<PAGE>
STAGECOACH FUNDS-Registered
Trademark-
Semi-Annual Report
ALLOCATION Funds
Asset Allocation Fund
Index Allocation Fund
U.S. Government Allocation Fund
August 31, 1998
<PAGE>
Allocation Funds TABLE OF CONTENTS
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LETTER TO SHAREHOLDERS................................1
INVESTMENT ADVISOR COMMENTARY AND PERFORMANCE AT A GLANCE
Asset Allocation Fund.............................3
Index Allocation Fund.............................8
U.S. Government Allocation Fund..................12
PORTFOLIOS OF INVESTMENTS
Asset Allocation Fund............................17
Index Allocation Fund............................37
U.S. Government Allocation Fund..................55
STAGECOACH FUNDS
Statement of Assets and Liabilities..............57
Statements of Operations.........................58
Statements of Changes in Net Assets..............60
Financial Highlights.............................62
Notes to Financial Statements....................72
LIST OF ABBREVIATIONS................................86
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
i
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THIS PAGE IS INTENTIONALLY LEFT BLANK --
ii
<PAGE>
LETTER TO SHAREHOLDERS Allocation Funds
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TO OUR SHAREHOLDERS
Thank you for your investment in the Stagecoach Funds.
We are pleased to present this Semi-Annual Report to you for the period ended
August 31, 1998. The purpose of the Semi-Annual Report is to provide important
information and an in-depth review of your investment. In the following pages,
we will highlight three major topics for each Fund, including a performance
summary, portfolio review, and strategic outlook. Due to a change in the fiscal
year-end for the Allocation Funds, this report includes information for a
five-month, rather than six-month reporting period. This change will not impact
the performance of your Fund.
For the five-month reporting period ended August 31, 1998, most domestic
long-term investors experienced increased market volatility. Stocks, as measured
by the S&P 500 Index(1) dropped 12.54% as a result of slower corporate earnings
and economic uncertainty in foreign markets. Conversely, government bonds
benefited from low inflation, stock market apprehension and favorable supply and
demand factors, with returns of 8.83% as measured by the Lehman Brothers Long
Government Bond Index.(2)
During the period, the biggest event impacting the financial markets and U.S.
economy was the economic crisis in Asia. The crisis began to unfold in late 1997
as Asian companies and governments could not afford to pay for excessive
borrowing that had accumulated over several years. In addition, Asian currencies
began to lose value, negatively affecting businesses within the region. These
factors combined to create a destabilizing effect on markets throughout Asia.
Lack of confidence in Asian markets prompted Asian investors to make a "flight
to quality" by investing in U.S. Treasury securities, which increased U.S.
Treasury security prices.
The challenges of investing in today's markets make mutual funds one of the
most popular investment vehicles. Investors poured more than $462 billion into
mutual funds for the twelve-month period ended July 31, 1998 according to
Strategic Insight, an industry
1
<PAGE>
Allocation Funds LETTER TO SHAREHOLDERS
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research firm. We understand that you have a variety of investment options and
we appreciate your confidence in selecting us to manage your money.
Over the years, the Stagecoach Funds have built a reputation for innovation,
leadership and commitment to investors. The Allocation Funds are three of eight
asset allocation funds in the Stagecoach Fund family. Each Fund offers a unique
asset allocation strategy that can provide a solid foundation for any investment
portfolio.
As part of our commitment to investor education, we completely redesigned and
restructured our prospectuses at the beginning of this year to make investing as
simple and as informative as possible. You will find that our marketing
materials and shareholder correspondence are designed to help you better
understand your investment.
We encourage you to review this Semi-Annual Report. We hope that you will find
it useful and informative, and recommend that you continually review your
investment portfolio with a financial consultant to determine an appropriate mix
of investments to meet your ongoing needs. Thank you for your continued
investment with the Stagecoach Funds.
Sincerely,
[SIGNATURE]
Michael J. Hogan
Senior Vice President
Wells Fargo Bank,
Mutual Fund Group
[SIGNATURE]
R. Greg Feltus
Chairman and President of
Stagecoach Funds
1 The "S&P 500 Index" is a trademark of Standard and Poor's Corporation. 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.
2 The Lehman Brothers Long Government Bond Index is an unmanaged index comprised
of U.S. Treasury bonds with 20-year or longer maturities.
2
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INVESTMENT ADVISOR COMMENTARY Asset Allocation Fund
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ASSET ALLOCATION FUND
The Asset Allocation Fund (the "Fund") seeks to earn over the long-term a high
level of total return, including net realized and unrealized capital gains and
net investment income, consistent with reasonable risk.
The Fund is a professionally managed portfolio, advised by Wells Fargo Bank,
N.A. Barclays Global Fund Advisors serves as the Fund's investment sub-advisor.
FUND DATA (as of August 31, 1998)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
TOTAL NET ASSETS ($MM) 1,180.3 293.5 2.3
NET ASSET VALUE $23.10 $14.00 $14.03
</TABLE>
PERFORMANCE SUMMARY
As of August 31, 1998, the Fund's Class A share net asset value was $23.10,
decreasing during the five-month period from $24.99 on March 31, 1998. The
Fund's Class A shares distributed $0.13 per share in dividend income in June and
no capital gains were paid out during this period.
During the five-month reporting period ended August 31, 1998, the Fund's Class
A shares reported a cumulative total loss of 7.09%, excluding sales charges. The
Fund, which maintains its greatest percentage allocation in equity securities,
remained competitive in comparison to its three benchmarks. The S&P 500 Index
lost 12.54%, the Lehman Brothers U.S. Treasury Bond Index returned 8.93%, and
the IBC All Taxable Money Fund Average posted a 2.37% return over the five-month
period. A portion of the Fund's performance can be attributed to the fact that
on the last day of the reporting period, August 31, the market experienced a
substantial decline, with the Dow Jones Industrial Average dropping over 500
points.
The Fund's performance was influenced by a number of factors, including strong
bond prices, a decline in corporate earnings estimates and continued record low
yields. Corporate earnings and U.S. economic growth have clearly been affected
by the Asian crisis, which has caused a continued flight to quality for many
investors.
3
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Asset Allocation Fund INVESTMENT ADVISOR COMMENTARY
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As a result, stock prices declined, prompting the Fund's strategy to sell bonds
and buy stocks to take advantage of attractive buying opportunities.
After a strong showing in June and early July, U.S. equities began to lose
steam as companies warned that the second half of the year would create
challenges for earnings. As a result, August was a volatile month for equities
as witnessed by the performance of the S&P 500 Index. Despite these market
conditions, we believe that stocks continue to be a more attractive investment
than bonds in the current economic environment, and have weighted the portfolio
accordingly.
AVERAGE ANNUAL RETURNS(1) (as of August 31, 1998)
- ------------------------------------------------------------------------
EXCLUDING SALES CHARGE
- -------------------------------------------
<TABLE>
<CAPTION>
YEAR-TO-
DATE 1- YEAR 5- YEAR 10- YEAR
<S> <C> <C> <C> <C>
CLASS A 2.38 11.88 11.93 12.82
CLASS B 1.90 11.12 11.34 12.22
CLASS C 1.95 11.17 11.35 12.22
</TABLE>
INCLUDING SALES CHARGE(2)
- -------------------------------------------
<TABLE>
<CAPTION>
YEAR-TO-
DATE 1- YEAR 5- YEAR 10- YEAR
<S> <C> <C> <C> <C>
CLASS A (2.21) 6.85 10.90 12.30
CLASS B (3.10) 6.12 11.15 12.22
CLASS C 0.95 10.17 11.35 12.22
</TABLE>
PORTFOLIO REVIEW
Every day the Fund's proprietary investment model analyzes extensive financial
data from numerous sources to determine an appropriate asset allocation and
recommend shifts in the Fund's investments based on changing economic
conditions. As opportunities arise among the three asset classes, the investment
model will shift Fund assets accordingly in 5% increments.
The composition of the Fund fluctuated four times during the five-month period
ended August 31, 1998. In April, the Fund was reallocated to 65% stocks and 35%
bonds from a previous mix of 70% stocks and 30% bonds when the model sought to
take advantage of opportunities on the shorter-end of the yield curve, and
lessen exposure to a slumping U.S. equity market.
In June, the Fund was rebalanced opportunistically to 70% stocks and 30% bonds
to take advantage of falling
4
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INVESTMENT ADVISOR COMMENTARY Asset Allocation Fund
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equity prices and a steady drop in bond yields. As bond yields continued to
decline, the Fund was reallocated twice in August, ending the five month period
with an allocation of 75% stocks, 20% bonds and 5% cash.
MODEL ALLOCATION CHANGES (during 5-month reporting period)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
DATE STOCKS BONDS CASH
- ------------------------------- --------- --------- ---------
<S> <C> <C> <C>
APRIL 28 65% 35% 0%
JUNE 16 70% 30% 0%
AUGUST 5 75% 25% 0%
AUGUST 25 75% 20% 5%
</TABLE>
PORTFOLIO DATA (as of August 31, 1998)
- ---------------------------------------------------------
<TABLE>
<S> <C>
AVERAGE COUPON OF BOND PORTFOLIO 7.45%
AVERAGE MATURITY OF BOND PORTFOLIO 23.96 years
AVERAGE DURATION OF BOND PORTFOLIO 12.26 years
</TABLE>
PORTFOLIO ALLOCATION(3) (as of August 31, 1998)
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash 5%
Stocks 75%
Bonds 20%
</TABLE>
5
<PAGE>
Asset Allocation Fund INVESTMENT ADVISOR COMMENTARY
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TOP 10 HOLDINGS (as of August 31, 1998)
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<TABLE>
<CAPTION>
NAME % OF PORTFOLIO
<S> <C>
U.S. T-BILL, 10/22/98 3.5%
GENERAL ELECTRIC CO. 2.5%
U.S. T-BOND 8.00%, 11/15/21 2.3%
MICROSOFT CORP. 2.2%
U.S. T-BILL, 10/15/98 2.0%
U.S. T-BOND 8.75%, 08/15/20 1.6%
COCA COLA CO. 1.5%
EXXON CORP. 1.5%
U.S. T-BOND 8.13%, 08/15/19 1.4%
U.S. T-BOND 6.25%, 08/15/23 1.4%
</TABLE>
STRATEGIC OUTLOOK
Low inflation, moderate economic growth and low interest rates continue to be
the three primary factors contributing to the strength of the overall U.S.
market. We believe that the U.S. dollar will continue to be strong and inflation
will remain at stable to low levels. Given these views, we feel that long-term
interest rates may drift lower and short-term rates will remain stable or be
reduced with possible interference from the Federal Reserve Board.
We still believe the crisis in Asia will continue to be a key factor in future
market movements. U.S. corporations deriving a large portion of their profits
from Asia could see continued share price volatility. Although the problems in
Asia could last several years, we believe that the U.S. economy will continue to
remain strong.
The Fund will continue to apply its quantitative strategies to allocate assets
among stocks, bonds and cash, taking into consideration news and events that
affect the economy and companies in general. Overall, we feel that the Fund is
well positioned for the upcoming months and we expect it to produce solid
long-term performance.
6
<PAGE>
INVESTMENT ADVISOR COMMENTARY Asset Allocation Fund
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1 Investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Figures quoted represent past performance, which is no
guarantee of future results.
The Fund's manager has voluntarily waived all or a portion of its management
fees or assumed responsibility for other expenses, which increases total
return to shareholders. Without these waivers and reimbursements, the Fund's
returns would have been lower.
Performance shown for Class A shares of the Stagecoach Asset Allocation Fund
for periods prior to January 2, 1992, reflects performance of the shares of
the Asset Allocation Fund for the Wells Fargo Investment Trust for Retirement
Programs, a predecessor portfolio with the same investment objective and
policies as the Stagecoach Asset Allocation Fund. Performance shown or
advertised for Class B shares of the Stagecoach Fund for periods prior to
January 1, 1995, reflects performance of the Class A shares of the Stagecoach
Fund, adjusted to reflect Class B share sales charges and expenses; for
periods prior to January 2, 1992, Class B share performance reflects
performance of the predecessor portfolio, adjusted to reflect Class B sales
charges and expenses. Performance shown or advertised for the Class C shares
of the Stagecoach Asset Allocation Fund for periods prior to April, 1998,
reflects performance of the Class A shares, adjusted for Class C share sales
charges and expenses.
2 For Class A shares, the maximum front-end sales charge is 4.50%. The maximum
contingent deferred sales charge for Class B shares is 5.00%. The maximum
contingent deferred sales charge for Class C shares is 1.00%.
3 Represents recommended asset mix. Actual portfolio allocation may differ
depending on current market activity.
7
<PAGE>
Index Allocation Fund INVESTMENT ADVISOR COMMENTARY
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INDEX ALLOCATION FUND
The Index Allocation Fund (the "Fund") seeks to earn over the long-term a high
level of total return, that is, income and capital appreciation combined,
consistent with the assumption of reasonable risk, by pursuing an "asset
allocation" strategy whereby its investments are allocated, based on changes in
market conditions, among three asset classes: common stocks in the S&P 500
Index, U.S. Treasury Bonds and money market instruments.
The Fund is a professionally managed portfolio, advised by Wells Fargo Bank,
N.A. Barclays Global Fund Advisors serves as investment sub-advisor.
FUND DATA (as of August 31, 1998)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
TOTAL ASSETS ($MM) 80.1 6.3 51.9
NET ASSET VALUE $15.27 $18.93 $18.94
</TABLE>
PERFORMANCE SUMMARY
As of August 31, 1998, the Fund's Class A share net asset value was $15.27,
decreasing during the five-month reporting period from $17.55 on March 31, 1998.
The Fund's Class A shares distributed $0.01 per share in dividend income in June
and no capital gains were distributed during this period.
During the five-month reporting period ended August 31, 1998, the Fund's Class
A shares reported a cumulative total loss of 12.94%, excluding sales charges.
The Fund remained competitive in comparison to its three benchmarks, based on
the Fund's predominant allocation in S&P 500 Index securities. The S&P 500 Index
lost 12.54%, the Lehman Brothers U.S. Treasury Bond Index returned 8.93%, and
the IBC All Taxable Money Fund Average posted a 2.37% return over the five-month
period. A portion of the Fund's performance can be attributed to the fact that
on the last day of the reporting period, August 31, the market experienced a
substantial decline, with the Dow Jones Industrial Average dropping over 500
points.
The Fund has performed as expected, remaining competitive with the S&P 500
Index. Stock returns for the first part of the reporting period were well above
8
<PAGE>
INVESTMENT ADVISOR COMMENTARY Index Allocation Fund
- ------------------------------------------------------------------------
historical norms. Unfortunately, concerns about Asia's financial and economic
woes impacted U.S. corporate earnings by the end of the reporting period.
After a strong showing in June and early July, U.S. equities began to lose
steam as companies warned that the second half of the year would create
challenges for earnings. As a result, August was a volatile month for equities
as witnessed by the performance of the S&P 500 Index. Despite these market
conditions, we believe that stocks continue to be a more attractive investment
than bonds in the current economic environment, and have weighted the portfolio
accordingly.
AVERAGE ANNUAL RETURNS(1) (as of August 31, 1998)
- ------------------------------------------------------------------------
EXCLUDING SALES CHARGE
- -------------------------------------------
<TABLE>
<CAPTION>
YEAR-TO-
DATE 1- YEAR 5- YEAR 10- YEAR
<S> <C> <C> <C> <C>
CLASS A (1.42) 6.60 14.32 13.35
CLASS B (1.97) 5.73 13.50 12.57
CLASS C (1.92) 5.82 13.52 12.57
</TABLE>
INCLUDING SALES CHARGE(2)
- -------------------------------------------
<TABLE>
<CAPTION>
YEAR-TO-
DATE 1- YEAR 5- YEAR 10- YEAR
<S> <C> <C> <C> <C>
CLASS A (5.85) 1.83 13.28 12.82
CLASS B (6.87) 0.97 13.25 12.57
CLASS C (2.90) 4.87 13.52 12.57
</TABLE>
PORTFOLIO REVIEW
Every day the Fund's proprietary investment model analyzes extensive financial
data from numerous sources to determine an appropriate asset allocation and
recommend shifts in the Fund's investments based on changing economic
conditions. As opportunities arise among the three asset classes, the investment
model will shift Fund assets accordingly in 5% increments.
We manage the allocation of investments in the Fund's portfolio based on the
assumption that the Fund's "normal" allocation is 100% stocks and no bonds. This
is not a "target" allocation but rather a measure of the level of risk tolerance
for the Fund.
During the five-month reporting period ended August 31, 1998, the Fund
maintained an asset allocation of 100% stocks and no bonds. The Fund's portfolio
is comprised predominately of stocks that make up the S&P 500 Index, including
some of the biggest corpora-
9
<PAGE>
Index Allocation Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
tions in the U.S. Investors tend to favor the relatively consistent earnings
that these stocks traditionally offer in comparison to small-capitalization
stocks.
