund's
Institutional Class Shares attributable to the servicing agent's customers.
The actual fee payable to servicing agents is determined, within such limits,
from time to time by mutual agreement between the Company and each servicing
agent and will not exceed the maximum service fees payable by mutual funds sold
by members of the NASD under the NASD Rules of Fair Practice.

10
<PAGE> 465
of the Servicing Plan Non-Interested Directors. No material amendment to the
Servicing Plans may be made except by a majority of both the Directors of the
Company and the Servicing Plan Non-Interested Directors.

PERFORMANCE CALCULATIONS

The following information supplements and should be read in
conjunction with the sections in the Prospectus entitled "Investing in the Fund
- -- Share Value" and "How the Fund Works -- Performance."

Performance information may be advertised for non-standardized
periods, including year-to-date and other periods less than a year.

The total return information for the Institutional Class Shares
presented below and advertised by the Fund for the period prior to September
16, 1996, the date the Fund commenced operations, is based upon the prior
performance of the Collective Investment Fund. The performance information is
adjusted to reflect the current level of operating expenses applicable to the
Institutional Class shares. There are no front-end or contingent deferred
sales charges on the Fund's Institutional Class shares.

11
<PAGE> 466
For the Applicable Period Ended September 30, 1996

Average Annual Total Return Cumulative Total Return
---------------------------- -----------------------
Class Inception(1) One Year Inception
----- ---------- -------- ----------
<S> <C> <C> <C>
I 52.49% 39.01% 119.09%
- ------------------------------
</TABLE>
(1) The Small Cap Fund commenced operations on September 16, 1996, as the
successor to the Small Capitalization Growth Fund for BRP Employment
Retirement Plans, an unregistered bank collective investment fund (the
"Predecessor Fund") which, in turn, commenced operations on November 2,
1994.

12
<PAGE> 467
In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo, and its
affiliates and predecessors, as one of the first investment managers to advise
investment accounts using asset allocation and index strategies. The Company
also may include in advertising and other types of literature information and
other data from reports and studies prepared by the Tax Foundation, including
information regarding federal and state tax levels and the related "Tax Freedom
Day."

13
<PAGE> 468
investments. The Company may compare the performance of the Fund with other
investments that are assigned ratings by the NRSROs. Any such comparisons may
be useful to investors who wish to compare the Fund's past performance with
other rated investments.

The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Fargo Investment Management
("WIFM"), a division of Wells Fargo Bank, is listed in the top 100 by
Institutional Investor magazine in its July 1996 survey "America's Top 300 Money
Managers". This survey ranks money managers in several asset categories. The
Company may also disclose in advertising and other types of sales literature the
assets and categories of assets and mutual fund assets managed by Wells Fargo
Bank. As of December 31, 1996, Wells Fargo Bank and its affiliates provided
investment Advisory services for approximately $54 billion of assets of
individual, Trusts, estates and institutions and $20 billion of mutual fund
assets.

The Company may disclose in advertising and other types of
literature that investors can open and maintain Sweep Accounts over the
Internet or through other electronic channels (collectively, "Electronic
Channels"). Such advertising and other literature may discuss the investment
options available to investors, including the types of accounts and any
applicable fees. Such advertising and other literature may disclose that Wells
Fargo Bank is the first major bank to offer an on-line application for a mutual
fund account that can be filled out completely through Electronic Channels.
Advertising and other literature may disclose that Wells Fargo Bank may
maintain Web sites, pages or other information sites accessible through
Electronic Channels (an "Information Site") and may describe the contents and
features of the Information Site and instruct investors on how to access the
Information Site and open a Sweep Account. Advertising and other literature
may also disclose the procedures employed by Wells Fargo Bank to secure
information provided by investors, including disclosure and discussion of the
tools and services for accessing Electronic Channels. Such advertising or
other literature may include discussions of the advantages of establishing and
maintaining a Sweep Account through Electronic Channels and testimonials from
Wells Fargo Bank customers or employees and may also include descriptions of
locations where product demonstrations may occur. The Company may also
disclose the ranking of Wells Fargo Bank as one of the largest money managers
in the United States.

DETERMINATION OF NET ASSET VALUE

14
<PAGE> 469
latest bid price quoted on such day. In the case of other securities,
including U.S. Government securities but excluding money market instruments
maturing in 60 days or less, the valuations are based on latest quoted bid
prices. Money market instruments maturing in 60 days or less are valued at
amortized cost. The assets of the Master Portfolio other than money market
instruments maturing in 60 days or less are valued at latest quoted bid prices.
Prices may be furnished by a reputable independent pricing service approved by
the Board of Trustees. Prices provided by an independent pricing service may
be determined without exclusive reliance on quoted prices and may take into
account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data. All other securities and other
assets of the Master Portfolio for which current market quotations are not
readily available are valued at fair value as determined in good faith by MIT's
Trustees and in accordance with procedures adopted by the Trustees.

Expenses and fees, including advisory fees are accrued daily and
are taken into account for the purpose of determining the net asset value of
the Master Portfolio's interests and the Fund's shares.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Institutional Class shares may be purchased on any day the Fund is
open. The Fund is open for business each day the New York Stock Exchange
("NYSE") is open for trading (a "Business Day"). Currently, the NYSE is closed
on New Year's Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day (each a "Holiday"). When any
Holiday falls on a weekend, the NYSE typically is closed on the weekday
immediately before or after such Holiday.

Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares

15
<PAGE> 470
involuntarily or make payment for redemption in securities or other property if
it appears appropriate to do so in light of the Company's responsibilities
under the 1940 Act.

In addition, the Company may redeem shares involuntarily to
reimburse the Fund for any losses sustained by reason of the failure of a
shareholders to make full payment for shares purchased or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to shares of the Fund as provided from time to time in the
Prospectus.

PORTFOLIO TRANSACTIONS

MIT has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by MIT's Board of Trustees, Wells Fargo is responsible for the
Master Portfolio decisions and the placing of portfolio transactions. In
placing orders, it is the policy of MIT to obtain the best overall terms taking
into account the dealer's general execution and operational facilities, the
type of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While Wells Fargo generally seeks
reasonably competitive spreads or commissions, the Master Portfolio will not
necessarily be paying the lowest spread or commission available.

In assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Master Portfolio to pay a broker/dealer
which furnishes brokerage and research services a higher commission than that
which might be charged by another broker/dealer for effecting the same
transaction, provided that Wells Fargo Bank determines in good faith that such
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker/dealer, viewed in terms of either the
particular transaction or the overall responsibilities of Wells Fargo Bank.
Such brokerage and research services might consist of reports and statistics
relating to specific companies or industries, general summaries of groups of
stocks or bonds and their comparative earnings and

16
<PAGE> 471
yields, or broad overviews of the stock, bond, and government securities
markets and the economy.

Supplementary research information so received is in addition to,
and not in lieu of, services required to be performed by Wells Fargo Bank and
does not reduce the advisory fees payable by the Master Portfolio. The Board of
Trustees will periodically review the commissions paid by the Master Portfolio
to consider whether the commissions paid over representative periods of time
appear to be reasonable in relation to the benefits inuring to the Master
Portfolio. It is possible that certain of the supplementary research or other
services received will primarily benefit one or more other investment companies
or other accounts for which investment discretion is exercised. Conversely,
the Master Portfolio may be the primary beneficiary of the research or services
received as a result of portfolio transactions effected for such other account
or investment company.

Under Section 28(e) of the Securities Exchange Act of 1934, an
adviser shall not be "deemed to have acted unlawfully or to have breached its
fiduciary duty" solely because under certain circumstances it has caused the
account to pay a higher commission than the lowest available. To obtain the
benefit of Section 28(e), an adviser must make a good faith determination that
the commissions paid are "reasonable in relation to the value of the brokerage
and research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to the Master Portfolio in any transaction may be less favorable than
that available from another broker/dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.

Broker/dealers utilized by Wells Fargo Bank may furnish
statistical, research and other information or services which are deemed by
Wells Fargo Bank to be beneficial to the Master Portfolio's investment
programs. Research services received from brokers supplement Wells Fargo
Bank's own research and may include the following types of information:
statistical and background information on industry groups and individual
companies; forecasts and interpretations with respect to U.S. and foreign
economies, securities, markets, specific industry groups and individual
companies; information on political developments; portfolio management
strategies; performance information on securities and information concerning
prices of securities; and information supplied by specialized services to Wells
Fargo Bank and to MIT's Trustees with respect to the performance, investment
activities and fees and expenses of other mutual Funds. Such information may
be communicated electronically, orally or in written form. Research services
may also include the providing of equipment used to communicate research
information, the arranging of meetings with management of companies and the
providing of access to consultants who supply research information.

17
<PAGE> 472
Fargo Bank with a diverse perspective on financial markets. Research services
which are provided to Wells Fargo Bank by brokers are available for the benefit
of all accounts managed or advised by Wells Fargo Bank. It is the opinion of
Wells Fargo Bank that this material is beneficial in supplementing their
research and analysis; and, therefore, it may benefit the Master Portfolio by
improving the quality of Wells Fargo Bank's investment advice. The advisory
fees paid by the Master Portfolio are not reduced because Wells Fargo Bank
receives such services.

Brokerage Commissions. For the period ended September 30, 1996,
the Fund paid $1,856 in brokerage commissions.

Securities of Regular Broker/Dealers. As of September 30, 1996,
the Fund owned no securities of its "regular brokers or dealers" or their
parents as defined in the Act.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens,
the Company bears all costs of its operations, including the compensation of
its Directors who are not affiliated with Stephens or Wells Fargo Bank or any
of their affiliates; advisory, shareholder servicing and administration fees;
payments pursuant to any Plan; interest charges; taxes; fees and expenses of
its independent accountants, legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming shares; expenses of preparing and
printing Prospectuses (except the expense of printing and mailing Prospectuses
used for promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of
its custodian, including those for keeping books and accounts and calculating
the NAV per share of the Fund; expenses of shareholders' meetings; expenses
relating to the issuance, registration and qualification of the Fund's shares;
pricing services, and any extraordinary expenses. Expenses attributable to the
Fund are charged against Fund assets. General expenses of the Company are
allocated among all of the funds of the Company, including the Fund, in a
manner proportionate to the net assets of the Fund, on a transactional basis,
or on such other basis as the Company's Board of Directors deems equitable.

FEDERAL INCOME TAX

In General. The following information supplements and should be
read in conjunction with the Prospectus sections entitled "Dividend and Capital
Gain Distributions" and

18
<PAGE> 473
"Taxes." The Prospectus of the Fund describes generally the tax treatment of
distributions by the Master Portfolio and the Fund. This section of the SAI
includes additional information concerning federal income taxes.

Qualification as a regulated investment company under the Code
requires, among other things, that (a) the Fund derive at least 90% of its
annual gross income from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; (b) the Fund derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) the Fund diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of
the Fund's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government securities and the
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are determined to be engaged in the same or
similar trades or businesses. For purposes of complying with these
qualification requirements, the Fund will be deemed to own a proportionate
share of the Master Portfolio's assets. As a regulated investment company, the
Fund will not be subject to federal income tax on its net investment income and
net capital gains distributed to its shareholders, provided that it distributes
to its shareholders at least 90% its net investment income, including net
tax-exempt income, earned in each year. The Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

A 4% nondeductible excise tax will be imposed on the Fund to the
extent it does not meet certain minimum distribution requirements by the end of
each calendar year. The Fund will either actually or be deemed to distribute
all of its net investment income and net capital gains by the end of each
calendar year and, thus, expects not to be subject to the excise tax.

19
<PAGE> 474
under the Code. As a non-publicly traded partnership, any interest, dividends,
gains and losses of the Master Portfolio shall be deemed to have been "passed
through" to the Fund (and the Master Portfolio's other investors) in proportion
to the Fund's ownership interest in the Master Portfolio. Therefore, to the
extent the Master Portfolio were to accrue but not distribute any interest,
dividends or gains, the Fund would be deemed to have realized and recognized
its proportionate share of interest, dividends or gains without receipt of any
corresponding distribution. However, the Master Portfolio will seek to
minimize recognition by investors of interest, dividends, gains or losses
without a corresponding distribution.

Federal Income Tax Rates. As of the printing of this SAI, the
maximum individual tax rate applicable to ordinary income is 39.60% (marginal
rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains is 28.00%; and the maximum corporate tax rate applicable to
ordinary income and net capital gains is 35.00% (except that to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

20
<PAGE> 475
different regulated investment company, the sales charge previously incurred
acquiring the Fund's shares shall not be taken into account (to the extent such
previous sales charges do not exceed the reduction in sales charges on the new
purchase) for the purpose of determining the amount of gain or loss on the
disposition, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of the Fund will be disallowed to the extent that substantially
identical shares are reacquired within the 61-day period beginning 30 days
before and ending 30 days after the shares are disposed of.

21
<PAGE> 476
Offsetting positions held by a regulated investment company
involving certain financial forward, futures or options contracts may be
considered, for tax purposes, to constitute "straddles." "Straddles" are
defined to include "offsetting positions" in actively traded personal property.
The tax treatment of "straddles" is governed by Section 1092 of the Code which,
in certain circumstances, overrides or modifies the provisions of Section 1256.

Foreign Shareholders. Under the Code, distributions of net
investment income by the Fund to a nonresident alien individual, nonresident
alien fiduciary of a Trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or a lower treaty rate). Withholding will not apply if a
dividend paid by the Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.

22
<PAGE> 477
shareholder, unless a shareholder certifies that the Taxpayer Identification
Number ("TIN") provided is correct and that the shareholder is not subject to
backup withholding, or the IRS notifies the Company that the shareholder's TIN
is incorrect or the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by the IRS.

CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Fund, the Master
Portfolio and Management."

The Fund is one of the funds of the Stagecoach Family of Funds.
The Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of twenty-four other funds.

Most of the Company's funds are authorized to issue multiple
classes of shares, one class generally subject to a front-end sales charge and,
in some cases, a class subject to a contingent-deferred sales charge, that are
offered to retail investors. Certain of the Company's funds also are
authorized to issue other classes of shares, which are sold primarily to
institutional investors. Each class of shares in a fund represents an equal,
proportionate interest in a fund with other shares of the same class.
Shareholders of each class bear their pro rata portion of the fund's operating
expenses, except for certain class-specific expenses (e.g., any state
securities registration fees, shareholder servicing fees or distribution fees
that may be paid under Rule 12b-1) that are allocated to a particular class.
Please contact Stagecoach Shareholder Services at 1-800-222-8222 if you would
like additional information about other funds or classes of shares offered.

The Fund is comprised of three classes of shares, Class A Shares,
Class B Shares and Institutional Class shares. With respect to matters that
affect one class but not another, shareholders vote as a class; for example,
the approval of a Plan. Subject to the foregoing, on any matter submitted to a
vote of shareholders, all shares then entitled to vote will be voted

23
<PAGE> 478
separately by portfolio unless otherwise required by the Act, in which case all
shares will be voted in the aggregate. For example, a change in the Fund's
fundamental investment policies would be voted upon only by shareholders of the
Fund and not shareholders of the Company's other investment portfolios.
Additionally, approval of an advisory contract is a matter to be determined
separately by the Fund. Approval by the shareholders of one portfolio is
effective as to that portfolio whether or not sufficient votes are received
from the shareholders of the other portfolios to approve the proposal as to
those portfolios. As used in the Prospectus and in this Statement of
Additional Information, the term "majority," when referring to approvals to be
obtained from shareholders of a class of the Fund, means the vote of the lesser
of (i) 67% of the shares of such class of the Fund represented at a meeting if
the holders of more than 50% of the outstanding shares of such class of the
Fund are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of such class of the Fund. The term "majority," when
referring to the approvals to be obtained from shareholders of the Company as a
whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares. Shareholders are entitled to one vote for
each full share held and fractional votes for fractional shares held.

Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Company.

MIT is a business Trust organized under the laws of Delaware. In
accordance with Delaware law and in connection with the tax treatment sought by
MIT, MIT's Declaration of Trust provides that its investors would be personally
responsible for MIT liabilities and obligations, but only to the extent MIT
property is insufficient to satisfy such liabilities and obligations. The
Declaration of Trust also provides that MIT shall maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance)
for the protection of MIT, its investors, Trustees, officers, employees and
agents covering possible tort and other liabilities, and that investors will be
indemnified to the extent they are held liable for a

24
<PAGE> 479
disproportionate share of MIT obligations. Thus, the risk of an investor
incurring financial loss on account of investor liability is limited to
circumstances in which both inadequate insurance existed and MIT itself was
unable to meet its obligations.

The Declaration of Trust further provides that obligations of MIT
are not binding upon the Trustees individually but only upon the property of
MIT and that the Trustees will not be liable for any action or failure to act.
However, nothing in the Declaration of Trust protects a Trustee against any
liability to which Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of Trustee's office.

The interests in the Master Portfolio have substantially identical
voting and other rights as those rights enumerated above for Fund shares. MIT
also intends to dispense with annual meetings, but will hold a special meeting
and assist investor communications under the circumstances described above with
respect to the Company in accord with provisions under Section 16(c) of the
Act. Whenever the Fund is requested to vote on a matter with respect to the
Master Portfolio, the Fund will hold a meeting of Fund shareholders and will
cast its votes as instructed by such shareholders. In a situation where the
Fund does not receive instruction from certain of its shareholders on how to
vote the corresponding shares of the Master Portfolio, the Fund will vote such
shares in the same proportion as the shares for which the Fund does receive
voting instructions.

Set forth below is the name, address and share ownership of each
person known by the Company to have, beneficial or record ownership of 5% or
more of a class of the Fund or 5% or more of the voting securities of the Fund
as a whole.

5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
SMALL CAP Wells Fargo Bank Institutional 93.49% 86.30%
420 Montgomery Street Class
San Francisco, CA 94104 [Record
Holder]
Wells Fargo Bank 48.93% N/A
P.O. Box 63015
San Francisco, CA 94163 Class A
Benefically
Stephens Inc. Owned 33.62% N/A
111 Center Street
Little Rock, AR 72201
Class A
Stephens Inc. Benefically 5.90% N/A
P.O. Box 34127 Owned
Little Rock, AR 72203

Stephens Inc. Class B 11.71% N/A
P.O. Box 34127 Benefically
Little Rock, AR 72203 Owned
Acct. 77586707

Class B
Benefically
Owned
Acct. 77478661
</TABLE>

25
<PAGE> 480
For purposes of the 1940 Act, any person who owns directly or
through one or more controlled companies more than 25% of the voting securities
of a company is presumed to "control" such company. Accordingly, to the extent
that a shareholder identified in the foregoing table is identified as the
beneficial holder of more than 25% of a class (or Fund), or is identified as
the holder of record of more than 25% of a class (or Fund) and has voting
and/or investment powers, it may be presumed to control such class (or Fund).

OTHER

INDEPENDENT AUDITORS

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the Fund for the fiscal period ended September
30, 1996 are hereby incorporated by reference to the Company's Annual Report as
filed with the SEC on December 9, 1996. The portfolio of investments, audited
financial statements and independent auditors' report for the Fund are attached
to all SAIs delivered to current or prospective shareholders.

26
<PAGE> 481
SAI APPENDIX

The following is a description of the ratings given by Moody's and
S&P to corporate bonds and commercial paper.

Corporate Bonds

Moody's: The four highest ratings for corporate bonds are "Aaa,"
"Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best quality"
and carry the smallest amount of investment risk. Bonds rated "Aa" are of
"high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1,
2 and 3 in each rating category from "Aa" through "Baa" in its rating system.
The modifier 1 indicates that the security ranks in the higher end of its
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by
S&P and have an extremely strong capacity to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity to pay interest and repay
principal" and differ "from the highest rated issued only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.

Corporate Commercial Paper

Moody's: The highest rating for corporate commercial paper is
"P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for repayment
of short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate commercial paper indicates
that the "degree of safety regarding timely payment is either overwhelming or
very strong." Commercial paper with "overwhelming safety characteristics" will
be rated "A-1+." Commercial paper with a strong capacity for timely payments
on issues will be rated "A-2."

A-1
<PAGE> 482

STAGECOACH FUNDS, INC.

Telephone: 1-800-260-5969

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

CALIFORNIA TAX-FREE BOND FUND
CALIFORNIA TAX-FREE INCOME FUND
GINNIE MAE FUND
GROWTH AND INCOME FUND
MONEY MARKET MUTUAL FUND
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND

INSTITUTIONAL CLASS

----------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series
investment company. This Statement of Additional Information ("SAI") contains
information about Institutional Class shares in six funds of the Stagecoach
Family of Funds -- the CALIFORNIA TAX-FREE BOND FUND (the "Bond Fund"), the
CALIFORNIA TAX-FREE INCOME FUND (the "Income Fund"), the GINNIE MAE FUND, the
GROWTH AND INCOME FUND (the "Growth Fund"), the MONEY MARKET MUTUAL FUND and
the SHORT- INTERMEDIATE U.S. GOVERNMENT INCOME FUND (the "Government Income
Fund") (each a "Fund" and collectively, the "Funds"). The investment objective
of each Fund is described in its respective Prospectus under "How the Fund(s)
Work(s) -- Investment Objective(s) and Policies."

This SAI is not a prospectus and should be read in conjunction
with each Fund's Prospectus dated February 1, 1997. All terms used in this SAI
that are defined in the Funds' Prospectuses have the meanings assigned in the
respective Prospectus. A copy of the Funds' Prospectuses may be obtained free
of charge by writing Stephens, Inc. ("Stephens"), the Company's sponsor,
co-administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201 or by calling the Transfer Agent at the telephone number indicated above.

----------------------------------

1
<PAGE> 483
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Permitted Investment Activities . . . . . . . . . . . . . . . 7
Special Considerations Affecting
California Municipal Obligations . . . . . . . . . . . . . . . . . . . 13
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . 22
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . 27
Additional Purchase and Redemption Information . . . . . . . . . . . . . 29
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 30
Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SAI Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

2
<PAGE> 484

INVESTMENT RESTRICTIONS

Fundamental Investment Policies: The Funds are subject to the
following investment restrictions, all of which are fundamental policies.

The Funds may not:

(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and
as a result thereof, the value of a Fund's investments in that industry would
be 25% or more of the current value of the Fund's total assets, provided that
there is no limitation with respect to investments in (i) obligations of the
U.S. Government, its agencies or instrumentalities ("U.S. Government
obligations"), and (ii) with respect only to the Bond and Income Funds,
municipal securities (for the purpose of this restriction, private activity
bonds and notes shall not be deemed municipal securities if the payments of
principal and interest on such bonds or notes is the ultimate responsibility of
non-governmental issuers), and (iii) with respect to the Money Market Mutual
Fund, the obligations of domestic banks (for the purpose of this restriction,
domestic bank obligations do not include obligations of U.S. branches of
foreign banks or obligations of foreign branches of U.S. banks);

(2) underwrite securities of other issuers, except to the extent
that the purchase of permitted investments (which includes municipal securities
for the Bond and Income Fund) directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with a Fund's investment program may be deemed to be an
underwriting; and

(3) make investments for the purpose of exercising control or
management.

