<PAGE>
- ---------------------
ANNUAL
- ---------------------
REPORT
- ---------------------
OVERLAND
- ---------------------
EXPRESS
- ---------------------
SWEEP
- ---------------------
FUND
- ---------------------
DECEMBER 31, 1997
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 1
Investment Adviser Q & A 3
Portfolio of Investments 4
Stagecoach Funds
Statement of Assets and Liabilities 7
Statement of Operations 8
Statements of Changes in Net Assets 9
Financial Highlights 10
Notes to Financial Statements 11
INDEPENDENT AUDITORS' REPORT 15
PROXY VOTING RESULTS 17
LIST OF ABBREVIATIONS 18
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- - ARE NOT FDIC INSURED
- - ARE NOT GUARANTEED BY WELLS FARGO BANK [NO FDIC]
- - ARE NOT DEPOSITS OR OBLIGATIONS OF WELLS FARGO
BANK
- - INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL
---------------------
i
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
ii
<PAGE>
LETTER TO SHAREHOLDERS
- ------------------
TO OUR SHAREHOLDERS:
On December 12, 1997, the Overland Express Fund Family merged with Stagecoach
Funds. This Annual Report, dated December 31, 1997, reflects the completion of
that merger. This report closes out the 1997 fiscal year for the Overland
Express Sweep Fund. The next Annual Report will be dated March 31. This will be
a change from the previous cycle of reports to which you may have become
accustomed. THIS IS A FISCAL YEAR CHANGE AND DOES NOT AFFECT THE WAY YOUR FUND
IS MANAGED.
The merger of Stagecoach and Overland Express has resulted in a single Fund
Family with over 30 Funds and $23 billion in assets. For the most part, account
servicing should be very similar to what you have enjoyed in the past. The
management and investment objective of the Fund has not changed.
MARKET RECAP
The second half of 1997 saw more market volatility than we may have grown
accustomed to over the past few years. On October 27, for example, the stock
market suffered its worst one-day drop since 1987. As measured by the Dow Jones
Industrial Average, the market lost 7.2% of its value. By the end of November,
however, the Dow had recovered all that it had lost during the "crash", only to
slump again in mid-December. Nevertheless, the stock market, as measured by the
S&P 500, rose 33.17% in 1997.
The bond market, as measured by the Lehman Brothers Long-Term Treasury Index,
had a strong year, posting a 15.08% gain, compared to the -0.81% return for the
same index in 1996. The bond market's strength did not assert itself until
mid-April, however, after slumping earlier in the year.
Yet despite these strong overall returns, it was the dramatic stock market
swings of the fall that received most of the attention from worried investors.
What are the lessons shareholders can learn from these events? The only
certainty is that there are no certainties when it comes to investing. Dramatic
market movements can occur at any time for a variety of reasons -- and the
effects can last for years or be balanced out in just a few days. Perhaps the
most significant lessons learned this October are the ones we have all heard
before:
- - HAVE A SOLID, LONG-TERM STRATEGIC PLAN. What are your goals? How long before
you will need to spend the money you have invested? How much risk are you
willing to tolerate? Solid planning with the long-term in mind will help you
keep your focus during periods of short-term volatility.
- - IF LONG-TERM GROWTH IS YOUR GOAL, STOCKS ARE HISTORICALLY THE BEST INVESTMENT.
While bonds or cash may have a greater return than stocks during certain
periods, over the long term stocks have outperformed every other investment
class.
---------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
- - USE ASSET ALLOCATION TO LIMIT VOLATILITY. The extent to which you should
allocate your assets to less volatile investment classes depends on your
individual circumstances, including such factors as how close you are to your
investment horizon and to what extent you need to preserve capital. Seek the
advice of an investment professional to help you determine your asset
allocation.
For those shareholders who have come to Stagecoach through the merger with
Overland Express, we thank you for your support of Overland Express and thank
you for your continued investment with the Stagecoach Funds.
STAGECOACH FUNDS
FEBRUARY 1998
THE S&P 500 INDEX IS AN UNMANAGED INDEX OF 500 WIDELY HELD COMMON STOCKS
REPRESENTING, AMONG OTHERS, INDUSTRIAL, FINANCIAL, UTILITY AND TRANSPORTATION
COMPANIES LISTED OR TRADED ON NATIONAL EXCHANGES OR OVER-THE-COUNTER MARKETS.