Given the recent tumble in stock prices and extremely expensive bond prices,
stocks continue to be viewed as attractive investments for the Fund at this
time. We will continue to evaluate expected returns and economic conditions
through our quantitative investment model to provide an optimal asset mix.
TOP 10 HOLDINGS (as of August 31, 1998)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
NAME % OF PORTFOLIO
<S> <C>
GENERAL ELECTRIC CO. 3.4%
MICROSOFT CORP. 3.1%
COCA COLA CO. 2.1%
EXXON CORP 2.1%
MERCK & CO. 1.8%
WAL MART STORES INC. 1.7%
PFIZER INC. 1.6%
INTEL CORP. 1.6%
IBM CORP. 1.4%
PROCTER & GAMBLE CO. 1.3%
</TABLE>
PORTFOLIO ALLOCATION(3) (as of August 31, 1998)
- ---------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 100%
</TABLE>
STRATEGIC OUTLOOK
- --------------------------------------------------
Low inflation, moderate economic growth and low interest rates continue to be
the three primary factors contributing to the strength of the overall U.S.
market. We believe that the U.S. dollar will continue to be strong
10
<PAGE>
INVESTMENT ADVISOR COMMENTARY Index Allocation Fund
- ------------------------------------------------------------------------
and inflation will remain at stable to low levels. Given these views, we feel
that long-term interest rates may drift lower and short-term rates will remain
stable or be reduced with possible interference from the Federal Reserve Board.
We still believe the crisis in Asia will continue to be a key factor in future
market movements. U.S. corporations deriving a large portion of their profits
from Asia could see continued share price volatility. Although the problems in
Asia could last several years, we believe that the economy will continue to
remain strong.
The Fund will continue to apply its quantitative strategies to allocate assets
among stocks, bonds and cash, taking into consideration news and events that
affect the economy and companies in general. Overall, we feel that the Fund is
well positioned for the upcoming months and we expect it to produce solid
long-term performance.
1 Investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Figures quoted represent past performance, which is no
guarantee of future results.
The Fund's manager has voluntarily waived all or a portion of its management
fees or assumed responsibility for other expenses, which reduces operating
expenses and increases total return to shareholders. Without these waivers and
reimbursements, the Fund's returns would have been lower.
Performance shown for Class A shares of the Stagecoach Index Allocation Fund,
reflects performance of the Class A shares of the Overland Express Index
Allocation Fund (the accounting survivor of a merger of the Funds on December
12, 1997). Performance shown or advertised for the Class B and Class C shares
of the Stagecoach Fund reflects performance of the Class D shares of the
Overland Fund adjusted to reflect sales charges and expenses of the Class B
and Class C shares, respectively. For periods prior to July 1, 1993, Class B
and Class C share performance of the Stagecoach Fund reflects performance of
the Class A shares of the Overland Fund adjusted to reflect the sales charges
and expenses of the Class B and Class C shares respectively.
2 For Class A shares, the maximum front-end sales charge is 4.50%. The maximum
contingent deferred sales charge for Class B shares is 5.00%. The maximum
contingent deferred sales charge for Class C shares is 1.00%.
3 Represents recommended asset mix. Actual portfolio allocation may differ
depending on current market activity.
11
<PAGE>
U.S. Government Allocation Fund INVESTMENT ADVISOR COMMENTARY
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U.S. GOVERNMENT ALLOCATION FUND
The U.S. Government Allocation Fund (the "Fund") seeks over the long-term a
high level of total return, including net realized and unrealized capital gains
and net investment income, consistent with reasonable risk.
The Fund is a professionally managed portfolio, advised by Wells Fargo Bank,
N.A. Barclays Global Fund Advisors serves as investment sub-advisor.
FUND DATA (as of August 31, 1998)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
TOTAL NET ASSETS ($MM) 78.2 16.8
NET ASSET VALUE $15.00 $10.91
</TABLE>
PERFORMANCE SUMMARY
As of August 31, 1998, the Fund's Class A share net asset value was $15.00,
increasing during the five-month reporting period from $14.87 on March 31, 1998.
The Fund's Class A shares distributed $0.30 per share in dividend income and no
capital gains were paid out during this period.
The distribution rate for Class A shares of the Fund for the period ended
August 31, 1998 was 4.42%, based on an annualization of August's monthly
dividend of $0.055 per share and the maximum offering price of $15.71 on August
31, 1998.
During the five-month reporting period ended August 31, 1998, the Fund's Class
A shares reported a cumulative total return of 2.90%, excluding sales charges.
The Fund remained competitive in comparison to its three benchmarks according to
the portfolio allocation. The Lehman Brothers U.S. Treasury Bond Index returned
8.93%, the Lehman Brothers U.S. Treasury Note Index returned 3.29%, and the IBC
All Taxable Money Fund Average posted a 2.37% return over the five-month period.
The Fund benefited from a number of factors, including flattening yield curves
and continued economic uncertainties in Asia. U.S. Treasuries prospered in the
last five months, primarily because of low inflation in the U.S. and demand from
foreign investors seeking a "safe haven" from global market volatility. If
problems in Asia deteriorate further, bond prices could prosper from slower
economic growth in the U.S. and increased safe haven demand from abroad.
12
<PAGE>
INVESTMENT ADVISOR COMMENTARY U.S. Government Allocation Fund
- ------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) (as of August 31, 1998)
- ------------------------------------------------------------------------
EXCLUDING SALES CHARGE
- -------------------------------------------
<TABLE>
<CAPTION>
YEAR-TO-
DATE 1- YEAR 5- YEAR 10- YEAR
<S> <C> <C> <C> <C>
CLASS A 4.15 7.25 4.10 8.26
CLASS B 3.68 6.45 3.54 7.67
</TABLE>
INCLUDING SALES CHARGE(2)
- -------------------------------------------
<TABLE>
<CAPTION>
YEAR-TO-
DATE 1- YEAR 5- YEAR 10- YEAR
<S> <C> <C> <C> <C>
CLASS A (0.53) 2.43 3.15 7.77
CLASS B (1.32) 1.45 3.31 7.67
</TABLE>
MONTHLY DIVIDEND HISTORY
<TABLE>
<CAPTION>
MONTH CLASS A CLASS B
- ------------------------------------ --------- ---------
<S> <C> <C>
APRIL 1998 $0.057 $0.035
MAY 1998 $0.061 $0.038
JUNE 1998 $0.059 $0.037
JULY 1998 $0.064 $0.040
AUGUST 1998 $0.055 $0.034
</TABLE>
PORTFOLIO REVIEW
The Fund's investment policy is to invest in the combination of long-term
Treasury bonds, intermediate-term Treasury notes, and money market securities
that offer the optimum balance of risk and return. The Fund selects the most
attractive mix by comparing the expected return, risk and correlation of
long-term, intermediate-term, and short-term Treasury securities.
During the five-month reporting period ended August 31, 1998, the Fund
experienced two asset allocation changes. In April, the Fund was reallocated to
0% bonds, 40% notes and 60% cash from a previous mix of 10% bonds, 20% notes and
70% cash. The Fund maintained this asset allocation until August 25, when it was
reallocated to 10% bonds, 10% notes and 80% cash to take advantage of
opportunities on the shorter-end of the yield curve.
The combination of a healthy U.S. economy and low inflation caused the yield
difference between short-term and long-term bonds to decline over the past five
months. Since yield is a measure of expected return, as long-term bond yields
declined, bonds became less
13
<PAGE>
U.S. Government Allocation Fund INVESTMENT ADVISOR COMMENTARY
- ------------------------------------------------------------------------
attractive relative to shorter maturity securities. As a result, the Fund
invested in a conservative mix more heavily weighted in intermediate notes and
cash.
MODEL ALLOCATION CHANGES (during 5-month reporting period)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
DATE BONDS NOTES CASH
- ---------------------------------------- ---- ---- ----
<S> <C> <C> <C>
APRIL 28 0% 40% 60%
AUGUST 25 10% 10% 80%
</TABLE>
PORTFOLIO DATA (as of August 31, 1998)
- ---------------------------------------------------------
<TABLE>
<S> <C>
AVERAGE COUPON 1.64%
AVERAGE MATURITY 3.16 years
AVERAGE DURATION 1.85 years
</TABLE>
PORTFOLIO ALLOCATION(3) (as of August 31, 1998)
- ---------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Bonds 10%
Notes 10%
Cash 80%
</TABLE>
STRATEGIC OUTLOOK
Low inflation, moderate economic growth and low interest rates continue to be
the three primary factors contributing to the strength of the overall U.S.
market. While the crisis in Asia has affected earnings in some areas, the
overall U.S. economy is sound. Given these views, we do not feel that interest
rates will increase in the near future. We feel that long-term interest rates
may drift lower and short-term rates will remain stable or be reduced with
possible interference this year from the Federal Reserve Board.
14
<PAGE>
INVESTMENT ADVISOR COMMENTARY U.S. Government Allocation Fund
- ------------------------------------------------------------------------
As a result, the Fund will continue to apply its process-driven strategy that
applies asset allocation technology to manage its fixed-income securities
portfolio. The Fund will take advantage of yield spread opportunities between
long-term U.S. government bonds, intermediate-term government notes and money
market instruments to benefit from a stable interest rate environment. The model
will continue to monitor events in Asia closely, as it determines the optimal
asset mixes on a daily basis. Overall, we feel that the Fund is well positioned
for the upcoming months and we expect it to produce solid long-term performance.
1 Average annual returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gains distributions. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Figures quoted represent past
performance, which is no guarantee of future results.
The Fund's manager has voluntarily waived all or a portion of its management
fees or assumed responsibility for other expenses, which increases total
return to shareholders. Without these waivers and reimbursements, the Fund's
returns would have been lower.
Performance shown for the Class A shares of the Stagecoach U.S. Government
Allocation Fund for periods prior to January 2, 1992, reflects performance of
the shares of the Fixed Income Strategy Fund of Wells Fargo Investment Trust
for Retirement Programs, a predecessor portfolio with the same investment
objective and policies as the Stagecoach Fund. Performance shown or advertised
for Class B shares of the Stagecoach Fund for periods between January 2, 1992,
and January 1, 1995, reflects performance of the Class A shares of the
Stagecoach Fund adjusted to reflect sales charges and expenses of the Class B
shares; for periods prior to January 2, 1992, performance shown or advertised
for Class B shares of the Stagecoach Fund reflects performance of the
predecessor portfolio with expenses adjusted to reflect Class B share sales
charges and expenses.
2 For Class A shares, the maximum front-end sales charge is 4.50%. The maximum
contingent deferred sales charge for Class B shares is 5.00%.
3 Represents recommended asset mix. Actual portfolio allocation may differ
depending on current market activity.
15
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
16
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 72.11%
AEROSPACE - 0.52%
140,343 Boeing Company $ 5,927,108 $ 4,341,862
27,311 Lockheed Martin Corporation 2,377,817 2,388,006
27,390 Rockwell International Corporation 1,295,858 992,887
------------ --------------
$ 9,600,783 $ 7,722,755
AUTOMOBILE & RELATED - 0.84%
89,868 Chrysler Corporation $ 3,144,820 $ 4,010,359
23,051 Dana Corporation 921,254 903,311
168,527 Ford Motor Company 5,005,234 7,415,188
------------ --------------
$ 9,071,308 $ 12,328,858
BASIC INDUSTRIES - 0.34%
27,449 Allegheny Teledyne Incorporated $ 647,066 $ 413,451
41,168 Colgate-Palmolive Company 2,493,545 2,969,242
25,146 Freeport-McMoran Copper & Gold Incorporated+ 601,479 292,322
40,003 Nike Incorporated 1,644,688 1,387,604
------------ --------------
$ 5,386,778 $ 5,062,619
BEVERAGE BREWING AND DISTRIBUTION - 1.90%
343,625 Coca-Cola Company $ 19,291,917 $ 22,378,578
207,437 Pepsico Incorporated 6,671,296 5,743,412
------------ --------------
$ 25,963,213 $ 28,121,990
CAPITAL GOODS - 0.63%
25,723 Browning Ferris Industrials Incorporated $ 875,021 $ 835,998
10,548 Case Corporation 561,586 284,796
68,580 Electronic Data Systems Corporation 2,786,855 2,297,430
21,673 Gateway 2000 Incorporated+ 1,226,891 1,025,404
11,147 Harris Corporation 418,667 355,311
22,769 IMS Health Incorporated 863,339 1,252,295
13,095 Maytag Corporation 384,274 564,722
47,104 Raytheon Company 2,387,621 2,149,120
</TABLE>
17
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,478 Tupperware Corporation $ 264,605 $ 160,022
15,562 Willamette Industries Incorporated 512,568 383,214
------------ --------------
$ 10,281,427 $ 9,308,312
COMPUTER SOFTWARE - 2.97%
60,241 First Data Corporation $ 2,004,252 $ 1,246,236
144,176 Hewlett Packard Company 7,552,567 7,001,547
342,834 Microsoft Corporation+ 19,270,253 32,890,637
136,018 Oracle Corporation+ 3,491,993 2,711,859
------------ --------------
$ 32,319,065 $ 43,850,279
COMPUTER SYSTEMS - 2.39%
49,820 3COM Corporation+ $ 2,069,060 $ 1,180,111
229,987 Compaq Computer Corporation 5,157,048 6,425,262
131,190 IBM Corporation 11,313,477 14,775,274
182,707 Lucent Technologies Incorporated 7,456,085 12,949,359
------------ --------------
$ 25,995,670 $ 35,330,006
CONGLOMERATES - 0.13%
16,560 ITT Industries Incorporated $ 456,173 $ 498,870
16,101 Loews Corporation 1,412,042 1,358,522
------------ --------------
$ 1,868,215 $ 1,857,392
CONSUMER - BASIC - 0.28%
40,279 Bestfoods $ 1,700,408 $ 2,021,502
53,570 CVS Corporation+ 1,531,250 1,948,609
10,257 Mallinckrodt Incorporated 366,090 234,629
------------ --------------
$ 3,597,748 $ 4,204,740
</TABLE>
18
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
CONSUMER-DISCRETIONARY - 0.28%
119,330 Cendant Corporation+ $ 3,111,243 $ 1,379,753
15,011 Dillards Incorporated 500,491 433,443
14,258 Harrah Entertainment Incorporated+ 341,051 205,850
35,763 Marriott International Incorporated 935,161 1,003,599
7,904 Reebok International Limited 264,379 127,946
21,252 Tricon Global Restaurants Incorporated+ 562,859 787,652
18,941 Venator Group Incorporated 367,256 171,653
------------ --------------
$ 6,082,440 $ 4,109,896
ELECTRICAL EQUIPMENT - 0.04%
34,089 Seagate Technology Incorporated+ $ 989,831 $ 596,557
ENERGY & RELATED - 4.22%
133,528 Amoco Corporation $ 5,333,033 $ 6,050,487
10,544 Ashland Incorporated 472,567 480,411