The Ginnie Mae, Government Income and Growth Funds may not:

(1) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;

(3) purchase commodities or commodity contracts (including futures
contracts), except that the Funds may purchase securities of an issuer which
invests or deals in commodities or commodity contracts;

(4) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and, with respect to the Ginnie Mae
and Growth Funds, except for

3
<PAGE> 485
margin payments in connection with options, futures and options on futures) or
make short sales of securities; and

(5) purchase securities of any issuer (except U.S. Government
obligations) if, with respect to 100% of the Ginnie Mae and Growth Funds' total
assets, and only 75% of the Government Income Fund's total assets, as a result,
more than 5% of the value of a Fund's total assets would be invested in the
securities of any one issuer or with respect to 100% of each Fund's total
assets the Fund's ownership would be more than 10% of the outstanding voting
securities of such issuer.

The Bond, Income and Money Market Mutual Funds may not:

(1) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions, except with regard to the Bond
Fund, for margin payments in connection with options, futures and options on
futures) or make short sales of securities;

(2) write, purchase or sell puts, calls, options or any
combination thereof, and with regard to the Money Market Mutual Fund write,
purchase or sell warrants, except that all Funds may purchase securities with
put rights in order to maintain liquidity;

(3) issue senior securities, except that a Fund may borrow from
banks up to 10% of the current value of its net assets for temporary purposes
only in order to meet redemptions, and these borrowings may be secured by the
pledge of up to 10% of the current value of the Fund's net assets (but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets); and

(4) purchase or sell real estate or real estate limited
partnerships (other than municipal obligations with respect to the Bond Fund
and the Income Fund, or other than money market securities with respect to the
Money Market Mutual Fund, or with respect to each Fund other securities secured
by real estate or interests therein or securities issued by companies that
invest in real estate or interests therein), commodities or commodity contracts
(including futures contracts);

The Ginnie Mae and Growth Funds may not:

(1) write, purchase or sell puts, calls, straddles, spreads,
warrants, options or any combination thereof, and except that the Growth Fund
may purchase securities with put rights in order to maintain liquidity, and may
invest up to 5% of its net assets in warrants in accordance with its investment
policies as stated below; and

(2) issue senior securities, except that the Growth Fund may
borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of the Fund's net
assets (but investments may not be purchased while any such outstanding
borrowings exceed 5% of its net assets), and except that the Ginnie Mae Fund
may borrow up to

4
<PAGE> 486
20% of the current value of the Fund's net assets for temporary purposes only
in order to meet redemptions, and these borrowings may be secured by the pledge
of up to 20% of the current value of the Fund's net assets (but investments may
not be purchased by the Fund while any such outstanding borrowings exceed 5% of
the Fund's net assets).

The Government Income Fund may not:

(1) write, purchase or sell straddles, spreads, warrants, or any
combination thereof;

(2) borrow money or issue senior securities as defined in the
Investment Company Act of 1940 (the "1940 Act"), except that the Fund may
borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of the Fund's net
assets (but investments may not be purchased while any such outstanding
borrowings exceed 5% of its net assets), except that the Fund may issue
multiple classes of shares in accordance with applicable laws, rules,
regulations or orders; and

(3) make loans, except that the Fund may purchase or hold debt
instruments or lend its portfolio securities in accordance with its investment
policies, and may enter into repurchase agreements.

The Income and Money Market Mutual Funds may not:

(1) make loans of portfolio securities, (with regard to the Income
Fund, having a value that exceeds 50% of the current value of its total
assets), or other assets with regard to the Money Market Mutual Fund, provided
that, for purposes of this restriction, loans will not include the purchase of
fixed time deposits, repurchase agreements, commercial paper and other
short-term obligations, and other types of debt instruments commonly sold in
public or private offerings.

With respect to loans of portfolio securities, the Funds do not
intend to engage in securities loans during the current year. If a Fund were
to engage in securities loans, the Fund would do so in compliance with SEC
guidelines applicable to these transactions, including limiting all loans to a
value not exceeding one third of the current value of its total assets.

Non-Fundamental Investment Policies: The Funds are subject to
the following non-fundamental policies; that is, they may be changed by a
majority vote of the Board of Directors without shareholder approval:

The Funds may not:

(1) purchase or retain securities of any issuer if the Officers
or Directors of the Company or the investment adviser owning beneficially more
than one-half of one percent (0.5%) of the securities of the issuer together
own beneficially more than 5% of such securities; and

5
<PAGE> 487
(2) purchase securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets.

The Bond, Money Market Mutual, Income, Ginnie Mae and Growth Funds
may not:

(1) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of such Fund's aggregate investment in such classes of
securities will exceed 5% of its total assets.

The Bond, Money Market Mutual and Income Funds may not:

(1) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs; and

(2) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days or other illiquid
securities (including restricted securities), with respect to the Bond Fund.
The Money Market Mutual Fund may not invest more than 10% of the current value
of its net assets that are illiquid by virtue of the absence of a readily
available market or legal or contractual restriction on resale and fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days. The Income Fund may not invest more than 15% of its net
assets in illiquid securities. For this purpose, illiquid securities include,
among others (a) securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale, (b)
fixed time deposits that are subject to withdrawal penalties and that have
maturities of more than seven days, (c) repurchase agreements not terminable
within seven days.

The Income Fund may not:

(1) invest more than 15% of its net assets in illiquid securities.
For this purpose, illiquid securities include, among others, (a) securities
that are illiquid by virtue of the absence of a readily available market or
legal or contractual restrictions on resale, (b) fixed time deposits that are
subject to withdrawal penalties and that have maturities of more than seven
days, and (c) repurchase agreements not terminable within seven days; and

(2) invest more than 5% of its assets at the time of purchase in
warrants and not more than 2% of its net assets in warrants that are not listed
on the New York or American Stock Exchange.

6
<PAGE> 488
In addition, the Government Income Fund reserves the right to
invest up to 15% of the current value of its net assets in fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, repurchase agreements maturing in more than seven days or other
illiquid securities. However, as long as the Fund's shares are registered for
sale in a state that imposes a lower limit on the percentage of a fund's assets
that may be so invested, the Fund will comply with such lower limit. The fund
presently is limited to investing 10% of its net assets in such securities due
to limits applicable in several states.

The Money Market Mutual Fund may not purchase or sell real estate
limited partnership interests.

The Growth and Ginnie Mae Fund may not invest more than 10% of the
current value of its net assets in repurchase agreements maturing in more than
seven days or other illiquid securities (including restricted securities).

Further, all of the Funds may invest in shares of other open-end,
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies that have a
fundamental investment policy of investing at least 80% of their net assets in
obligations that are exempt from federal income taxes and are not subject to
the federal alternative minimum tax. The Funds' investment adviser will waive
its advisory fees, however, for that portion of the Funds' assets so invested,
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition.

Notwithstanding any other investment policy or limitation (whether
or not fundamental), the Income Fund may invest all of its assets in the
securities of a single, open-end management investment company with
substantially the same fundamental investment objective, policies and
limitations as the Fund.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

Unrated Investments. The Bond, Growth, Income, Ginnie Mae and
Money Market Mutual Funds may purchase instruments that are not rated if, in
the opinion of Wells Fargo

7
<PAGE> 489
Bank, such obligations are of comparable quality to other rated investments
that are permitted to be purchased by the Funds, provided that the Money Market
Mutual Fund may do so subject to the provisions and restrictions of Rule 2a-7
under the 1940 Act. After purchase by a Fund, a security may cease to be rated
or its rating may be reduced below the minimum required for purchase by such
Fund. Neither event will require an immediate sale of such security by the
Fund, provided that with respect to the Money Market Mutual Fund, when a
security ceases to be rated, the Company's Board of Directors determines that
such security presents minimal credit risks and provided further that, when a
security is downgraded below the eligible quality for investment or no longer
presents minimal credit risks, the Board finds that the sale of such security
would not be in the Fund's best interests. To the extent the ratings given by
Moody's or S&P may change as a result of changes in such organizations or their
rating systems, each Fund will attempt to use comparable ratings as standards
for investments in accordance with the investment policies contained in the
Funds' Prospectuses and in this SAI. The ratings of Moody's and S&P are more
fully described in the SAI Appendix.

Letters of Credit. For the Bond, Income, Ginnie Mae, Growth and
Money Market Mutual Funds, certain of the debt obligations (including municipal
securities, certificates of participation, commercial paper and other
short-term obligations) that the Funds may purchase may be backed by an
unconditional and irrevocable letter of credit of a bank, savings and loan
association or insurance company that assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies that, in the opinion of
Wells Fargo Bank, are of comparable quality to issuers of other permitted
investments of each Fund may be used for letter of credit-backed investments.

Pass-Through Obligations. The Bond, Ginnie Mae, Government
Income, and Income Funds may purchase pass- through obligations that represent
an ownership interest in a pool of mortgages and the resultant cash flow from
those mortgages. Payments by homeowners on the loans in the pool flow through
to certificate holders in amounts sufficient to repay principal and to pay
interest at the pass-through rate. The stated maturities of pass-through
obligations may be shortened by unscheduled prepayments of principal on the
underlying mortgages. Therefore, it is not possible to predict accurately the
average maturity of a particular pass-through obligation. Variations in the
maturities of pass-through obligations will affect the yield of a Fund.
Furthermore, as with any debt obligation, fluctuations in interest rates will
inversely affect the market value of pass-through obligations. Each Fund may
invest in pass-through obligations that are supported by the full faith and
credit of the U.S. Government (such as those issued by the Government National
Mortgage Association) or those that are guaranteed by an agency or
instrumentality of the U.S. Government (such as the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation) or bonds
collateralized by any of the foregoing.

When-Issued Securities. The Bond, Government Income, Ginnie Mae,
Growth, and Income Funds may invest in securities that are purchased on a
when-issued basis, in which case delivery and payment normally take place
within 45 days after the date of the commitment to purchase (120 days for the
Growth Fund and the Ginnie Mae Fund). The Bond, Growth and Government Income
Funds do not intend to invest more than 5% of their net assets in such

8
<PAGE> 490
securities during the coming year. Each Fund currently will only make
commitments to purchase securities on a when- issued basis with the intention
of actually acquiring the securities but may sell them before the settlement
date if it is deemed advisable.

When-issued securities are subject to market fluctuation, and no
income accrues to the purchaser during the period prior to issuance. The
purchase price and the interest rate that will be received on debt securities
are fixed at the time the purchaser enters into the commitment. Purchasing a
security on a when-issued basis can involve a risk that the market price at the
time of delivery may be lower than the agreed-upon purchase price, in which
case there could be an unrealized loss at the time of delivery.

Each Fund will establish a segregated account in which it will
maintain cash, U.S. Government Obligations, or other high-quality debt
instruments in an amount at least equal in value to its commitments to purchase
when-issued securities. If the value of these assets declines, a Fund will
place additional liquid assets in the account on a daily basis so that the
value of the assets in the account is equal to the amount of such commitments.

Loans of Portfolio Securities. The Ginnie Mae and Growth Funds
may lend securities from its portfolios to brokers, dealers and financial
institutions (but not individuals) if cash, U.S. Government securities or other
high- quality debt obligations equal to at least 100% of the current market
value of the securities loan (including accrued interest thereon) plus the
interest payable to the Fund with respect to the loan is maintained with a
Fund. In determining whether to lend a security to a particular broker, dealer
or financial institution, the Fund's investment adviser will consider all
relevant facts and circumstances, including the creditworthiness of the broker,
dealer, or financial institution. Any loans of portfolio securities will be
fully collateralized based on values that are marked- to-market daily. The
Fund will not enter into any portfolio security lending arrangement having a
duration of longer than one year. Any securities that the Fund may receive as
collateral will not become part of the Fund's portfolio at the time of the loan
and, in the event of a default by the borrower, the Fund will, if permitted by
law, dispose of such collateral except for such part thereof that is a security
in which the Fund is permitted to invest. During the time securities are on
loan, the borrower will pay the Fund any accrued income on those securities,
and the Fund may invest the cash collateral and earn additional income or
receive an agreed-upon fee from a borrower that has delivered cash- equivalent
collateral. The Fund will not lend securities having a value that exceeds one
third of the current value of its total assets. Loans of securities by the
Fund will be subject to termination at the Fund's or the borrower's option.
The Fund may pay reasonable administrative and custodial fees in connection
with a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with Stagecoach, its Investment Adviser, or its Distributor. The Ginnie Mae
Fund currently intends to limit the practice of lending portfolio securities to
no more than 5% of its net assets during the coming year.

9
<PAGE> 491
Foreign Obligations. For the Ginnie Mae and Growth Funds,
investments in foreign obligations involve certain considerations that are not
typically associated with investing in domestic obligations. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to uniform accounting,
auditing and financial reporting standards or governmental supervision
comparable to those applicable to domestic issuers. In addition, with respect
to certain foreign countries, taxes may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect investments in, the liquidity of, and the ability to enforce
contractual obligations with respect to, securities of issuers located in those
countries. While the Growth Fund currently does not intend to invest more than
10% of its assets in foreign obligations, it may invest 25% or more of its
assets in foreign obligations. The Ginnie Mae Fund does not intend to invest
in foreign obligations during the coming year.

Convertible Securities (Lower Rated Securities) Subject to the
limitations described in its Prospectus, the Ginnie Mae and Growth Funds may
invest in convertible securities that are not rated in one of the four highest
rating categories by a nationally recognized statistical rating organization
(NRSRO). The yields on such lower rated securities, which include securities
also known as junk bonds, generally are higher than the yields available on
higher- rated securities. However, investments in lower rated securities and
comparable unrated securities generally involve greater volatility of price and
risk of loss of income and principal, including the probability of default by
or bankruptcy of the issuers of such securities. Lower rated securities and
comparable unrated securities (a) will likely have some quality and protective
characteristics that, in the judgment of the rating organization, are
outweighed by large uncertainties or major risk exposures to adverse conditions
and (b) are predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligation. Accordingly, it is possible that these types of factors could, in
certain instances, reduce the value of securities held in the Fund's portfolio,
with a commensurate effect on the value of the Fund's shares. Therefore, an
investment in the Fund should not be considered as a complete investment
program and may not be appropriate for all investors.

10
<PAGE> 492
While the market values of lower rated securities and comparable unrated
securities tend to react less to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of certain lower
rated securities and comparable unrated securities also tend to be more
sensitive to individual corporate developments and changes in economic
conditions than higher-rated securities. In addition, lower rated securities
and comparable unrated securities generally present a higher degree of credit
risk. Issuers of lower rated securities and comparable unrated securities
often are highly leveraged and may not have more traditional methods of
financing available to them so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by such
issuers is significantly greater because lower rated securities and comparable
unrated securities generally are unsecured and frequently are subordinated to
the prior payment of senior indebtedness. The Fund may incur additional
expenses to the extent that it is required to seek recovery upon a default in
the payment of principal or interest on its portfolio holdings. The existence
of limited markets for lower rated securities and comparable unrated securities
may diminish the Fund's ability to (a) obtain accurate market quotations for
purposes of valuing such securities and calculating net asset value and (b)
sell the securities at fair value either to meet redemption requests or to
respond to changes in the economy or in financial markets.

Privately Issued Securities (Rule 144A). The Growth Fund may
invest in privately issued securities which may be resold only in accordance
with Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"). Rule
144A Securities are restricted securities and will not be publicly traded.
Accordingly, the liquidity of the market for specific Rule 144A Securities may
vary. The Company's investment adviser, pursuant to guidelines established by
the Board of Directors of the Company will evaluate the liquidity
characteristics of each Rule 144A Security proposed for purchase by the Fund on
a case-by-case basis and will consider the following factors, among others, in
their evaluation: (1) the frequency of trades and quotes for the Rule 144A
Security; (2) the number of dealers willing to purchase or sell the Rule 144A
Security and the number of other potential purchasers; (3) dealer undertakings
to make a market in the Rule 144A Security; and (4) the nature of the Rule 144A
Security and the nature of the marketplace trades (e.g., the time needed to
dispose of the Rule 144A Security, the method of

11
<PAGE> 493
soliciting offers and the mechanics of transfer). The Fund does not intend to
invest more than 5% of its net assets in Rule 144A Securities during the coming
year.

Municipal Bonds. The Bond and Income Funds may invest in
municipal bonds. As discussed in the Prospectus, the two principal
classifications of municipal bonds are "general obligation" and "revenue"
bonds. Municipal bonds are debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public
facilities such as bridges, highways, housing, hospitals, mass transportation,
schools, streets, and water and sewer works. Other purposes for which
municipal bonds may be issued include the refunding of outstanding obligations
and obtaining funds for general operating expenses or to loan to other public
institutions and facilities. Industrial development bonds are a specific type
of revenue bond backed by the credit and security of a private user. Certain
types of industrial development bonds are issued by or on behalf of public
authorities to obtain funds to provide privately-operated housing facilities,
sports facilities, convention or trade show facilities, airport, mass transit,
port or parking facilities, air or water pollution control facilities and
certain local facilities for water supply, gas, electricity, or sewage or solid
waste disposal. Neither Fund may invest 25% or more of its assets in
industrial development bonds. Assessment bonds, wherein a specially created
district or project area levies a tax (generally on its taxable property) to
pay for an improvement or project may be considered a variant of either
category. There are, of course, other variations in the types of municipal
bonds, both within a particular classification and between classifications,
depending on numerous factors. Some of these bonds may be considered private
activity bonds for federal income tax purposes.

Municipal Notes. The Bond and Income Funds may invest in
municipal notes which include, but are not limited to, tax anticipation notes
("TANs"), bond anticipation notes ("BANs"), revenue anticipation notes ("RANs")
and construction loan notes. Notes sold as interim financing in anticipation
of collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuer.

TANs. An uncertainty in a municipal issuer's capacity to raise
taxes as a result of such things as a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers mix
various tax proceeds into a general fund that is used to meet obligations other
than those of the outstanding TANs. Use of such a general fund to meet various
obligations could affect the likelihood of making payments on TANs.

12
<PAGE> 494
to meet other obligations could affect the ability of the issuer to pay the
principal of, and interest on, RANs.

Investments in Warrants. Although they have no present intention
to do so, the Bond, Income and Growth Funds may each invest up to 5% of their
net assets at the time of purchase in warrants (other than those that have been
acquired in units or attached to other securities), and not more than 2% of its
net assets in warrants which are not listed on the New York or American Stock
Exchange. Warrants represent rights to purchase securities at a specific price
valid for a specific period of time. The prices of warrants do not necessarily
correlate with the prices of the underlying securities. Each Fund may only
purchase warrants on securities in which the Fund may invest directly.

SPECIAL CONSIDERATIONS AFFECTING
CALIFORNIA MUNICIPAL OBLIGATIONS

The California Economy and General Information. From mid-1990 to
late 1993, the State suffered a recession with the worst economic, fiscal and
budget conditions since the 1930s. Construction, manufacturing (particularly
related to defense), exports and financial services, among others, were all
severely affected. Job losses had been the worst of any post-war recession.
Unemployment reached 10.1% in January 1994, but fell sharply to 7.7% in October
and November 1994, reflecting the state's recovery from the recession.

13
<PAGE> 495
The recession seriously affected California tax revenues, which
basically mirror economic conditions. It also caused increased expenditures
for health and welfare programs. In addition, the state has been facing a
structural imbalance in its budget with the largest programs supported by the
General Fund (e.g., K-12 schools and community colleges--also known as "K-14
schools," health and welfare, and corrections) growing at rates higher than the
growth rates for the principal revenue sources of the General Fund. As a
result, the state experienced recurring budget deficits in the late 1980s and
early 1990s. The state's Controller reported that expenditures exceeded
revenues for four of the five fiscal years ending with 1991-92. Moreover,
California accumulated and sustained a budget deficit in its Special Fund for
Economic Uncertainties ("SFEU") approaching $2.8 billion at its peak at June
30, 1993.
The accumulated budget deficits during the early 1990's, together
with expenditures for school funding which are not reflected in the state's
budget, and reduction of available internal borrowable funds, combined to
significantly deplete the state's cash resources to pay its ongoing expenses.
In order to meet its cash needs, the state has had to rely for several years on
a series of external borrowings, including borrowings past the end of a fiscal
year. Such borrowings are expected to continue in future fiscal years. To
meet its cash flow needs in the 1995-96 fiscal year, California issued $2
billion of revenue anticipation warrants which matured on June 28, 1996.
Because of the state's deteriorating budget and cash situation, the rating
agencies reduced the state's credit ratings between October 1991 and July 1994.
Moody's Investors Service lowered its rating from "Aa" to "A1," Standard &
Poor's Ratings Group lowered its rating from "AAA" to "A" and termed its
outlook as "stable," and Fitch Investors Service lowered its rating from "AA"
to "A."
However, since the start of 1994, California's economy has been
recovering steadily. Employment has grown in excess of 500,000 during 1994 and
1995, and is expected to continue to grow in 1996. Because of the improving
economy and the California's fiscal austerity, the state has had operating
surpluses for its past four consecutive fiscal years through 1996-97 and has
forecast a balanced 1996-97 fiscal year budget. In addition, the SFEU was
projected to have a small negative balance of approximately $70 million as of
June 30, 1996, all but eliminating the accumulated budget deficit of the early
1990's, and a modest reserve of $305 million, as of June 30, 1997. For these
and other reasons, Standard & Poors upgraded its rating of California municipal
obligations back to "A+" on July 30, 1996.

Local Governments. On December 6, 1994, Orange County, California
became the largest municipality in the United States to file for protection
under the Federal Bankruptcy laws. The filing stemmed from approximately $1.7
billion in losses suffered by the county's investment pool because of
investments in high risk "derivative" securities. In September 1995,
California's legislature approved legislation permitting the county to use for
bankruptcy recovery $820 million over 20 years in sales taxes previously
earmarked for highways, transit, and development. In June 1996, the county
completed an $880 million bond offering secured by real property owned by the
county. In June 1996, the county emerged from bankruptcy.

On January 17, 1994, an earthquake of the magnitude of an estimated
6.8 on the Richter Scale struck Los Angeles County, California causing
significant damage to public and

14
<PAGE> 496
private structures and facilities. While county residents and businesses
suffered losses totaling in the billions of dollars, the overall effect of the
earthquake on the county's and California's economy is not expected to be
serious. However, Los Angeles County is experiencing financial difficulty due
in part to the severe operating deficits for the county's health care system.
In August 1995, the credit rating of the county's long term bonds was
downgraded for the third time since 1992. Although the county has received
federal and state assistance, it is still facing a potential budget gap of
approximately $1 billion in the 1996-97 fiscal year. Even though state has no
existing obligations with respect to either Orange County or Los Angeles
County, the state may be required to intervene and provide funding if the
counties cannot maintain certain programs because of insufficient resources.

15
<PAGE> 497
impact on California state and municipal issuers. Article XIIIB restricts the
state from spending certain appropriations in excess of an appropriation's
limit imposed for each state and local government entity. If revenues exceed
such appropriation's limit, such revenues must be returned either as revisions
in the tax rates or fee schedules.

Other Information. Certain debt obligations held by the Funds may
be obligations payable solely from lease payments on real or personal property
leased to the state, cities, counties or their various public entities.
California law provides that a lessor may not be required to make payments
during any period that it is denied use and occupancy of the property in
proportion to such loss. Moreover, the lessor only agrees to appropriate
funding for lease payments in its annual budget for each fiscal year. In case
of a default under the lease, the only remedy available against the lessor is
that of reletting the property; no acceleration of lease payments is permitted.
Each of these factors presents a risk that the lease financing obligations held
by a Fund would not be paid in a timely manner.

Certain debt obligations held by the Funds may be obligations
payable solely from the revenues of health care institutions. The method of
reimbursement for indigent care, California's selective contracting with health
care providers for such care and selective contracting by health insurers for
care of its beneficiaries now in effect under California and federal law may
adversely affect these revenues and, consequently, payment on those debt
obligations.