THE LEHMAN BROTHERS LONG-TERM TREASURY INDEX IS AN UNMANAGED INDEX COMPOSED OF
U.S. TREASURY BONDS WITH 20-YEAR OR LONGER MATURITIES.
- ---------------------
2
<PAGE>
OVERLAND EXPRESS SWEEP FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE SEVEN-DAY YIELD AS OF DECEMBER 31, 1997?
The seven-day yield for the Fund as of December 31, 1997 was 4.69%.
WHAT HAPPENED TO INTEREST RATES DURING THE YEAR?
There was considerable uncertainty regarding interest rates early in the year.
The bond market slumped in the first quarter in response to inflation fears.
This prompted the Federal Reserve to tighten monetary policy with a 0.25%
increase in the federal funds target rate. The markets absorbed this news and
gradually yields began to fall for the benchmark 30-year Treasury bond. The
yield curve, which measures the spread in yields between short-term and long-
term instruments, began to flatten. Short-term rates are vulnerable to swings in
market expectations of Federal Reserve policy, but recent comments by Federal
Reserve Chairman Alan Greenspan suggest that no further rate hike is likely in
the immediate future. We expect rates to move lower as inflation fears recede,
and believe the Federal Reserve may ease monetary policy later in the year if
inflation fears continue to erode.
WHAT ARE SOME OF THE MARKET PRESSURES THAT AFFECT YIELDS?
There are a number of influences. If the economy is expected to grow rapidly,
interest rates usually move higher in anticipation of a Federal Reserve rate
hike. Cash flows into the money market, by influencing supply and demand, can
drive yields higher or drag them lower. Heavy cash flows into the money market
can result in increased competition for the available instruments, forcing
yields higher. Outflows can reduce yields if there are not enough buyers for the
instruments that fund managers are selling.
WHAT DOES "WEIGHTED AVERAGE MATURITY" TELL US ABOUT THE FUND? HOW HAS IT CHANGED
DURING THE PERIOD?
Weighted average maturity is a measure of the average length of time before
securities in a portfolio mature on a dollar for dollar basis. It is one of the
measures of a fund's sensitivity to interest rate changes. Funds with longer
maturities generally are more sensitive to interest rate fluctuations.
Typically, for a money market mutual fund, managers will increase maturity to
lock in higher rates or shorten maturity if they anticipate higher rates being
available soon. Market forces also may make one maturity range relatively more
attractive than another. For the most part, the weighted average maturity for
the Fund has been fairly steady and in the short range of 45 to 55 days.
WHAT ARE REPURCHASE AGREEMENTS AND WHY ARE THEY ATTRACTIVE?
A repurchase agreement is as an agreement between the buyer and seller of a
security to repurchase the security at an agreed upon time and price. In effect,
it's like a loan with the security acting as collateral. They are attractive to
both parties because they offer a short-term return that is usually greater than
market yields, yet they are often less expensive than some traditional loans.
The Fund will generally invest in short-term repurchase agreements to boost
yields. While the allocation can vary, the investment was at 13% at the end of
1997.
---------------------
3
<PAGE>
OVERLAND EXPRESS SWEEP FUND
- ---------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31,1997
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSITS - 24.93%
$54,000,000 Barclays Bank Plc 5.90 % 10/22/98 $ 53,976,287
35,000,000 Bayerische Landersbank 5.78 07/27/98 34,980,864
35,000,000 Commerzbank Finance Inc 5.80 01/15/98 35,000,386
100,000,000 Deutsche Bank Financial Inc 5.77 01/16/98 100,000,000
40,000,000 Dresdner Bank 6.13 03/09/98 40,003,459
40,000,000 Dresdner Bank 5.95 10/20/98 40,006,082
30,000,000 Huntington National Bank 6.05 01/06/98 30,000,000
140,000,000 Key National Bank 6.00 01/02/98 140,000,000
25,000,000 National Westminster Bank 5.88 01/16/98 25,000,103
18,000,000 Rabobank Nederland N.V. 6.05 03/27/98 17,998,437
20,000,000 Rabobank Nederland N.V. 6.07 03/26/98 19,999,118
60,000,000 Societe Generale 5.97 09/15/98 59,979,815
100,000,000 Union Bank Corp 5.86 06/10/98 100,000,000