44,649 Atlantic Richfield Company 3,042,745 2,589,642
44,509 Baker Hughes Incorporated 1,246,982 812,289
340,496 Exxon Corporation 18,370,565 22,281,207
25,493 FPL Group Incorporated 1,254,631 1,696,878
108,696 Mobil Corporation 6,922,463 7,513,611
298,424 Royal Dutch Petroleum Company 13,509,612 11,862,354
69,430 Schlumberger Limited 4,107,527 3,041,902
75,330 Texaco Incorporated 3,740,691 4,185,523
35,473 Union Pacific Resources Group Incorporated 852,600 303,738
10,420 W. R. Grace & Company+ 150,076 134,157
59,222 Williams Companies Incorporated 1,441,752 1,362,106
------------ --------------
$ 60,445,244 $ 62,314,305
</TABLE>
19
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
ENTERTAINMENT & LEISURE - 0.71%
25,059 Mirage Resorts Incorporated+ $ 633,621 $ 372,753
70,557 Tele-Communications Service Group+ 1,569,488 2,328,381
284,552 Walt Disney Company 7,822,242 7,807,395
------------ --------------
$ 10,025,351 $ 10,508,529
FINANCE & RELATED - 5.40%
20,273 Aetna Incorporated $ 1,701,979 $ 1,220,181
48,251 Associates First Capital Corporation 2,734,666 2,852,840
97,666 Banc One Corporation 4,348,446 3,711,308
104,568 Bank of New York Company Incorporated 2,193,884 2,529,239
94,999 BankAmerica Corporation 5,579,485 6,085,873
40,870 BankBoston Corporation 1,531,478 1,458,548
39,294 BB & T Corporation 1,274,850 1,107,600
9,193 Capital One Financial Corporation 1,130,286 804,388
118,752 Chase Manhattan Corporation 5,650,943 6,293,856
30,127 CIGNA Corporation 1,552,028 1,753,015
43,123 Conseco Incorporated 1,725,109 1,191,273
15,211 Countrywide Credit Industries Incorporated 567,125 569,462
144,291 Federal National Mortgage Association 6,298,784 8,197,532
40,012 First Chicago Corporation 2,439,559 2,535,761
134,885 First Union Corporation 5,751,529 6,541,922
21,012 Guidant Corporation 988,624 1,297,491
32,838 Hartford Financial Services Group Incorporated 1,240,398 1,469,500
35,791 Mellon Bank Corporation 1,597,556 1,861,132
83,160 Morgan Stanley Dean Witter & Company 3,986,442 4,828,477
133,333 Nationsbank Corporation 7,106,762 7,599,981
13,375 Providian Financial Corporation 459,321 858,508
15,288 Republic New York Corporation 709,639 630,630
19,814 SAFECO Corporation 832,757 804,944
23,719 SLM Holding Corporation 1,153,866 850,919
22,600 State Street Corporation 1,248,409 1,176,612
24,640 Summit Bancorp 1,210,371 840,840
</TABLE>
20
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
160,072 Travelers Group Incorporated $ 6,282,561 $ 7,103,195
103,216 US Bancorp 2,941,500 3,522,246
------------ --------------
$ 74,238,357 $ 79,697,273
FOOD & RELATED - 1.78%
34,357 Albertsons Incorporated $ 1,336,906 $ 1,737,176
38,306 American Stores Company 782,221 1,110,874
84,207 Archer Daniels Midland Corporation 1,570,210 1,263,103
50,852 H. J. Heinz Company 2,168,514 2,711,047
95,614 McDonald's Corporation 4,601,898 5,360,360
338,084 Philip Morris Companies Incorporated 12,488,152 14,051,616
------------ --------------
$ 22,947,901 $ 26,234,176
FOOD SERVICES - 0.02%
19,814 Darden Restaurants Incorporated $ 233,813 $ 307,117
GENERAL BUSINESS & RELATED - 4.59%
99,902 CBS Corporation+ $ 2,532,186 $ 2,597,452
32,382 Corning Incorporated 1,231,964 797,407
157,047 E. I. du Pont de Nemours & Company 8,199,224 9,059,649
20,625 FDX Corporation+ 1,116,874 1,032,539
453,394 General Electric Company 26,838,558 36,271,520
20,659 General Instrument Corporation 375,644 410,598
12,902 Georgia-Pacific Group 747,538 553,173
59,186 HBO & Company 1,427,702 1,257,702
77,522 Kimberly Clark Corporation 3,400,570 2,955,526
84,693 MediaOne Group Incorporated+ 2,114,469 3,472,413
18,196 Morton International Incorporated 529,144 404,861
17,718 Provident Companies Incorporated 644,827 637,848
16,943 Tribune Company 812,372 1,091,765
71,571 US West Incorporated 2,750,839 3,721,692
78,635 Waste Management Incorporated 3,757,702 3,469,769
------------ --------------
$ 56,479,613 $ 67,733,914
</TABLE>
21
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
HEALTHCARE - 2.66%
182,460 American Home Products Corporation $ 6,326,909 $ 9,145,807
89,550 Columbia HCA Healthcare Corporation 2,838,510 2,020,472
154,125 Eli Lilly & Company 7,578,780 10,095,187
57,021 Healthsouth Corporation+ 1,409,333 1,079,835
181,669 Pfizer Incorporated 11,047,146 16,895,217
------------ --------------
$ 29,200,678 $ 39,236,518
INTERNATIONAL STOCKS - 0.38%
89,041 Unilever NV $ 4,552,382 $ 5,642,973
LARGE CAPITALIZATION STOCKS - 23.52%
5,232 Adolph Coors Company $ 145,560 $ 215,820
19,799 Advanced Micro Devices Incorporated+ 467,538 261,099
32,582 Air Products & Chemicals Incorporated 1,149,983 995,787
79,296 Airtouch Communications Incorporated+ 2,954,405 4,460,400
7,957 Alberto Culver Company 194,873 159,140
31,805 Alcan Aluminum Limited 933,155 604,295
9,172 Allergan Incorporated 311,634 433,377
78,697 Allied Signal Incorporated 2,625,696 2,700,291
38,475 ALLTEL Corporation 1,474,555 1,736,184
12,043 Alza Corporation+ 356,389 433,548
12,838 Amerada Hess Corporation 674,451 630,667
26,554 American Electric Power Company Incorporated 1,145,066 1,201,568
64,159 American Express Company 4,495,014 5,004,402
35,281 American General Corporation 1,689,753 2,266,804
10,151 American Greetings Corporation 357,462 371,780
145,995 American International Group Incorporated 8,872,869 11,287,238
153,147 Ameritech Corporation 5,104,660 7,217,052
35,540 Amgen Incorporated+ 1,884,016 2,163,497
30,857 AMP Incorporated 1,264,968 1,101,209
25,613 AMR Corporation 1,365,757 1,395,908
12,507 Andrew Corporation+ 272,252 185,260
67,643 Anheuser-Busch Companies Incorporated 2,673,073 3,120,033
</TABLE>
22
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
18,636 Apple Computer Incorporated $ 474,398 $ 581,210
15,257 Armco Incorporated 87,551 62,935
5,615 Armstrong World Industrials Incorporated 364,760 269,520
5,870 Asarco Incorporated 157,214 93,553
6,731 Autodesk Incorporated 252,915 157,337
41,891 Automatic Data Processing Incorporated 2,054,336 2,670,551
16,451 Avery Dennison Corporation 632,890 883,213
18,378 Avon Products Incorporated 1,073,497 1,155,517
4,237 Ball Corporation 140,279 158,358
20,630 Baltimore Gas & Electric Company 570,888 635,662
13,786 Bankers Trust Corporation 1,327,698 1,024,472
52,319 Barrick Gold Corporation 1,157,980 680,147
7,756 Bausch & Lomb Incorporated 326,472 328,176
39,265 Baxter International Incorporated 1,840,830 2,090,861
34,422 Becton Dickinson & Company 838,064 1,146,683
137,765 Bellsouth Corporation 6,535,337 9,445,513
7,310 Bemis Company Incorporated 270,469 262,246
16,056 Bethlehem Steel Corporation 207,520 115,402
15,642 Biomet Incorporated+ 339,454 420,379
13,300 Black & Decker Corporation 521,197 553,612
7,894 Boise Cascade Corporation 277,299 192,910
27,016 Boston Scientific Corporation+ 1,447,048 1,870,858
3,352 Briggs & Stratton Corporation 151,823 123,395
9,636 Brown Forman Corporation 445,171 578,160
13,930 Brunswick Corporation 365,884 208,079
24,747 Burlington Resources Incorporated 998,913 731,583
7,986 C. R. Bard Incorporated 253,464 261,541
63,202 Campbell Soup Company+ 2,695,951 3,183,801
21,102 Carolina Power & Light Company 750,702 908,705
51,234 Caterpillar Incorporated 2,256,096 2,161,434
8,228 Centex Corporation 202,027 291,065
29,830 Central & Southwest Corporation 747,573 779,309
10,121 Ceridian Corporation 439,319 490,868
13,452 Champion International Corporation 647,938 443,916
91,007 Chevron Corporation 6,230,699 6,740,206
23,381 Chubb Corporation 1,438,510 1,461,312
</TABLE>
23
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
5,580 Cincinnati Milacron Incorporated $ 136,482 $ 108,112
13,851 Circuit City Stores Incorporated 473,773 427,650
142,369 Cisco Systems Incorporated+ 7,108,232 11,656,462
62,835 Citicorp 7,074,635 6,794,034
14,553 Clorox Company 906,708 1,403,455
29,754 Coastal Corporation 738,056 773,604
11,749 Columbia Energy Group 466,018 584,513
51,659 Comcast Corporation 1,328,073 1,930,755
75,984 Computer Associates International Incorporated 2,901,331 2,051,568
21,867 Computer Sciences Corporation+ 881,443 1,236,852
66,792 Conagra Incorporated 1,852,090 1,653,102
13,350 Consolidated Natural Gas Company 676,227 584,897
16,935 Cooper Industries Incorporated 814,807 720,796
11,003 Cooper Tire & Rubber Company 265,143 176,048
6,386 Crane Company 234,610 257,036
17,270 Crown Cork & Seal Company Incorporated 838,479 565,592
5,272 Cummins Engine Company Incorporated 290,091 214,504
13,016 Cyprus Amax Minerals Company 287,419 119,584
6,660 Data General Corporation 124,159 49,950
34,537 Deere & Company 1,567,492 1,137,562
11,304 Deluxe Corporation 370,066 327,816
27,151 Dominion Resource Incorporated 1,072,079 1,131,857
31,225 Dover Corporation 874,183 850,881
31,303 Dow Chemical Company 2,663,209 2,441,634
12,924 Dow Jones & Company Incorporated 581,410 643,777
24,577 Dresser Industries Incorporated 820,303 628,250
2,780 Eastern Enterprises 97,866 109,984
11,006 Eastman Chemical Company 654,562 567,497
17,966 Ecolab Incorporated 385,416 499,679
6,444 EG & G Incorporated 133,250 151,031
61,553 Emerson Electric Company 3,077,632 3,508,521
20,178 Engelhard Corporation 400,563 370,771
46,021 Enron Corporation 1,870,526 1,947,264
34,182 Entergy Corporation 936,768 984,869
39,508 Fleet Financial Group Incorporated 2,436,241 2,590,243
</TABLE>
24
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
5,165 Fleetwood Enterprises Incorporated $ 157,471 $ 172,705
11,696 Fluor Corporation 579,992 462,723
4,852 FMC Corporation 340,789 251,091
5,627 Foster Wheeler Corporation 200,987 69,282
94,462 Freddie Mac Common Stock 3,040,208 3,731,249
39,814 Gannett Company Incorporated 1,863,129 2,349,026
17,662 General Dynamics Corporation 639,339 840,049
22,144 General Mills Incorporated 1,389,185 1,449,048
92,957 General Motors Corporation 5,164,016 5,368,267
10,702 General Re Corporation 1,985,913 2,220,665
6,071 General Signal Corporation 245,646 223,109
25,016 Genuine Parts Company 784,016 783,313
156,286 Gillette Company 6,666,457 6,427,262
7,974 Golden West Financial Corporation 567,636 607,021
21,877 Goodyear Tire & Rubber Company 1,194,951 1,071,973
5,296 Great Atlantic & Pacific Tea Company 143,384 126,111
8,282 Great Lakes Chemical Corporation 404,790 324,033
14,774 H&R Block Incorporated 601,564 578,033
15,359 H. F. Ahmanson & Company 728,587 818,827
36,793 Halliburton Company 1,419,197 977,314
9,901 Harcourt General Incorporated 469,986 480,817
6,891 Harnischfeger Industrials Incorporated 238,710 110,687
17,915 Hasbro Incorporated 519,900 560,963
6,971 Helmerich & Payne Incorporated 172,663 113,279
20,024 Hershey Foods Corporation 994,786 1,401,680
34,314 Hilton Hotels Corporation 862,973 712,015
21,807 Homestake Mining Company 313,844 193,537
67,707 Household International Incorporated 2,071,327 2,500,927
39,925 Houston Industries Incorporated 922,856 1,150,339
34,788 Illinois Tool Works Incorporated 1,560,807 1,685,044
23,340 INCO Limited 581,656 195,472
23,210 Ingersoll Rand Company 823,750 922,597
15,297 International Flavors & Fragrances Incorporated 735,094 592,759
42,485 International Paper Company 1,912,172 1,571,945
17,838 Interpublic Group Companies Incorporated 724,036 1,016,766
</TABLE>
25
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
35,103 J. C. Penney Company Incorporated $ 1,932,528 $ 1,739,792
24,847 J.P. Morgan & Company Incorporated 2,446,778 2,310,771
14,900 Jefferson Pilot Corporation 647,571 845,575
5,379 Jostens Incorporated 124,113 106,908
5,409 Kaufman & Broad Home Corporation 106,164 115,617
56,900 Kellogg Company 2,257,302 1,735,450
6,724 Kerr McGee Corporation 398,076 259,714
61,604 KeyCorp 1,656,984 1,570,902
10,257 King World Productions Incorporated+ 232,159 215,397
68,318 KMart Corporation 911,705 871,054
10,957 Knight Ridder Incorporated 494,804 521,827
35,745 Kroger Company+ 1,017,152 1,608,525
31,635 Limited Incorporated 700,724 660,381
14,007 Lincoln National Corporation 910,322 1,204,602
9,380 Liz Claiborne Incorporated 370,486 267,330
5,372 Longs Drug Stores Corporation 130,161 183,319
15,267 Louisiana-Pacific Corporation 376,653 288,165
48,996 Lowes Companies Incorporated 1,089,176 1,717,922
8,946 Manor Care Incorporated 265,122 214,704
35,748 Marsh & McLennan Companies Incorporated 1,579,000 1,733,778
46,370 Masco Corporation 958,748 1,066,510
40,751 Mattel Incorporated 1,283,749 1,319,314
69,704 MBNA Corporation 1,517,406 1,638,044
7,939 McDermott International Incorporated 229,958 159,276
13,922 McGraw-Hill Companies Incorporated 816,996 1,061,552
100,824 MCI Communications Corporation 3,805,956 5,041,200
14,675 Mead Corporation 433,919 401,728
7,355 Meredith Corporation 204,248 246,852
48,172 Merrill Lynch & Company 2,736,441 3,179,352
6,104 Millipore Corporation 216,060 132,380
56,247 Minnesota Mining & Manufacturing Company 4,473,383 3,852,920
83,247 Monsanto Company 3,002,374 4,552,570
12,391 Moore Limited Corporation 214,668 118,489
1,202 NACCO Industries Incorporated 95,797 114,491
</TABLE>
26
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
9,273 NALCO Chemical Company $ 337,481 $ 268,337
45,629 National City Corporation 2,795,029 2,680,704
6,149 National Industrial Service Incorporated 251,716 229,050
23,028 National Semiconductor Corporation+ 548,567 210,131
9,632 Navistar International Corporation 189,096 202,272
27,006 New York Times Company 638,328 783,174
22,320 Newell Company 804,579 1,065,780
21,867 Newmont Mining Corporation 769,264 299,305
20,565 Niagara Mohawk Power Corporation 257,777 318,758
6,826 NICOR Incorporated 230,022 264,934
21,264 Nordstrom Incorporated 547,553 636,591
52,961 Norfolk Southern Corporation 1,558,364 1,492,838
20,819 Northern States Power Company 526,695 551,704
90,923 Northern Telecom Limited 3,950,363 4,341,554
9,310 Northrop Grumman Corporation 851,352 590,021
105,256 Norwest Corporation 2,882,887 3,131,366
49,110 Novell Incorporated+ 590,292 466,545
12,274 Nucor Corporation 642,204 441,097
51,517 Occidental Petroleum Corporation 1,258,891 953,065
14,748 Oryx Energy Company 289,453 183,428
10,987 PACCAR Incorporated 438,290 450,467
41,576 PacifiCorp 901,339 938,059
15,601 Parker Hannifin Corporation 526,282 452,429
31,126 PECO Energy Company 787,314 1,066,066
6,647 Pennzoil Company 384,663 237,630
4,920 Peoples Energy Corporation 165,979 162,975
8,920 Pep Boys-Manny Moe & Jack 245,741 131,013
6,782 Perkin Elmer Corporation 396,610 392,508
8,248 Phelps Dodge Corporation 551,688 369,098
36,337 Phillips Petroleum Company 1,526,701 1,483,004
34,150 Pioneer Hi-Bred International 976,978 1,152,563
38,189 Pitney Bowes Incorporated 1,352,737 1,895,129
34,700 Placer Dome Incorporated 621,966 279,769
41,875 PNC Bank Corporation 1,812,403 1,800,625
6,293 Polaroid Corporation 272,303 176,991
4,045 Potlatch Corporation 178,194 132,979
</TABLE>
27
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
24,946 PPG Industries Incorporated $ 1,330,759 $ 1,267,569
32,470 Public Service Enterprise Group Incorporated 952,058 1,189,214
5,908 Pulte Corporation 108,282 170,594