There can be no assurance that general economic difficulties or the
financial circumstances of California or its towns and cities will not
adversely affect the market value of California municipal securities or the
ability of obligors to continue to make payments on such securities.

* * *

The taxable securities market is a broader and more liquid market
with a greater number of investors, issuers and market makers than the market
for municipal securities. The

16
<PAGE> 498
more limited marketability of municipal securities may make it difficult in
certain circumstances to dispose of large investments advantageously.

MANAGEMENT

Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate Professor of Finance
of the School of Business and Accounting at
Wake Forest University since 1983.
</TABLE>

17
<PAGE> 499
<TABLE>
<S> <C> <C>
Joseph N. Hankin, 55 Director President, Westchester
75 Grasslands Road Community College since
Valhalla, N.Y. 10595 1971; President of Hartford
(appointed as of Junior College from 1967 to
September 6, 1996) 1971; Adjunct Professor of
Columbia University
Teachers College since
1976.

*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

18
<PAGE> 500
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
---------- -------------
December 31, 1995 September 30, 1996
------------------ ------------------
Total
Aggregate Total Compensation Aggregate Compensation from
Compensation from Registrant Compensation Registrant
Name and Position from Registrant and Fund Complex from Registrant and Fund Complex
- ----------------- --------------- ------------------ --------------- -----------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company
and by all the registrants in each fund complex they serve as indicated above
and also are reimbursed for all out-of-pocket expenses relating to attendance
at board meetings. The Company, Overland Express Funds, Inc., Stagecoach
Trust, Life & Annuity Trust and Master Investment Trust are considered to be
members of the same fund complex as such term is defined in Form N-1A under the
1940 Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment Trust together form a
separate fund complex (the "BGFA Fund

19
<PAGE> 501
Complex"). Each of the Directors and Officers of the Company serves in the
identical capacity as directors and officers or as trustees and/or officers of
each registered open-end management investment company in both the Wells Fargo
and BGFA Fund Complexes, except for Joseph N. Hankin, who only serves the
aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann Hines who,
after September 6, 1996, only serves the aforementioned members of the BGFA
Fund Complex. The Directors are compensated by other companies and trusts
within a fund complex for their services as directors/trustees to such
companies and trusts. Currently the Directors do not receive any retirement
benefits or deferred compensation from the Company or any other member of each
fund complex.

As of the date of this SAI, Directors and Officers of the Company
as a group beneficially owned less than 1% of the outstanding shares of the
Company.

INVESTMENT ADVISER. The Funds are advised by Wells Fargo Bank
pursuant to Advisory Contracts that provide for Wells Fargo Bank to furnish to
the Funds investment guidance and policy direction in connection with the daily
portfolio management of the Funds. Pursuant to the Advisory Contracts, Wells
Fargo Bank furnishes to the Company's Board of Directors periodic reports on
the investment strategy and performance of each Fund.

Wells Fargo Bank has agreed to provide to each Fund with, among
other things, money market and fixed-income research, analysis and statistical
and economic data and information concerning interest rate and security market
trends, portfolio composition, credit conditions and average maturities of each
Fund's portfolio.

20
<PAGE> 502
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1994 December 31, 1995 September 30, 1996
------------------ ----------------- ----------------- ------------------
Fees Fees Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived Paid Waived
- ---- ---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
California Tax- $2,157,487 $0 $ 368,134 $1,728,107 $ 1,542,893 $0 $ 1,202,280 $0
Free Bond Fund

California Tax- $ 38,402 $122,967 $0 $ 279,496 $ 236,632 $31,013 $ 281,991 $18,321
Free Income

Ginnie Mae $ 888,174 $437,110 $1,185,036 $0 $ 840,112 $0 $679,123 $0

Growth and $ 443,874 $0 $ 587,977 $0 $ 754,149 $0 $799,899 $0
Income

Money Market $1,285,690 $0 $2,073,686 $2,008,946 $12,729,506 $0 $11,593,678 $0
Mutual

Short-Intermediate $0 $ 3,704 $0 $ 58,270 $ 56,387 $60,241 $ 213,467 $0
U.S. Government
Income

</TABLE>

ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained
Wells Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of
each Fund. The Administration Agreement between Wells Fargo and each Fund, and
the Co-Administration Agreement among Wells Fargo, Stephens and each Fund,
state that Wells Fargo and Stephens shall provide as administrative services,
among other things: (i) general supervision of the operation of a Fund,
including coordination of the services performed by each Fund's investment
adviser, transfer agent, custodian, shareholder servicing agent(s), independent
public accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions; and preparation of proxy statements
and shareholder reports for a Fund; and (ii) general supervision relative to
the compilation of data required for the preparation of periodic reports
distributed to the Company's officers and Board of Directors. Wells Fargo Bank
and Stephens also furnish office space and certain facilities required for
conducting the business of each Fund together with ordinary clerical and
bookkeeping services. Stephens pays the compensation of the Company's
Directors, officers and employees who are affiliated with Stephens. The
Administrator and Co-Administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of each Fund.

For the fiscal years ended December 31, 1993, 1994 and 1995, and
the fiscal period ended September 30 ,1996, the net amounts paid by the Funds
for administrative fees to Stephens, as sole administrator during these
periods, were as indicated below. Stephens was entitled to receive a fee,
payable monthly, at the annual rate of 0.03% of each Fund's average daily net
assets.

<TABLE>
<CAPTION>
Dec. 31, Dec. 31, Dec. 31, Sept. 30,
Fund 1993 1994 1995 1996
---- ----- ---- ---- ----
<S> <C> <C> <C> <C>
California Tax-Free Bond $130,939 $126,570 $ 93,013 $ 73,687
California Tax-Free Income $ 9,912 -0- $ 16,793 $ 18,371
</TABLE>

21
<PAGE> 503
<TABLE>
<S> <C> <C> <C> <C>
Ginnie Mae $ 81,058 $ 71,842 $ 50,407 $ 40,747
Growth and Income $ 26,644 $ 35,279 $ 45,249 $ 51,193
Money Market Mutual $ 96,535 $ 306,209 $ 954,713 $ 872,577
Short-Intermediate U.S. Govt. Income $ 3,522 $ 3,522 $ 6,998 $ 12,808
</TABLE>

SPONSOR AND DISTRIBUTOR. As discussed in each Fund's prospectus
under the heading "Management and Servicing Fees," Stephens serves as each
Fund's sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in the Funds'
prospectuses under the heading "Shareholder Servicing Agent," the Company may
enter into shareholder servicing agreements on behalf of each Fund's
Institutional Class shares with Wells Fargo Bank. The Company does not
currently intend to pay fees to Shareholder Servicing Agents during the
upcoming fiscal year.

For its services as transfer and dividend disbursing agent for the
Institutional Class shares of the Funds, Wells Fargo Bank is entitled to
receive monthly payments at the annual rate of 0.06% of the average daily net
assets of the Institutional Class shares of the Non-Money Market Funds, and
0.02% of the average daily net assets of the Institutional Class shares of the
Money Market Mutual Fund. Under the prior transfer agency agreement, Wells
Fargo Bank was entitled to receive a per account fee plus transaction fees and
out-of-pocket related costs with a minimum of $3,000 per month per Fund, unless
net assets of the Fund were under $20 million. For as long as a Fund's assets
remained under $20 million, the Fund was not charged any transfer agency fees.

For the year ended December 31, 1995 and the fiscal period ended
September 30, 1996, the Growth and Income Fund paid $ 15,578 and $17,963,
respectively, in custody fees and $ 160,168 and $ 217,737, respectively, in
transfer and dividend disbursing agency fees to Wells Fargo Bank. The
remaining Funds waived such fees entirely.

UNDERWRITING COMMISSIONS. The Institutional Class of each Fund
does not charge any front-end sales loads or contingent deferred sales charges
in connection with the purchase and redemption of its shares, and therefore
pays no underwriting commissions to the Distributor.

PERFORMANCE CALCULATIONS

As indicated in the Prospectuses, performance information for the
Funds' Institutional Class shares may be presented from time to time.

AVERAGE ANNUAL COMPOUND RATE OF RETURN ("T") is computed by using
the redeemable value at the end of a specified period ("ERV") of a hypothetical
initial investment in a Class of shares ("P") over a period of years ("n")
according to the following formula: P(1+T)n = ERV.

22
<PAGE> 504
Average Annual Total Return for the Applicable Period Ended September 30,
1996(1)

<TABLE>
<CAPTION>
Fund Inception(2) Five Year Three Year One Year
---- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
California Tax-Free Bond 7.25% N/A 3.80% 6.28%

California Tax-Free Income 4.58% N/A 3.68% 3.87%

Ginnie Mae 7.20% 6.46% 4.67% 4.12%

Growth and Income 14.29% 13.92% 14.35% 14.47%

Short-Intermediate U.S. Govt. Income 4.28% N/A N/A 4.45%
</TABLE>

- -----------------------------------
(1) Performance figures for the Institutional Class Shares reflect the
performance of the Class A Shares for periods prior to September 6,
1996. The Institutional Class shares assess no sales charges.

(2) Each Fund's Institutional Class Shares commenced operations on September
6, 1996. Class A Shares commenced operations as follows: California
Tax-Free Bond - January 2, 1992; California Tax-Free Income - November
18, 1992; Ginnie Mae - January 3, 1991; Growth and Income - August 2,
1990; and Short-Intermediate U.S. Government Income - October 27, 1993.

CUMULATIVE TOTAL RETURNS on each Fund's Institutional Class shares
may also be presented from time to time. Cumulative total return is computed
on a per share basis and assumes the reinvestment of dividends and
distributions. Cumulative total return of shares generally is expressed as a
percentage rate calculated by combining the income and principal changes for a
specified period and dividing by the net asset value per share at the beginning
of the period. Advertisements may include the percentage rate of total return
of shares or may include the value of a hypothetical investment in shares at
the end of the period which assumes the application of the percentage rate of
total return.

Cumulative Total Return for the Applicable Period Ended September 30, 1996(1)

<TABLE>
<CAPTION>
Fund Inception(2) Five Year Three Year
---- ------------ --------- ----------
<S> <C> <C> <C>
California Tax-Free Bond 39.47% N/A 11.82%

California Tax-Free Income 18.93% N/A 11.46%

Ginnie Mae 49.17% 36.73% 14.69%

Growth and Income 127.90% 91.84% 49.54%

Short-Intermediate U.S. 13.01% N/A N/A
Govt. Income
</TABLE>
- -------------

23
<PAGE> 505

(1) Performance figures for the Institutional Class Shares reflect the
performance of the Class A Shares for periods prior to September 6,
1996. The Institutional Class Shares have no sales charges.

YIELD: As indicated in their Prospectuses, the yield of each
Fund's Institutional Class shares may also be presented from time to time.
Yield is calculated based on a 30-day (or one month) period, by dividing the
net investment income per share of the Institutional Class shares of a Fund
earned during the period by the net asset value price per share of such Class
on the last day of the period, according to the following formula: YIELD =
2[((a- b/cd)+1)6-1], where a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. The net investment income of a Fund's Institutional Class
shares includes actual interest income, plus or minus amortized purchase
discount (which may include original issue discount) or premium, less accrued
expenses. Realized and unrealized gains and losses on portfolio securities are
not included in net investment income. Tax-equivalent yield for each Fund is
computed by dividing that portion of the yield of the Fund that is tax exempt
by one minus a stated income tax rate and adding the product to that portion,
if any, of the yield of the Fund that is not tax exempt. For purposes of sales
literature, a distribution rate of the Institutional Class shares also may be
presented provided that the yield data derived pursuant to the calculation
described above also are presented.

Effective yield for each Fund is calculated by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding one, raising the sum to a power
equal to 365 divided by 30, and subtracting one from the result.

Fund performance information will fluctuate from time to time,
unlike bank deposits or other investments that pay a fixed yield for a stated
period of time, and does not provide a basis for determining future yields
since it is based on historical data. Yield, total return and other
performance calculations are a function of portfolio quality, composition,
maturity and market conditions as well as the expenses allocated to a Fund and
its Institutional Class shares.

Yield and total return information for a Fund or Class of shares
in a Fund may be useful in reviewing the performance of such Fund or Class of
shares and for providing a basis for comparison with investment alternatives.
The yields and total returns, however, may not be comparable to the yields or
total returns from investment alternatives because of differences in the
foregoing variables and differences in the methods used to value portfolio
securities, compute

<PAGE> 506

expenses and calculate yield. In addition, investors should recognize that
changes in the net asset value of shares of a Class of the Funds will affect
the yield of each such Class for any specified period, and such changes should
be considered together with the yield in ascertaining the total return to
shareholders of a Class of shares for the period.

Yield for the Applicable Period Ended September 30, 1996(1)

<TABLE>
<CAPTION>
Thirty-Day Yield Thirty-Day Tax-Equivalent Yield(2)
---------------- -------------------------------
Fund After Waiver Before Waiver After Waiver Before Waiver
---- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
California Tax-Free Bond 5.36% 4.81% 9.97% 8.95%

California Tax-Free Income 4.13% 3.84% 7.68% 7.14%

Ginnie Mae 7.38% 6.82% 13.73% 12.69%

Short-Intermediate U.S. 5.11% 4.91% 9.51% 9.13%
Government Income
</TABLE>

<TABLE>
<CAPTION>
Fund Seven-Day Yield Seven-Day Effective Yield
---- --------------- -------------------------
<S> <C> <C>
Money Market Mutual 4.88% 5.00%
</TABLE>

____________________________________

(1) "After Waivers" figures reflect any reimbursed expenses throughout the
period. The yield of the predecessor portfolios' shares through
September 5, 1996 is also reflected.

(2) Based on a combined federal and state income tax rate of 46.24% for
each of the California Tax-Free Bond and Income Funds, and a federal
income tax rate of 28.00% for the Ginnie Mae and Short-Intermediate
U.S. Government Income Fund.

<PAGE> 507

Industrial Average are unmanaged indices of selected common stock prices. The
performance of a Class also may be compared to those of other mutual funds
having similar objectives. This comparative performance could be expressed as
a ranking prepared by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Bloomberg Financial Markets or Morningstar, Inc.,
independent services which monitor the performance of mutual funds.

Any such comparisons may be useful to investors who wish to
compare past performance of the Funds with that of competitors. Of course,
past performance cannot be a guarantee of future results. The Company also may
include, from time to time, a reference to certain marketing approaches of the
Distributor, including, for example, a reference to a potential shareholder
being contacted by a selected broker or dealer. General mutual fund statistics
provided by the Investment Company Institute may also be used.

The Company also may disclose in sales literature, the
distribution rate on the shares of a class of the Funds. Distribution rate,
which may be annualized, is the amount determined by dividing the dollar amount
per share of each class of the most recent dividend by the most recent NAV or
maximum offering price per share as of a date specified in the sales
literature. Distribution rate will be accompanied by the standard 30-day yield
as required by the SEC.

The Company also may use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for the Fund: (i) the Consumer Price Index may be
used to assess the real rate of return from an investment in a Fund; (ii) other
government statistics, including, but not limited to, The Survey of Current
Business, may be used to illustrate investment attributes of a Fund or the
general economic, business, investment, or financial environment in which a
Fund operates; (iii) the effect of tax-deferred compounding on the investment
returns of a Fund, or on returns in general, may be illustrated by graphs,
charts, etc., where such graphs or charts would compare, at various points in
time, the return from an investment in a Fund (or returns in general) on a
tax-deferred basis (assuming reinvestment of capital gains and dividends and
assuming one or more tax rates) with the return on a taxable basis; and (iv)
the sectors or industries in which a Fund invests may be compared to relevant
indices of stocks or surveys (e.g., S&P Industry Surveys) to evaluate a Fund's
historical performance or current or potential value with respect to the
particular industry or sector.

<PAGE> 508

redemption requests for shares of the Funds through ATMs and the availability
of combined Wells Fargo Bank and Stagecoach Funds account statements."

The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Fargo Investment Management
("WFIM"), a division of Wells Fargo Bank, is listed in the top 100 by
Institutional Investor magazine in its July 1996 survey "America's Top 300 Money
Managers". This survey ranks money managers in several asset categories. The
Company may also disclose in advertising and other types of sales literature the
assets and categories of assets under management by its investment adviser or
sub-adviser and the total amount of assets and mutual fund assets managed by
Wells Fargo Bank. As of December 31, 1996, Wells Fargo Bank and its affiliates
provided investment Advisory services for approximately $54 billion of assets of
individual, trusts, estates and institutions and $20 billion of mutual fund
assets.

The Company may disclose in advertising and other types of
literature that investors can open and maintain Sweep Accounts over the
Internet or through other electronic channels (collectively, "Electronic
Channels"). Such advertising and other literature may discuss the investment
options available to investors, including the types of accounts and any
applicable fees. Such advertising and other literature may disclose that Wells
Fargo Bank is the first major bank to offer an on-line application for a mutual
fund account that can be filled out completely through Electronic Channels.
Advertising and other literature may disclose that Wells Fargo Bank may
maintain Web sites, pages or other information sites accessible through
Electronic Channels (an "Information Site") and may describe the contents and
features of the Information Site and instruct investors on how to access the
Information Site and open a Sweep Account. Advertising and other literature
may also disclose the procedures employed by Wells Fargo Bank to secure
information provided by investors, including disclosure and discussion of the
tools and services for accessing Electronic Channels. Such advertising or
other literature may include discussions of the advantages of establishing and
maintaining a Sweep Account through Electronic Channels and testimonials from
Wells Fargo Bank customers or employees and may also include descriptions of
locations where product demonstrations may occur. The Company may also
disclose the ranking of Wells Fargo Bank as one of the largest money managers
in the United States.

DETERMINATION OF NET ASSET VALUE

The assets of the Bond Fund, other than debt securities maturing
in 60 days or less, are valued at latest quoted bid prices. Debt securities
maturing in 60 days or less are valued at amortized cost. In all cases, bid
prices will be furnished by a reputable independent pricing service approved by
the Board of Directors. Prices provided by an independent pricing service may
be determined without exclusive reliance on quoted prices and may take into
account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data. All other securities and other
assets of the Bond Fund for which current market quotations are not readily
available are valued at fair value as determined in good faith by the Company's
Directors and in accordance with procedures adopted by the Directors.

For the Government Income and Growth Funds, securities for which
market quotations are available are valued at latest prices. Securities of a
Fund for which the primary market is a national securities exchange or the
National Association of Securities Dealers Automated Quotations National Market
System are valued at last sale prices. In the absence of

<PAGE> 509

any sale of such securities on the valuation date and in the case of other
securities, including U.S. Government securities but excluding money market
instruments maturing in 60 days or less, the valuations are based on latest
quoted bid prices. Money market instruments maturing in 60 days or less are
valued at amortized cost. Futures contracts will be marked to market daily at
their respective settlement prices determined by the relevant exchange. These
prices are not necessarily final closing prices, but are intended to represent
prices prevailing during the final 30 seconds of the trading day. Options
listed on a national exchange are valued at the last sale price on the exchange
on which they are traded at the close of the NYSE, or, in the absence of any
sale on the valuation date, at latest quoted bid prices. Options not listed on
a national exchange are valued at latest quoted bid prices. Debt securities
maturing in 60 days or less are valued at amortized cost. In all cases, bid
prices will be furnished by a reputable independent pricing service approved by
the Board of Directors. Prices provided by an independent pricing service may be
determined without exclusive reliance on quoted prices and may take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. All other securities and other assets of
the Funds for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Company's Directors and
in accordance with procedures adopted by the Directors.

As indicated under "Investing In The Funds -- Share Price" in the
Prospectus, the Money Market Mutual Fund uses the amortized cost method to
determine the value of its portfolio securities pursuant to Rule 2a-7 under the
1940 Act. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which the value, as determined by amortized cost, is higher
or lower than the price that the Money Market Mutual Fund would receive if the
security were sold. During these periods the yield to a shareholder may differ
somewhat from that which could be obtained from a similar fund that uses a
method of valuation based upon market prices. Thus, during periods of declining
interest rates, if the use of the amortized cost method resulted in a lower
value of the Funds' portfolio on a particular day, a prospective investor in the
Funds would be able to obtain a somewhat higher yield than would result from
investment in a fund using solely market values, and existing Fund shareholders
would receive correspondingly less income. The converse would apply during
periods of rising interest rates.

Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Money Market Mutual Fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase
securities having remaining maturities (as defined in Rule 2a-7) of thirteen
months or less and invest only in those high-quality securities that are
determined by the Board of Directors to present minimal credit risks. The
maturity of an instrument is generally deemed to be the period remaining until
the date when the principal amount thereof is due or the date on which the
instrument is to be redeemed. However, Rule 2a-7 provides that the maturity of
an instrument may be deemed shorter in the case of certain instruments,
including certain variable and floating rate instruments subject to demand
features. Pursuant to the Rule, the Board is required to establish procedures
designed to stabilize, to the

<PAGE> 510

extent reasonably possible, the Money Market Mutual Fund's price per share as
computed for the purpose of sales and redemptions at $1.00. Such procedures
include review of the Fund's portfolio holdings by the Board of Directors, at
such intervals as it may deem appropriate, to determine whether the Fund's net
asset value calculated by using available market quotations deviates from $1.00
per share based on amortized cost. The extent of any deviation will be examined
by the Board of Directors. If such deviation exceeds 1/2 of 1%, the Board will
promptly consider what action, if any, will be initiated. In the event the
Board determines that a deviation exists that may result in material dilution or
other unfair results to investors or existing shareholders, the Board will take
such corrective action as it regards as necessary and appropriate, including the
sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding dividends or
establishing a net asset value per share by using available market quotations.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Institutional Class shares of the Non-Money Market Funds may be
purchased on any day the Funds are open. The Funds are open for business each
day the New York Stock Exchange ("NYSE") is open for trading (a "Business
Day"). Currently, the NYSE is closed on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day (each a "Holiday"). When any Holiday falls on a weekend, the NYSE
typically is closed on the weekday immediately before or after such Holiday.

Institutional Class shares of the Money Market Mutual Fund may be
purchased on any day the Fund is open for business, provided Wells Fargo Bank
also is open for business (for the Money Market Mutual Fund, a "Business Day").
Currently, Wells Fargo Bank is closed on New Year's Day, Presidents' Day, Martin
Luther King's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day and Christmas Day (for the Money Market Mutual
Fund, each, a "Holiday"). When any Holiday falls on a weekend, the Funds are
typically closed on the weekday immediately before or after such Holiday.

<PAGE> 511

as determined by the SEC by rule or regulation) an emergency exists as a result
of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such periods as the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

PORTFOLIO TRANSACTIONS

The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Company's Board of Directors, Wells Fargo Bank is
responsible for the Funds' portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Company to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities involved. While Wells Fargo Bank
generally seeks reasonably competitive spreads or commissions, the Funds do not
necessarily pay the lowest spread or commission available.

Except in the case of equity securities purchased by the Growth
Fund, purchases and sales of securities usually are principal transactions.
Portfolio securities normally are purchased or sold from or to dealers serving
as market makers for the securities at a net price. The Funds also purchase
portfolio securities in underwritten offerings and may purchase securities
directly from the issuer. Generally, money market securities, ARMs and CMOs
are traded on a net basis and do not involve brokerage commissions. The cost
of executing a Fund's portfolio securities transactions consists primarily of
dealer spreads and underwriting commissions. Under the 1940 Act, persons
affiliated with the Company are prohibited from dealing with the Company as a
principal in the purchase and sale of securities unless an exemptive order
allowing such transactions is obtained from the SEC or an exemption is
otherwise available.