40,000,000 Wachovia Corp 6.00 01/02/98 40,000,000
--------------
TOTAL CERTIFICATES OF DEPOSITS $ 736,944,551
COMMERCIAL PAPER - 45.03%
$100,000,000 Asset Securitization Cooperative Corp++ 5.72 %(F) 03/05/98 $ 98,999,000
45,000,000 Bankers Trust Corp 5.72 (F) 03/04/98 44,556,700
25,000,000 Bankers Trust Corp 5.63 (F) 05/13/98 24,483,917
28,892,000 Bell Atlantic Corp 5.80 (F) 01/08/98 28,859,416
60,000,000 Cargill Financial Services Corp++ 5.60 (F) 05/11/98 58,788,111
36,000,000 CC USA Inc++ 5.03 (F) 01/15/98 35,929,573
40,000,000 Corporate Receivables Corp++ 5.60 (F) 01/16/98 39,906,667
35,000,000 Corporate Asset Funding Co++ 5.59 (F) 01/07/98 34,967,392
45,000,000 General Electric Capital Corp 5.63 (F) 01/09/98 44,943,700
40,000,000 General Electric Capital Corp 5.53 (F) 03/09/98 39,588,322
70,000,000 Goldman Sachs & Co 5.71 (F) 03/12/98 69,222,806
30,800,000 Grand Metropolitan Investment Corp 5.70 (F) 03/04/98 30,497,647
50,000,000 Household Finance Corp 5.51 (F) 02/27/98 49,563,792
50,000,000 Household Finance Corp 5.65 (F) 02/12/98 49,670,417
25,000,000 Merrill Lynch Corp 5.62 (F) 02/05/98 24,863,403
90,000,000 Merrill Lynch Corp 5.53 (F) 02/03/98 89,543,775
</TABLE>
- ------------------------
4
<PAGE>
OVERLAND EXPRESS SWEEP FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
$60,000,000 Morgan Stanley Corp 5.52 %(F) 01/15/98 $ 59,871,200
40,000,000 Morgan Stanley Corp 5.63 (F) 01/09/98 39,949,956
25,000,000 Morgan Stanley Corp 5.72 (F) 03/03/98 24,757,694
30,000,000 National Rural Utilities Cooperative Finance
Corp 5.53 (F) 01/20/98 29,912,442
23,500,000 New Center Asset Funding 5.60 (F) 01/27/98 23,404,956
100,000,000 Receivables Capital Corp++ 5.71 (F) 01/30/98 99,540,028
70,000,000 Riverwoods Funding Corp 5.55 (F) 01/14/98 69,859,708
80,000,000 Sigma Finance Inc++ 5.56 (F) 01/20/98 79,765,244
25,000,000 Sigma Finance Inc++ 5.56 (F) 01/06/98 24,980,694
50,000,000 Toronto Dominion Holdings USA 5.53 (F) 01/02/98 49,992,319
25,000,000 Unifunding Corp 5.71 (F) 01/21/98 24,920,694
40,000,000 WCP Funding Inc++ 5.60 (F) 01/20/98 39,881,777
--------------
TOTAL COMMERCIAL PAPER $1,331,221,350
FEDERAL AGENCIES SECURITIES - 0.27%
$ 8,000,000 Federal Farm Credit Bank Discount Note 5.75 % 09/11/98 $ 7,995,325
VARIABLE AND FLOATING RATE BONDS - 18.21%
$30,000,000 American Express Co 5.97 % 05/08/98 $ 30,000,000
42,000,000 Australia & New Zealand Bank Group 5.60 07/28/98 41,986,725
60,000,000 Bank of America N.A. 5.65 04/16/98 59,991,646
53,000,000 Bodegroup Holdings Inc 5.60 05/22/98 52,986,162
50,000,000 CC USA Inc 5.67 02/18/98 50,000,000
33,420,000 CIT Group Holdings Inc 6.13 09/01/98 33,463,183
50,000,000 Comerica Inc 5.63 09/17/98 49,984,354
50,000,000 Comerica Inc 6.01 12/14/98 49,991,065
80,000,000 FCC National Bank 5.60 06/11/98 79,972,744
40,000,000 Huntington National Bank 5.64 08/28/98 39,990,653
50,000,000 Huntington National Bank 5.85 12/17/98 50,000,000
--------------
TOTAL VARIABLE AND FLOATING RATE BONDS $ 538,366,532
</TABLE>
---------------------
5
<PAGE>
OVERLAND EXPRESS SWEEP FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS - 11.33%
$268,495,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50 % 01/02/98 $ 268,495,000
10,000,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.30 01/02/98 10,000,000
56,381,000 Morgan Stanley & Co Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.50 01/02/98 56,381,000
--------------
TOTAL REPURCHASE AGREEMENTS $ 334,876,000
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $2,949,403,758)* (Note 1) 99.77% $2,949,403,758
Other Assets and Liabilities, Net 0.23% 6,686,329
------ --------------
TOTAL NET ASSETS 100.00% $2,956,090,087
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
++ REPRESENTS COMMERCIAL PAPER SOLD WITHIN TERMS OF PRIVATE PLACEMENT
MEMORANDUM, EXEMPT FROM REGISTRATION UNDER SECTION 4(2) OF THE
SECURITIES ACT OF 1933, THAT MAY BE RESOLD TO QUALIFIED INSTITUTIONAL
BUYERS. THIS SECURITY WAS DEEMED LIQUID BY THE INVESTMENT ADVISER IN
ACCORDANCE WITH PROCEDURES APPROVED BY THE FUND'S BOARD OF DIRECTORS.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
- ------------------------
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1997
<TABLE>
<CAPTION>
OVERLAND
EXPRESS
SWEEP FUND
<S> <C>