19,360 Quaker Oats Company 854,121 1,028,500
44,054 Ralston-Ralston Purina Group 1,152,834 1,159,171
12,121 Raychem Corporation 428,674 351,509
10,282 Reynolds Metals Company 606,947 492,893
8,597 Rohm & Haas Company 693,510 742,029
12,087 Rowan Companies Incorporated 253,506 111,805
19,700 RR Donnelley & Sons Company 738,097 714,125
20,863 Rubbermaid Incorporated 612,930 530,703
5,133 Russel Corporation 147,549 162,331
10,669 Ryder Systems Incorporated 317,450 251,388
65,287 Sara Lee Corporation 2,880,566 2,954,237
102,131 Schering Plough Corporation 5,076,172 8,949,229
11,026 Scientific-Atlanta Incorporated 214,470 195,022
48,350 Seagrams Company Limited 1,725,296 1,492,806
35,261 Service Corporation International 1,066,312 1,194,466
3,569 Shared Medical System Corporation 196,711 190,495
24,205 Sherwin Williams Company 629,414 577,894
14,010 Sigma Aldrich Corporation 422,601 388,778
26,135 Silicon Graphics Incorporated+ 543,625 236,848
8,498 Snap-On Incorporated 305,008 223,073
15,313 Sonat Incorporated 621,203 414,408
46,366 Southwest Airlines Company 643,784 825,894
2,801 Springs Industries Incorporated 127,573 92,608
59,951 Sprint Corporation 3,050,489 4,020,464
11,645 St Jude Medical Incorporated 402,508 256,918
32,279 St Paul Companies Incorporated 1,150,112 986,527
12,448 Stanley Works 450,571 490,140
13,946 Stone Container Corporation 214,113 145,561
13,274 Sun Company Incorporated 469,613 438,872
52,900 Sun Microsystems Incorporated+ 1,663,101 2,096,163
29,555 SunTrust Banks Incorporated 1,596,951 1,655,080
16,668 Supervalu Incorporated 299,615 338,569
</TABLE>
28
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
46,947 Sysco Corporation $ 881,521 $ 947,743
14,141 Tandy Corporation 450,942 771,568
7,119 Tektronix Incorporated 247,074 108,120
7,936 Temple-Inland Incorporated 421,722 355,632
54,369 Texas Instruments Incorporated 2,248,439 2,592,722
37,024 Texas Utilities Company 1,432,840 1,573,520
22,811 Textron Incorporated 1,228,141 1,431,390
7,767 Thomas & Betts Corporation 363,874 264,563
82,241 Time Warner Incorporated 4,587,160 6,610,120
12,413 Times Mirror Company 609,875 709,868
8,718 Timken Company 243,450 158,559
44,402 TJX Companies Incorporated 592,227 990,720
19,595 Torchmark Corporation 663,698 700,521
38,817 Toys 'R' Us Incorporated+ 1,211,053 720,541
8,823 Transamerica Corporation 796,387 904,909
17,241 TRW Incorporated 850,694 739,208
30,254 Unicom Corporation 864,861 1,077,799
9,759 Union Camp Corporation 509,148 361,693
17,421 Union Carbide Corporation 753,903 700,106
34,638 Union Pacific Corporation 1,886,421 1,379,025
35,105 Unisys Corporation 546,636 629,696
26,464 United Healthcare Corporation 1,403,071 956,012
10,581 United States Surgical Corporation 324,391 422,579
31,934 United Technologies Corporation 2,136,718 2,317,211
33,567 Unocal Corporation 1,180,938 1,051,067
19,396 Unum Corporation 795,027 853,424
14,153 US Airways Group Incorporated 648,532 824,412
12,070 US Steel Group Incorporated 400,614 252,716
25,754 UST Incorporated 786,741 672,823
40,420 USX-Marathon Group 1,103,977 1,050,920
16,923 V F Corporation 647,271 640,959
49,586 Viacom Incorporated+ 2,068,661 2,460,705
13,608 W W Grainger Incorporated 569,026 533,264
28,867 Wachovia Corporation 1,952,673 2,116,312
114,046 Warner Lambert Company 4,228,431 7,441,502
11,866 Wells Fargo & Company 3,140,329 3,344,729
</TABLE>
29
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
18,353 Wendy's International Incorporated $ 394,524 $ 368,207
14,234 Westvaco Corporation 424,428 298,914
27,976 Weyerhaeuser Company 1,314,944 1,050,849
10,504 Whirlpool Corporation 597,994 521,261
20,818 Winn-Dixie Stores Incorporated 770,814 775,471
16,248 Wm. Wrigley Jr & Company 1,107,826 1,259,220
13,535 Worthington Industries Incorporated 256,260 175,955
45,683 Xerox Corporation 3,064,808 4,011,538
------------ --------------
$316,646,827 $ 347,120,252
MANUFACTURING PROCESSING - 3.71%
214,755 Abbott Laboratories $ 6,252,753 $ 8,268,068
3,994 Aeroquip-Vickers Incorporated 174,877 161,008
25,610 Aluminum Company of America 1,630,115 1,533,399
10,015 B. F. Goodrich Company 399,752 271,031
23,884 Dun & Bradstreet Corporation 583,731 561,274
45,037 Eastman Kodak Company 2,996,182 3,518,516
9,973 Eaton Corporation 773,019 584,044
29,451 Fort James Corporation 1,148,406 857,760
24,093 Fortune Brands Incorporated 804,997 664,063
21,439 Fred Meyer Incorporated+ 1,028,927 842,821
13,160 Hercules Incorporated 627,984 336,403
17,515 Honeywell Incorporated 1,113,734 1,094,688
18,800 IKON Office Solutions Incorporated 540,396 104,575
187,064 Johnson & Johnson 10,469,370 12,907,416
11,882 Johnson Controls Incorporated 487,860 508,698
20,023 Owens-Illinois Incorporated 746,504 624,467
17,705 Pall Corporation 400,813 362,953
22,070 Praxair Incorporated 933,666 791,761
186,606 Procter & Gamble Company 11,900,892 14,275,359
11,646 Sealed Air Corporation 659,170 419,256
33,582 Sempra Energy 827,381 854,242
23,802 Tenneco Incorporated 1,022,995 754,226
80,352 Tyco International Limited 3,446,452 4,459,536
------------ --------------
$ 48,969,976 $ 54,755,564
</TABLE>
30
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
MEDIUM CAPITALIZATION STOCKS - 3.19%
9,620 Adobe Systems Incorporated $ 409,906 $ 252,525
116,812 Allstate Corporation 4,005,259 4,380,450
16,730 Anadarko Petroleum Corporation 551,236 480,988
23,485 AON Corporation 1,169,457 1,469,280
13,340 Apache Corporation 465,972 305,153
51,378 Applied Materials Incorporated+ 1,423,213 1,261,972
21,357 AutoZone Incorporated+ 614,211 553,947
32,044 Battle Mountain Gold Company 214,924 98,135
15,932 Bear Stearns Companies Incorporated 900,372 588,488
22,075 Cabletron Systems Incorporated+ 564,156 154,525
18,371 Cardinal Health Incorporated 1,339,036 1,607,463
37,159 Charles Schwab Corporation 1,165,988 1,110,125
23,252 Cincinnati Financial Corporation 1,045,424 781,849
21,796 Comerica Incorporated 980,307 1,138,841
15,006 Consolidated Stores Corporation+ 629,177 472,689
89,594 Dell Computer Corporation+ 3,359,330 8,959,400
20,465 Dollar General Corporation 923,112 549,997
69,270 EMC Corporation+ 1,665,461 3,130,138
20,961 Equifax Incorporated 689,453 746,736
29,411 Federated Department Stores Incorporated 1,123,151 1,281,217
33,995 Fifth Third Bancorp 1,388,487 1,808,109
35,396 Franklin Resources Incorporated 1,849,456 1,141,521
23,095 Frontier Corporation 562,973 701,511
10,364 Fruit of the Loom Incorporated 287,807 232,542
23,028 Humana Incorporated+ 588,630 299,364
29,445 Huntington Bancshares Incorporated 922,375 669,874
11,831 KLA-Tencor Corporation+ 677,537 251,409
22,046 Kohls Corporation+ 1,258,402 1,001,715
16,564 Lehman Brothers Holdings Incorporated 945,000 652,208
13,755 MBIA Incorporated 830,678 771,999
20,236 Mercantile Bancorporation Incorporated 1,118,722 889,119
15,963 MGIC Investment Corporation 760,935 662,465
15,653 Northern Trust Corporation 1,086,524 872,655
22,801 Omnicom Group Incorporated 931,187 1,085,898
36,109 Parametric Technology Corporation+ 800,205 370,117
</TABLE>
31
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
10,020 Progressive Corporation $ 1,130,335 $ 976,324
26,653 Regions Financial Corporation 944,593 922,860
27,388 SunAmerica Incorporated 1,125,253 1,696,344
36,838 Synovus Financial Corporation 798,208 669,991
21,361 Thermo Electron Corporation+ 792,971 347,116
54,139 Washington Mutual Incorporated 2,141,598 1,732,448
------------ --------------
$ 44,181,021 $ 47,079,507
PHARMACEUTICALS - 2.42%
138,479 Bristol Myers Squibb Company $ 10,288,180 $ 13,553,632
166,334 Merck & Company Incorporated 14,627,994 19,284,348
70,644 Pharmacia & Upjohn Incorporated 2,665,022 2,936,141
------------ --------------
$ 27,581,196 $ 35,774,121
RETAIL & RELATED - 3.00%
30,099 Costco Companies Incorporated+ $ 1,005,984 $ 1,416,534
60,821 Dayton Hudson Corporation 1,639,210 2,189,556
54,736 GAP Incorporated 1,638,090 2,794,957
204,470 Home Depot Incorporated 5,004,837 7,872,095
32,160 May Department Stores Company 1,560,977 1,809,000
65,319 Medtronic Incorporated 2,628,047 3,355,764
36,191 Rite Aid Corporation 950,068 1,309,662
54,382 Sears Roebuck & Company 2,430,364 2,470,982
312,556 Wal Mart Stores Incorporated 11,081,049 18,362,665
69,130 Walgreen Company 1,780,700 2,661,505
------------ --------------
$ 29,719,326 $ 44,242,720
SEMICONDUCTORS - 1.44%
236,039 Intel Corporation $ 14,060,522 $ 16,803,026
19,666 LSI Logic Corporation+ 561,017 240,909
29,664 Micron Technology Incorporated 987,281 674,856
83,143 Motorola Incorporated 4,962,686 3,580,345
------------ --------------
$ 20,571,506 $ 21,299,136
</TABLE>
32
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
SHELTER & RELATED - 0.02%
7,438 Owens Corning Fiberglass Corporation $ 287,281 $ 260,795
TELECOMMUNICATIONS - 3.30%
252,160 American Telephone & Telegraph Company $ 12,061,641 $ 12,639,520
27,002 Ascend Communications Incorporated+ 1,309,127 945,070
215,978 Bell Atlantic Corporation 8,040,843 9,530,029
34,588 Clear Channel Communications Incorporated+ 1,372,538 1,556,460
133,905 GTE Corporation 6,060,559 6,695,250
36,950 Nextel Communications Incorporated 1,212,054 667,409
255,839 SBC Communications Incorporated 7,763,483 9,721,882
26,275 Tellabs Incorporated+ 1,212,560 1,110,119
143,584 Worldcom Incorporated+ 4,759,948 5,877,970
------------ --------------
$ 43,792,753 $ 48,743,709
TRANSPORTATION - 0.32%
21,928 Burlington Northern Santa Fe Corporation $ 1,890,051 $ 2,040,675
30,641 CSX Corporation 1,487,195 1,156,698
10,502 Delta Airlines Incorporated 1,029,907 1,071,204
45,821 Laidlaw Incorporated 556,817 395,206
------------ --------------
$ 4,963,970 $ 4,663,783
UTILITIES - 1.11%
19,207 Ameren Corporation $ 760,551 $ 759,877
22,006 Cinergy Corporation 701,111 764,709
32,975 Consolidated Edison Incorporated 1,143,554 1,560,130
20,360 DTE Energy Company 658,451 857,665
50,390 Duke Energy Corporation 2,310,333 3,143,076
50,578 Edison International 1,184,473 1,438,312
32,202 First Energy Corporation 809,903 929,833
17,746 GPU Incorporated 624,792 666,584
4,385 ONEOK Incorporated 132,183 131,824
53,453 Pacific Gas & Electric Company 1,456,436 1,717,178
23,257 PP & L Resources Incorporated 547,379 547,993
</TABLE>
33
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
96,880 Southern Company $ 2,276,702 $ 2,724,750
42,978 Tenet Healthcare Corporation+ 1,198,807 1,109,370
------------ --------------
$ 13,804,675 $ 16,351,301
TOTAL COMMON STOCKS $939,798,348 $1,064,459,097
</TABLE>
34
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Asset Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 27.80%
U.S. TREASURY BILLS - 5.46%
$52,267,000 U.S. Treasury Bills 4.95 %# 10/22/98 $ 51,899,351
28,909,000 U.S. Treasury Bills 4.98 %# 10/15/98 28,734,955
--------------
$ 80,634,306
U.S. TREASURY BONDS - 22.34%
$ 5,600,000 U.S. Treasury Bonds 5.50 % 08/15/28 $ 5,775,000
9,675,000 U.S. Treasury Bonds 6.00 02/15/26 10,467,092
16,450,000 U.S. Treasury Bonds 6.13 11/15/27 18,272,331
18,375,000 U.S. Treasury Bonds 6.25 08/15/23 20,378,978
8,050,000 U.S. Treasury Bonds 6.38 08/15/27 9,179,496
8,400,000 U.S. Treasury Bonds 6.50 11/15/26 9,688,896
8,750,000 U.S. Treasury Bonds 6.63 02/15/27 10,267,600
4,550,000 U.S. Treasury Bonds 6.75 08/15/26 5,405,264
9,750,000 U.S. Treasury Bonds 6.88 08/15/25 11,710,628
14,725,000 U.S. Treasury Bonds 7.13 02/15/23 18,019,719
8,550,000 U.S. Treasury Bonds 7.25 08/15/22 10,575,239
8,375,000 U.S. Treasury Bonds 7.50 11/15/24 10,759,279
8,975,000 U.S. Treasury Bonds 7.63 11/15/22 11,567,967
9,400,000 U.S. Treasury Bonds 7.63 02/15/25 12,253,746
8,700,000 U.S. Treasury Bonds 7.88 02/15/21 11,388,822
25,250,000 U.S. Treasury Bonds 8.00 11/15/21 33,598,155
15,699,000 U.S. Treasury Bonds 8.13 08/15/19 20,872,291
8,475,000 U.S. Treasury Bonds 8.13 05/15/21 11,381,671
9,700,000 U.S. Treasury Bonds 8.13 08/15/21 13,044,948
7,950,000 U.S. Treasury Bonds 8.50 02/15/20 10,978,473
5,650,000 U.S. Treasury Bonds 8.75 05/15/20 7,992,095
17,050,000 U.S. Treasury Bonds 8.75 08/15/20 24,160,362
12,615,000 U.S. Treasury Bonds 8.88 02/15/19 17,887,692
9,849,000 U.S. Treasury Bonds 9.00 11/15/18 14,090,176
--------------
$ 329,715,920
TOTAL U.S. TREASURY SECURITIES $ 410,350,226
(Cost $371,625,807)
</TABLE>
35
<PAGE>
Asset Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $1,311,424,151)* 99.91% $1,474,809,323
(Notes 1 and 3)
Other Assets and Liabilities, Net 0.09 1,256,614
------ --------------
TOTAL NET ASSETS 100.00% $1,476,065,937
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
# YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 250,480,906
Gross Unrealized Depreciation (87,095,735)
--------------
NET UNREALIZED APPRECIATION $ 163,385,172
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Index Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 99.41%
AEROSPACE - 0.72%
18,173 Boeing Company $ 835,187 $ 562,227
3,523 Lockheed Martin Corporation 314,166 308,042
3,549 Rockwell International Corporation 172,891 128,651
------------ --------------
$ 1,322,244 $ 998,920
AUTOMOBILE & RELATED - 1.15%
11,644 Chrysler Corporation $ 385,223 $ 519,614
2,962 Dana Corporation 113,391 116,073
21,814 Ford Motor Company 586,197 959,816
------------ --------------
$ 1,084,811 $ 1,595,503
BASIC INDUSTRIES - 0.48%
3,491 Allegheny Teledyne Incorporated $ 87,373 $ 52,583
5,336 Colgate-Palmolive Company 311,080 384,859
3,435 Freeport-McMoran Copper & Gold Incorporated+ 93,233 39,932
5,157 Nike Incorporated 240,746 178,883
------------ --------------
$ 732,432 $ 656,257
BEVERAGE BREWING AND DISTRIBUTION - 2.62%
44,353 Coca-Cola Company $ 2,460,091 $ 2,888,489
26,775 Pepsico Incorporated 839,711 741,333
------------ --------------
$ 3,299,802 $ 3,629,822
CAPITAL GOODS - 0.87%
3,441 Browning Ferris Industrials Incorporated $ 114,194 $ 111,832
1,298 Case Corporation 73,177 35,046
8,810 Electronic Data Systems Corporation 357,351 295,135
2,835 Gateway 2000 Incorporated+ 164,659 134,131
1,416 Harris Corporation 53,732 45,135
2,954 IMS Health Incorporated 104,741 162,470
1,704 Maytag Corporation 44,127 73,485
6,135 Raytheon Company 312,605 279,909
</TABLE>
37
<PAGE>
Index Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,101 Tupperware Corporation $ 40,740 $ 20,781
1,944 Willamette Industries Incorporated 68,914 47,871
------------ --------------
$ 1,334,240 $ 1,205,795
COMPUTER SOFTWARE - 4.10%
8,039 First Data Corporation $ 287,310 $ 166,307
18,609 Hewlett Packard Company 1,024,327 903,700
44,251 Microsoft Corporation+ 2,351,120 4,245,330
17,479 Oracle Corporation+ 503,785 348,488
------------ --------------
$ 4,166,542 $ 5,663,825
COMPUTER SYSTEMS - 3.30%
6,421 3COM Corporation+ $ 304,596 $ 152,097
29,717 Compaq Computer Corporation 654,328 830,219
16,943 IBM Corporation 1,427,939 1,908,205
23,602 Lucent Technologies Incorporated 847,948 1,672,792
------------ --------------
$ 3,234,811 $ 4,563,313
CONGLOMERATES - 0.17%
2,070 ITT Industries Incorporated $ 54,719 $ 62,359
2,114 Loews Corporation 194,536 178,369
------------ --------------