<PAGE> 512

The Bond and Income Funds may purchase municipal obligations from
underwriting syndicates of which Stephens, Wells Fargo Bank or their affiliates
is a member under certain conditions in accordance with the provisions of a
rule adopted under the 1940 Act and in compliance with procedures adopted by
the Board of Directors.

For the Growth Fund, purchases and sales of equity securities on a
securities exchange are effected through brokers who charge a negotiated
commission for their services. Orders may be directed to any broker including,
to the extent and in the manner permitted by applicable law, Stephens or Wells
Fargo Securities Inc. In the over-the-counter market, securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. In underwritten offerings, securities are
purchased at a fixed price that includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
No Fund will deal with Stephens, Wells Fargo Bank or their affiliates in any
transaction in which any of them acts as principal without an exemptive order
from the SEC or unless an exemption is otherwise available.

In assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Growth Fund to pay a broker/dealer which
furnishes brokerage and research services a higher commission than that which
might be charged by another broker/dealer for effecting the same transaction,
provided that Wells Fargo Bank determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker/dealer, viewed in terms of either the particular
transaction or the overall responsibilities of Wells Fargo Bank. Such
brokerage and research services might consist of reports and statistics relating
to specific companies or industries, general summaries of groups of stocks or
bonds and their comparative earnings and yields, or broad overviews of the
stock, bond, and government securities markets and the economy.

<PAGE> 513

available. To obtain the benefit of Section 28(e), an adviser must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided . . . viewed in terms of
either that particular transaction or its overall responsibilities with respect
to the accounts as to which it exercises investment discretion and that the
services provided by a broker provide an adviser with lawful and appropriate
assistance in the performance of its investment decision-making
responsibilities." Accordingly, the price to a Fund in any transaction may be
less favorable than that available from another broker/dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered.

Broker/dealers utilized by Wells Fargo Bank may furnish
statistical, research and other information or services which are deemed by
Wells Fargo Bank to be beneficial to a Fund's investment programs. Research
services received from brokers supplement Wells Fargo Bank's own research and
may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities, markets,
specific industry groups and individual companies; information on political
developments; portfolio management strategies; performance information on
securities and information concerning prices of securities; and information
supplied by specialized services to Wells Fargo Bank and to the Company's
Directors with respect to the performance, investment activities and fees and
expenses of other mutual funds. Such information may be communicated
electronically, orally or in written form. Research services may also include
the providing of equipment used to communicate research information, the
arranging of meetings with management of companies and the providing of access
to consultants who supply research information.

The outside research assistance is useful to Wells Fargo Bank
since the brokers utilized by Wells Fargo Bank as a group tend to follow a
broader universe of securities and other matters than the staff of Wells Fargo
Bank can follow. In addition, this research provides Wells Fargo Bank with a
diverse perspective on financial markets. Research services which are provided
to Wells Fargo Bank by brokers are available for the benefit of all accounts
managed or advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank
that this material is beneficial in supplementing their research and analysis;
and, therefore, it may benefit the Funds by improving the quality of Wells Fargo
Bank's investment advice. The advisory fees paid by the Funds are not reduced
because Wells Fargo Bank receives such services.

Brokerage Commissions. For the years ended December 31, 1993,
1994 and 1995, and the fiscal period ended September 30, 1996, only the Growth
and Income Fund paid brokerage commissions as follows:

<TABLE>
<CAPTION>
Dec. 31, Dec. 31, Dec. 31, Sept. 30,
Fund 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Growth and Income Fund $ 347,779 $ 407,643 $ 607,442 $531,052

</TABLE>

<PAGE> 514

Securities of Regular Broker/Dealers. As of September 30, 1996, each Fund
owned securities of its "regular brokers or dealers" or their parents as
defined in the Act, as follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
- ---- ------ ---------------------
<S> <C> <C>
California Tax-Free Income Fund N/A N/A
California Tax-Free Bond Fund N/A N/A
Short-Intermediate U.S.
Government Income Fund $ 2,170,000 Goldman Sachs & Co.
Growth and Income Fund $ 6,438,000 Goldman Sachs & Co.
Money Market Mutual Fund $ 202,778,000 Goldman Sachs & Co.
Ginnie Mae Fund $ 4,475,000 Goldman Sachs & Co.

</TABLE>

As of December 31, 1995 each Fund owned securities of its
"regular brokers or dealers" or their parents as defined in the Act, as
follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
- ---- ------ ---------------------
<S> <C> <C>
California Tax-Free Income Fund $0 N/A
California Tax-Free Bond Fund $0 N/A
Short-Intermediate U.S.
Government Income Fund $1,119,000 Goldman Sachs & Co.
Growth and Income Fund $1,998,000 Goldman Sachs & Co.
Money Market Mutual Fund $0 N/A
</TABLE>

33
<PAGE> 515
Portfolio Turnover. For the Government Income Fund, portfolio
turnover generally involves some expenses to the Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover can
generate short-term capital gain tax consequences. The portfolio turnover rate
for the Fund generally is not expected to exceed 100%. For the Bond Fund and
the Income Fund, the portfolio turnover rate for the Funds generally is not
expected to exceed 300%. For the Money Market Mutual Fund, because the
portfolios of the Fund consist of securities with relatively short-term
maturities, the Fund can expect to experience high portfolio turnover rates.
The higher portfolio rates of the Ginnie Mae Fund should not adversely affect
it because portfolio transactions are made directly with principals on a net
basis and, consequently, the Fund usually does not incur brokerage expenses.
For the Funds, the portfolio turnover rate is not a limiting factor when Wells
Fargo Bank deems portfolio changes appropriate.

FUND EXPENSES

Except for the expenses borne by Wells Fargo Bank and Stephens,
the Funds bear all costs of its operations, including the compensation of its
Directors who are not affiliated with Stephens or Wells Fargo Bank or any of
their affiliates; advisory and administration fees; interest charges; taxes;
fees and expenses of its independent auditors, legal counsel, transfer agent
and dividend disbursing agent; expenses of redeeming shares; expenses of
preparing and printing prospectuses (except the expense of printing and mailing
prospectuses used for promotional purposes), shareholders' reports, notices,
proxy statements and reports to regulatory agencies; insurance premiums and
certain expenses relating to insurance coverage; trade association membership
dues; brokerage and other expenses connected with the execution of portfolio
transactions; fees and expenses of its custodian, including those for keeping
books and accounts and calculating the NAV per share of a Fund; expenses of
shareholders' meetings; expenses relating to the issuance, registration and
qualification of a Fund's shares; pricing services, and any extraordinary
expenses. Expenses attributable to a Fund are charged against the Fund's
assets, and expenses of a class (such as shareholder servicing fees or expenses
paid pursuant to a Plan) are charged against the assets of the class. General
expenses of the Company are allocated among all of the funds of the Company,
including each Fund, in a manner proportionate to the net assets of each Fund,
on a transactional basis, or on such other basis as the Company's Board of
Directors deems equitable.

FEDERAL INCOME TAXES

The Company intends to qualify each Fund as a regulated investment
company under Subchapter M of the Code as long as such qualification is in the
best interest of the Fund's

34
<PAGE> 516
shareholders. Each Fund will be treated as a separate entity for tax purposes
and thus the provisions of the Code applicable to regulated investment
companies will generally be applied to the Fund, rather than to the Company as
a whole. In addition, net capital gains, net investment income, and operating
expenses will be determined separately for each Fund.

Qualification as a regulated investment company under the Code
requires, among other things, that (a) each Fund derive at least 90% of its
annual gross income from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; (b) each Fund derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) each Fund diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of
each Fund's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government obligations and
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are determined to be engaged in the
same or similar trades or businesses. As a regulated investment company, each
Fund will not be subject to federal income tax on its net investment income and
net capital gains distributed to its shareholders, provided that it distributes
to its shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. Each Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

Federal Income Tax Rates. As of the printing of this SAI, the
maximum individual tax rate applicable to ordinary income is 39.60% (marginal
rates may be higher for some

35
<PAGE> 517
individuals due to phase out of exemptions and elimination of deductions); the
maximum individual tax rate applicable to net capital gains is 28.00%; and the
maximum corporate tax rate applicable to ordinary income and net capital gains
is 35.00% (except that to eliminate the benefit of lower marginal corporate
income tax rates, corporations which have taxable income in excess of $100,000
for a taxable year will be required to pay an additional amount of income tax
of up to $11,750 and corporations which have taxable income in excess of
$15,000,000 for a taxable year will be required to pay an additional amount of
tax of up to $100,000). Naturally, the amount of tax payable by an individual
or corporation will be affected by a combination of tax laws covering, for
example, deductions, credits, deferrals, exemptions, sources of income and
other matters.

Capital Gain Distributions. To the extent that each Fund
recognizes long-term capital gains, such gains will be distributed at least
annually and these distributions will be taxable to shareholders as long-term
capital gains, regardless of how long a shareholder has held Fund shares. Such
distributions will be designated as capital gain distributions in a written
notice mailed by the Fund to the shareholders not later than 60 days after the
close of the Fund's taxable year.

Other Distributions. With respect to the Money Market Mutual
Fund, although dividends will be declared daily based on the Fund's daily
earnings, for federal income tax purposes, the Fund's earnings and profits will
be determined at the end of each taxable year and will be allocated pro rata
over the entire year. For federal income tax purposes, only amounts paid out
of earnings and profits will qualify as dividends. Thus, if during a taxable
year the Money Market Mutual Fund's declared dividends (as declared daily
throughout the year) exceed the Fund's net income (as determined at the end of
the year), only that portion of the year's distributions which equals the
year's earnings and profits will be deemed to have constituted a dividend. It
is expected that the Money Market Mutual Fund's net income, on an annual basis,
will equal the dividends declared during the year.

36
<PAGE> 518
acquisition of such other shares. Also, any loss realized on a redemption or
exchange of shares of the Fund will be disallowed to the extent that
substantially identical shares are reacquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.

Taxation of Fund Investments. Gains or losses on sales of
portfolio securities by a Fund will generally be long-term capital gains or
losses if the securities have been held by it for more than one year, except in
certain cases such as where the Fund acquires a put or writes a call thereon.
Gains recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by the Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Fund held the debt obligation. Other
gains or losses on the sale of portfolio securities will be short-term capital
gains or losses.

37
<PAGE> 519
investment company were treated as entering into "straddles" by reason of its
engaging in certain financial forward, futures or option contracts, such
straddles could be characterized as "mixed straddles" if the futures, forwards,
or options comprising a part of such straddles were governed by Section 1256 of
the Code. The regulated investment company may make one or more elections with
respect to "mixed straddles." Depending upon which election is made, if any,
the results with respect to the regulated investment company may differ.
Generally, to the extent the straddle rules apply to positions established by
the regulated investment company, losses realized by the regulated investment
company may be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle and the conversion
transaction rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gain may be
characterized as short-term capital gain or ordinary income.

If a Fund purchases shares in a "passive foreign investment
company" ("PFIC"), the Fund may be subject to federal income tax and an
interest charge imposed by the IRS upon certain distributions from the PFIC or
the Fund's disposition of PFIC shares. If the Fund invests in a PFIC, the Fund
intends to make an available election to mark-to- market its interest in PFIC
shares. Under the election, the Fund will be treated as recognizing at the end
of each taxable year the excess, if any, of the fair market value of its
interest in PFIC shares over its basis in such shares. Although such excess
will be taxable to the Fund as ordinary income notwithstanding any
distributions by the PFIC, the Fund will not be subject to federal income tax
or the interest charge with respect to its interest in the PFIC.

Backup Withholding. The Company may be required to withhold,
subject to certain exemptions, at a rate of 31% ("backup withholding") on
dividends, capital gain distributions, and redemption proceeds (including
redemptions in- kind and proceeds from exchanges) paid or credited to an
individual Fund shareholder, unless a shareholder certifies that the Taxpayer
Identification Number ("TIN") provided is correct and that the shareholder is
not subject to backup withholding, or the IRS notifies the Company that the
shareholder's TIN is incorrect or the shareholder is subject to backup
withholding. Such tax withheld does not constitute any additional tax imposed
on the shareholder, and may be claimed as a tax payment on the shareholder's
federal income tax return. An investor must provide a valid TIN upon opening
or reopening an account. Failure to furnish a valid TIN to the Company could
subject the investor to penalties imposed by the IRS.

38
<PAGE> 520
Special Tax Considerations for the Income Fund and the Bond Fund

Federal -- The Income Fund and the Bond Fund intend that at
least 50% of the value of their total assets at the close of each quarter of
their taxable years will consist of obligations the interest on which is exempt
from federal income tax, so that they will qualify under the Code to pay
"exempt-interest dividends." The portion of total dividends paid by the Fund
with respect to any taxable year that constitutes exempt-interest dividends
will be the same for all shareholders receiving dividends during such year.
Long-term and/or short-term capital gain distributions will not constitute
exempt-interest dividends and will be taxed as capital gain or ordinary income
dividends, respectively. The exemption of interest income derived from
investments in tax-exempt obligations for federal income tax purposes may not
result in a similar exemption under the laws of a particular state or local
taxing authority.

Not later than 60 days after the close of its taxable year, the
Fund will notify its shareholders of the portion of the dividends paid with
respect to such taxable year which constitutes exempt-interest dividends. The
aggregate amount of dividends so designated cannot exceed the excess of the
amount of interest excludable from gross income under Section 103 of the Code
received by the Fund during the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code. Finally, interest on
indebtedness incurred to purchase or carry shares of the Fund will not be
deductible to the extent that the Fund's distributions are exempt from federal
income tax.

In addition, the federal alternative minimum tax ("AMT") rules
ensure that at least a minimum amount of tax is paid by taxpayers who obtain
significant benefit from certain tax deductions and exemptions. Some of these
deductions and exemptions have been designated "tax preference items" which
must be added back to taxable income for purposes of calculating AMT. Among
the tax preference items is tax-exempt interest from "private activity bonds"
issued after August 7, 1986. To the extent that the Fund invests in private
activity bonds, its shareholders who pay AMT will be required to report that
portion of Fund dividends attributable to income from the bonds as a tax
preference item in determining their AMT. Shareholders will be notified of the
tax status of distributions made by the Fund. Persons who may be "substantial
users" (or "related persons" of substantial users) of facilities financed by
private activity bonds should consult their tax advisors before purchasing
shares in a Tax-Free Fund. Furthermore, shareholders will not be permitted to
deduct any of their share of the Fund's expenses in computing their AMT. With
respect to a corporate shareholder of such Funds, exempt-interest dividends
paid by a Fund is included in the corporate shareholder's "adjusted current
earnings" as part of its AMT calculation, and may also affect its federal
"environmental tax" liability. As of the printing of this SAI, individuals are
subject to an AMT at a maximum rate of 28% and corporations at a maximum rate
of 20%. Shareholders with questions or concerns about AMT should consult their
tax advisors.

Shares of the Income Fund and the Bond Fund would not be suitable
for tax-exempt institutions and may not be suitable for retirement plans
qualified under Section 401 of the Code, H.R. 10 plans and IRAs since such
plans and accounts are generally tax-exempt and, therefore,

39
<PAGE> 521
would not benefit from the exempt status of dividends from such Funds. Such
dividends would be ultimately taxable to the beneficiaries when distributed to
them.

California -- The Income Fund and the Bond Fund expect to be
exempt from tax in California on the same basis as under Subchapter M of the
Code as described above. Moreover, if at the close of each quarter of the each
such Fund's taxable year, at least 50% of the value of its total assets
consists of obligations the interest on which, if such obligations were held by
an individual, would be exempt from California personal income tax (under
either the laws of California or of the United States), the Fund will be
entitled to pay dividends to its shareholders which will be exempt from
California personal income tax (referred to herein as "California
exempt-interest dividends"). Under normal market conditions, each Fund will
invest primarily in municipal securities of the State of California, its
cities, municipalities and other political authorities so that it can pay
California exempt-interest dividends.

Not later than 60 days after the close of its taxable year, the
Fund will notify its shareholders of the portion of the dividends paid which
constitutes California exempt-interest dividends with respect to such taxable
year. The total amount of California exempt-interest dividends paid by the
Fund to all of its shareholders with respect to any taxable year cannot exceed
the amount of interest received by the Fund during such year on California
municipal securities and other obligations the interest on which is tax exempt,
less any expenses or expenditures (including any expenditures attributable to
the acquisition of securities of other investment companies). Dividends paid
by the Fund in excess of this limitation will be treated as ordinary dividends
subject to California personal income tax at ordinary rates.

Other Matters. Investors should be aware that the investments to
be made by the Funds may involve sophisticated tax rules that may result in
income or gain recognition by the Funds without corresponding current cash
receipts. Although the Funds will seek to avoid significant noncash income,
such noncash income could be recognized by the Funds, in which case the Funds
may distribute cash derived from other sources in order to meet the minimum
distribution requirements described above.

40
<PAGE> 522
CAPITAL STOCK

The Funds are six of the funds of the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991 and
currently offers shares of nineteen other funds.

Most of the Company's funds are authorized to issue multiple classes
of shares, one class generally subject to a front-end sales charge and, in some
cases, a class subject to a contingent-deferred sales charge, that are offered
to retail investors. Certain of the Company's funds also are authorized to
issue other classes of shares, which are sold primarily to institutional
investors. Each class of shares in a fund represents an equal, proportionate
interest in a fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the fund's operating expenses, except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule
12b-1) that are allocated to a particular class. Please contact Stagecoach
Shareholder Services at 1-800-222-8222 if you would like additional information
about other funds or classes of shares offered.

The Funds are authorized to issue other classes of shares, subject to a
front-end sales charge and, in some cases, subject to a contingent deferred
sales charge, that are offered to retail investors, and another class that is
offered to qualified business investors who purchase such shares through certain
non-interest bearing transaction accounts offered by Wells Fargo Bank. The
Bond, Ginnie Mae, Growth and Money Market Mutual Funds are comprised of three
classes of shares and the Government Income and Income Funds are comprised of
two classes of shares. Each class of shares represents an equal proportionate
interest in a Fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the Fund's operating expenses except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule
12b-1) that are allocated to a particular class. With respect to matters
affecting one class, but not another, shareholders of each Fund vote as a class.
For example, approval of a distribution plan is voted on only by members of the
class affected by the plan. Subject to the foregoing, all shares of a Fund have
equal voting rights. In situations where voting by series (fund) is required by
law or where the matter involved affects only one series, shares of each Fund
vote by series. For example, a change in a Fund's fundamental investment policy
would be voted upon by only shareholders of the Fund involved. Additionally,
approval of an advisory contract is a matter to be determined separately by a
Fund. Approval by the shareholders of one Fund is effective as to that Fund
whether or not sufficient votes are received from the shareholders of other
series to approve the proposal as to those series. As used in the Prospectuses
and in this SAI, the term "majority", when referring to approvals to be obtained
from shareholders means the vote of the lesser of (i) 67% of the shares of the
Fund, or the respective class of the Fund, depending on the context, represented
at a meeting if the holders of more than 50% of the outstanding shares of the
Fund, or of such class of the Fund, are present in person or by proxy, or (ii)
more than 50% of the outstanding shares of such Fund, or of the respective class
of the Fund. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held.

41
<PAGE> 523
The Company is not required to hold annual meetings of
shareholders and may dispense with a special meeting of shareholders in any
year in which it is not required to elect Directors under the 1940 Act.

Each Fund share represents an equal proportional interest in the
Fund with every other share and is entitled to such dividends and distributions
out of the income earned on the assets belonging to the Fund as are declared in
the discretion of the Directors. In the event of the liquidation or
dissolution of the Company, shareholders of a Fund are entitled to receive the
assets attributable to the Fund that are available for distribution, and a
distribution of any general assets not attributable to a particular investment
portfolio that are available for distribution in such manner and on such basis
as the Directors in their sole discretion may determine.

Shareholders are not entitled to any preemptive rights. All
shares, when issued for the consideration described in the applicable
Prospectus, will be fully paid and non-assessable by the Company.

5% OWNERSHIP AS OF JANUARY 2, 1996

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
CALIFORNIA TAX-FREE BOND Dim & Co. Institutional 81.74% 19.10%
Attn: MF Dept. A88-4 Class
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Hep & Co 6.70% N/A
Attn: MF Dept. A88-4 Institutional
P.O. Box 9800 MAC 9139- Class
027 Record Holder
Calabasas, CA 91372

CALIFORNIA TAX-FREE Dim & Co. Institutional 76.84% 7.20%
INCOME Attn: MF Dept. A88-4 Class
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Hep & Co 19.01% N/A
Attn: MF Dept. A88-4 Institutional
P.O. Box 9800 MAC 9139- Class
027 Record Holder
Calabasas, CA 91372

SHORT-INTERMEDIATE U.S. First Interstate Bank Institutional 9.49% 6.20%
GOVERNMENT INCOME (Trustee) Class
Choicemaster Record holder
Attn: Mutual Funds
P.O. Box 9800
Calabasas, CA 91372

Dim & Co. Institutional 48.10% 31.20%
Attn: MF Dept. A88-4 Class
P.O. Box 9800 Record Holder
Calabasas, CA 91372

</TABLE>

42
<PAGE> 524
<TABLE>
<S> <C> <C> <C> <C>
Virg & Co
Attn: MF Dept. A88-4 Institutional 20.85% 13.50%
P.O. Box 9800 Class
Calabasas, CA 91372 Record Holder

Hep & Co
Attn: MF Dept. A88-4
P.O. Box 9800 MAC 9139- Institutional 18.47% 12.00%
027 Class
Calabasas, CA 91372 Record Holder

GINNIE MAE Stephens Inc. Institutional 6.54% N/A
111 Center Street Class
Little Rock, AR 72201 Benefically Owned

Dim & Co. 20.98% N/A
Attn: MF Dept. A88-4 Institutional
P.O. Box 9800 Class
Calabasas, CA 91372 Record Holder

Virg & Co 33.40% N/A
Attn: MF Dept. A88-4
P.O. Box 9800 Institutional
Calabasas, CA 91372 Class
Record Holder
Hep & Co 11.20% N/A
Attn: MF Dept. A88-4
P.O. Box 9800 MAC 9139-
027 Institutional
Calabasas, CA 91372 Class
Record Holder 7.33% N/A
Wells Fargo Bank
(for Donald L. Hill MD
Managed IRA)
420 Montgomery Street Institutional
5th Floor Class
San Francisco, CA 94163 Beneficially Owned

GROWTH AND INCOME Virg & Co Institutional 33.60% N/A
Attn: MF Dept. A88-4 Class
P.O. Box 9800 Record Holder
Calabasas, CA 91372

Hep & Co 59.47% N/A
Attn: MF Dept. A88-4 Institutional
P.O. Box 9800 MAC 9139- Class
027 Record Holder
Calabasas, CA 91372

MONEY MARKET MUTUAL Hep & Co Institutional 97.99% N/A
Attn: MF Dept. A88-4 Class
P.O. Box 9800 MAC 9139- Record Holder
027
Calabasas, CA 91372
</TABLE>

For purposes of the 1940 Act, any person who owns directly or
through one or more controlled companies more than 25% of the voting securities
of a company is presumed to "control" such company. Accordingly, to the extent
that a shareholder identified in the foregoing table is identified as the
beneficial holder of more than 25% of a class (or Fund), or is identified as the
holder of record of more than 25% of a class (or Fund) and has voting and/or
investment powers, it may be presumed to control such class (or Fund).