- -----------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value and
identified cost
(includes repurchase agreements of
$334,876,000) $2,949,403,758
Cash 1,585
Receivables:
Interest 15,048,243
Prepaid expenses 19,097
TOTAL ASSETS 2,964,472,683
LIABILITIES
Payables:
Distribution to shareholders 5,660,124
Due to sponsor and distributor (Note
2) 807,564
Due to adviser (Note 2) 1,825,534
Other 89,374
TOTAL LIABILITIES 8,382,596
TOTAL NET ASSETS $2,956,090,087
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets $2,956,090,087
Shares outstanding 2,956,664,782
Net asset value and offering price per
share $ 1.00
- -----------------------------------------------------------
</TABLE>
AT DECEMBER 31, 1997, NET ASSETS WERE COMPRISED PREDOMINANTLY OF PAID-IN
CAPITAL.
The accompanying notes are an integral part of these financial statements.
---------------------
7
<PAGE>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
OVERLAND
EXPRESS
SWEEP FUND
<S> <C>
- ---------------------------------------------------------
INVESTMENT INCOME
Interest(1) $119,573,333
TOTAL INVESTMENT INCOME 119,573,333
EXPENSES (NOTE 2)
Advisory fees(1) 5,540,534
Administration fees(1) 1,211,007
Custody fees(1) 359,885
Shareholder servicing fees 6,951,112
Portfolio accounting fees(1) 485,037
Transfer agency fees 510,100
Distribution fees 11,332,851
Legal and audit fees(1) 158,370
Other(1) 102,597
TOTAL EXPENSES 26,651,493
Less:
Waived fees and reimbursed expenses(1) (362,061)
Net Expenses 26,289,432
NET INVESTMENT INCOME 93,283,901
Realized gain (loss) on investments (8,595)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 93,275,306
- ---------------------------------------------------------
</TABLE>
(1) INCLUDES AMOUNTS ALLOCATED FROM CASH INVESTMENT TRUST. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
- ------------------------
8
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
OVERLAND EXPRESS SWEEP FUND
-----------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1997 DEC. 31, 1996
<S> <C> <C>
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 93,283,901 $ 55,913,517
Net realized gain (loss) on
investments (8,595) 136,401
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 93,275,306 56,049,918
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (93,283,901) (55,913,517)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 5,854,849,943 4,856,143,166
Reinvestment of dividends 5,474 4,923
Cost of shares redeemed (4,901,482,140) (4,062,742,186)
NET INCREASE IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS 953,373,277 793,405,903
INCREASE IN NET ASSETS 953,364,682 793,542,304
NET ASSETS:
Beginning net assets 2,002,725,405 1,209,183,101
ENDING NET ASSETS $ 2,956,090,087 $ 2,002,725,405
SHARES ISSUED AND REDEEMED AT CONSTANT
$1.00 NAV
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
9
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
OVERLAND EXPRESS SWEEP FUND
----------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.04 0.04 0.05 0.03 0.02
LESS DISTRIBUTIONS:
Dividends from net investment income (0.04) (0.04) (0.05) (0.03) (0.02)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN 4.47% 4.29% 4.80% 3.11% 1.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $2,956,090 $2,002,725 $1,209,183 $812,559 $528,072
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)(1):
Ratio of expenses to average net
assets 1.24% 1.24% 1.25% 1.25% 1.25%
Ratio of net investment income to
average net assets 4.40% 4.20% 4.70% 2.92% 1.67%
- ----------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses(1) 1.26% 1.26% 1.28% 1.33% 1.31%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses(1) 4.38% 4.18% 4.67% 2.84% 1.61%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) RATIOS INCLUDE ACTIVITY OF THE CASH INVESTMENT TRUST MASTER PORTFOLIO
PRIOR TO DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
- ---------------------
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Stagecoach Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company. The Company commenced operations on January 1,
1992, and currently offers thirty-two separate series. These financial
statements represent the Overland Express Sweep Fund (the "Fund"), a diversified
series of the Company.