$ 249,255 $ 240,728
CONSUMER - BASIC - 0.39%
5,160 Bestfoods $ 210,898 $ 258,968
6,938 CVS Corporation+ 190,958 252,370
1,322 Mallinckrodt Incorporated 50,559 30,241
------------ --------------
$ 452,415 $ 541,579
CONSUMER-DISCRETIONARY - 0.38%
15,171 Cendant Corporation+ $ 407,957 $ 175,415
1,968 Dillards Incorporated 63,877 56,826
1,750 Harrah Entertainment Incorporated+ 40,146 25,266
4,598 Marriott International Incorporated 122,211 129,031
</TABLE>
38
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Index Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,029 Reebok International Limited $ 40,205 $ 16,657
2,761 Tricon Global Restaurants Incorporated+ 72,738 102,330
2,430 Venator Group Incorporated 51,708 22,022
------------ --------------
$ 798,842 $ 527,547
ELECTRICAL EQUIPMENT - 0.06%
4,319 Seagate Technology Incorporated+ $ 144,653 $ 75,582
ENERGY & RELATED - 5.82%
17,328 Amoco Corporation $ 715,535 $ 785,175
1,317 Ashland Incorporated 60,414 60,006
5,800 Atlantic Richfield Company 408,102 336,400
5,730 Baker Hughes Incorporated 171,017 104,572
43,946 Exxon Corporation 2,377,803 2,875,716
3,223 FPL Group Incorporated 151,969 214,531
14,035 Mobil Corporation 921,152 970,169
38,580 Royal Dutch Petroleum Company 1,783,438 1,533,555
8,970 Schlumberger Limited 558,056 392,998
9,756 Texaco Incorporated 497,617 542,068
4,489 Union Pacific Resources Group Incorporated 118,606 38,437
1,318 W. R. Grace & Company+ 18,328 16,969
7,578 Williams Companies Incorporated 178,747 174,294
------------ --------------
$ 7,960,784 $ 8,044,890
ENTERTAINMENT & LEISURE - 0.98%
3,204 Mirage Resorts Incorporated+ $ 85,026 $ 47,660
9,066 Tele-Communications Service Group+ 172,725 299,178
36,746 Walt Disney Company 974,670 1,008,218
------------ --------------
$ 1,232,421 $ 1,355,056
FINANCE & RELATED - 7.46%
2,684 Aetna Incorporated $ 228,040 $ 161,543
6,250 Associates First Capital Corporation 340,417 369,531
12,570 Banc One Corporation 568,814 477,660
13,470 Bank of New York Company Incorporated 269,865 325,806
</TABLE>
39
<PAGE>
Index Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
12,372 BankAmerica Corporation $ 701,176 $ 792,581
5,290 BankBoston Corporation 197,193 188,787
5,032 BB & T Corporation 163,472 141,840
1,161 Capital One Financial Corporation 143,960 101,588
15,346 Chase Manhattan Corporation 725,467 813,338
3,906 CIGNA Corporation 189,311 227,280
5,610 Conseco Incorporated 227,650 154,976
1,940 Countrywide Credit Industries Incorporated 69,002 72,629
18,612 Federal National Mortgage Association 799,384 1,057,394
5,226 First Chicago Corporation 312,694 331,198
17,380 First Union Corporation 706,587 842,930
2,716 Guidant Corporation 119,322 167,713
4,236 Hartford Financial Services Group Incorporated 153,873 189,561
4,723 Mellon Bank Corporation 204,633 245,596
10,829 Morgan Stanley Dean Witter & Company 487,520 628,759
17,278 Nationsbank Corporation 908,999 984,846
1,736 Providian Financial Corporation 55,963 111,430
2,002 Republic New York Corporation 94,915 82,583
2,551 SAFECO Corporation 111,715 103,634
3,010 SLM Holding Corporation 147,674 107,984
2,849 State Street Corporation 152,127 148,326
3,216 Summit Bancorp 159,868 109,746
20,708 Travelers Group Incorporated 767,936 918,918
13,301 US Bancorp 357,424 453,897
------------ --------------
$ 9,365,001 $ 10,312,074
FOOD & RELATED - 2.45%
4,439 Albertsons Incorporated $ 164,359 $ 224,447
4,899 American Stores Company 101,299 142,071
10,685 Archer Daniels Midland Corporation 205,403 160,272
6,617 H. J. Heinz Company 279,739 352,769
12,370 McDonald's Corporation 578,234 693,493
43,711 Philip Morris Companies Incorporated 1,623,832 1,816,738
------------ --------------
$ 2,952,866 $ 3,389,790
</TABLE>
40
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Index Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD SERVICES - 0.03%
2,609 Darden Restaurants Incorporated $ 27,480 $ 40,440
GENERAL BUSINESS & RELATED - 6.31%
12,882 CBS Corporation+ $ 307,438 $ 334,932
4,192 Corning Incorporated 169,122 103,228
20,301 E. I. du Pont de Nemours & Company 1,067,491 1,171,114
2,632 FDX Corporation+ 140,579 131,765
58,550 General Electric Company 3,376,630 4,684,000
2,677 General Instrument Corporation 47,008 53,205
1,617 Georgia-Pacific Group 96,478 69,329
7,690 HBO & Company 185,176 163,412
9,989 Kimberly Clark Corporation 452,380 380,831
10,982 MediaOne Group Incorporated+ 240,763 450,262
2,297 Morton International Incorporated 70,679 51,108
2,282 Provident Companies Incorporated 83,026 82,152
2,149 Tribune Company 96,490 138,476
8,993 US West Incorporated 323,122 467,636
10,112 Waste Management Incorporated 493,665 446,192
------------ --------------
$ 7,150,047 $ 8,727,642
HEALTHCARE - 3.67%
23,582 American Home Products Corporation $ 797,026 $ 1,182,048
11,526 Columbia HCA Healthcare Corporation 382,053 260,055
19,947 Eli Lilly & Company 932,151 1,306,529
7,556 Healthsouth Corporation+ 184,745 143,092
23,482 Pfizer Incorporated 1,283,115 2,183,826
------------ --------------
$ 3,579,090 $ 5,075,550
INTERNATIONAL STOCKS - 0.53%
11,535 Unilever NV $ 559,018 $ 731,031
</TABLE>
41
<PAGE>
Index Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
LARGE CAPITALIZATION STOCKS - 32.41%
651 Adolph Coors Company $ 16,963 $ 26,854
2,504 Advanced Micro Devices Incorporated+ 68,775 33,021
4,178 Air Products & Chemicals Incorporated 150,239 127,690
10,324 Airtouch Communications Incorporated+ 355,895 580,725
977 Alberto Culver Company 24,668 19,540
4,084 Alcan Aluminum Limited 133,311 77,596
1,215 Allergan Incorporated 41,920 57,409
10,174 Allied Signal Incorporated 361,017 349,095
4,877 ALLTEL Corporation 181,235 220,075
1,540 Alza Corporation+ 42,688 55,440
1,603 Amerada Hess Corporation 89,570 78,747
3,423 American Electric Power Company Incorporated 145,713 154,891
8,302 American Express Company 539,008 647,556
4,597 American General Corporation 209,031 295,357
1,272 American Greetings Corporation 40,851 46,587
18,833 American International Group Incorporated 1,082,749 1,456,026
19,764 Ameritech Corporation 628,669 931,378
4,676 Amgen Incorporated+ 245,303 284,651
3,938 AMP Incorporated 168,514 140,537
3,288 AMR Corporation 168,581 179,196
1,517 Andrew Corporation+ 42,293 22,471
8,683 Anheuser-Busch Companies Incorporated 344,527 400,503
2,405 Apple Computer Incorporated 63,305 75,006
1,759 Armco Incorporated 9,601 7,256
732 Armstrong World Industrials Incorporated 49,224 35,136
667 Asarco Incorporated 19,437 10,630
868 Autodesk Incorporated 32,667 20,289
5,398 Automatic Data Processing Incorporated 252,680 344,122
2,141 Avery Dennison Corporation 80,694 114,945
2,375 Avon Products Incorporated 140,804 149,328
518 Ball Corporation 15,352 19,360
2,656 Baltimore Gas & Electric Company 72,152 81,838
1,757 Bankers Trust Corporation 172,435 130,567
6,635 Barrick Gold Corporation 155,447 86,255
1,019 Bausch & Lomb Incorporated 41,875 43,116
</TABLE>
42
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Index Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
5,076 Baxter International Incorporated $ 238,713 $ 270,297
4,422 Becton Dickinson & Company 97,534 147,308
17,753 Bellsouth Corporation 787,676 1,217,190
964 Bemis Company Incorporated 36,854 34,583
2,360 Bethlehem Steel Corporation 27,720 16,962
2,007 Biomet Incorporated+ 39,402 53,938
1,696 Black & Decker Corporation 63,245 70,596
979 Boise Cascade Corporation 34,940 23,924
3,492 Boston Scientific Corporation+ 194,644 241,821
497 Briggs & Stratton Corporation 21,558 18,296
1,214 Brown Forman Corporation 56,422 72,840
1,771 Brunswick Corporation 48,955 26,454
3,190 Burlington Resources Incorporated 139,361 94,304
1,025 C. R. Bard Incorporated 31,885 33,569
8,146 Campbell Soup Company+ 335,242 410,355
2,751 Carolina Power & Light Company 96,218 118,465
6,579 Caterpillar Incorporated 295,798 277,552
1,046 Centex Corporation 23,561 37,002
3,798 Central & Southwest Corporation 92,584 99,223
1,347 Ceridian Corporation 59,373 65,330
1,720 Champion International Corporation 85,518 56,760
11,749 Chevron Corporation 819,198 870,160
2,986 Chubb Corporation 181,153 186,625
707 Cincinnati Milacron Incorporated 17,788 13,698
1,741 Circuit City Stores Incorporated 58,923 53,753
18,413 Cisco Systems Incorporated+ 846,722 1,507,564
8,079 Citicorp 902,765 873,542
1,899 Clorox Company 113,579 183,135
3,770 Coastal Corporation 92,974 98,020
1,517 Columbia Energy Group 66,190 75,471
6,579 Comcast Corporation 154,302 245,890
9,821 Computer Associates International Incorporated 380,691 265,167
2,776 Computer Sciences Corporation+ 107,697 157,017
8,622 Conagra Incorporated 238,514 213,395
1,769 Consolidated Natural Gas Company 94,605 77,504
2,123 Cooper Industries Incorporated 101,869 90,360
</TABLE>
43
<PAGE>
Index Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,439 Cooper Tire & Rubber Company $ 33,402 $ 23,024
819 Crane Company 29,425 32,965
2,249 Crown Cork & Seal Company Incorporated 112,570 73,655
683 Cummins Engine Company Incorporated 39,390 27,790
1,672 Cyprus Amax Minerals Company 39,215 15,361
784 Data General Corporation 18,139 5,880
4,457 Deere & Company 205,633 146,802
1,420 Deluxe Corporation 46,014 41,180
3,559 Dominion Resource Incorporated 134,960 148,366
3,942 Dover Corporation 113,800 107,419
4,013 Dow Chemical Company 337,465 313,014
1,682 Dow Jones & Company Incorporated 71,561 83,785
3,137 Dresser Industries Incorporated 109,394 80,190
405 Eastern Enterprises 14,834 16,023
1,464 Eastman Chemical Company 86,697 75,487
2,308 Ecolab Incorporated 47,259 64,191
795 EG & G Incorporated 14,927 18,633
7,998 Emerson Electric Company 406,426 455,886
2,572 Engelhard Corporation 56,195 47,260
5,884 Enron Corporation 245,256 248,967
4,383 Entergy Corporation 115,419 126,285
5,113 Fleet Financial Group Incorporated 314,205 335,221
642 Fleetwood Enterprises Incorporated 19,806 21,467
1,496 Fluor Corporation 84,639 59,185
594 FMC Corporation 46,452 30,739
696 Foster Wheeler Corporation 27,495 8,569
12,377 Freddie Mac Common Stock 385,821 488,892
5,113 Gannett Company Incorporated 236,582 301,667
2,222 General Dynamics Corporation 80,603 105,684
2,861 General Mills Incorporated 182,262 187,217
11,968 General Motors Corporation 675,573 691,152
1,409 General Re Corporation 243,739 292,368
781 General Signal Corporation 32,731 28,702
3,170 Genuine Parts Company 99,308 99,261
20,196 Gillette Company 855,926 830,561
1,045 Golden West Financial Corporation 73,702 79,551
2,845 Goodyear Tire & Rubber Company 157,756 139,405
</TABLE>
44
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Index Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
664 Great Atlantic & Pacific Tea Company $ 18,403 $ 15,812
1,109 Great Lakes Chemical Corporation 51,760 43,390
1,835 H&R Block Incorporated 68,450 71,794
2,013 H. F. Ahmanson & Company 90,580 107,318
4,719 Halliburton Company 189,523 125,348
1,268 Harcourt General Incorporated 60,516 61,577
861 Harnischfeger Industrials Incorporated 33,995 13,830
2,425 Hasbro Incorporated 69,504 75,933
886 Helmerich & Payne Incorporated 25,603 14,397
2,556 Hershey Foods Corporation 127,831 178,920
4,463 Hilton Hotels Corporation 120,452 92,607
3,735 Homestake Mining Company 49,051 33,148
8,799 Household International Incorporated 267,140 325,013
5,301 Houston Industries Incorporated 118,552 152,735
4,500 Illinois Tool Works Incorporated 201,781 217,969
3,054 INCO Limited 83,947 25,577
2,982 Ingersoll Rand Company 107,722 118,534
1,976 International Flavors & Fragrances Incorporated 95,030 76,570
5,517 International Paper Company 256,288 204,129
2,487 Interpublic Group Companies Incorporated 105,574 141,759
4,502 J. C. Penney Company Incorporated 248,212 223,130
3,195 J.P. Morgan & Company Incorporated 318,847 297,135
1,957 Jefferson Pilot Corporation 82,314 111,060
673 Jostens Incorporated 15,560 13,376
680 Kaufman & Broad Home Corporation 11,785 14,535
7,340 Kellogg Company 291,077 223,870
904 Kerr McGee Corporation 55,730 34,917
7,882 KeyCorp 211,744 200,991
1,274 King World Productions Incorporated+ 27,725 26,754
8,732 KMart Corporation 112,140 111,333
1,452 Knight Ridder Incorporated 65,065 69,152
4,583 Kroger Company+ 125,345 206,235
4,042 Limited Incorporated 88,728 84,377
1,798 Lincoln National Corporation 110,852 154,628
1,149 Liz Claiborne Incorporated 47,270 32,747
699 Longs Drug Stores Corporation 16,850 23,853
</TABLE>
45
<PAGE>
Index Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,897 Louisiana-Pacific Corporation $ 44,400 $ 35,806
6,260 Lowes Companies Incorporated 124,555 219,491
1,138 Manor Care Incorporated 32,441 27,312
4,636 Marsh & McLennan Companies Incorporated 196,445 224,846
6,046 Masco Corporation 124,180 139,058
5,230 Mattel Incorporated 167,111 169,321
9,008 MBNA Corporation 193,789 211,688
1,088 McDermott International Incorporated 31,781 21,828
1,795 McGraw-Hill Companies Incorporated 100,780 136,869
13,061 MCI Communications Corporation 457,500 653,050
1,902 Mead Corporation 58,031 52,067
932 Meredith Corporation 23,317 31,280
6,189 Merrill Lynch & Company 337,074 408,474
819 Millipore Corporation 32,783 17,762
7,222 Minnesota Mining & Manufacturing Company 602,037 494,707
10,771 Monsanto Company 391,619 589,039
1,544 Moore Limited Corporation 30,944 14,765
129 NACCO Industries Incorporated 8,392 12,287
1,179 NALCO Chemical Company 44,650 34,117
5,873 National City Corporation 349,436 345,039
790 National Industrial Service Incorporated 30,788 29,428
2,911 National Semiconductor Corporation+ 81,679 26,563
1,291 Navistar International Corporation 23,994 27,111
3,380 New York Times Company 78,660 98,020
2,813 Newell Company 97,973 134,321
2,785 Newmont Mining Corporation 104,972 38,120
3,340 Niagara Mohawk Power Corporation 40,446 51,770
912 NICOR Incorporated 33,302 35,397
2,782 Nordstrom Incorporated 68,990 83,286
6,809 Norfolk Southern Corporation 206,631 191,929
2,684 Northern States Power Company 66,933 71,126
11,708 Northern Telecom Limited 488,183 559,038
1,254 Northrop Grumman Corporation 115,602 79,472
13,631 Norwest Corporation 371,730 405,522
6,146 Novell Incorporated+ 79,367 58,387
1,595 Nucor Corporation 83,798 57,320
</TABLE>
46
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Index Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,551 Occidental Petroleum Corporation $ 163,954 $ 121,193
1,894 Oryx Energy Company 41,047 23,557
1,441 PACCAR Incorporated 61,491 59,081
5,250 PacifiCorp 111,896 118,453
2,007 Parker Hannifin Corporation 70,158 58,203
4,023 PECO Energy Company 99,016 137,788
873 Pennzoil Company 53,006 31,210
598 Peoples Energy Corporation 20,518 19,809
1,078 Pep Boys-Manny Moe & Jack 32,988 15,833
890 Perkin Elmer Corporation 55,693 51,509
1,067 Phelps Dodge Corporation 73,365 47,748
4,675 Phillips Petroleum Company 203,497 190,798
4,402 Pioneer Hi-Bred International 127,540 148,568
5,174 Pitney Bowes Incorporated 177,995 256,760
4,469 Placer Dome Incorporated 87,738 36,031
5,402 PNC Bank Corporation 227,101 232,286
759 Polaroid Corporation 33,899 21,347