43
<PAGE> 525
OTHER INFORMATION

The Registration Statement, including the Prospectuses, the SAI
and the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C. Statements contained in the Prospectuses or the SAI as to the
contents of any contract or other document are not necessarily complete, and,
in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP serves as the independent auditor for the
Company. KPMG Peat Marwick LLP provides audit services, tax return preparation
and assistance and consultation in connection with review of certain SEC
filings. KPMG Peat Marwick LLP's address is Three Embarcadero Center, San
Francisco, California 94111.

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the Funds for the fiscal period ended
September 30, 1996 are hereby incorporated by reference to the Company's Annual
Report as filed with the SEC on December 9, 1996. The portfolio of
investments, audited financial statements and independent auditors' report for
the Funds are attached to all SAIs delivered to current or prospective
shareholders. The Company's annual report may be obtained by calling
1-800-222-8222.

44
<PAGE> 526

SAI APPENDIX

The following is a description of the ratings given by Moody's and
S&P to corporate and municipal bonds, municipal notes, and corporate and
municipal commercial paper.

Corporate and Municipal Bonds

Municipal Notes

A-1
<PAGE> 527

"VMIG 3" are of "favorable quality," with all security elements accounted for,
but lacking the strength of the preceding grades.

Corporate and Municipal Commercial Paper

Corporate Notes

A-2
<PAGE> 528
STAGECOACH FUNDS(R), INC.

Telephone: 1-800-260-5969

STATEMENT OF ADDITIONAL INFORMATION
Dated February 1, 1997

ARIZONA TAX-FREE FUND
BALANCED FUND
EQUITY VALUE FUND
INTERMEDIATE BOND FUND
NATIONAL TAX-FREE FUND
OREGON TAX-FREE FUND
PRIME MONEY MARKET MUTUAL FUND
TREASURY MONEY MARKET MUTUAL FUND

INSTITUTIONAL CLASS

--------------------------------

Stagecoach Funds, Inc. (the "Company") is an open-end, series investment
company. This Statement of Additional Information ("SAI") contains additional
information about one class of shares offered in eight funds of the Stagecoach
Family of Funds (each, a "Fund" and collectively, the "Funds"): the ARIZONA
TAX-FREE FUND, NATIONAL TAX-FREE FUND and OREGON TAX-FREE FUND (collectively,
the "Tax-Free Funds"), the PRIME MONEY MARKET MUTUAL FUND and TREASURY MONEY
MARKET MUTUAL FUND (each, a "Money Market Fund" and collectively, the "Money
Market Funds") and the BALANCED FUND, EQUITY VALUE FUND and INTERMEDIATE BOND
FUND. This SAI relates only to the Institutional Class shares offered by the
Funds. The investment objective of each Fund is described in the applicable
prospectus under "How the Funds Work -- Investment Objective(s) and Policies."

This SAI is not a prospectus and should be read in conjunction with the
prospectus applicable to each Fund, dated February 1, 1997. All terms used in
this SAI that are defined in the prospectus for each Fund have the meanings
assigned in that Fund's prospectus. A copy of the prospectus for each Fund may
be obtained without charge by writing Stephens Inc., the Company's sponsor,
administrator and distributor, at 111 Center Street, Little Rock, Arkansas
72201 or calling the Company's Transfer Agent at the telephone number indicated
above.

--------------------------------

<PAGE> 529
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Additional Permitted Investment Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Special Considerations Affecting Arizona Municipal Obligations . . . . . . . . . . . . . . . . . . 24

Special Considerations Affecting Oregon Municipal Obligations . . . . . . . . . . . . . . . . . . . 26

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Servicing Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Additional Purchase and Redemption Information . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Tax-Free Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

i
<PAGE> 530
GENERAL

Stagecoach Funds, Inc. (the "Company" and, at times, "Stagecoach") is
an open-end management investment company offering shares in separately managed
investment portfolios. The Arizona Tax-Free, Intermediate Bond, National
Tax-Free and Oregon Tax-Free Funds were originally organized as investment
portfolios of Westcore Trust under the following names: Arizona Intermediate
Tax-Free, Bonds Plus, Quality Tax-Exempt Income, and Oregon Tax-Exempt Funds,
respectively. On October 1, 1995, each Fund was reorganized as an investment
portfolio of Pacifica Funds Trust ("Pacifica" or the "predecessor Company").
The Balanced Fund and Equity Value Fund were originally organized as investment
portfolios of Pacifica under the same names. The Prime Money Market Mutual
Fund operated as Pacific American Liquid Assets, Inc. from its commencement of
operations on April 30, 1981 until it was reorganized as a portfolio of Pacific
American Fund on October 1, 1985; on October 1, 1994, it was reorganized as the
Pacific American Money Market Portfolio of Pacifica; and, in July of 1995, it
was renamed the Pacifica Prime Money Market Fund. Prior to August 1, 1990, the
Treasury Money Market Mutual Fund was known as the Short-Term Government Fund
and invested in obligations issued or guaranteed by agencies and
instrumentalities of the U.S. Government in accordance with fundamental
policies that were then effective for the Fund. The Fund operated as a
portfolio of Pacific American Fund through October 1, 1994, when it was
reorganized as the Pacific American U.S. Treasury Portfolio, a portfolio of
Pacifica Funds Trust. In July 1995, the Fund was renamed the Pacifica Treasury
Money Market Fund.

On April 25, 1996, the Agreement and Plan of Reorganization of
Pacifica with Stagecoach and the creation of each Fund as a new fund of
Stagecoach were approved by the Company's Board of Directors. On May 17, 1996,
the Agreement and Plan of Reorganization of Pacifica with the Company was
approved by Pacifica's Board of Trustees. The reorganization of Pacifica with
Stagecoach became effective on September 6, 1996 (the "Reorganization"). Each
of the following portfolios of Pacifica was reorganized as the specified
Stagecoach Fund:

<TABLE>
<CAPTION>
PACIFICA FUNDS TRUST PORTFOLIO NAME STAGECOACH FUND NAME
----------------------------------- --------------------
<S> <C>
Pacifica Arizona Tax-Exempt Fund Arizona Tax-Free Fund
Pacifica Balanced Fund Balanced Fund
Pacifica Equity Value Equity Value Fund
Pacifica Intermediate Bond Fund Intermediate Bond Fund
Pacifica National Tax-Exempt Fund National Tax-Free Fund
Pacifica Oregon Tax-Exempt Fund Oregon Tax-Free Fund
Pacifica Prime Money Market Fund Prime Money Market Mutual Fund
Pacifica Treasury Money Market Fund Treasury Money Market Mutual Fund
</TABLE>

1
<PAGE> 531
INVESTMENT RESTRICTIONS

The Intermediate Bond Fund and the Tax-Free Funds may not:

2. Purchase or sell real estate, except that each Fund may purchase
securities of issuers that deal in real estate and may purchase securities that
are secured by interests in real estate.

3. Purchase securities of companies for the purpose of exercising
control.

6. Write or sell put options, call options, straddles, spreads, or
any combination thereof, except that the Oregon Tax-Free Fund may enter into
transactions in futures contracts and related options, and except that the
Intermediate Bond Fund may enter into transactions in options on securities,
futures contracts and options on futures contracts.

7. Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of the total assets at the time of
such borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 10% of the value of a Fund's total assets at
the time of such borrowing. None of these Funds will purchase securities while
its borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. Securities held in escrow or separate accounts in
connection with a Fund's investment practices described in this SAI or in its
prospectus are not deemed to be pledged for purposes of this limitation.

2
<PAGE> 532
The Intermediate Bond Fund may not:

As a matter of non-fundamental policy (which may be changed without
shareholder vote) the Intermediate Bond Fund may not (i) invest in mineral
leases and (ii) purchase, hold or deal in real estate limited partnerships.

The Tax-Free Funds may not:

3. Make loans, except that each Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies.

<PAGE> 533
The Oregon Tax-Free Fund may not:

The Arizona Tax-Free Fund may not:

1. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the issuer's
outstanding voting securities would be owned by the Fund, except that (a) up to
50% of the value of the Fund's total assets may be invested without regard to
these limitations provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is backed only by the assets and revenues of a
nongovernmental user, such nongovernmental user. In certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security shall not
be deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets.

4
<PAGE> 534
subdivisions, which would cause 25% or more of the value of the Fund's total
assets at the time of purchase to be invested in the securities of issuers
conducting their principal business activities in the same industry.

The National Tax-Free Fund may not:

1. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
invested in the securities of such issuer, or more than 10% of the issuer's
outstanding voting securities would be owned by the Fund, except that (a) up to
50% of the value of the Fund's total assets may be invested without regard to
these limitations provided that no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of these
limitations, a security is considered to be issued by the governmental entity
(or entities) whose assets and revenues back the security, or, with respect to
a private activity bond that is backed only by the assets and revenues of a
nongovernmental user, such nongovernmental user. In certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee, except that a guarantee of a security shall not
be deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets.

The Balanced Fund and Equity Value Fund, except as indicated, may
not:

1. Borrow money or pledge or mortgage its assets, except that a Fund
may borrow from banks up to 10% of the current value of its total net assets
for temporary or emergency purposes and those borrowings may be secured by the
pledge of not more than 15% of the current value of its total net assets (but
investments may not be purchased by a Fund while any such borrowings exist).

2. Make loans, except loans of portfolio securities and except that a
Fund may enter into repurchase agreements with respect to its portfolio
securities and may purchase the types of debt instruments described in the
prospectuses or the SAI.

3. Invest in companies for the purpose of exercising control or
management.

5
<PAGE> 535
4. Knowingly purchase securities of other investment companies,
except (i) in connection with a merger, consolidation, acquisition, or
reorganization; and (ii) may invest up to 10% of their net assets in shares of
other investment companies.

5. Invest in real property (including limited partnership interests),
commodities, commodity contracts, or oil, gas and other mineral resource,
exploration, development, lease or arbitrage transactions.

6. Acquire securities subject to restrictions on disposition imposed
by the Securities Act of 1933, if, immediately after and as a result of such
acquisition, the value of such restricted securities and all other illiquid
securities held by a Fund would exceed 10% of the value of the Fund's total
assets.

7. Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933.

8. Make loans, except that the Funds may purchase readily marketable
debt securities and invest in repurchase agreements and make loans of portfolio
securities. No Fund will invest in repurchase agreements maturing in more than
seven days (unless subject to a demand feature) if any such investment,
together with any illiquid securities (including securities which are subject
to legal or contractual restrictions on resale) held by a Fund, exceeds 10% of
the value of its total assets.

9. Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.

10. Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.

11. Mortgage, pledge, or hypothecate any of its assets, except as
described in Investment Restriction No. 1.

14. Write, purchase or sell puts, calls or combinations thereof,
except that the Funds may purchase or sell puts and calls as otherwise
described in the prospectus or SAI; however, no Fund will invest more than 5%
of its total assets in these classes of securities.

6
<PAGE> 536
15. Invest more than 5% of the current value of its total assets in
the securities of companies that, including predecessors, have a record of less
than three years' continuous operation.

The Prime Money Market Mutual and the Treasury Money Market Mutual
Funds may not:

5. Write put or call options.

7. Invest in companies for the purpose of exercising control.

9. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation, acquisition of assets or
where otherwise permitted by the 1940 Act.

10. Lend its portfolio securities in excess of one-third of the value
of its total assets.

7
<PAGE> 537
As a non-fundamental policy (which may be changed without shareholder
vote), any loans of portfolio securities will be made according to guidelines
established by the SEC and the Company's Board of Directors, and the Fund will
maintain collateral of the borrower equal at all times to at least the current
market value of the securities loaned.

The Prime Money Market Mutual Fund may not:

The Treasury Money Market Mutual Fund may not:

1. Purchase or sell real estate.

2. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs.

8
<PAGE> 538
15% of their net assets in illiquid securities. Otherwise, a Fund may continue
to hold a security even though it causes the Fund to exceed a percentage
limitation because of fluctuation in the value of the Fund's assets.

ADDITIONAL PERMITTED INVESTMENT ACTIVITIES

The prospectuses discuss the investment objectives of the Funds and
the policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment policies and

9
<PAGE> 539
portfolio strategies that the Funds may utilize, and certain risks attendant to
such investments, policies and strategies.

U.S. Government Obligations. The Funds may invest in various types of
U.S. Government obligations. For the Money Market Funds, such obligations must
have remaining maturities of up to one year. U.S. Government obligations
include securities issued or guaranteed as to principal and interest by the
U.S. Government and supported by the full faith and credit of the U.S.
Treasury. U.S. Treasury obligations differ mainly in the length of their
maturity. Treasury bills, the most frequently issued marketable government
securities, have a maturity of up to one year and are issued on a discount
basis. U.S. Government obligations also include securities issued or
guaranteed by federal agencies or instrumentalities, including
government-sponsored enterprises. Some obligations of such agencies or
instrumentalities of the U.S. Government are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, by the right
of the issuer or guarantor to borrow from the U.S. Treasury; still others by
the discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, only by the credit of
the agency or instrumentality issuing the obligation. In the case of
obligations not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the
U.S. Government would provide financial support to its agencies or
instrumentalities (including government-sponsored enterprises) where it is not
obligated to do so. In addition, U.S. Government obligations are subject to
fluctuations in market value due to fluctuations in market interest rates. As
a general matter, the value of debt instruments, including U.S. Government
obligations, declines when market interest rates increase and rises when market
interest rates decrease. Certain types of U.S. Government obligations are
subject to fluctuations in yield or value due to their structure or contract
terms. The Funds may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. Examples of the types of U.S.
Government obligations that may be held by the Funds include U.S. Treasury
bonds, notes and bills and the obligations of Federal Home Loan Banks, Federal
Farm Credit Banks, Federal Land Banks, the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, Federal
National Mortgage Association, General Services Administration, Student Loan
Marketing Association, Central Bank for Cooperatives, Federal Home Loan
Mortgage corporation, Federal Intermediate Credit Banks and Maritime
Administration.

Repurchase Agreements. Each Fund may enter into repurchase agreements
wherein the seller of a security to the Fund agrees to repurchase that security
from the Fund at a mutually agreed-upon time and price which involve the
acquisition by a Fund of an underlying debt instrument, subject to the seller's
obligation to repurchase, and such Fund's obligation to resell, the instrument
at a fixed price usually not more than one week after its purchase. The Fund's
custodian has custody of, and holds in a segregated account, securities
acquired as collateral by a Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Fund. The Funds may enter into repurchase
agreements only with respect to securities of the type in which such Fund may
invest,

10
<PAGE> 540
including government securities and mortgage-related securities, regardless of
their remaining maturities, and requires that additional securities be
deposited with the custodian if the value of the securities purchased should
decrease below resale price. Wells Fargo Bank monitors on an ongoing basis
the value of the collateral to assure that it always equals or exceeds the
repurchase price. Certain costs may be incurred by a Fund in connection with
the sale of the underlying securities if the seller does not repurchase them in
accordance with the repurchase agreement. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the securities,
disposition of the securities by a Fund may be delayed or limited. While it
does not presently appear possible to eliminate all risks from these
transactions (particularly the possibility of a decline in the market value of
the underlying securities, as well as delay and costs to a Fund in connection
with insolvency proceedings), it is the policy of each Fund to limit repurchase
agreements to selected creditworthy securities dealers or domestic banks or
other recognized financial institutions. Each Fund considers on an ongoing
basis the creditworthiness of the institutions with which it enters into
repurchase agreements.

Bank Obligations. Each Fund may invest in bank obligations, including
certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations of domestic banks, foreign subsidiaries of domestic
banks, foreign branches of domestic banks, and domestic and foreign branches of
foreign banks, domestic savings and loan associations and other banking
institutions. With respect to such securities issued by foreign branches of
domestic banks, foreign subsidiaries of domestic banks, and domestic and
foreign branches of foreign banks, a Fund may be subject to additional
investment risks that are different in some respects from those incurred by a
fund which invests only in debt obligations of U.S. domestic issuers. Such
risks include possible future political and economic developments, the possible
imposition of foreign withholding taxes on interest income payable on the
securities, the possible establishment of exchange controls or the adoption of
other foreign governmental restrictions which might adversely affect the
payment of principal and interest on these securities and the possible seizure
or nationalization of foreign deposits. In addition, foreign branches of U.S.
banks and foreign banks may be subject to less stringent reserve requirements
and to different accounting, auditing, reporting and recordkeeping standards
than those applicable to domestic branches of U.S. banks.

Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.

Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Time deposits which
may be held by a Fund will not benefit from insurance from the Bank Insurance
Fund or the Savings Association Insurance Fund administered by the Federal
Deposit Insurance Corporation. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the face amount of

11
<PAGE> 541
the instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations, bearing fixed, floating- or variable-interest
rates.

Floating- and Variable-Rate Obligations. The Funds may purchase
floating- and variable-rate obligations as described in the Prospectuses. Each
Fund may purchase floating- and variable-rate demand notes and bonds. For the
Money Market Funds, these obligations ordinarily have stated maturities in
excess of thirteen months, but permit the holder to demand payment of principal
at any time, or at specified intervals not exceeding thirteen months.
Variable-rate demand notes include master demand notes which are obligations
that permit a Fund to invest fluctuating amounts, which may change daily
without penalty, pursuant to direct arrangements between the Fund, as lender,
and the borrower. The interest rates on these notes fluctuate from time to
time. The issuer of such obligations ordinarily has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of
days' notice to the holders of such obligations. The interest rate on a
floating-rate demand obligation is based on a known lending rate, such as a
bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable-rate demand obligation is adjusted
automatically at specified intervals. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by banks.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value. Accordingly, where
these obligations are not secured by letters of credit or other credit support
arrangements, the Funds' right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies and each Fund may invest in obligations
which are not so rated only if Wells Fargo Bank determines that at the time of
investment the obligations are of comparable quality to the other obligations
in which such Fund may invest. Wells Fargo Bank, on behalf of each Fund,
considers on an ongoing basis the creditworthiness of the issuers of the
floating- and

12
<PAGE> 542
variable-rate demand obligations in such Fund's portfolio. No Fund will invest
more than 10% of the value of its total net assets in floating- or
variable-rate demand obligations whose demand feature is not exercisable within
seven days. Such obligations may be treated as liquid, provided that an active
secondary market exists.

Floating and variable-rate demand instruments acquired by the Tax-Free
Funds may include participations in municipal obligations purchased from and
owned by financial institutions, primarily banks. Participation interests
provide these Funds with a specified undivided interest (up to 100%) in the
underlying obligation and the right to demand payment of the unpaid principal
balance plus accrued interest on the participation interest from the
institution upon a specified number of days' notice, not to exceed thirty days.
Each participation interest is backed by an irrevocable letter of credit or
guarantee of a bank that the adviser has determined meets the prescribed
quality standards for these Funds. The bank typically retains fees out of the
interest paid on the obligation for servicing the obligation, providing the
letter of credit and issuing the repurchase commitment.

Loans of Portfolio Securities. The Funds may lend their portfolio
securities to brokers, dealers and financial institutions (but not
individuals), provided: (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or letters of credit
maintained on a daily marked-to-market basis in an amount at least equal to the
current market value of the securities loaned; (2) the Funds may at any time
call the loan and obtain the return of the securities loaned within five
business days; (3) the Funds will receive any interest or dividends paid on the
loaned securities; and (4) the aggregate market value of securities loaned will
not at any time exceed one third of the total assets of a particular Fund. The
Treasury Money Market Mutual Fund does not currently intend to lend its
portfolio securities.

13
<PAGE> 543
actually acquiring the securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. The Fund will not accrue
income in respect of a security purchased on a forward commitment basis prior
to its stated delivery date.

Mortgage-Backed Securities. As stated in the prospectuses, certain
Funds may invest in mortgage-backed securities, including those representing an
undivided ownership interest in a pool of mortgages, such as certificates of
the Government National Mortgage Association ("GNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate,
net of certain fees. The average life of a mortgage- backed security varies
with the underlying mortgage instruments, which generally have maximum
maturities of 40 years. The average life is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of prepayments, mortgage refinancings or foreclosure. Mortgage
prepayment rates are affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions. Such prepayments are passed through to

14
<PAGE> 544
the registered holder with the regular monthly payments of principal and
interest and have the effect of reducing future payments.

Asset-Backed Securities. To the extent described in the prospectuses,
the Funds may purchase asset-backed securities, which are securities backed by
installment contracts, credit-card receivables or other assets. Asset-backed
securities represent interests in "pools" of assets in which payments of both
interest and principal on the securities are made monthly, thus in effect
"passing through" monthly payments made by the individual borrowers on the
assets that underlie the securities, net of any fees paid to the issuer or
guarantor of the securities. The average life of asset- backed securities
varies with the maturities of the underlying instruments and is likely to be
substantially less than the original maturity of the assets underlying
the-securities as a result of prepayments. For this and other reasons, an
asset-backed security's stated maturity may be shortened, and the security's
total return may be difficult to predict precisely.

Municipal Obligations. Municipal obligations include debt obligations
issued by governmental entities to obtain funds for various public purposes,
including the construction of a wide range of public facilities, the refunding
of outstanding obligations, the payment of general operating expenses and the
extension of loans to public institutions and facilities.

The two principal classifications of municipal obligations that may be
held by a Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the issuer of the
facility being financed. a Fund's portfolio may also include "moral obligation"
securities, which are issued normally by special purpose public authorities. If
the issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality that created the issuer.

Private activity bonds are issued to obtain funds to provide privately
operated housing facilities, pollution control facilities, convention or trade
show facilities, mass transit, airport, port

15
<PAGE> 545
or parking facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. State and local governments are
authorized in most states to issue private activity bonds for such purposes in
order to encourage corporations to locate within their communities. Private
activity bonds are in most cases revenue securities and are not payable from
the unrestricted revenues of the issuer. The credit quality of such bonds is
usually directly related to the credit standing of the corporate user of the
facility involved. Private activity bonds issued by or on behalf of public
authorities to finance various privately operated facilities are considered
municipal obligations if the interest paid thereon is exempt from federal
income tax, but nevertheless, subject to federal alternative minimum tax.

BANs. The ability of a municipal issuer to meet its obligations on
its BANs is primarily dependent on the issuer's adequate access to the longer
term municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal of, and interest on, BANs.

As stated in the prospectuses, the adviser, under the supervision of
the Board, makes determinations concerning the liquidity of a municipal lease
obligation based on all relevant factors. These factors may include, among
others: (1) the frequency of trades and quotes for the obligation; (2) the
number of dealers willing to purchase or sell the security and the number of
other potential buyers; (3) the willingness of dealers to undertake to make a
market in the security; and (4) the nature of the marketplace trades, including
the time needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer. In addition, the general credit quality of the
municipality and the essentiality to the municipality of the property covered
by the lease may be considered. In evaluating the credit quality of a municipal
lease obligation, the factors to be considered might include: (1) whether the
lease can be canceled; (2) what assurance there is that the

16
<PAGE> 546
assets represented by the lease can be sold; (3) the strength of the lessee's
general credit (e.g., its debt, administrative, economic, and financial
characteristics); (4) the likelihood that the municipality will discontinue
appropriating funding for the leased property because the property is no longer
deemed essential to the operations of the municipality (e.g., the potential for
an "event of the nonappropriation"); and (5) the legal recourse in the event of
failure to appropriate.