At a meeting held on July 23, 1997, the Boards of Directors of Overland Express
Funds, Inc. (at times, "Overland") and the Company approved a consolidation
agreement providing for the transfer of the assets and liabilities of each
Overland fund to a corresponding fund of the Company in exchange for shares of
designated classes of the corresponding Stagecoach Fund (the "Consolidation").
The Consolidation was subsequently approved by Overland shareholders. As a
result of this Consolidation, effective at the close of business on December 12,
1997, the Company's Overland Express Sweep Fund was established to acquire all
of the assets and assume all of the liabilities of the Overland Sweep Fund (the
"Predecessor Fund") of Overland Express Funds, Inc. The acquisition was
accomplished in a tax-free exchange for shares of the Fund. All performance and
financial data for the Fund prior to December 15, 1997 refer to the Predecessor
Fund, as it is the survivor for accounting purposes.
At the time of the Consolidation, the Fund, structured as a "feeder" Fund in a
"master-feeder" structure, was restructured to invest directly in a portfolio of
securities, rather than to invest in portfolio securities through a "master"
portfolio (the Cash Investment Trust Master Portfolio, "CIT"). CIT distributed
all of its assets net of assumed liabilities in-kind to its interestholders and
wound up its affairs (the "Dissolution"). The Dissolution occurred at the close
of business on December 12, 1997. For the period from January 1, 1997 to
December 12, 1997, CIT allocated $112,389,468 of interest income and $5,866,521
of expenses to the Fund.
The following significant accounting policies are consistently followed by the
Company in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles ("GAAP") for investment
companies.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. These
---------------------
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
estimates should not be considered an indication of actual or expected figures;
actual results may differ.
INVESTMENT POLICY AND SECURITY VALUATION
The Fund invests only in securities with remaining maturities not exceeding 397
days (thirteen months). Certain floating- and variable-rate instruments in the
portfolio may have maturities in excess of 397 days, but carry a demand feature
that permits the holder to tender the instruments back to the issuer at par
value prior to maturity.
The Fund uses the amortized cost method to value its portfolio securities. The
amortized cost method involves valuing a security at its cost, plus accretion of
discount or minus amortization of premium over the period until maturity, which
approximates market value. The Fund seeks to maintain a constant net asset value
of $1.00 per share, although there is no assurance that it will be able to do
so.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are recorded on a trade date basis. Interest income is
accrued daily. Realized gains or losses are reported on the basis of identified
cost of securities delivered. Bond discounts are accreted and premiums are
amortized as required by the Internal Revenue Code of 1986, as amended (the
"Code").
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell such
securities ("repurchase agreements") are treated as collateralized financing
transactions and are recorded at their contracted resale amounts. These
repurchase agreements, if any, are detailed in the Fund's Portfolio of
Investments. The Fund may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank, N.A. ("WFB"). The
repurchase agreements must be fully collateralized based on values that are
marked to market daily. The collateral may be held by an agent bank under a
tri-party agreement. It is the custodian's responsibility to value the
collateral daily and to take action to obtain additional collateral as necessary
to maintain market value equal to or greater than the resale price. Repurchase
agreements held by the Fund are collateralized by instruments such as U.S.
Treasury or federal agency obligations.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income, if any, are declared daily
and distributed monthly. Any distributions to shareholders from net realized
capital gains are declared and distributed annually.