500 Potlatch Corporation 22,685 16,438
3,163 PPG Industries Incorporated 170,928 160,720
4,157 Public Service Enterprise Group Incorporated 116,473 152,250
740 Pulte Corporation 11,540 21,368
2,488 Quaker Oats Company 106,958 132,175
5,739 Ralston-Ralston Purina Group 144,982 151,007
1,492 Raychem Corporation 58,798 43,268
1,342 Reynolds Metals Company 85,076 64,332
1,051 Rohm & Haas Company 82,701 90,714
1,523 Rowan Companies Incorporated 36,491 14,088
2,630 RR Donnelley & Sons Company 95,710 95,337
2,645 Rubbermaid Incorporated 70,226 67,282
634 Russel Corporation 18,509 20,050
1,328 Ryder Systems Incorporated 40,862 31,291
8,456 Sara Lee Corporation 356,095 382,634
13,232 Schering Plough Corporation 593,281 1,159,454
1,447 Scientific-Atlanta Incorporated 28,768 25,594
6,395 Seagrams Company Limited 229,625 197,446
4,639 Service Corporation International 142,796 157,146
451 Shared Medical System Corporation 24,834 24,072
</TABLE>
47
<PAGE>
Index Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,105 Sherwin Williams Company $ 85,318 $ 74,132
1,817 Sigma Aldrich Corporation 56,895 50,422
3,413 Silicon Graphics Incorporated+ 77,860 30,930
1,101 Snap-On Incorporated 40,293 28,901
1,917 Sonat Incorporated 87,743 51,879
5,928 Southwest Airlines Company 76,908 105,593
386 Springs Industries Incorporated 18,839 12,762
7,763 Sprint Corporation 369,427 520,606
1,476 St Jude Medical Incorporated 53,299 32,564
4,172 St Paul Companies Incorporated 146,333 127,507
1,575 Stanley Works 57,661 62,016
1,824 Stone Container Corporation 29,852 19,038
1,668 Sun Company Incorporated 58,494 55,148
6,831 Sun Microsystems Incorporated+ 217,692 270,678
3,747 SunTrust Banks Incorporated 196,515 209,832
2,112 Supervalu Incorporated 36,781 42,900
6,026 Sysco Corporation 109,211 121,650
1,846 Tandy Corporation 53,570 100,722
950 Tektronix Incorporated 35,407 14,428
1,017 Temple-Inland Incorporated 57,876 45,574
7,038 Texas Instruments Incorporated 292,231 335,625
4,984 Texas Utilities Company 188,844 211,820
2,983 Textron Incorporated 163,177 187,183
1,007 Thomas & Betts Corporation 49,170 34,301
10,591 Time Warner Incorporated 541,834 851,252
1,567 Times Mirror Company 70,367 89,613
1,121 Timken Company 32,620 20,388
5,710 TJX Companies Incorporated 66,267 127,404
2,550 Torchmark Corporation 82,312 91,163
5,033 Toys 'R' Us Incorporated+ 156,070 93,425
1,174 Transamerica Corporation 105,954 120,408
2,201 TRW Incorporated 112,742 94,368
3,930 Unicom Corporation 103,018 140,006
1,287 Union Camp Corporation 69,464 47,699
2,419 Union Carbide Corporation 106,169 97,214
4,472 Union Pacific Corporation 256,957 178,042
4,523 Unisys Corporation 62,165 81,131
</TABLE>
48
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Index Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,485 United Healthcare Corporation $ 176,381 $ 125,896
1,398 United States Surgical Corporation 46,756 55,833
4,174 United Technologies Corporation 290,581 302,876
4,359 Unocal Corporation 162,553 136,491
2,529 Unum Corporation 97,717 111,276
1,809 US Airways Group Incorporated 76,895 105,374
1,516 US Steel Group Incorporated 50,407 31,741
3,282 UST Incorporated 100,224 85,742
5,142 USX-Marathon Group 141,676 133,692
2,185 V F Corporation 83,080 82,757
6,450 Viacom Incorporated+ 254,435 320,081
1,806 W W Grainger Incorporated 73,928 70,773
3,684 Wachovia Corporation 242,319 270,083
14,721 Warner Lambert Company 513,231 960,545
1,504 Wells Fargo & Company 368,979 423,940
2,361 Wendy's International Incorporated 51,421 47,368
1,758 Westvaco Corporation 54,737 36,918
3,526 Weyerhaeuser Company 175,352 132,445
1,395 Whirlpool Corporation 75,060 69,227
2,637 Winn-Dixie Stores Incorporated 95,716 98,228
2,047 Wm. Wrigley Jr & Company 128,347 158,643
1,710 Worthington Industries Incorporated 33,065 22,230
5,927 Xerox Corporation 385,616 520,465
------------ --------------
$ 40,343,257 $ 44,820,924
MANUFACTURING PROCESSING - 5.11%
27,716 Abbott Laboratories $ 803,639 $ 1,067,066
521 Aeroquip-Vickers Incorporated 23,202 21,003
3,323 Aluminum Company of America 220,808 198,965
1,273 B. F. Goodrich Company 51,987 34,451
3,084 Dun & Bradstreet Corporation 73,330 72,474
5,754 Eastman Kodak Company 398,426 449,531
1,245 Eaton Corporation 97,998 72,910
3,902 Fort James Corporation 156,769 113,646
3,093 Fortune Brands Incorporated 106,309 85,251
2,712 Fred Meyer Incorporated+ 131,600 106,615
</TABLE>
49
<PAGE>
Index Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,755 Hercules Incorporated $ 86,983 $ 44,862
2,222 Honeywell Incorporated 146,740 138,875
2,389 IKON Office Solutions Incorporated 78,490 13,289
24,172 Johnson & Johnson 1,331,355 1,667,868
1,500 Johnson Controls Incorporated 64,818 64,219
2,790 Owens-Illinois Incorporated 103,845 87,013
2,165 Pall Corporation 50,672 44,382
2,870 Praxair Incorporated 128,592 102,961
24,130 Procter & Gamble Company 1,498,601 1,845,945
1,541 Sealed Air Corporation 86,452 55,476
4,249 Sempra Energy 104,079 108,084
3,001 Tenneco Incorporated 130,764 95,094
10,487 Tyco International Limited 431,175 582,028
------------ --------------
$ 6,306,634 $ 7,072,008
MEDIUM CAPITALIZATION STOCKS - 4.42%
1,205 Adobe Systems Incorporated $ 54,175 $ 31,631
15,180 Allstate Corporation 496,963 569,250
2,190 Anadarko Petroleum Corporation 73,447 62,962
3,022 AON Corporation 148,325 189,064
1,730 Apache Corporation 63,148 39,574
6,611 Applied Materials Incorporated+ 194,244 162,383
2,756 AutoZone Incorporated+ 79,208 71,484
4,064 Battle Mountain Gold Company 27,852 12,446
2,014 Bear Stearns Companies Incorporated 114,490 74,392
2,785 Cabletron Systems Incorporated+ 85,199 19,495
2,367 Cardinal Health Incorporated 165,379 207,112
4,819 Charles Schwab Corporation 147,394 143,968
2,985 Cincinnati Financial Corporation 138,015 100,371
2,858 Comerica Incorporated 131,425 149,331
1,952 Consolidated Stores Corporation+ 84,422 61,488
11,610 Dell Computer Corporation+ 335,325 1,161,000
2,592 Dollar General Corporation 118,496 69,660
8,993 EMC Corporation+ 194,318 406,371
2,674 Equifax Incorporated 85,839 95,261
3,752 Federated Department Stores Incorporated 139,669 163,447
</TABLE>
50
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Index Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
4,745 Fifth Third Bancorp $ 189,132 $ 252,375
4,561 Franklin Resources Incorporated 242,551 147,092
3,056 Frontier Corporation 71,297 92,826
1,270 Fruit of the Loom Incorporated 37,700 28,496
2,944 Humana Incorporated+ 70,026 38,272
3,748 Huntington Bancshares Incorporated 118,703 85,267
1,544 KLA-Tencor Corporation+ 101,154 32,810
2,799 Kohls Corporation+ 159,754 127,180
2,170 Lehman Brothers Holdings Incorporated 120,028 85,444
1,740 MBIA Incorporated 103,554 97,658
2,724 Mercantile Bancorporation Incorporated 151,274 119,686
2,007 MGIC Investment Corporation 91,591 83,291
2,050 Northern Trust Corporation 142,003 114,288
3,042 Omnicom Group Incorporated 124,293 144,875
4,802 Parametric Technology Corporation+ 107,131 49,220
1,334 Progressive Corporation 151,374 129,982
3,398 Regions Financial Corporation 120,831 117,656
3,501 SunAmerica Incorporated 137,710 216,843
4,699 Synovus Financial Corporation 102,373 85,463
2,843 Thermo Electron Corporation+ 112,005 46,199
6,990 Washington Mutual Incorporated 275,763 223,680
------------ --------------
$ 5,607,580 $ 6,109,293
PHARMACEUTICALS - 3.34%
17,868 Bristol Myers Squibb Company $ 1,251,300 $ 1,748,831
21,501 Merck & Company Incorporated 1,855,745 2,492,772
9,134 Pharmacia & Upjohn Incorporated 338,378 379,632
------------ --------------
$ 3,445,423 $ 4,621,235
RETAIL & RELATED - 4.13%
3,875 Costco Companies Incorporated+ $ 124,524 $ 182,367
7,886 Dayton Hudson Corporation 198,537 283,896
7,092 GAP Incorporated 182,991 362,135
26,450 Home Depot Incorporated 587,605 1,018,325
4,104 May Department Stores Company 196,515 230,850
</TABLE>
51
<PAGE>
Index Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,422 Medtronic Incorporated $ 318,965 $ 432,680
4,672 Rite Aid Corporation 117,120 169,068
7,025 Sears Roebuck & Company 334,461 319,198
40,406 Wal Mart Stores Incorporated 1,314,425 2,373,853
8,897 Walgreen Company 209,830 342,535
------------ --------------
$ 3,584,973 $ 5,714,907
SEMICONDUCTORS - 1.99%
30,513 Intel Corporation $ 1,990,178 $ 2,172,144
2,545 LSI Logic Corporation+ 78,915 31,176
3,780 Micron Technology Incorporated 142,524 85,995
10,760 Motorola Incorporated 674,686 463,352
------------ --------------
$ 2,886,303 $ 2,752,667
SHELTER & RELATED - 0.02%
961 Owens Corning Fiberglass Corporation $ 37,975 $ 33,695
TELECOMMUNICATIONS - 4.55%
32,531 American Telephone & Telegraph Company $ 1,435,037 $ 1,630,616
3,425 Ascend Communications Incorporated+ 166,002 119,875
27,890 Bell Atlantic Corporation 996,988 1,230,646
4,492 Clear Channel Communications Incorporated+ 172,572 202,140
17,335 GTE Corporation 772,886 866,750
4,878 Nextel Communications Incorporated 162,406 88,109
33,000 SBC Communications Incorporated 952,500 1,254,000
3,437 Tellabs Incorporated+ 164,749 145,213
18,559 Worldcom Incorporated+ 584,352 759,759
------------ --------------
$ 5,407,492 $ 6,297,108
</TABLE>
52
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) Index Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
TRANSPORTATION - 0.43%
2,815 Burlington Northern Santa Fe Corporation $ 244,071 $ 261,971
3,897 CSX Corporation 193,365 147,112
1,326 Delta Airlines Incorporated 123,906 135,252
5,929 Laidlaw Incorporated 76,215 51,138
------------ --------------
$ 637,557 $ 595,473
UTILITIES - 1.52%
2,442 Ameren Corporation $ 96,295 $ 96,612
2,789 Cinergy Corporation 89,543 96,918
4,220 Consolidated Edison Incorporated 138,379 199,659
2,555 DTE Energy Company 78,313 107,629
6,469 Duke Energy Corporation 289,778 403,504
6,822 Edison International 151,226 194,001
4,131 First Energy Corporation 101,789 119,283
2,331 GPU Incorporated 81,589 87,558
580 ONEOK Incorporated 17,498 17,436
6,864 Pacific Gas & Electric Company 177,555 220,506
2,943 PP & L Resources Incorporated 67,892 69,344
12,485 Southern Company 283,564 351,141
5,499 Tenet Healthcare Corporation+ 151,273 141,943
------------ --------------
$ 1,724,694 $ 2,105,534
TOTAL COMMON STOCKS $119,628,642 $ 137,498,188
</TABLE>
53
<PAGE>
Index Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 0.86%
U.S. TREASURY BILLS - 0.86%
$ 63,000 U.S. Treasury Bills 4.95 %# 09/03/98 $ 62,976
105,000 U.S. Treasury Bills 4.95 # 10/22/98 104,286
305,000 U.S. Treasury Bills 4.96 # 10/08/98 303,474
514,000 U.S. Treasury Bills 4.98 # 10/15/98 510,939
20,000 U.S. Treasury Bills 4.99 # 09/24/98 19,939
151,000 U.S. Treasury Bills 5.00 # 09/10/98 150,799
31,000 U.S. Treasury Bills 5.01 # 09/17/98 30,930
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 1,183,343
(Cost $1,183,385)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $120,812,024)* 100.27% $ 138,681,531
(Notes 1 and 3)
Other Assets and Liabilities, Net (0.27) (370,815)
------ --------------
TOTAL NET ASSETS 100.00% $ 138,310,716
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
# YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 28,847,967
Gross Unrealized Depreciation (10,978,460)
--------------
NET UNREALIZED APPRECIATION $ 17,869,507
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998 (UNAUDITED) U.S. Government
Allocation Fund
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 100.36%
U.S. TREASURY BILLS - 79.71%
$19,810,000 U.S. Treasury Bills 4.95 %# 10/22/98 $ 19,673,081
180,000 U.S. Treasury Bills 4.96 # 10/08/98 179,100
55,585,000 U.S. Treasury Bills 4.98 # 10/15/98 55,250,103
32,000 U.S. Treasury Bills 5.00 # 09/10/98 31,957
580,000 U.S. Treasury Bills 5.01 # 09/17/98 578,691
--------------
$ 75,712,932
U.S. TREASURY BONDS - 12.17%
$ 1,700,000 U.S. Treasury Bonds 6.13 % 11/15/27 $ 1,888,326
1,800,000 U.S. Treasury Bonds 6.25 08/15/23 1,996,308
1,400,000 U.S. Treasury Bonds 8.00 11/15/21 1,862,868
1,400,000 U.S. Treasury Bonds 8.75 08/15/20 1,983,842
1,300,000 U.S. Treasury Bonds 8.88 02/15/19 1,843,361
500,000 U.S. Treasury Bonds 11.63 11/15/04 672,265
1,000,000 U.S. Treasury Bonds 11.88 11/15/03 1,308,750
--------------
$ 11,555,720
U.S. TREASURY NOTES - 8.48%
$ 1,150,000 U.S. Treasury Notes 5.88 % 02/15/04 $ 1,197,621
600,000 U.S. Treasury Notes 6.50 05/15/05 649,218
1,300,000 U.S. Treasury Notes 7.25 05/15/04 1,440,556
1,000,000 U.S. Treasury Notes 7.25 08/15/04 1,112,660
1,000,000 U.S. Treasury Notes 7.50 02/15/05 1,132,500
2,200,000 U.S. Treasury Notes 7.88 11/15/04 2,525,182
--------------
$ 8,057,737
TOTAL U.S. TREASURY SECURITIES $ 95,326,389
(Cost $94,862,734)
</TABLE>
55
<PAGE>
U.S. Government Allocation Fund PORTFOLIO OF INVESTMENTS - AUGUST 31, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $94,862,734)* 100.36% $ 95,326,389
(Notes 1 and 3)
Other Assets and Liabilities, Net (0.36) (341,260)
------ --------------
TOTAL NET ASSETS 100.00% $ 94,985,129
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
# YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 477,582
Gross Unrealized Depreciation (13,927)
--------------
NET UNREALIZED APPRECIATION $ 463,655
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) - AUGUST 31, 1998 Allocation
Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
ASSET INDEX GOVERNMENT
ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND
<S> <C> <C> <C>
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $1,474,809,323 $138,681,531 $ 95,326,389
Cash 5,076 5,383 4,675
RECEIVABLES:
Dividends and Interest 4,444,763 234,288 233,310
Fund shares sold 840,528 205,084 25,000
Investment securities sold 387,104 49,007 0
Organization expenses, net of
amortization 1,765 0 4,144
Prepaid expenses 144,038 5,357 1,634
TOTAL ASSETS 1,480,632,597 139,180,650 95,595,152
LIABILITIES
Payables:
Investment securities purchased 1,589,420 203,856 0
Distribution to shareholders 0 0 339,481
Fund shares redeemed 544,747 84,148 0
Due to distributor (Note 2) 1,084,881 253,303 23,337
Due to adviser (Note 2) 1,145,863 133,943 76,071
Other 201,749 194,684 171,134
TOTAL LIABILITIES 4,566,660 869,934 610,023
TOTAL NET ASSETS $1,476,065,937 $138,310,716 $ 94,985,129
NET ASSETS CONSIST OF:
Paid-in capital $1,176,321,614 $117,904,669 $116,944,607
Undistributed net investment income
(loss) 4,581,078 (185,110) 0
Undistributed net realized gain (loss)
on investments 131,778,073 2,721,650 (22,423,133)
Net unrealized appreciation
(depreciation) of investments 163,385,172 17,869,507 463,655
TOTAL NET ASSETS $1,476,065,937 $138,310,716 $ 94,985,129
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE PER SHARE
Net assets - Class A $1,180,300,221 $ 80,066,420 $ 78,178,292
Shares outstanding - Class A 51,087,678 5,243,953 5,212,904
Net asset value per share - Class A $ 23.10 $ 15.27 $ 15.00
Maximum offering price per share - Class
A(1) $ 24.19 $ 15.99 $ 15.71
Net Assets - Class B $ 293,490,102 $ 6,339,011 $ 16,806,837
Shares outstanding - Class B 20,958,221 334,847 1,539,803
Net asset value and offering price per
share - Class B $ 14.00 $ 18.93 $ 10.91