From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. For example, under federal tax legislation
enacted in 1986, interest on certain private activity bonds must be included in
an investor's alternative minimum taxable income, and corporate investors must
treat all tax-exempt interest as an item of tax preference. Moreover, with
respect to Oregon obligations and Arizona obligations, the Funds cannot predict
what legislation, if any, may be proposed in the state legislature regarding
the state income tax status of interest on such obligations, or which
proposals, if any, might be enacted. Such proposals, while pending or if
enacted, might materially and adversely affect the availability of municipal
obligations generally, or Oregon obligations and Arizona obligations,
specifically, for investment by a Fund and the liquidity and value of the
Fund's portfolio. In such an event, the Fund involved would re- evaluate its
investment objective and policies and consider possible changes in its
structure or possible dissolution.

Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds
nor Wells Fargo Bank will review the proceedings relating to the issuance of
municipal obligations or the bases for such opinions.

As stated in the prospectus, the Intermediate Bond Fund may, when
deemed appropriate by the adviser in light of the Fund's investment objective,
invest in obligations issued by state and local governmental issuers. Dividends
paid by the Intermediate Bond Fund that are derived from interest of municipal
obligations would be taxable to the Fund's shareholders for federal income tax
purposes.

Stand-By Commitments. Each Tax-Free Fund may acquire stand-by
commitments with respect to municipal obligations held by it. Under a stand-by
commitment, a dealer or bank agrees to purchase from a Fund, at the Fund's
option, specified municipal obligations at a specified price. The amount
payable to a Fund upon its exercise of a stand-by commitment is normally (i)
the Fund's acquisition cost of the municipal obligations (excluding any accrued
interest that the Fund paid on their acquisition), less any amortized market
premium plus any amortized market or

17
<PAGE> 547
original issue discount during the period the Fund owned the securities, plus
(ii) all interest accrued on the securities since the last interest payment
date during that period. Stand-by commitments may be sold, transferred or
assigned by a Fund only with the underlying instrument.

18
<PAGE> 548
Forward foreign currency exchange contracts may be bought or sold to protect a
Fund against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar, or between foreign
currencies. Although such contracts are intended to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.

The Equity Value and Balanced Funds may also invest in American
Depositary Receipts ("ADRs"). ADRs are receipts issued by an American bank or
trust company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs may be listed on a national securities exchange or may trade in
the over-the-counter market. ADR prices are denominated in U.S. dollars,
although the underlying security may be denominated in a foreign currency. The
underlying security may be subject to foreign government taxes which could
reduce the yield on such securities. Some institutions issuing ADRs may not be
sponsored by the issuer. A non-sponsored depository may not provide the same
shareholder information that a sponsored depository may be required to provide
under its contractual arrangement with the issuer.

Investments in foreign securities also involve certain inherent risks,
such as political or economic instability of the issuer or the country of
issue, the difficulty of predicting international trade patterns and the
possibility of imposition of exchange controls. Such securities may also be
subject to greater fluctuations in price than securities of domestic
corporations. In addition, there may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies. With
respect to certain foreign countries, there is a possibility of expropriation
or confiscatory taxation, or diplomatic developments which could affect
investments in those countries. Further, income received from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries.

19
<PAGE> 549
exercise price of the option. The aggregate value of the securities subject to
options written by the Intermediate Bond Fund will not exceed 25% of the value
of its net assets. The use of covered call options and securities put options
will not be a primary investment technique of the Intermediate Bond Fund, and
they are expected to be used infrequently. If the adviser is incorrect in its
forecast of market value or other factors when writing the foregoing options,
the Fund would be in a worse position than it would have been had the foregoing
investment techniques not been used.

The Funds will write call options only if they are "covered." In the
case of a call option on a security or currency, the option is "covered" if a
Fund owns the instrument underlying the call or has an absolute and immediate
right to acquire that instrument without additional cash consideration (or, if
additional cash consideration is required, cash, U.S. Government securities or
other liquid high grade debt obligations, in such amount are held in a
segregated account by the Fund's custodian) upon conversion or exchange of
other securities held by it. For a call option on an index, the option is
covered if a Fund maintains with its custodian a diversified portfolio of
securities comprising the index or liquid assets equal to the contract value. A
call option is also covered if a Fund holds a call on the same instrument or
index as the call written where the exercise price of the call held is (i)
equal to or less than the exercise price of the call written, or (ii) greater
than the exercise price of the call written provided the difference is
maintained by the Fund in liquid assets in a segregated account with its
custodian. The Funds will write put options only if they are "secured" by
liquid assets maintained in a segregated account by the Funds, custodian in an
amount not less than the exercise price of the option at all times during the
option period.

20
<PAGE> 550
market will exist for any particular option. An option writer, unable to effect
a closing purchase transaction, will not be able to sell the underlying
instrument (in the case of a covered call option) or liquidate the segregated
account (in the case of a secured put option) until the option expires or the
optioned instrument or currency is delivered upon exercise with the result that
the writer in such circumstances will be subject to the risk of market decline
or appreciation in the instrument during such period.

There are several risks associated with transactions in options. For
example, there are significant differences between the securities, currency and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In
addition, a liquid secondary market for particular options, whether traded
over-the-counter or on an exchange, may be absent for reasons that include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities or currencies; unusual or unforeseen circumstances may interrupt
normal operations on an exchange; the facilities of an exchange or the Options
Clearing Corporation may not be adequate at all times to handle current
trading value; or one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of
options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. A Fund is likely to
be unable to control losses by closing its position where a liquid secondary
market does not exist. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected events.

21
<PAGE> 551
Stock Index Futures Contracts and Options on Stock Index Futures
Contracts. The Equity Value and Balanced Funds may participate in stock index
futures contracts and options on stock index futures contracts. A futures
transaction involves a firm agreement to buy or sell a commodity or financial
instrument at a particular price on a specified future date, while an option
transaction generally involves a right, which may or may not be exercised, to
buy or sell a commodity of financial instrument at a particular price on a
specified future date. Futures contracts and options are standardized and
exchange-traded, where the exchange serves as the ultimate counterparty for all
contracts. Consequently, the only credit risk on futures contracts is the
creditworthiness of the exchange. Futures contracts, however, are subject to
market risk (i.e., exposure to adverse price changes).

Stock index futures contracts may be purchased to protect a Fund
against an increase in the prices of stocks that the Fund intends to purchase.
If the Fund is unable to invest its cash (or cash equivalents) in stock in an
orderly fashion, the Fund may purchase a stock index futures contract to offset
any increase in the price of the stock. However, it is possible that the market
may decline instead, resulting in a loss on the stock index futures contract.
If the Fund then concludes not to invest in stock at that time, or if the price
of the securities to be purchased remains constant or increases, the Fund
realizes a loss on the stock index futures contract that is not offset by a
reduction in the price of securities purchased. The Funds also may buy or sell
stock index futures contracts to close out existing futures positions.

22
<PAGE> 552
date during the option period, the holder receives the futures position, as
well as any balance in the futures margin account. If an option is exercised on
the last trading day prior to the expiration date of the option, the settlement
is made entirely in cash in an amount equal to the difference between the
strike price and the closing level of the relevant index on the expiration
date.

Wells Fargo Bank expects that an increase or decrease in the index in
relation to the strike price level would normally correlate to an increase or
decrease (but not necessarily to the same extent) in the value of a Fund's
common stock portfolio against which the option was written. Thus, any loss in
the option transaction may be offset by an increase in the value of the common
stock portfolio to the extent changes in the index correlate to changes in the
value of that portfolio. The Funds may liquidate the put options they have
purchased by effecting a closing sale transactions rather than exercising the
option. This is accomplished by selling an option of the same series as the
option previously purchased. There is no guarantee that the Funds will be able
to effect the closing sale transaction. The Funds realize a gain from a closing
sale transaction if the price at which the transaction is effected exceeds the
premium paid to purchase the option and, if less, the Funds realize a loss.

Investments in Warrants. Although they have no present intention to
do so, the Balanced and Equity Value Funds may each invest up to 5% of its net
assets at the time of purchase in warrants (other than those that have been
acquired in units or attached to other securities), and not more than 2% of its
net assets in warrants which are not listed on the New York or American Stock
Exchange. Warrants represent rights to purchase securities at a specific price
valid for a specific period of time. The prices of warrants do not necessarily
correlate with the prices of the underlying securities. The Funds may only
purchase warrants on securities in which the Funds may invest directly.

23
<PAGE> 553
purchase by a Fund. The adviser will consider such an event in determining
whether the Fund involved should continue to hold the obligation.

SPECIAL CONSIDERATIONS AFFECTING ARIZONA MUNICIPAL OBLIGATIONS

Under its constitution, the State of Arizona is not permitted to issue
general obligation bonds secured by the full faith and credit of the State.
However, certain agencies and instrumentalities of the State are authorized to
issue bonds secured by revenues from specific projects and activities. The
State enters into certain lease transactions that are subject to annual renewal
at the option of the State. Local governmental units in the State are also
authorized to incur indebtedness. The major source of financing for such local
government indebtedness is an ad valorem property tax. In addition, in order
to finance public projects, local governments in the State can issue revenue
bonds payable from the revenues of a utility or enterprise or from the proceeds
of an excise tax, or assessment bonds payable from special assessments. Arizona
local governments have also financed public projects through leases which are
subject to annual appropriation at the option of the local government.

24
<PAGE> 554
There are periodic attempts in the form of voter initiatives and
legislative proposals to further limit the amount of annual increases in taxes
that can be levied by the various taxing jurisdictions without voter approval,
or to restructure the State's revenue mix among sales, income, property and
other taxes. It is possible that if any such proposals were enacted, there
would be an adverse impact on State or local government financing. It is not
possible to predict whether any such proposals will be enacted in the future or
what would be their possible impact on state or local government financing.

Arizona is required by law to maintain a balanced budget. To achieve
this objective, the State has, at various times in the past, utilized a
combination of spending reductions or reductions in the rate of growth in
spending, and tax increases. In recent years, the State's fiscal situation has
improved even while tax reduction measures have been enacted each year since
1992. In 1992, Arizona voters passed a measure that requires a two-thirds vote
of the legislature to increase State revenue. Accordingly, it will be more
difficult to reverse tax reductions, which may adversely affect State fund
balances and fiscal conditions over time.

Arizona state government general fund revenue growth in fiscal year
1996 is forecast to increase 4.1%, although growth would be projected at 10.9%
but for legislative changes, principally an income tax reduction measure
enacted in 1995. The 6.8% projected increase in sales tax revenue, adjusted
for reductions resulting from legislative changes, reflects continued strong
economic growth in the state. With revenue growth outpacing increased
expenditures, the state general fund is projected to end fiscal year 1996 with
a total general fund balance of approximately $579 million. The amount of this
balance is approximately 12.5% of total general fund expenditures for fiscal
year 1996. Included in the total balance is a general fund ending balance of
approximately $347 million, and a budget stabilization ("rainy day") fund
balance of approximately $232 million.

Additionally, the 1995 legislature enacted a $200 million income tax
reduction package, and the 1996 legislature enacted a $200 million property tax
reduction package. There may be additional legislative activity during 1997 in
the area of tax reform and school finance, and the 1998 general election ballot
may include one or more questions related to these issues and the State's tax
structure generally. The outcomes of any legislative actions or election
issues of this nature may adversely affect State fund balances and fiscal
conditions.

25
<PAGE> 555
institutions, many of which were placed under the control of the Resolution
Trust Corporation. Spillover effects produced further weakening in the State's
economy. The Arizona economy has begun to grow again, albeit at a slower pace
than experienced before the real estate collapse. The North American Free
Trade Agreement is generally viewed as beneficial to the State. However,
current and proposed reductions in federal military expenditures may adversely
affect the Arizona economy.

SPECIAL CONSIDERATIONS AFFECTING OREGON MUNICIPAL OBLIGATIONS

The concentration of the Oregon Tax-Free Fund in Oregon Obligations
raises additional considerations for investors in that portfolio, as discussed
below.

State Bonds and Revenues

26
<PAGE> 556
forecast predicts that State General Fund revenues for the 1995-97 biennium
will exceed the legislatively approved budget forecast by approximately $331.6
million (or 4.8%).

The Economy

The Oregon economy appears to have ample momentum to continue growing
through 1997, though the pace is likely to be slower than the previous two-year
period. Expansion of the State's semiconductor industry and its suppliers will
likely remain the key engine driving growth in the State. Rising wages and a
continuing flow of new residents are expected to generate jobs in the State's
service and trade sectors. The primary factors likely to slow growth over the
next two years are dwindling supply of skilled labor and flattening of the
construction boom.

Recent Environmental Developments

27
<PAGE> 557
Recent Developments Affecting Government Revenues.

The limitations of Ballot Measure 5 do not apply to taxes imposed to
pay the principal of and interest on bonded indebtedness authorized by a
specific provision of the State Constitution. Therefore, the ability of the
State to levy taxes to service its constitutionally authorized general
obligation bonds is not subject to the limit. In addition, because the State
currently receives its revenues from sources other than property taxes, Ballot
Measure 5 has not directly affected State revenues.

Ballot Measure 47 will generally reduce the revenues of local
governments available from ad valorem property taxes starting on July 1, 1997.
For fiscal year 1997-98, the amount of tax

28
<PAGE> 558
which may be collected from each property subject to taxation is limited to the
lesser of the amount due for fiscal year 1995-96 reduced by ten percent (10%)
or the amount due for fiscal year 1994-95. Future increases in annual ad
valorem property taxes which can be collected from each property subject to
taxation are limited to three percent (3%) unless certain exceptions apply.
Ballot Measure 47 also contains provisions limiting local governments' ability
to shift activities previously funded in whole or in part from ad valorem
property tax revenues to a user fee or other form of non-ad valorem property
tax basis. One of the exceptions is for taxes levied to pay bonded
indebtedness which has been approved by the voters in accordance with certain
specific and new guidelines contained in Ballot Measure 47.

By its terms, Ballot Measure 47 does not affect the revenues of
governmental units which do not rely upon the collection of ad valorem property
taxes, such as the State, or governmental operations which are supported solely
from user fees and charges, such as many municipal utilities. However, its
revenue reducing provisions are expected to create new financial burdens on the
State revenue resources as well as on the revenue resources of units of
government which levy and collect ad valorem property taxes. Such burdens are
expected to arise, at least in part, from the potential need for the State to
assist units of local government adversely affected by the implementation of
Ballot Measure 47. Although the actual impact of Ballot Measure 47 on a
particular unit of local government cannot presently be determined because the
methodology for applying its provisions to individual properties has not yet
been established, it is anticipated that the general fund operations of many
local government units will be materially adversely affected by its revenue
reduction and revenue growth limiting provisions.

29
<PAGE> 559
measure is to be voted. State law permits persons circulating initiative
petition to pay money to persons obtaining signatures for the petition.

MANAGEMENT

30
<PAGE> 560
Arkansas 72201. Directors deemed to be "interested persons" of the Company
for purposes of the 1940 Act are indicated by an asterisk.

*R. Greg Feltus, 45 Director, Senior Vice President
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of Stephens
Sports Management
Inc.; and President of
Investor Brokerage
Insurance Inc.
Thomas S. Goho, 54 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy; Associate
Professor of Finance
of the School
of Business and
Accounting at
Wake Forest University
since 1983.

31
<PAGE> 561
<TABLE>
<S> <C> <C>
*W. Rodney Hughes, 70 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901

Robert M. Joses, 78 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901

32
<PAGE> 562
COMPENSATION TABLE

<TABLE>
<CAPTION>
Year Ended Period Ended
---------- -------------
December 31, 1995 September 30, 1996
------------------ ------------------
Total
Aggregate Total Aggregate Compensation from
Compensation Compensation Compensation Registrant
from from Registrant from and
Name and Position Registrant and Fund Complex Registrant Fund Complex
- ----------------- ------------ ------------------ ------------ -----------------
<S> <C> <C> <C> <C>
Jack S. Euphrat $10,188 $39,750 $9,750 $29,250
Director

*R. Greg Feltus $-0- $-0- $-0- $-0-
Director

Thomas S. Goho $10,188 $39,750 $9,750 $29,250
Director

Joseph N. Hankin N/A N/A $-0- $-0-
Director

*Zoe Ann Hines $-0- $-0- $-0- $-0-
Director
(resigned as of
September 6, 1996)

*W. Rodney Hughes $9,438 $37,000 $8,250 $24,750
Director

Robert M. Joses $9,938 $39,000 $9,750 $29,250
Director

*J. Tucker Morse $8,313 $33,250 $8,250 $24,750
Director
</TABLE>

Directors of the Company are compensated annually by the Company and
by all the registrants in each fund complex they serve as indicated above and
also are reimbursed for all out-of-pocket expenses relating to attendance at
board meetings. The Company, Overland Express Funds, Inc., Stagecoach Trust,
Life & Annuity Trust and Master Investment Trust are considered to be members
of the same fund complex as such term is defined in Form N-1A under the 1940
Act (the "Wells Fargo Fund Complex"). MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment Trust together form a
separate fund complex (the "BGFA Fund Complex"). Each of the Directors and
Officers of the Company serves in the identical capacity as

33
<PAGE> 563
directors and officers or as trustees and/or officers of each registered
open-end management investment company in both the Wells Fargo and BGFA Fund
Complexes, except for Joseph N. Hankin, who only serves the aforementioned
members of the Wells Fargo Fund Complex, and Zoe Ann Hines who, after September
6, 1996, only serves the aforementioned members of the BGFA Fund Complex. The
Directors are compensated by other companies and trusts within a fund complex
for their services as directors/trustees to such companies and trusts.
Currently the Directors do not receive any retirement benefits or deferred
compensation from the Company or any other member of each fund complex.

As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.

INVESTMENT ADVISER. The Funds are advised by Wells Fargo Bank
pursuant to an advisory contract for each Fund under which Wells Fargo Bank has
agreed to furnish investment guidance and policy direction in connection with
the daily portfolio management of the Fund. On behalf of each Fund, the
Company's Board of Directors approved the advisory contracts with Wells Fargo
Bank on April 25, 1996, for an initial two-year period. Pursuant to the
advisory contracts, Wells Fargo Bank also has agreed to furnish to the Board of
Directors periodic reports on the investment strategy and performance of each
Fund.

<TABLE>
<CAPTION>
Annual Rate
Fund Name (as percentage of net assets)
--------- -----------------------------
<S> <C>
o Arizona Tax-Free 0.50%
o Balanced 0.60%
o Equity Value 0.50%
o Intermediate Bond 0.50%
o National Tax-Free 0.50%
o Oregon Tax-Free 0.50%
o Prime Money Market Mutual 0.25%
o Treasury Money Market Mutual 0.25%
</TABLE>

34
<PAGE> 564
1940 Act) of any such party. The advisory contracts may be terminated on 60
days' written notice by either party and will terminate automatically if
assigned.

<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1996
------------------------------------
Fund Fees Paid Fees Waived
----- --------- -----------
<S> <C> <C> <C>
o Arizona Tax-Free $ 22,457 $ 98,300
o Balanced $ 750,323 $ 4,608
o Equity Value $ 1,378,145 $ -0-
o Intermediate Bond $ 227,965 $ 39,513
o National Tax-Free $ - 0- $ 67,463
o Oregon Tax-Free $ 173,249 $ 57,377
o Prime Money Market Mutual $ 1,845,269 $1,553,968
o Treasury Money Market Mutual $ 2,442,922 $2,073,426
</TABLE>

Prior to October 1, 1995, First Interstate Bank of Oregon, N.A. and
First Interstate Bank of Washington, N.A. served as co-advisers to the
predecessor portfolios of the National Tax-Free Fund; First Interstate Bank of
Oregon, N.A. served as adviser to the predecessors of the Intermediate Bond
Fund and Oregon Tax-Free Fund; and First Interstate Bank of Arizona, N.A.
served as adviser to the predecessor of the Arizona Tax-Free Fund. For the
periods ended September 30, 1995, May 31, 1995 and May 31, 1994, the prior
advisers for these Funds were entitled to receive advisory fees from the Funds
at the same annual rates as those that were in effect for WFIM. For these
periods, the prior advisers was entitled to receive the following amounts in
advisory fees:
Investment Advisory Fees

<TABLE>
<CAPTION>
Period Ended Period Ended Period Ended
Fund Sept. 30, 1995* May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $41,159 $124,904 $128,905
Intermediate Bond $94,698 $275,948 $318,000
National Tax-Free $24,173 $ 67,845 $ 57,059
Oregon Tax-Free $84,999 $256,430 $269,574
</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

35
<PAGE> 565
For the periods ended September 30, 1995, May 31, 1995 and May 31,
1994, the prior advisers for the predecessors of the Arizona Tax-Free,
Intermediate Bond, National Tax-Free and Oregon Tax-Free Funds waived advisory
fees and reimbursed expenses in the following amounts:

Investment Advisory Fees Waived
and Expenses Reimbursed by Adviser

<TABLE>
<CAPTION>
Period Ended
September 30, Period Ended Period Ended
Fund 1995* May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $66,373 $166,803 $172,383
Intermediate Bond $ 0 $ 0 $ 0
National Tax-Free $68,667 $145,244 $141,590
Oregon Tax-Free $43,995 $ 84,770 $104,948

</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

During the fiscal years ended September 30, 1995 and 1994, the adviser
(and prior adviser, as the case may be) was entitled to receive advisory fees
from the Balanced and Equity Value Funds at the same annual rates as those
currently in effect. For such fiscal years, the adviser (and prior adviser, as
the case may be) was entitled to receive the following amounts in advisory
fees:

Investment Advisory Fees

36
<PAGE> 566
During the fiscal years ended September 30, 1995 and 1994, the adviser
(or prior adviser, as the case may be) waived advisory fees and reimbursed
expenses for the Balanced and Equity Value Funds in the following amounts:

Investment Advisory Fees Waived
and Expenses Reimbursed by Adviser

Investment Advisory Fees Paid*

<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
FUND Sept. 30, 1995 Sept. 30, 1994 March 31, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Money Market Mutual $ 693,315 $330,715 $737,811
Treasury Money Market Mutual $1,160,424 $454,029 $900,919
</TABLE>

ADMINISTRATOR AND CO-ADMINISTRATOR . The Company has retained Wells
Fargo Bank as Administrator and Stephens as Co-Administrator on behalf of each
Fund. The Administration Agreement between Wells Fargo Bank and each Fund, and
the Co-Administration Agreements among Wells Fargo, Stephens and each Fund,
state that Wells Fargo and Stephens shall provide as administrative services,
among other things: (i) general supervision of the operation of each Fund,
including coordination of the services performed by the Fund's investment
adviser, transfer agent, custodian, shareholder servicing agent(s), independent
public accountants and legal counsel, regulatory compliance, including the
compilation of information for documents such as reports to, and filings with,
the SEC and state securities commissions; and preparation of proxy statements
and shareholder reports for each Fund; and (ii) general supervision relative to
the compilation of data required for the preparation of periodic reports
distributed to the Company's officers and Board of Directors. Wells Fargo Bank
and Stephens also furnish office space and certain facilities required for
conducting the business of the Funds together with ordinary clerical and
bookkeeping services. Stephens pays the compensation of the Company's
Directors, officers

37
<PAGE> 567
and employees who are affiliated with Stephens. The Administrator and
Co-Administrator are entitled to receive a monthly fee of 0.04% and 0.02%
respectively, of the average daily net assets of each Fund.