FEDERAL INCOME TAXES
The Fund is treated as a separate entity for federal income tax purposes. It is
the policy of the Fund to continue to qualify as a regulated investment company
by complying with the provisions applicable to regulated investment companies,
as defined in the Code, and to make distributions of substantially all of its
- ---------------------
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
investment company taxable income and any net realized capital gains (after
reduction for capital loss carryforwards) sufficient to relieve it from all, or
substantially all, federal income taxes. Accordingly, no provision for federal
income taxes was required at December 31, 1997. The Fund has capital loss
carryforwards of $555,468 and $8,595 which will expire in the years 2003 and
2005, respectively. The Company's Board of Directors intends to offset net
capital gains with the capital loss carryforward, and no capital gain
distribution shall be made until the carryforward has been fully utilized or
expires.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into an advisory contract on behalf of the Fund with
WFB. Pursuant to the contract, WFB has agreed to provide the Fund with daily
portfolio management. Under the contract, WFB is entitled to receive a monthly
advisory fee at an annual rate of 0.45% of the average daily net assets of the
Fund. Prior to December 15, 1997, the Fund did not directly retain an investment
adviser because it invested all of its assets in CIT which, in turn, retained
WFB as investment adviser. Advisory fees were charged to CIT at an annual rate
of 0.25% of its average daily net assets.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB is responsible for providing custody and portfolio accounting services for
the Fund. Pursuant to the contract, WFB is entitled to certain transaction
charges plus an annual fee for custody services at the annual rate of 0.0167% of
the Fund's average daily net assets. For portfolio accounting services, WFB is
entitled to a monthly base fee of $2,000 plus an annual fee of 0.07% of the
first $50 million of the Fund's average daily net assets, 0.045% of the next $50
million, and 0.02% of the Fund's average daily net assets in excess of $100
million. Prior to December 15, 1997, WFB was entitled to compensation for its
custodial and portfolio accounting services to CIT at the same rates as listed
above.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB provides transfer agency services for the Fund. Under the transfer agency
contract, WFB is entitled to receive transfer agency fees at an annual rate of
0.10% of the average daily net assets of the Fund. For the period from February
1, 1997 to December 15, 1997, WFB was entitled to receive transfer agency fees
at an annual rate of 0.02% of the average daily net assets of the Fund. Prior to
February 1, 1997, WFB was paid a per account fee plus other related costs with a
minimum monthly fee of $3,000.
The Company has entered into a contract on behalf of the Fund with WFB, whereby
WFB has agreed to provide shareholder services for the Fund. Pursuant to the
contract, WFB is entitled to receive shareholder servicing fees at an annual
rate of 0.30% of the average daily net assets of the Fund. Prior to December 15,
1997, WFB was entitled to
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13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
receive shareholder servicing fees at an annual rate of 0.35% of the average
daily net assets of the Fund.
The Company has entered into an administration agreement on behalf of the Fund
whereby WFB as administrator and Stephens Inc. ("Stephens") as co-administrator
provide the Fund with administration services. For these services, WFB and
Stephens (prior to February 1, 1998) were entitled to receive monthly fees at
the annual rates of 0.04% and 0.02%, respectively, of the Fund's average daily
net assets. Prior to May 1, 1997, Stephens provided substantially the same
services as sole administrator to the Fund and CIT. Under the previous
agreement, Stephens was entitled to receive a monthly fee at the annual rate of
0.025% of the average daily net assets of the Fund and CIT.
The Company has adopted a Distribution Plan on behalf of the Fund pursuant to
Rule 12b-1 under the 1940 Act (the "Plan"). The Plan provides that the Fund may
pay to Stephens, as compensation for distribution-related services, a monthly
fee at an annual rate of up to 0.30% of the Fund's average daily net assets.
Prior to December 15, 1997, the Plan provided that the Fund pay to Stephens up
to 0.55% of its average daily net assets.
Under the contracts and agreements described above, WFB and Stephens may each
voluntarily waive fees payable or reimburse expenses to the Fund. The amount
shown as waived fees and reimbursed expenses on the Statement of Operations for
the year ended December 31, 1997, was waived by WFB. Waived fees and reimbursed
expenses continue at the discretion of WFB and Stephens.
Certain officers and one director of the Company are also officers of Stephens.
As of December 31, 1997, Stephens owned 124,153 shares of the Fund.