Net Assets - Class C $ 2,275,614 $ 51,905,285 N/A
Shares outstanding - Class C 162,189 2,740,623 N/A
Net asset value and offering price per
share - Class C $ 14.03 $ 18.94 N/A
INVESTMENT AT COST (NOTE 3) $1,311,424,151 $120,812,024 $ 94,862,734
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
Allocation Funds STATEMENTS OF OPERATIONS - AUGUST 31, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
------------------------------
(UNAUDITED)
FOR THE FIVE FOR THE
MONTHS ENDED YEAR ENDED
AUGUST 31, MARCH 31,
1998 1998
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 6,841,955 $ 12,275,848
Interest 12,634,357 40,153,342
TOTAL INVESTMENT INCOME 19,476,312 52,429,190
EXPENSES (NOTE 2)
Advisory fees 2,352,018 4,754,399
Administration fees 475,448 826,553
Shareholder servicing fees 2,037,386 4,016,149
Portfolio accounting fees 161,621 103,995
Transfer agency fees 950,896 1,874,203
Distribution fees 905,074 1,704,239
Organization costs 629 1,500
Legal and audit fees 35,075 89,661
Registration fees 71,260 119,062
Directors' fees 1,874 4,213
Shareholder reports 136,233 206,000
Other 16,562 50,992
TOTAL EXPENSES 7,144,076 13,750,966
Less:
Waived fees and reimbursed expenses (3,956) (7,060)
Net Expenses 7,140,120 13,743,906
NET INVESTMENT INCOME (LOSS) 12,336,192 38,685,284
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 110,113,140 107,023,056
Net change in unrealized appreciation
(depreciation) of investments (236,143,255) 266,073,223
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (126,030,115) 373,096,279
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(113,693,923) $411,781,563
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
STATEMENTS OF OPERATIONS - AUGUST 31, 1998 Allocation Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT
ALLOCATION FUND
INDEX ALLOCATION FUND -------------------------
------------------------------ (UNAUDITED)
FOR THE
(UNAUDITED) FOR THE FIVE
FOR THE FIVE THREE MONTHS FOR THE
MONTHS ENDED MONTHS ENDED ENDED YEAR ENDED
AUGUST 31, MARCH 31, AUGUST 31, MARCH 31,
1998 1998 1998 1998
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 950,596 $ 490,640 $ 0 $ 0
Interest 41,457 53,339 2,369,050 5,944,916
TOTAL INVESTMENT INCOME 992,053 543,979 2,369,050 5,944,916
EXPENSES (NOTE 2)
Advisory fees 461,467 236,106 199,612 467,948
Administration fees 46,147 22,424 27,946 56,777
Shareholder servicing fees 67,548 31,681 119,767 280,721
Portfolio accounting fees 38,963 21,910 33,264 23,326
Transfer agency fees 92,293 47,221 55,892 131,004
Distribution fees 299,907 147,686 48,326 108,466
Organization costs 0 12,575 1,132 2,689
Legal and audit fees 13,954 7,801 16,212 44,184
Registration fees 19,660 11,343 16,767 41,535
Directors' fees 1,874 1,103 1,874 4,218
Shareholder reports 16,767 9,863 33,309 83,566
Other 21,833 3,326 6,453 11,732
TOTAL EXPENSES 1,080,413 553,039 560,554 1,256,166
Less:
Waived fees and reimbursed expenses (15,404) (15,653) (43,355) (108,847)
Net Expenses 1,065,009 537,386 517,199 1,147,319
NET INVESTMENT INCOME (LOSS) (72,956) 6,593 1,851,851 4,797,597
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 1,093,104 (5,156) 158,491 1,537,644
Net change in unrealized appreciation
(depreciation) of investments (21,816,832) 17,255,641 637,388 1,998,550
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (20,723,728) 17,250,485 795,879 3,536,194
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (20,796,684) $ 17,257,078 $2,647,730 $8,333,791
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
Allocation Funds STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
----------------------------------------------------
(UNAUDITED)
FOR THE FIVE
MONTHS ENDED FOR THE FOR THE SIX
AUGUST 31, YEAR ENDED MONTHS ENDED
1998 MARCH 31, 1998 MARCH 31, 1997
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 12,336,192 $ 38,685,284 $ 22,799,885
Net realized gain (loss) on sale of
investments 110,113,140 107,023,056 16,581,561
Net change in unrealized appreciation
(depreciation) of investments (236,143,255) 266,073,223 16,935,058
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (113,693,923) 411,781,563 56,316,504
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (6,760,544) (35,147,512) (21,499,154)
CLASS B (992,218) (3,537,772) (1,300,731)
CLASS C (2,352)(1) N/A N/A
From net realized gain on sale of
investments
CLASS A 0 (82,707,854) (77,923,468)
CLASS B 0 (13,021,038) (5,356,143)
CLASS C 0(1) N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 48,104,165 124,090,392 43,986,740
Reinvestment of dividends - Class A 12,528,043 120,926,511 99,267,295
Cost of shares redeemed - Class A (90,173,607) (224,954,049) (113,370,104)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (29,541,399) 20,062,854 29,883,931
Proceeds from shares sold - Class B 68,974,194 147,505,581 28,861,527
Reinvestment of dividends - Class B 1,664,049 16,241,731 6,539,212
Cost of shares redeemed - Class B (18,984,332) (19,143,117) (5,436,423)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 51,653,911 144,604,195 29,964,316
Proceeds from shares sold - Class C 2,563,704(1) N/A N/A
Reinvestment of dividends - Class C 2,245(1) N/A N/A
Cost of shares redeemed - Class C (71,747)(1) N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C 2,494,202(1) N/A N/A
INCREASE (DECREASE) IN NET ASSETS (96,842,323) 442,034,436 10,085,255
NET ASSETS:
Beginning net assets 1,572,908,260 1,130,873,824 1,120,788,569
ENDING NET ASSETS $1,476,065,937 $1,572,908,260 $1,130,873,824
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) THIS CLASS OF SHARES COMMENCED OPERATIONS ON APRIL 1, 1998.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS Allocation Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION
INDEX ALLOCATION FUND FUND
---------------------------------------------- ----------------------------
(UNAUDITED) FOR THE (UNAUDITED)
FOR THE FIVE THREE FOR THE FOR THE FIVE FOR THE
MONTHS ENDED MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
AUGUST 31, MARCH 31, DECEMBER 31, AUGUST 31, MARCH 31,
1998 1998 1997 1998 1998
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ (72,956) $ 6,593 $ 1,656,589 $ 1,851,851 $ 4,797,597
Net realized gain (loss) on sale of
investments 1,093,104 (5,156) 12,775,977 158,491 1,537,644
Net change in unrealized appreciation
(depreciation) of investments (21,816,832) 17,255,641 8,758,372 637,388 1,998,550
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (20,796,684) 17,257,078 23,190,938 2,647,730 8,333,791
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (55,739) (63,008) (1,312,200) (1,587,144) (4,378,902)
CLASS B 0 0 0(2) (264,707) (418,695)
CLASS C 0 0 (344,406) N/A N/A
From net realized gain on sale of
investments
CLASS A 0 0 (8,070,952) 0 0
CLASS B 0 0 0(2) 0 0
CLASS C 0 0 (4,429,345) N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 5,180,198 3,920,461 13,097,927 3,422,469 12,501,406
Reinvestment of dividends - Class A 92,905 141,708 7,755,142 1,341,091 3,688,770
Cost of shares redeemed - Class A (6,022,489) (2,572,600) (7,305,205) (10,198,360) (23,411,657)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (749,386) 1,489,569 13,547,864 (5,434,800) (7,221,481)
Proceeds from shares sold - Class B 4,132,847 2,711,120 349,731(2) 3,762,092 8,698,249
Reinvestment of dividends - Class B 0 0 0(2) 197,731 316,321
Cost of shares redeemed - Class B (139,729) 0 0(2) (1,437,944) (2,377,863)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 3,993,118 2,711,120 349,731(2) 2,521,879 6,636,707
Proceeds from shares sold - Class C 9,171,450 5,805,673 20,805,099 N/A N/A
Reinvestment of dividends - Class C 0 10,699 3,210,184 N/A N/A
Cost of shares redeemed - Class C (5,471,533) (1,944,342) (5,001,988) N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C 3,699,917 3,872,030 19,013,295 N/A N/A
INCREASE (DECREASE) IN NET ASSETS (13,908,774) 25,266,789 41,944,925 (2,117,042) 2,951,420
NET ASSETS:
Beginning net assets 152,219,490 126,952,701 85,007,776 97,102,171 94,150,751
ENDING NET ASSETS $138,310,716 $152,219,490 $126,952,701 $ 94,985,129 $97,102,171
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31,
1997
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 2,874,874
Net realized gain (loss) on sale of
investments 1,030,525
Net change in unrealized appreciation
(depreciation) of investments (2,042,135)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 1,863,264
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (2,697,855)
CLASS B (177,019)
CLASS C N/A
From net realized gain on sale of
investments
CLASS A 0
CLASS B 0
CLASS C N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 3,383,948
Reinvestment of dividends - Class A 2,218,226
Cost of shares redeemed - Class A (16,500,755)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (10,898,581)
Proceeds from shares sold - Class B 1,811,816
Reinvestment of dividends - Class B 128,252
Cost of shares redeemed - Class B (1,026,305)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 913,763
Proceeds from shares sold - Class C N/A
Reinvestment of dividends - Class C N/A
Cost of shares redeemed - Class C N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A
INCREASE (DECREASE) IN NET ASSETS (10,996,428)
NET ASSETS:
Beginning net assets 105,147,179
ENDING NET ASSETS $ 94,150,751
- ---------------------------------------------------------------------
</TABLE>
(1) THIS CLASS OF SHARES COMMENCED OPERATIONS ON APRIL 1, 1998.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
Allocation Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
CLASS A
-----------------------------
(UNAUDITED)
FIVE MONTHS
ENDED YEAR ENDED
AUGUST 31, MARCH 31,
1998 (2) 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $24.99 $20.30
------------ --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(loss) 0.21 0.69
Net realized and unrealized gain(loss) on investments (1.97) 6.37
------------ --------------
TOTAL FROM INVESTMENT OPERATIONS (1.76) 7.06
LESS DISTRIBUTIONS:
Dividends from net investment income (0.13) (0.69)
Distributions from net realized gain 0.00 (1.68)
------------ --------------
TOTAL FROM DISTRIBUTIONS (0.13) (2.37)
------------ --------------
NET ASSET VALUE, END OF PERIOD $23.10 $24.99
------------ --------------
------------ --------------
TOTAL RETURN (NOT ANNUALIZED)* (7.09)% 36.08%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $1,180,300 $1,305,848
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.92% 0.95%(5)
Ratio of net investment income to average net assets 1.95% 2.99%(5)
Portfolio turnover 64% 51%(6)
Average commission rate paid(1) $0.03 $0.03(6)
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses N/A N/A
Ratio of net investment income to average net assets prior to waived
fees and reimbursed expenses N/A N/A
- -----------------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(5) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997.
(6) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID INCLUDE
ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER 15, 1997.
(7) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID BY THE
ASSET ALLOCATION MASTER PORTFOLIO FROM ITS INCEPTION ON APRIL 28, 1996
TO SEPTEMBER 30, 1996, WERE 28% AND $.0261 RESPECTIVELY. THE
INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
FINANCIAL HIGHLIGHTS Allocation Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.)
CLASS A (CONT.)
----------------------------------------------
NINE
SIX MONTHS MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED
MARCH 31, SEPT. 30, DEC. 31, DEC. 31,
1997 (3) 1996 (4) 1995 1994
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $21.24 $20.74 $16.73 $18.80
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income(loss) 0.41 0.57 0.74 0.77
Net realized and
unrealized gain(loss) on
investments 0.65 0.50 4.07 (1.31)
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 1.06 1.07 4.81 (0.54)
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.41) (0.57) (0.74) (0.77)
Distributions from net
realized gain (1.59) 0.00 (0.06) (0.76)
---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (2.00) (0.57) (0.80) (1.53)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $20.30 $21.24 $20.74 $16.73
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 4.94% 5.14% 29.18% (2.82)%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $1,041,622 $1,057,346 $1,077,935 $896,943
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.92%(5) 0.90%(5) 0.84% 0.84%
Ratio of net investment
income to average net
assets 3.91%(5) 3.53%(5) 3.81% 4.30%
Portfolio turnover 5%(6) 1%(7) 15% 49%
Average commission rate
paid(1) $0.03(6) $0.03(7) N/A N/A
- ----------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses N/A N/A N/A N/A
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses N/A N/A N/A N/A
- ----------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(5) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997.
(6) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID INCLUDE
ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER 15, 1997.
(7) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID BY THE
ASSET ALLOCATION MASTER PORTFOLIO FROM ITS INCEPTION ON APRIL 28, 1996
TO SEPTEMBER 30, 1996, WERE 28% AND $.0261 RESPECTIVELY. THE
INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
Allocation Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.)
CLASS B
----------------------------------
(UNAUDITED)
FIVE
MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
AUGUST 31, MARCH 31, MARCH 31,
1998 (2) 1998 1997 (3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $15.16 $12.29 $12.84
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(loss) 0.08 0.29 0.19
Net realized and unrealized gain(loss) on investments (1.19) 3.89 0.41
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS (1.11) 4.18 0.60
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.29) (0.19)
Distributions from net realized gain 0.00 (1.02) (0.96)
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.05) (1.31) (1.15)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $14.00 $15.16 $12.29
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* (7.36)% 35.16% 4.62%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $293,490 $267,060 $89,252
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.61% 1.60%(8) 1.53%(8)
Ratio of net investment income to average net assets 1.25% 2.15%(8) 3.30%(8)
Portfolio turnover 64% 51%(9) 5%(9)
Average commission rate paid(1) $0.03 $0.03(9) $0.03(9)
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses N/A N/A 1.58%(8)
Ratio of net investment income to average net assets prior
to waived fees and reimbursed expenses N/A N/A 3.25%(8)
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(6) THIS CLASS COMMENCED OPERATIONS ON APRIL 1, 1998.
(7) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO MARCH 31.
(8) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997.
(9) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID INCLUDE
ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER 15, 1997.