Prior to September 6, 1996, the administrator of the Pacifica
predecessor portfolios (Furman Selz LLC) provided management and administrative
services necessary for the operation of such Funds, pursuant to an
Administrative Services Contract. For these services, the former administrator
was entitled to receive a fee, payable monthly, at the annual rate of 0.15% of
the average daily net assets of the predecessors of all such Funds except the
Prime Money Market Mutual and Treasury Money Market Mutual Funds (which were
administered until April 22, and April 15, 1996, respectively, by the Dreyfus
Corporation), at the annual rate of 0.10% of each such Fund's average daily net
assets. The tables reflect the net amounts paid (after waivers) for
administrative services by the Funds to Stephens who, as sole administrator to
the Funds for the period begun September 6, 1996 and ended September 30, 1996,
was entitled to receive a fee, payable monthly, at the annual rate of 0.05% of
each Fund's average daily net assets. The tables also reflect the net
administration fees paid to the respective former administrators of the
predecessor portfolios during the period begun October 1, 1995 and ended
September 5, 1996.

Administration Fees
<TABLE>
<CAPTION>
Year Ended
Fund September 30, 1996
----- ------------------
<S> <C> <C>
o Arizona Tax-Free $ 24,636
o Balanced $ 130,709
o Equity Value $ 240,273
o Intermediate Bond $ 55,482
o National Tax-Free $ 14,138
o Oregon Tax-Free $ 49,627
o Prime Money Market Mutual $ 1,230,872
o Treasury Money Market Mutual $ 1,745,759
</TABLE>

Administration Fees

<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
FUND Sept. 30, 1995* May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $4,116 $12,490 $12,890
Intermediate Bond $9,470 $27,595 $31,800
National Tax-Free $2,417 $ 6,785 $ 5,706
</TABLE>

38
<PAGE> 568
<TABLE>
<S> <C> <C> <C>
Oregon Tax-Free $8,500 $25,643 $26,957
</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

Administration Fees Waived

<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
FUND Sept. 30, 1995* May 31, 1995 May 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Tax-Free $0 $0 $0
Intermediate Bond $0 $0 $0
National Tax-Free $0 $2,018 $4,210
Oregon Tax-Free $0 $0 $0
</TABLE>

* The Funds changed their fiscal year from May 31 to September 30.

During the fiscal years ended September 30, 1995 and 1994, Furman Selz
was entitled to receive administration services fees from the Balanced and
Equity Value Funds in the following amounts:

Administration Fees

For the fiscal years ended September 30, 1995 and 1994, Furman Selz
waived administration fees for the Balanced and Equity Value Funds in the
following amounts:

Administration Fees Waived

During the fiscal year ended September 30, 1995, the six-month period ended
September 30, 1994 and the fiscal year ended March 31, 1994, the administration
fees paid to the Dreyfus

39
<PAGE> 569

Corporation by the Prime Money Market Mutual Fund and the Treasury Money Market
Mutual Fund were as follows: Administration Fees Paid

SPONSOR AND DISTRIBUTOR. As discussed in each Fund's prospectus under
the heading "Management and Servicing Fees," Stephens serves as each Fund's
sponsor and distributor.

SHAREHOLDER SERVICING AGENT. As discussed in each Fund's prospectus
under the heading "Shareholder Servicing Agent," the Funds approved Servicing
Plans and have entered into related shareholder servicing agreements with
financial institutions, including Wells Fargo Bank. For providing these
services, a Servicing Agent is entitled to a fee from the applicable Fund, not
to exceed 0.25%, on an annualized basis, of the average daily net assets of the
class of shares owned of record or beneficially by the customers of the
Servicing Agent during the period for which payment is being made. The
Servicing Plans and related shareholder servicing agreements were approved by
the Company's Board of Directors and provide that a Fund shall not be
obligated to make any payments under such Plans or related Agreements that
exceed the maximum amounts payable under Article III, Section 26 of the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
(NASD).

For the period begun October 1, 1995 and ended September 5, 1996, and
under a similar service agreement, payments were made to First Interstate
Bancorp for the following funds, except, and under similar service agreements
with certain institutions, including affiliates of FICM, payments were made to
various institutions for the Prime Money Market Mutual Fund and Treasury Money
Market Mutual Fund, as indicated below. For the period begun September 6, 1996
and ended September 30, 1996, shareholder servicing fees were paid to Wells
Fargo Bank or its affiliates as indicated below:

Shareholder Servicing Fees - Institutional Class Shares(1)

<TABLE>
<CAPTION>
Fiscal Year Ended
Fund September 30, 1996
----- ------------------
<S> <C> <C>
o Arizona Tax-Free -0-
o Balanced $ 11,728
o Equity Value $ 31,181
o Intermediate Bond -0-
o National Tax-Free -0-
o Oregon Tax-Free $ 1,295
o Prime Money Market Mutual -0-
o Treasury Money Market Mutual -0-
</TABLE>

- --------------------
(1) After waivers and reimbursements.

40
<PAGE> 570

Under the prior transfer agency agreement for the Funds, Wells Fargo
Bank was entitled to receive monthly payments at the annual rate of 0.07% of
the average daily net assets of each class of the Non-Money Market Funds and
0.02% of the average daily net assets of the Institutional Class shares of the
Money Market Funds, as well as reimbursement for all reasonable out-of-pocket
expenses. Furman Selz acted as transfer agent for the predecessor portfolios.
Pacifica compensated Furman Selz for providing personnel and facilities to
perform transfer agency related services for Pacifica at a rate intended to
represent the cost of providing such services.

For the fiscal year ended September 30, 1996, the Funds paid custody
fees as indicated below. For the period prior to September 6, 1996, these
amounts include fees paid by the Funds to FICAL.

Custody Fees(1)
<TABLE>
<CAPTION>
Fiscal Year Ended
Fund September 30, 1996
----- ------------------
<S> <C> <C>
o Arizona Tax-Free -0-
o Balanced -0-
o Equity Value $ 40,035
o Intermediate Bond -0-
o National Tax-Free -0-
o Oregon Tax-Free -0-
o Prime Money Market Mutual $ 73,023
o Treasury Money Market Mutual $252,183
</TABLE>

- ---------------

(1) After waivers and reimbursements.

41
<PAGE> 571

UNDERWRITING COMMISSIONS. The Institutional Class of each Fund does
not charge any front-end sales loads or contingent deferred sales charges in
connection with the purchase and redemption of its shares, and therefore pays
no underwriting commissions to the Distributor.

SERVICING PLANS

As indicated in each Fund's prospectus, the Company's Board of
Directors, on behalf of each Fund (except for the Prime and Treasury Money
Market Mutual Funds), adopted a Servicing Plan ("Servicing Plan") and related
forms of Shareholder Servicing Agreements on April 25, 1996, with respect to
each class of the Funds' shares. The Board of Directors included a majority of
the Directors who were not "interested persons" (as defined in the Act) of each
Fund and who had no direct or indirect financial interest in the operation of
the Servicing Plan or in any agreement related to the Servicing Plan (the
"Servicing Plan Non-Interested Directors").

Under the Servicing Plan and pursuant to the shareholder servicing
agreements for the Institutional Class shares, each Fund may pay one or more
servicing agents, as compensation for performing certain services, a fee at an
annual rate of up to 0.25% of the average daily net assets of the Fund's
Institutional Class shares attributable to the servicing agent's customers.
The actual fee payable to servicing agents is determined, within such limits,
from time to time by mutual agreement between the Company and each servicing
agent and will not exceed the maximum service fees payable by mutual funds sold
by members of the NASD under the NASD Rules of Fair Practice.

Each Servicing Plan continues in effect from year to year if such
continuance is approved by a majority vote of both the Directors of the Company
and the Servicing Plan Non-Interested Directors. Any form of servicing
agreement related to the Servicing Plan also must be approved by such vote of
the Directors and the Servicing Plan Non-Interested Directors. Servicing
agreements may be terminated at any time, without payment of any penalty, by
vote of a majority of the Servicing Plan Non-Interested Directors. No material
amendment to the Servicing Plans may be made except by a majority of both the
Directors of the Company and the Servicing Plan Non-Interested Directors.

Each Servicing Plan requires that the administrator shall provide to
the Directors, and the Directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under the Servicing
Plan.

PERFORMANCE CALCULATIONS

The following information supplements and should be read in
conjunction with the sections in each prospectus entitled "Determination of Net
Asset Value" and "Performance Data."

42
<PAGE> 572
TOTAL RETURN: The Funds may advertise certain total return information
computed in the manner described in the prospectus. As and to the extent
required by the SEC, an average annual compound rate of return ("T") is
computed by using the redeemable value at the end of a specified period ("ERV")
of a hypothetical initial investment ("P") over a period of years ("n")
according to the following formula: P(1+T)n = ERV. In addition, as indicated
in each prospectus, each Fund also may, at times, calculate total return based
on net asset value per share (rather than the public offering price), in which
case the figures would not reflect the effect of any sales charges that would
have been paid by an investor, or based on the assumption that a sales charge
other than the maximum sales charge (reflecting a Volume Discount) was
assessed, provided that total return data derived pursuant to the calculation
described above also are presented.

The total return information presented below and advertised by the New
Funds for the period prior to September 6, 1996, the date the Funds commenced
operations, is based upon the prior performance of the predecessor Funds. The
performance information is adjusted to reflect The current level of operating
expenses of the Institutional Class Shares of the Funds.
<TABLE>
<CAPTION>
Average Annual Total Return - For The Applicable Period Ended September 30, 1996
--------------------------------------------------------------------------------
Institutional Class Shares(1) Inception(2) Five Year Three Year One Year
-------------------------- --------- - ---------- ----------- ---------
<S> <C> <C> <C> <C>
Arizona Tax-Free 6.26% N/A 3.88% 3.74%

Balanced 10.63% 10.38% 7.83% 10.80%

Equity Value 12.76% 14.48% 12.82% 14.58%

Intermediate Bond 8.19% 6.64% 4.25% 4.19%

National Tax-Free 5.01% N/A 3.73% 4.04%

Oregon Tax-Free 7.09% 6.63% 3.60% 5.13%

Prime Money Market Mutual 5.31% N/A N/A 5.39%

Treasury Money Market Mutual 5.30% N/A N/A 5.26%
</TABLE>

- --------------------

(1) For periods prior to September 6, 1996, performance for each of the
Funds reflects the performance of the predecessor portfolio's
Institutional Class. Institutional Class shares have no sales
charges.

(2) Each predecessor portfolio's Institutional Class shares commenced
operations as follows: Arizona Tax-Free - March 2, 1992; National
Tax-Free - January 15, 1993; Intermediate Bond and Oregon Tax-Free -
June 1, 1988; Equity Value and Balanced - July 2, 1990; Prime Money
Market Mutual and Treasury Money Market Mutual - August 11, 1995.

43
<PAGE> 573
CUMULATIVE TOTAL RETURN: Each Fund may advertise cumulative total
return. Cumulative total return of shares is computed on a per share basis and
assumes the reinvestment of dividends and distributions. Cumulative total
return of shares generally is expressed as a percentage rate which is
calculated by combining the income and principal changes for a specified period
and dividing by the net asset value per share at the beginning of the period.
Advertisements may include the percentage rate of total return of shares or may
include the value of a hypothetical investment in shares at the end of the
period which assumes the application of the percentage rate of total return.

Cumulative Total Return - For the Applicable Period Ended September 30, 1996

<TABLE>
<CAPTION>
Institutional Class Shares(1) Inception(2) Five Year Three Year
----------------------------- ------------ --------- ----------
<S> <C> <C> <C>
Arizona Tax-Free 32.09% N/A 12.10%

Balanced 87.97% 63.82% 25.38%

Equity Value 111.86% 96.66% 43.59%

Intermediate Bond 92.64% 37.94% 13.31%

National Tax-Free 19.62% N/A 11.61%

Oregon Tax-Free 76.95% 36.11% 11.18%

Prime Money Market Mutual 6.23% N/A N/A

Treasury Money Market Mutual 6.07% N/A N/A
</TABLE>

- --------------------

44
<PAGE> 574
(6)
YIELD - 2[(a - b + 1) -1]
-----
cd

TAX EQUIVALENT YIELD = ( E ) + t
-----
1 - p
E = Tax-exempt yield
p = stated income tax rate
t = taxable yield

Effective Yield = [(Base Period Return +1)365/7]-1.

Institutional Class Yield For The Applicable Period Ended September 30, 1996(1)

<TABLE>
<CAPTION>
Thirty-Day Tax- Seven-Day
Fund Thirty-Day Yield Equivalent Yield2 Seven-Day Yield Effective Yield
---- ----------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
Intermediate Bond 6.15% N/A 5.83% N/A

Arizona Tax-Free Fund 4.88% 8.56% 4.92% N/A

Oregon Tax-Free Fund 4.77% 8.68% 5.14% N/A

National Tax-Free Fund 4.82% N/A 4.54% N/A
</TABLE>

45
<PAGE> 575
<TABLE>
<S> <C> <C> <C> <C>
Prime Money Market Mutual 5.33% 8.82% 5.29% 5.43%

Treasury Money Market Mutual 5.09% 8.43% 5.10% 5.23%
</TABLE>

- ---------------

(1) These figures reflect any reimbursed expenses throughout the period. The
yield of the predecessor portfolios' Institutional Class shares through
September 5, 1996 is also reflected.

(2) Based on a combined federal and state income tax rate of 45.94% and
42.98% for the Oregon Tax-Free Fund and the Arizona Tax-Free Fund,
respectively, and a federal income tax rate of 28.00% for the Money Market
Funds.

From time to time and only to the extent the comparison is appropriate
for a Fund or a class of shares, the Company may quote performance or
price-earning ratios in advertising and other types of literature as compared
with the performance of the Lehman Brothers Municipal Bond Index, 1-Year
Treasury Bill Rate, S&P Index, the Dow Jones Industrial Average, the Lehman
Brothers 20+ Years Treasury Index, the Lehman Brothers 5-7 Year Treasury Index,
IBC/Donoghue's Money Fund Averages, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by the World Gold Council), Bank Averages (which
is calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), average annualized certificate of deposit rates (from the Federal
Reserve G-13 Statistical Releases or the Bank Rate Monitor), the Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), Ten Year U.S. Government Bond Average, S&P's
Corporate Bond Yield Averages, Schabacter Investment Management Indices,
Salomon Brothers High Grade Bond Index, Lehman Brothers Long-Term High Quality
Government/Corporate Bond Index, other managed or unmanaged indices or
performance data of bonds, stocks or government securities (including data
provided by Ibbotson Associates), or by other services, companies, publications
or persons who monitor mutual funds on overall performance or other criteria.
The S&P Index and the Dow Jones Industrial Average are unmanaged indices of
selected common stock prices.

46
<PAGE> 576
The performance of a Fund or a class of shares also may be compared to
the performance of other mutual funds having similar objectives. This
comparative performance could be expressed as a ranking prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Bloomberg
Financial Markets or Morningstar, Inc., independent services that monitor the
performance of mutual funds. Any such comparisons may be useful to investors
who wish to compare a Fund's past performance with that of its competitors. Of
course, past performance cannot be a guarantee of future results. The Company
also may include, from time to time, a reference to certain marketing
approaches of the Distributor, including, for example, a reference to a
potential shareholder being contacted by a selected broker or dealer. General
mutual fund statistics provided by the Investment Company Institute may also be
used.

The Company also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as S&P or Moody's. Such rating
would assess the creditworthiness of the investments held by a Fund. The
assigned rating would not be a recommendation to purchase, sell or hold any
class of a Fund's shares since the rating would not comment on the market price
of a Fund's shares or the suitability of a Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information
relating to a Fund or its investments. The Company may compare a Fund's
performance with other investments that are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare a Fund's past
performance with other rated investments.

47
<PAGE> 577
From time to time the Company may reprint, reference or otherwise use
material from magazines, newsletters, newspapers and books including, but not
limited to the Wall Street Journal, Money Magazine, Barrons, Kiplingers,
Business Week, Fortune, Forbes, the San Francisco Chronicle, the San Jose
Mercury News, The New York Times, the Los Angeles Times, the Boston Globe, the
Washington Post, the Chicago Sun-Times, Investor Business Daily, Worth, Bank
Investor, American Banker, Smart Money, the 100 Best Mutual Funds (Adams
Publishing), Morningstar or Value Line.

48
<PAGE> 578
DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the prospectus section under "Purchase of Shares." Net asset
value per share for a Fund or a class of shares of a non-money market Fund is
determined by the Funds' Custodian on each day the Exchange is open for trading
as of the close of regular trading on the Exchange, which is currently 1:00
p.m. Pacific time.

Securities of a Fund for which market quotations are available are
valued at latest prices. Any security for which the primary market is an
exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the latest bid price quoted on
such day. In the case of other securities, including U.S. Government
securities but excluding money market instruments maturing in 60 days or less,
the valuations are based on latest quoted bid prices. Money market instruments
maturing in 60 days or less are valued at amortized cost. The assets of a Fund
other than money market instruments maturing in 60 days or less are valued at
latest quoted bid prices. Prices may be furnished by a reputable independent
pricing service approved by the Company's Board of Directors. Prices provided
by an independent pricing service may be determined without exclusive reliance
on quoted prices and may take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. All other securities and other assets of a Fund for which current market
quotations are not readily available are valued at fair value as determined in
good faith by the Company's Board of Directors and in accordance with
procedures adopted by the Directors.

Expenses and fees, including Advisory fees, are accrued daily and are
taken into account for the purpose of determining the net asset value of a
Fund's shares.

Net asset value per share for a Fund or a class of shares of a Money
Market Fund is determined as of 12:00 noon and 1:00 p.m. Pacific time on each
Business Day as described in the prospectus.

The Money Market Funds' instruments are valued on the basis of
amortized cost. This technique involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price a Money Market Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of a Money Market Fund computed as described above may tend to be higher
than a like computation made by a fund with identical investments utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its instruments. Thus, if the use of amortized cost by a Money Market
Fund resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in a Money Market Fund would be able to obtain a somewhat
higher yield than would result from investment in a fund utilizing solely
market values

49
<PAGE> 579
and existing investors in a Money Market Fund would receive less investment
income. The converse would apply in a period of rising interest rates.

The Company's Board of Directors has established valuation procedures
designed to stabilize, to the extent reasonably possible, each Money Market
Fund's price per share as computed for the purpose of sales and redemptions.
Such procedures include the determination, at such intervals as the Directors
deem appropriate, of the extent to which each such Fund's NAV as calculated by
using available market quotations deviates from $1.00 per share, such deviation
may result in material dilution or other unfair results to existing
shareholders or investors. In the event the Directors determine that such a
material deviation exists, they have agreed to take such corrective action as
they regard as necessary and appropriate, which may include selling portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding dividends; redeeming shares in kind or
without monetary or other consideration; or establishing a net asset value per
share by using available market quotations. It is the intention of the Money
Market Funds to maintain a per share net asset value of $1.00, but there can be
no assurance that each Fund will do so.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Institutional Class shares of the Non-Money Market Funds may be
purchased on any day the Funds are open. The Funds are open for business each
day the New York Stock Exchange

50
<PAGE> 580
("NYSE") is open for trading (a "Business Day"). Currently, the NYSE is closed
on New Year's Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day (each a "Holiday"). When any
Holiday falls on a weekend, the NYSE typically is closed on the weekday
immediately before or after such Holiday.

Institutional Class shares of the Money Market Funds may be purchased
on any day the Funds are open for business, provided Wells Fargo Bank also is
open for business (for Money Market Funds, a "Business Day"). Currently, Wells
Fargo Bank is closed on New Year's Day, Presidents' Day, Martin Luther King's
Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving Day and Christmas Day (for Money Market Funds, each, a
"Holiday"). When any Holiday falls on a weekend, the Funds are typically closed
on the weekday immediately before or after such Holiday.

Payment for shares may, in the discretion of the adviser, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectuses. For further information about this form of
payment please contact Stephens. In connection with an in-kind securities
payment, the Funds will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by a
Fund and that such Fund receives satisfactory assurances that (i) it will have
good and marketable title to the securities received by it; (ii) that the
securities are in proper form for transfer to the Fund; and (iii) adequate
information will be provided concerning the basis and other matters relating to
the securities.

Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule
or regulation) an emergency exists as a result of which disposal or valuation
of portfolio securities is not reasonably practicable, or for such periods as
the SEC may permit.

The Company may suspend redemption rights or postpone redemption
payments for such periods as are permitted under the 1940 Act. The Company may
also redeem shares involuntarily or make payment for redemption in securities
or other property if it appears appropriate to do so in light of the Company's
responsibilities under the 1940 Act.

In addition, the Company may redeem shares involuntarily to reimburse
the Funds for any losses sustained by reason of the failure of a shareholders
to make full payment for shares purchased or to collect any charge relating to
a transaction effected for the benefit of a shareholder which is applicable to
shares of a Fund as provided from time to time in the Prospectus.

PORTFOLIO TRANSACTIONS

The Company has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the

51
<PAGE> 581
Company's Board of Directors, Wells Fargo Bank is responsible for the Funds'
portfolio decisions and the placing of portfolio transactions. In placing
orders, it is the policy of the Company to obtain the best results taking into
account the dealer's general execution and operational facilities, the type of
transaction involved and other factors such as the dealer's risk in positioning
the securities involved. While Wells Fargo Bank generally seeks reasonably
competitive spreads or commissions, the Funds do not necessarily pay the lowest
spread or commission available.

Purchase and sale orders of the securities held by the Funds may be
combined with those of other accounts that Wells Fargo Bank manages, and for
which it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When Wells Fargo Bank determines that a
particular security should be bought or sold for a Fund and other accounts
managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate those
transactions among the participants equitably.

Except in the case of equity securities purchased by the Balanced and
Equity Value Funds, purchases and sales of securities usually are principal
transactions. Portfolio securities normally are purchased or sold from or to
dealers serving as market makers for the securities at a net price. The Funds
also purchase portfolio securities in underwritten offerings and may purchase
securities directly from the issuer. Generally, money market securities, ARMs
and CMOs are traded on a net basis and do not involve brokerage commissions.
The cost of executing a Fund's portfolio securities transactions consists
primarily of dealer spreads and underwriting commissions. Under the 1940 Act,
persons affiliated with the Company are prohibited from dealing with the
Company as a principal in the purchase and sale of securities unless an
exemptive order allowing such transactions is obtained from the SEC or an
exemption is otherwise available.

The Arizona, National and Oregon Tax-Free Funds may purchase municipal
obligations from underwriting syndicates of which Stephens, Wells Fargo Bank or
their affiliates is a member under certain conditions in accordance with the
provisions of a rule adopted under the 1940 Act and in compliance with
procedures adopted by the Board of Directors.

For the Balanced and Equity Value Funds, purchases and sales of equity
securities on a securities exchange are effected through brokers who charge a
negotiated commission for their services. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law,
Stephens or Wells Fargo Securities Inc. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. No Fund will deal with Stephens, Wells Fargo Bank or
their affiliates in any transaction in which any of them acts as principal
without an exemptive order from the SEC or unless an exemption is otherwise
available.

52
<PAGE> 582
In assessing the best overall terms available for any transaction,
Wells Fargo Bank considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Wells Fargo Bank may cause the Balanced and Equity Value Funds to pay a
broker/dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker/dealer for
effecting the same transaction, provided that Wells Fargo Bank determines in
good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker/dealer, viewed in terms
of either the particular transaction or the overall responsibilities of Wells
Fargo Bank. Such brokerage and research services might consist of reports and
statistics relating to specific companies or industries, general summaries of
groups of stocks or bonds and their comparative earnings and yields, or broad
overviews of the stock, bond, and government securities markets and the
economy.