3. CAPITAL SHARE TRANSACTIONS
As of December 31, 1997, there were over 106 billion shares of $0.001 par value
capital stock authorized by the Company. As of December 31, 1997, the Fund was
authorized to issue 3 billion shares of capital stock with a par value of $0.001
per share. Transactions in capital shares for the years ended December 31, 1997
and December 31, 1996 are disclosed in detail in the Statements of Changes in
Net Assets.
4. SUBSEQUENT EVENTS
The Fund has changed its fiscal year-end to March 31 to coincide with the year-
end of other funds offered by the Company.
On January 29, 1998, the Board approved a change to the administration and co-
administration agreements for the Fund. Effective February 1, 1998, WFB and
Stephens will be entitled to receive 0.03% and 0.04%, respectively, of the
Fund's average daily net assets for administration services.
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14
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
STAGECOACH FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Overland Express Sweep Fund (formerly
Overland Sweep Fund) (one of the funds comprising Stagecoach Funds, Inc.) as of
December 31, 1997, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and financial highlights for the periods indicated
herein. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Overland Express Sweep Fund of Stagecoach Funds, Inc. as of December 31, 1997,
the results of its operations, the changes in its net assets and its financial
highlights for the periods indicated herein in conformity with generally
accepted accounting principles.
[SIG]
[KPMG Peat Marwick LLP]
SAN FRANCISCO, CALIFORNIA
FEBRUARY 6, 1998
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15
<PAGE>
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16
<PAGE>
OVERLAND EXPRESS SWEEP FUND
- -----------------------
SHAREHOLDERS' MEETING AND
PROXY VOTING RESULTS
The following proposal was passed by a majority of the Predecessor Fund's
outstanding shares at a Special Shareholders' Meeting held on November 26, 1997
for the purpose of voting on such proposal.
To approve a proposed Agreement and Plan of Consolidation providing for the
transfer of the assets and stated liabilities of the Overland Sweep Fund to the
Overland Express Sweep Fund of Stagecoach Funds, Inc., in exchange for shares of
equal value of the Stagecoach Overland Express Sweep Fund.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
1,229,016,781 20,991,827 92,664,208
</TABLE>
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17
<PAGE>
LIST OF ABBREVIATIONS
The following is a list of common abbreviations for terms and entities which may
have appeared in this report.
<TABLE>
<S> <C> <C>
ABAG -- Association of Bay Area Governments
ADR -- American Depository Receipts
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
ARM -- Adjustable Rate Mortgages
BART -- Bay Area Rapid Transit
CDA -- Community Development Authority
CDSC -- Contingent Deferred Sales Charge
CGIC -- Capital Guaranty Insurance Company
CGY -- Capital Guaranty Corporation
CMT -- Constant Maturity Treasury
COFI -- Cost of Funds Index
CONNIE LEE -- Connie Lee Insurance Company
COP -- Certificate of Participation
CP -- Commercial Paper
DW&P -- Department of Water & Power
DWR -- Department of Water Resources
EDFA -- Education Finance Authority
FGIC -- Financial Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance, Inc
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
HFFA -- Health Facilities Financing Authority
IDA -- Industrial Development Authority
LIBOR -- London Interbank Offered Rate
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
MFHR -- Multi-Family Housing Revenue
MUD -- Municipal Utility District
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Public School Fund Guaranty
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Authority
RDFA -- Redevelopment Finance Authority
R&D -- Research & Development
SFMR -- Single Family Mortgage Revenue
TBA -- To Be Announced
TRAN -- Tax Revenue Anticipation Notes
USD -- Unified School District
V/R -- Variable Rate
</TABLE>
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18
<PAGE>
Wells Fargo Bank provides investment advisory services, shareholder services,
and certain other services for the Stagecoach Funds. The Funds are sponsored and
distributed by STEPHENS INC., Member NYSE/SIPC. Wells Fargo Bank is not
affiliated with Stephens Inc.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Stagecoach Funds. If this report
is used for promotional purposes, distribution of the report must be accompanied
or preceded by a current prospectus. For a prospectus containing more complete
information, including charges and expenses, call 1-800-222-8222. Read the
prospectus carefully before you invest or send money.
SC SWP AR (2/98)
<TABLE>
<S> <C>
STAGECOACH
FUNDS-REGISTERED TRADEMARK-
P.O. Box 7066
San Francisco, CA 94120-7066
DATED MATERIAL
PLEASE EXPEDITE
</TABLE>
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-C- 1998 Stagecoach Funds