Supplementary research information so received is in addition to, and
not in lieu of, services required to be performed by Wells Fargo Bank and does
not reduce the advisory fees payable by the Funds. The Board of Directors will
periodically review the commissions paid by the Funds to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Funds. It is possible that certain of
the supplementary research or other services received will primarily benefit
one or more other investment companies or other accounts for which investment
discretion is exercised. Conversely, the Funds may be the primary beneficiary
of the research or services received as a result of portfolio transactions
effected for such other account or investment company.

Under Section 28(e) of the Securities Exchange Act of 1934, an adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), an adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to a Fund in any transaction may be less favorable than that
available from another broker/dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.

53
<PAGE> 583
performance information on securities and information concerning prices of
securities; and information supplied by specialized services to Wells Fargo
Bank and to the Company's Directors with respect to the performance, investment
activities and fees and expenses of other mutual funds. Such information may
be communicated electronically, orally or in written form. Research services
may also include the providing of equipment used to communicate research
information, the arranging of meetings with management of companies and the
providing of access to consultants who supply research information.

The outside research assistance is useful to Wells Fargo Bank since
the brokers utilized by Wells Fargo Bank as a group tend to follow a broader
universe of securities and other matters than the staff of Wells Fargo Bank can
follow. In addition, this research provides Wells Fargo Bank with a diverse
perspective on financial markets. Research services which are provided to
Wells Fargo Bank by brokers are available for the benefit of all accounts
managed or advised by Wells Fargo Bank. It is the opinion of Wells Fargo Bank
that this material is beneficial in supplementing their research and analysis;
and, therefore, it may benefit the Funds by improving the quality of Wells
Fargo Bank's investment advice. The advisory fees paid by the Funds are not
reduced because Wells Fargo Bank receives such services.

Brokerage Commissions. During the fiscal periods ended September 30,
1996, September 30, 1995, May 31, 1995 and May 31, 1994, the predecessor
portfolios of the Intermediate Bond Fund and the Arizona, National and Oregon
Tax-Free Funds did not pay any brokerage commissions, because all of their
portfolio transactions occurred in the over-the- counter market.

During the fiscal years ended September 30, 1996, 1995 and 1994, the
predecessor portfolios of the Equity Value and Balanced Funds paid the
following amounts in brokerage commissions:

Brokerage Commissions Paid

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND Sept. 30, 1996(1) Sept. 30, 1995 Sept. 30, 1994
- ------------------------------------------------------ -------------------------------------------
<S> <C> <C> <C>
Equity Value Fund $575,504 $619,124 $247,218

Balanced Fund $254,191 $197,751 $104,835
</TABLE>

- -------------------------

(1) For the period begun September 6, and ended September 30, 1996, such
commissions were paid by the Funds, not their predecessor portfolios.

54
<PAGE> 584

During the time periods stated above, no brokerage commissions were
paid by the Funds to an affiliated broker.

Securities of Regular Broker/Dealers. The Funds may from time to time
purchase securities issued by their regular broker/dealers. As of September
30, 1996, the Funds owned securities of their "regular brokers or dealers" or
their parents as defined in the Act, as follows:

<TABLE>
<CAPTION>
Fund Amount Regular Broker/Dealer
---- -------- ---------------------
<S> <C> <C> <C>
o Arizona Tax-Free $ -0- N/A
o Balanced $ 720,000 Goldman Sachs & Co.
o Equity Value $ 5,800,000 Goldman Sachs & Co.
o Intermediate Bond $ 984,000 Goldman Sachs & Co.
o National Tax-Free $ -0- N/A
o Oregon Tax-Free $ -0- N/A
o Prime Money Market Mutual $166,369,000 Goldman Sachs & Co.
o Treasury Money Market Mutual $225,975,000 Goldman Sachs & Co.
o Treasury Money Market Mutual $230,000,000 HSBC Securities
o Treasury Money Market Mutual $225,000,000 JP Morgan Securities
o Treasury Money Market Mutual $230,000,000 Morgan Stanley
</TABLE>

Furman Selz, the administrator to the predecessor portfolios, did not
report in their N-SAR for the fiscal year ended September 30, 1995, that any
of the Funds held securities of their regular broker/dealers or of their
parents that derive more than 15% of gross revenues from securities-related
activities.

Portfolio Turnover Rate. Changes may be made in the portfolios
consistent with the investment objectives and policies of the Funds whenever
such changes are believed to be in the best interests of the Funds and their
shareholders. The portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities by the average monthly value of
the Fund's portfolio securities. For purposes of this calculation, portfolio
securities exclude all securities having a maturity when purchased of one year
or less.

FUND EXPENSES

55
<PAGE> 585
expense of printing and mailing prospectuses used for promotional purposes,
unless otherwise payable pursuant to a Plan), shareholders' reports, notices,
proxy statements and reports to regulatory agencies; insurance premiums and
certain expenses relating to insurance coverage; trade association membership
dues; brokerage and other expenses connected with the execution of portfolio
transactions; fees and expenses of its custodian, including those for keeping
books and accounts and calculating the NAV per share of a Fund; expenses of
shareholders' meetings; expenses relating to the issuance, registration and
qualification of a Fund's shares; pricing services, and any extraordinary
expenses. Expenses attributable to a Fund are charged against a Fund assets.
General expenses of the Company are allocated among all of the funds of the
Company, including a Fund, in a manner proportionate to the net assets of each
Fund, on a transactional basis, or on such other basis as the Company's Board
of Directors deems equitable.

TAXES

In General. The following information supplements and should be read
in conjunction with Prospectus sections entitled "Dividend and Capital Gain
Distributions" and "Taxes." The Prospectus of the Funds describes generally
the tax treatment of distributions by the Funds. This section of the SAI
includes additional information concerning federal income taxes.

The Company intends to qualify each Fund as a regulated investment
company under Subchapter M of the Code as long as such qualification is in the
best interest of the Fund's shareholders. Each Fund will be treated as a
separate entity for tax purposes and thus the provisions of the Code applicable
to regulated investment companies will generally be applied to the Fund, rather
than to the Company as a whole. In addition, net capital gains, net investment
income, and operating expenses will be determined separately for each Fund.

Qualification as a regulated investment company under the Code
requires, among other things, that (a) each Fund derive at least 90% of its
annual gross income from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or options
thereon; (b) each Fund derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) each Fund diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of
each Fund's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government obligations and
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are determined to be engaged in the
same or similar trades or businesses. As a regulated investment company, each
Fund will not be subject to federal income tax on its net investment income and
net capital gains distributed to its shareholders, provided that it distributes
to its shareholders at least 90% of its net investment income, including net
tax-exempt income, earned in each year. Each Fund intends to pay out
substantially all of its net investment income and net realized capital gains
(if any) for each year.

56
<PAGE> 586
A 4% nondeductible excise tax will be imposed on each Fund (other than
to the extent of the Fund's tax-exempt income) to the extent it does not meet
certain minimum distribution requirements by the end of each calendar year.
Each Fund will either actually or be deemed to distribute all of its net
investment income and net capital gains by the end of each calendar year and,
thus, expects not to be subject to the excise tax.

Income and dividends received by each Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Although in some circumstances a regulated
investment company can elect to "pass through" foreign tax credits to its
shareholders, each Fund does not expect to be eligible to make such an
election.

Federal Income Tax Rates. As of the printing of this SAI, the maximum
individual marginal tax rate applicable to ordinary income is 39.60% (marginal
rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual marginal tax rate applicable
to net capital gains is 28.00%; the maximum corporate tax rate applicable to
ordinary income and net capital gains is 35.00% (except that to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional amount of income tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual or corporation will be affected by a combination
of tax laws covering, for example, deductions, credits, deferrals, exemptions,
sources of income and other matters.

57
<PAGE> 587
the end of the year), only that portion of the year's distributions which
equals the year's earnings and profits will be deemed to have constituted a
dividend. It is expected that each Money Market Fund's net income, on an
annual basis, will equal the dividends declared during the year.

Disposition of Fund Shares. If a shareholder receives a designated
capital gain distribution (to be treated by the shareholder as a long-term
capital gain) with respect to any Fund share and such Fund share is held for
six months or less, then (unless otherwise disallowed) any loss on the sale or
exchange of that Fund share will be treated as a long-term capital loss to the
extent of the designated capital gain distribution. In addition, any loss
realized by a shareholder upon the sale or redemption of Fund shares held less
than six months is disallowed to the extent of any exempt-interest dividends
received thereon by the shareholder. These rules shall not apply, however, to
losses incurred under a periodic redemption plan.

If a shareholder exchanges or otherwise disposes of Fund shares within
90 days of having acquired such shares and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or of a different regulated investment company,
the sales charge previously incurred acquiring the Fund's shares shall not be
taken into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are reacquired within the 61-day
period beginning 30 days before and ending 30 days after the shares are
disposed of.

Taxation of Fund Investments. Gains or losses on sales of portfolio
securities by a Fund will generally be long-term capital gains or losses if the
securities have been held by it for more than one year, except in certain cases
such as where the Fund acquires a put or writes a call thereon. Gains
recognized on the disposition of a debt obligation (including tax-exempt
obligations purchased after April 30, 1993) purchased by the Fund at a market
discount (generally at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of market discount which
accrued during the period of time the Fund held the debt obligation. Other
gains or losses on the sale of portfolio securities will be short-term capital
gains or losses.

58
<PAGE> 588
The requirement that a Fund derive less than 30% of its gross income from gains
from the sale of securities held for less than three months may limit the
Fund's ability to write options.

Offsetting positions held by a regulated investment company involving
certain financial forward, futures or options contracts may be considered, for
tax purposes, to constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax treatment
of "straddles" is governed by Section 1092 of the Code which, in certain
circumstances, overrides or modifies the provisions of Section 1256. If a
regulated investment company were treated as entering into "straddles" by
reason of its engaging in certain financial forward, futures or option
contracts, such straddles could be characterized as "mixed straddles" if the
futures, forwards, or options comprising a part of such straddles were governed
by Section 1256 of the Code. The regulated investment company may make one or
more elections with respect to "mixed straddles." Depending upon which
election is made, if any, the results with respect to the regulated investment
company may differ. Generally, to the extent the straddle rules apply to
positions established by the regulated investment company, losses realized by
the regulated investment company may be deferred to the extent of unrealized
gain in any offsetting positions. Moreover, as a result of the straddle and
the conversion transaction rules, short-term capital loss on straddle positions
may be recharacterized as long-term capital loss, and long-term capital gain
may be characterized as short-term capital gain or ordinary income.

If a Fund purchases shares in a "passive foreign investment company"
("PFIC"), the Fund may be subject to federal income tax and an interest charge
imposed by the IRS upon certain distributions from the PFIC or the Fund's
disposition of PFIC shares. If the Fund invests in a PFIC, the Fund intends to
make an available election to mark-to- market its interest in PFIC shares.
Under the election, the Fund will be treated as recognizing at the end of each
taxable year the excess, if any, of the fair market value of its interest in
PFIC shares over its basis in such shares. Although such excess will be
taxable to the Fund as ordinary income notwithstanding any distributions by the
PFIC, the Fund will not be subject to federal income tax or the interest charge
with respect to its interest in the PFIC.

Foreign Shareholders. Under the Code, distributions of net investment
income by a Fund to a nonresident alien individual, nonresident alien fiduciary
of a trust or estate, foreign

59
<PAGE> 589
corporation, or foreign partnership (a "foreign shareholder") will be subject
to U.S. withholding tax (at a rate of 30% or a lower treaty rate). Withholding
will not apply if a dividend paid by a Fund to a foreign shareholder is
"effectively connected" with a U.S. trade or business, in which case the
reporting and withholding requirements applicable to U.S. citizens, U.S.
residents or domestic corporations will apply. Distributions of net long-term
capital gains are not subject to tax withholding, but in the case of a foreign
shareholder who is a nonresident alien individual, such distributions
ordinarily will be subject to U.S. income tax at a rate of 30% if the
individual is physically present in the U.S. for more than 182 days during the
taxable year.

Backup Withholding. The Company may be required to withhold, subject
to certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (including redemptions in
kind and proceeds from exchanges) paid or credited to an individual Fund
shareholder, unless a shareholder certifies that the Taxpayer Identification
Number ("TIN") provided is correct and that the shareholder is not subject to
backup withholding, or the IRS notifies the Company that the shareholder's TIN
is incorrect or the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a tax payment on the shareholder's federal income tax return.
An investor must provide a valid TIN upon opening or reopening an account.
Failure to furnish a valid TIN to the Company could subject the investor to
penalties imposed by the IRS.

Special Tax Considerations for the Tax-Free Funds. The Tax-Free Funds
intend that at least 50% of the value of their total assets at the close of
each quarter of their taxable years will consist of obligations the interest on
which is exempt from federal income tax, so that they will qualify under the
Code to pay "exempt-interest dividends." The portion of total dividends paid by
a Tax Free Fund with respect to any taxable year that constitutes
exempt-interest dividends will be the same for all shareholders receiving
dividends during such year. Long-term and/or short-term capital gain
distributions will not constitute exempt-interest dividends and will be taxed
as capital gain or ordinary income dividends, respectively. The exemption of
interest income derived from investments in tax-exempt obligations for federal
income tax purposes may not result in a similar exemption under the laws of a
particular state or local taxing authority.

60
<PAGE> 590
Among the tax preference items is tax-exempt interest from "private activity
bonds" issued after August 7, 1986. To the extent that a Tax-Free Fund invests
in private activity bonds, its shareholders who pay AMT will be required to
report that portion of Fund dividends attributable to income from the bonds as
a tax preference item in determining their AMT. Shareholders will be notified
of the tax status of distributions made by the Fund. Persons who may be
"substantial users" (or "related persons" of substantial users) of facilities
financed by private activity bonds should consult their tax advisors before
purchasing shares in a Tax-Free Fund. Furthermore, shareholders will not be
permitted to deduct any of their share of a Tax-Free Fund's expenses in
computing their AMT. With respect to a corporate shareholder of such Funds,
exempt-interest dividends paid by a Fund is included in the corporate
shareholder's "adjusted current earnings" as part of its AMT calculation, and
may also affect its federal "environmental tax" liability. As of the printing
of this SAI, individuals are subject to an AMT at a maximum rate of 28% and
corporations at a maximum rate of 20%. Shareholders with questions or concerns
about AMT should consult their tax advisors.

Other Matters. Investors should be aware that the investments to be
made by the Funds may involve sophisticated tax rules that may result in income
or gain recognition by the Funds without corresponding current cash receipts.
Although the Funds will seek to avoid significant noncash income, such noncash
income could be recognized by the Funds, in which case the Funds may distribute
cash derived from other sources in order to meet the minimum distribution
requirements described above.

The foregoing discussion and the discussions in the Prospectus address
only some of the federal tax considerations generally affecting investments in
a Fund. Each investor is urged to consult his or her tax advisor regarding
specific questions as to federal, state or local taxes and foreign taxes.

CAPITAL STOCK

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "The Funds and
Management."

The Funds are eight of the funds of the Stagecoach Family
of Funds. The Company was organized as a Maryland corporation on September 9,
1991 and currently offers shares of seventeen other funds.

Each Fund offers three classes of shares. Most of the Company's
funds are authorized to issue multiple classes of shares, one class generally
subject to a front-end sales charge and, in some

61
<PAGE> 591
cases, a class subject to a contingent-deferred sales charge, that are offered
to retail investors. Certain of the Company's funds also are authorized to
issue other classes of shares, which are sold primarily to institutional
investors. Each class of shares in a fund represents an equal, proportionate
interest in a fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the fund's operating expenses, except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule
12b-1) that are allocated to a particular class. Please contact Stagecoach
Shareholder Services at 1-800-222-8222 if you would like additional information
about other funds or classes of shares offered.

With respect to matters that affect one class of a Fund's shares but
not another, shareholders vote as a class; for example, the approval of a Plan.
Subject to the foregoing, on any matter submitted to a vote of shareholders,
all shares then entitled to vote are voted separately by series unless
otherwise required by the Act, in which case all shares are voted in the
aggregate. For example, a change in a series' fundamental investment policy
affects only one series and are voted upon only by shareholders of the series
and not by shareholders of the Company's other series. Additionally, approval
of an advisory contract is a matter to be determined separately by each series.
Approval by the shareholders of one series is effective as to that series
whether or not sufficient votes are received from the shareholders of the other
series to approve the proposal as to those series. As used in the prospectus
and in this SAI, the term "majority" when referring to approvals to be obtained
from shareholders of a class of a Fund, means the vote of the lesser of (i) 67%
of the shares of such class of the Fund represented at a meeting if the holders
of more than 50% of the outstanding shares of such class of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of such class of the Fund. The term "majority," when referring to the
approvals to be obtained from shareholders of the Company as a whole, means the
vote of the lesser of (i) 67% of the Company's shares represented at a meeting
if the holders of more than 50% of the Company's outstanding shares are present
in person or by proxy, or (ii) more than 50% of the Company's outstanding
shares. Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held. The Company may dispense with an
annual meeting of shareholders in any year in which it is not required to elect
directors under the 1940 Act.

Shares have no preemptive rights or subscription. All shares, when
issued for the consideration described in the prospectus, are fully paid and
non-assessable by the Company.

62
<PAGE> 592
Set forth below the name, address and share ownership of each person
known by the Company to have beneficial or record ownership of 5% or more of a
class of a Fund or 5% or more of the voting securities of a Fund as a whole.

5% OWNERSHIP AS OF JANUARY 2, 1997

<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
ARIZONA TAX- Virg. & Co. Institutional Class 98.28% 69.70%
FREE FUND Attn: MF Dept A88-4 [Record Holder]
P.O. Box 9800
Calabasas, CA 91372

BALANCED FUND Hep & Co. Institutional Class 44.65% 29.30%
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
MAC 9139-027
Calabasas, CA 91372

Dim & Co. Institutional Class 6.40% N/A
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
MAC 9139-027
Calabasas, CA 91372

First Interstate Bank Institutional Class 39.14% 25.70%
(Trustee) Record Holder
ChoiceMaster
Attn: Mutual Funds
A88-4
P.O. Box 9800
Calabasas, CA 91372

EQUITY VALUE Virg. & Co. Institutional Class 7.54% 6.90%
FUND Attn: MF Dept A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372

Hep & Co. Institutional Class 26.49% 24.10%
Attn: MF Dept A88-4 Record Holder
P.O. Box 9800
MAC 9139-027
Calabasas, CA 91372

Dim & Co. Institutional Class 42.48% 38.70%
Attn: MF Dept A88-4 Record Holder
P.O. Box 9800
MAC 9139-027
Calabasas, CA 91372

First Interstate Bank Institutional 17.91% 16.30%
(Trustee) Class
ChoiceMaster Record Holder
Attn: Mutual Funds
A88-4
P.O. Box 9800
Calabasas, CA 91372

INTERMEDIATE Virg. & Co. Institutional 41.09% 39.00%
BOND FUND Attn: MF Dept A88-4 Class Record Holder
</TABLE>

63
<PAGE> 593
<TABLE>
<S> <C> <C> <C> <C>
P.O. Box 9800
Calabasas, CA 91372

Hep & Co. 56.43% 53.50%
Attn: MF Dept A88-4 Institutional
P.O. Box 9800 Class
MAC 9139-027 Record Holder
Calabasas, CA 91372

NATIONAL TAX- Virg. & Co. Institutional Class 65.08% 40.00%
FREE FUND Attn: MF Dept A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372

Hep & Co. Institutional Class 34.92% 21.50%
Attn: MF Dept A88-4 Benefically Owned
P.O. Box 9800
MAC 9139-027
Calabasas, CA 91372

OREGON TAX Dim & Co. Institutional Class 6.50% N/A
-FREE FUND Attn: MF Dept. A88-4 Benefically Owned
P.O. Box 9800
Calabasas, CA 91372

Virg. & Co. Institutional Class 72.30% 14.10%
Attn: MF Dept A88-4 Benefically Owned
P.O. Box 9800
Calabasas, CA 91372

Hep & Co. Institutional Class 21.20% N/A
Attn: MF Dept A88-4 Record Holder
P.O. Box 9800
MAC 9139-027
Calabasas, CA 91372

PRIME Virg. & Co. Institutional Class 81.84% 25.90%
MONEY MARKET Attn: MF Dept A88-4 Record Holder
MUTUAL FUND P.O. Box 9800
Calabasas, CA 91372

TREASURY The Peterson Liv Tr Institutional Class 21.37% 6.50%
MONEY MARKET 640 Wilshire Blvd., Record Holder
MUTUAL FUND 12th Fl.
Los Angeles, CA
90048 Institutional Class 10.19% N/A
Record Holder
First Interstate Bank
of Oregon, N.A.
Attn: Investment
Sweep
1300 S.W. Fifth Institutional Class 62.40% 19.00%
Avenue Record Holder
Portland, OR 97201-
5688

Virg. & Co.
Attn: MF Dept. A88-4
P.O. Box 9800
Calabasas, CA 91372-
0800
</TABLE>

For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more than 25% of the voting securities of a
fund is presumed to "control" such fund. Accordingly, to the extent that a
shareholder identified in the foregoing table is defined as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of

64
<PAGE> 594
record of more that 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).

OTHER INFORMATION

This Registration Statement, including the prospectus for each Fund,
the SAI and the exhibits filed therewith, may be examined at the office of the
SEC in Washington, D.C. Statements contained in a prospectus or the SAI as to
the contents of any contract or other document referred to herein or in the
prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

INDEPENDENT AUDITORS

FINANCIAL INFORMATION

The portfolio of investments, audited financial statements and
independent auditors' report for the fiscal year ended September 30, 1996 are
hereby incorporated by reference to the Company's Annual Reports as filed with
the SEC on December 9, 1996. The Company's Annual Reports may be obtained by
calling 1-800-222-8222. The portfolio of investments, audited financial
statements and independent auditors' report are attached to all SAIs delivered
to current or prospective shareholders.

65
<PAGE> 595

SAI APPENDIX

The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.

Corporate and Municipal Bonds

Moody's: The four highest ratings for corporate and municipal bonds
are "Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the
"best quality" and carry the smallest amount of investment risk. Bonds rated
"Aa" are of "high quality by all standards," but margins of protection or other
elements make long-term risks appear somewhat greater than "Aaa" rated bonds.
Bonds rated "A" possess many favorable investment attributes and are considered
to be upper medium grade obligations. Bonds rated "Baa" are considered to be
medium grade obligations; interest payments and principal security appear
adequate for the present, but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds
have speculative characteristics as well. Moody's applies numerical modifiers:
1, 2 and 3 in each rating category from "Aa" through "Baa" in its rating
system. The modifier 1 indicates that the security ranks in the higher end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.

S&P: The four highest ratings for corporate and municipal bonds are
"AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings
assigned by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded as having an "adequate capacity" to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of
a plus or minus sign to show relative standing within the category.

Municipal Notes

A-1

<PAGE> 596
S&P: The "SP-1" rating reflects a "very strong or strong capacity to
pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.

Corporate and Municipal Commercial Paper

Moody's: The highest rating for corporate and municipal commercial
paper is "P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for
repayment of short-term promissory obligations." Issuers rated "P-2" (Prime-2)
"have a strong capacity for repayment of short-term promissory obligations,"
but earnings trends, while sound, will be subject to more variation.

S&P: The "A-1" rating for corporate and municipal commercial paper
indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."

A-2