(10) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID BY THE
ASSET ALLOCATION MASTER PORTFOLIO FROM ITS INCEPTION ON APRIL 28, 1996
TO SEPTEMBER 30, 1996, WERE 28% AND $.0261 RESPECTIVELY. THE
INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
FINANCIAL HIGHLIGHTS Allocation Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.) INDEX ALLOCATION FUND
CLASS A
CLASS B (CONT.) CLASS C ----------------------
---------------------- ---------- (UNAUDITED)
NINE (UNAUDITED) FIVE THREE
MONTHS PERIOD MONTHS MONTHS
ENDED YEAR ENDED ENDED ENDED ENDED
SEPT. 30, DEC. 31, AUGUST 31, AUGUST 31, MARCH 31,
1996 (4) 1995 (5) 1998 (6) 1998 (2) 1998 (7)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $12.50 $10.00 $15.16 $17.55 $15.51
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income(loss) 0.28 0.22 0.05 0.01 0.01
Net realized and
unrealized gain(loss) on
investments 0.34 2.53 (1.16) (2.28) 2.04
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.62 2.75 (1.11) (2.27) 2.05
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.28) (0.22) (0.02) (0.01) (0.01)
Distributions from net
realized gain 0.00 (0.03) 0.00 0.00 0.00
---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.28) (0.25) (0.02) (0.01) (0.01)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $12.84 $12.50 $14.03 $15.27 $17.55
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 4.96% 27.72% (7.32)% (12.94)% 13.23%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $63,443 $26,271 $2,276 $80,066 $92,733
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.14%(8) 1.53% 1.64% 1.31% 1.31%
Ratio of net investment
income to average net
assets 3.37%(8) 2.71% 1.18% 0.20% 0.30%
Portfolio turnover 1%(10) 15% 64% 16% 0%
Average commission rate
paid(1) $0.03(10) N/A $0.03 $0.03 $0.02
- ----------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.56%(8) 1.76% 2.43% N/A 1.32%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 2.95%(8) 2.48% 0.39% N/A 0.29%
- ----------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(6) THIS CLASS COMMENCED OPERATIONS ON APRIL 1, 1998.
(7) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO MARCH 31.
(8) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997.
(9) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID INCLUDE
ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER 15, 1997.
(10) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID BY THE
ASSET ALLOCATION MASTER PORTFOLIO FROM ITS INCEPTION ON APRIL 28, 1996
TO SEPTEMBER 30, 1996, WERE 28% AND $.0261 RESPECTIVELY. THE
INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
The accompanying notes are an integral part of these financial statements.
65
<PAGE>
Allocation Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND (CONT.)
CLASS A (CONT.)
----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $13.99 $13.76 $10.67
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(loss) 0.28 0.29 0.28
Net realized and unrealized gain(loss) on investments 3.23 2.02 3.42
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 3.51 2.31 3.70
LESS DISTRIBUTIONS:
Dividends from net investment income (0.28) (0.29) (0.28)
Distributions from net realized gain (1.71) (1.79) (0.33)
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (1.99) (2.08) (0.61)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $15.51 $13.99 $13.76
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 25.18% 17.04% 34.71%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $80,512 $60,353 $52,007
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.26% 1.31% 1.30%
Ratio of net investment income to average net assets 1.82% 2.06% 2.07%
Portfolio turnover 80% 67% 47%
Average commission rate paid(1) $0.03 $0.02 N/A
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.29% 1.44% 1.35%
Ratio of net investment income to average net assets prior
to waived fees and reimbursed expenses 1.79% 1.93% 2.02%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS AS CLASS D SHARES ON JULY 1,
1993. THESE SHARES WERE RENAMED AS CLASS C SHARES IN CONJUNCTION WITH
THE CONSOLIDATION OF OVERLAND EXPRESS FUNDS, INC. AND STAGECOACH
FUNDS, INC. SEE NOTE 1.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO MARCH 31.
(5) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
66
<PAGE>
FINANCIAL HIGHLIGHTS Allocation Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND (CONT.)
CLASS B CLASS C(2)
---------------------------------- ----------
CLASS A (UNAUDITED) (UNAUDITED)
(CONT.) FIVE THREE FIVE
---------- MONTHS MONTHS PERIOD MONTHS
YEAR ENDED ENDED ENDED ENDED ENDED
DEC. 31, AUGUST 31, MARCH 31, DEC. 31, AUGUST 31,
1994 1998 (3) 1998 (4) 1997 (5) 1998 (3)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $11.90 $21.81 $19.31 $18.99 $21.82
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income(loss) 0.31 (0.03) 0.01 0.00 (0.05)
Net realized and
unrealized gain(loss) on
investments (0.39) (2.85) 2.51 0.32 (2.83)
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.08 (2.88) 2.50 0.32 (2.88)
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.31) 0.00 0.00 0.00 0.00
Distributions from net
realized gain (0.84) 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (1.15) 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $10.67 $18.93 $21.81 $19.31 $18.94
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* (0.68)% (13.20)% 12.95% 1.69% (13.20)%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $40,308 $6,339 $3,322 $356 $51,905
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.30% 2.06% 2.06% 2.05% 2.06%
Ratio of net investment
income to average net
assets 2.41% (0.56)% (0.43)% (0.17)% (0.56)%
Portfolio turnover 50% 16% 0% 80% 16%
Average commission rate
paid(1) N/A $0.03 $0.02 $0.03 $0.03
- ----------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.38% 2.70% 4.03% 15.17% 2.07%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 2.33% (1.20)% (2.40)% (13.29)% (0.57)%
- ----------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS AS CLASS D SHARES ON JULY 1,
1993. THESE SHARES WERE RENAMED AS CLASS C SHARES IN CONJUNCTION WITH
THE CONSOLIDATION OF OVERLAND EXPRESS FUNDS, INC. AND STAGECOACH
FUNDS, INC. SEE NOTE 1.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO MARCH 31.
(5) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
67
<PAGE>
Allocation Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND (CONT.)
CLASS C (2) (CONT.)
----------------------------------
THREE
MONTHS
ENDED YEAR ENDED YEAR ENDED
MARCH 31, DEC. 31, DEC. 31,
1998 (3) 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $19.32 $17.42 $17.10
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(loss) 0.02 0.20 0.22
Net realized and unrealized gain(loss) on investments 2.52 4.00 2.54
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 2.50 4.20 2.76
LESS DISTRIBUTIONS:
Dividends from net investment income 0.00 (0.20) (0.22)
Distributions from net realized gain 0.00 (2.10) (2.22)
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS 0.00 (2.30) (2.44)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $21.82 $19.32 $17.42
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 13.00% 24.07% 16.37%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $56,164 $46,084 $24,655
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 2.05% 2.02% 2.05%
Ratio of net investment income to average net assets (0.44)% 1.00% 1.35%
Portfolio turnover 0% 80% 67%
Average commission rate paid(1) $0.02 $0.03 $0.02
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 2.09% 2.05% 2.20%
Ratio of net investment income to average net assets prior
to waived fees and reimbursed expenses (0.48)% 0.97% 1.20%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS AS CLASS D SHARES ON JULY 1,
1993. THESE SHARES WERE RENAMED AS CLASS C SHARES IN CONJUNCTION WITH
THE CONSOLIDATION OF OVERLAND EXPRESS FUNDS, INC. AND STAGECOACH
FUNDS, INC. SEE NOTE 1.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(5) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(6) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997.
(7) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID INCLUDE
ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
68
<PAGE>
FINANCIAL HIGHLIGHTS Allocation Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
INDEX ALLOCATION FUND CLASS A
(CONT.) ----------------------------------
(UNAUDITED)
CLASS C (2) (CONT.) FIVE
---------------------- MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED ENDED
DEC. 31, DEC. 31, AUGUST 31, MARCH 31, MARCH 31,
1995 1994 1998 (4) 1998 1997 (5)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $13.26 $14.75 $14.87 $14.32 $14.48
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income(loss) 0.20 0.25 0.30 0.77 0.42
Net realized and
unrealized gain(loss) on
investments 4.24 (0.45) 0.13 0.55 (0.16)
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 4.44 0.20 0.43 1.32 0.26
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.20) (0.25) (0.30) (0.77) (0.42)
Distributions from net
realized gain (0.40) (1.04) 0.00 0.00 0.00
---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.60) (1.29) (0.30) (0.77) (0.42)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $17.10 $13.26 $15.00 $14.87 $14.32
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 33.72% (1.38)% 2.90% 9.36% 1.75%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $16,075 $9,798 $78,178 $82,958 $86,930
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 2.05% 2.01% 1.19% 1.16%(6) 1.00%(6)
Ratio of net investment
income to average net
assets 1.30% 1.75% 4.75% 5.21%(6) 5.70%(6)
Portfolio turnover 47% 50% 292% 62%(7) 113%(7)
Average commission rate
paid(1) N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 2.17% 2.20% 1.28% 1.26%(6) 1.13%(6)
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 1.18% 1.56% 4.66% 5.11%(6) 5.39%(6)
- ----------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THIS CLASS OF SHARES COMMENCED OPERATIONS AS CLASS D SHARES ON JULY 1,
1993. THESE SHARES WERE RENAMED AS CLASS C SHARES IN CONJUNCTION WITH
THE CONSOLIDATION OF OVERLAND EXPRESS FUNDS, INC. AND STAGECOACH
FUNDS, INC. SEE NOTE 1.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO MARCH 31.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(5) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(6) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997.
(7) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID INCLUDE
ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
Allocation Funds FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
(CONT.)
CLASS A (CONT.)
----------------------------------
NINE
MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPT. 30, DEC. 31, DEC. 31,
1996 (2) 1995 1994
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $14.98 $13.76 $15.71
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(loss) 0.59 0.79 0.87
Net realized and unrealized gain(loss) on investments (0.50) 1.22 (1.95)
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.09 2.01 (1.08)
LESS DISTRIBUTIONS:
Dividends from net investment income (0.59) (0.79) (0.87)
Distributions from net realized gain 0.00 0.00 0.00
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.59) (0.79) (0.87)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $14.48 $14.98 $13.76
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED)* 0.69% 14.91% (6.99)%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $98,741 $135,577 $140,066
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.12%(6) 1.04% 1.01%
Ratio of net investment income to average net assets 5.45%(6) 5.41% 5.94%
Portfolio turnover 31%(8) 292% 112%
Average commission rate paid(1) N/A N/A N/A
- -----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.20%(6) 1.07% 1.08%
Ratio of net investment income to average net assets prior
to waived fees and reimbursed expenses 5.37%(6) 5.38% 5.87%
- -----------------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(6) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997.
(7) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID INCLUDE
ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER 15, 1997.
(8) THE PORTFOLIO TURNOVER FOR THE U.S. GOVERNMENT ALLOCATION MASTER
PORTFOLIO FROM ITS INCEPTION ON APRIL 28, 1996 TO SEPTEMBER 30, 1996,
WAS 87%. THE INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
The accompanying notes are an integral part of these financial statements.
70
<PAGE>
FINANCIAL HIGHLIGHTS Allocation Funds
- ------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND (CONT.)
CLASS B
----------------------------------------------------------
(UNAUDITED)
FIVE NINE
MONTHS SIX MONTHS MONTHS
ENDED YEAR ENDED ENDED ENDED YEAR ENDED
AUGUST 31, MARCH 31, MARCH 31, SEPT. 30, DEC. 31,
1998 (3) 1998 1997 (4) 1996 (2) 1995 (5)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.82 $10.42 $10.54 $10.91 $10.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income(loss) 0.18 0.49 0.27 0.36 0.49
Net realized and
unrealized gain(loss) on
investments 0.09 0.40 (0.12) (0.37) 0.91
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.27 0.89 0.15 (0.01) 1.40
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.18) (0.49) (0.27) (0.36) (0.49)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.18) (0.49) (0.27) (0.36) (0.49)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $10.91 $10.82 $10.42 $10.54 $10.91
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED)* 2.57% 8.64% 1.42% 0.11% 14.11%
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $16,807 $14,144 $7,221 $6,406 $4,077
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.84% 1.82%(6) 1.61%(6) 1.92%(6) 1.65%
Ratio of net investment
income to average net
assets 4.08% 4.40%(6) 5.12%(6) 4.60%(6) 4.31%
Portfolio turnover 292% 62%(7) 113%(7) 31%(8) 292%
Average commission rate
paid(1) N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 2.05% 2.08%(6) 2.28%(6) 2.21%(6) 2.36%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 3.87% 4.14%(6) 4.45%(6) 4.31%(6) 3.60%
- ----------------------------------------------------------------------------------------
</TABLE>
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM MARCH 31 TO FEBRUARY 28.
(4) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(5) THIS CLASS OF SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(6) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER
15, 1997.
(7) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID INCLUDE
ACTIVITY OF THE MASTER PORTFOLIO PRIOR TO DECEMBER 15, 1997.
(8) THE PORTFOLIO TURNOVER FOR THE U.S. GOVERNMENT ALLOCATION MASTER
PORTFOLIO FROM ITS INCEPTION ON APRIL 28, 1996 TO SEPTEMBER 30, 1996,
WAS 87%. THE INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
The accompanying notes are an integral part of these financial statements.
71
<PAGE>
Allocation Funds NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Stagecoach Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company. The Company commenced operations on January 1,
1992, and is currently comprised of thirty-three separate series. These
financial statements represent the Asset Allocation, Index Allocation and U.S.
Government Allocation Funds (each, a "Fund", collectively, the "Funds"), each a
diversified series of the Company.
At a meeting held on July 23, 1997, the Boards of Directors of Overland
Express Funds, Inc. ("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 Stagecoach Index Allocation Fund was established to acquire all of the
assets and assume all of the liabilities of the Overland Index Allocation Fund
(the "Predecessor Fund"). The acquisition was accomplished in a tax-free
exchange for shares of the Stagecoach Index Allocation Fund. All performance and
financial data for the Index Allocation Fund prior to December 15, 1997 refers
to the Predecessor Fund, as it is the survivor for accounting purposes.
At the time of the Consolidation, the Asset Allocation and U.S. Government
Allocation Funds, structured as "feeder" Funds in a "master-feeder" structure,
were restructured to invest directly in a portfolio of securities, rather than
to invest in portfolio securities through a "master" portfolio. The
corresponding Asset Allocation and U.S. Government Allocation Master Portfolios
(the "Master Portfolios") distributed all of their assets, net of their assumed
liabilities, in-kind to their interestholders and wound up their affairs (the
"Dissolution"). The Dissolution occurred at the close of business on
72
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Allocation Funds
- ------------------------------------------------------------------------
December 12, 1997. The following amounts of income and expense were allocated
from the Master Portfolios to their corresponding feeder Funds for the period
from April 1, 1997 to December 12, 1997:
<TABLE>
<CAPTION>
FUND DIVIDENDS INTEREST EXPENSES
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund $7,820,237 $31,939,545 $3,287,423
U.S. Government Allocation Fund 0 4,301,678 340,347
</TABLE>
Each Fund offers Class A and Class B shares. The Asset Allocation and Index
Allocation Funds also offer Class C shares. The separate classes of shares
differ principally in the applicable sales charges (if any), distribution fees
and shareholder servicing fees. Shareholders of each class also bear certain
expenses that pertain to that particular class. All shareholders bear the common
expenses of the Fund and earn income from the portfolio pro rata based on the
average daily net assets of each class, without distinction between share
classes. Dividends are determined separately for each class based on income and
expenses allocable to each class. Realized gains are allocated to each class pro
rata based on the net assets of each class on the date of distribution. No class
has preferential dividend rights. Differences in per share dividend rates
generally result from the relative weightings of pro rata income and realized
gain and loss allocations and from differences in separate class expenses,
including distribution and shareholder servicing fees.
The following significant accounting policies are consistently followed by the
Company in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles ("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. Actual results could differ from those
estimates.
SECURITY VALUATION
All securities are valued at the close of each business day. Securities, for
which the primary market is a national or foreign recognized securities or
commodities exchange or the National Association of Securities Dealers Automated
73
<PAGE>
Allocation Funds NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------
Quotation ("NASDAQ") National Market, are valued at the last reported sales
price on the day of valuation. Debt securities are generally traded in the
over-the-counter market and are valued at a price deemed best to reflect fair
value as quoted by dealers who make markets in those securities or by an
independent pricing source. U.S. Government obligations are valued at the last
reported bid price. In the absence of any sale of such securities on the
valuation date and in the case of other securities, excluding money market
instruments maturing in 60 days or less, the valuations are based on latest
quoted bid prices. Debt securities maturing in 60 days or less are valued at
amortized cost. 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. Securities for which
quotations are not readily available are valued at fair value as determined by
policies set by the Company's Board of Directors.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities 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 under provisions of the Internal Revenue Code of 1986, as amended (the
"Code").
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Asset Allocation
and Index Allocation Funds, if any, are declared and distributed quarterly.
Dividends to shareholders from net investment income of the U.S. Government
Allocation Fund, if any, are declared daily and distributed monthly. Any
distributions to shareholders from net realized capital gains are declared and
distributed at least annually.
FEDERAL INCOME TAXES
Each Fund is treated as a separate entity for federal income tax purposes. It
is the policy of each Fund of the Company to continue to qualify as a regulated
investment company by complying with the provisions applicable to regulated
investment companies, as defined in the Code, and to make distributions of
substantially all of its investment company taxable income and any net realized
74
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Allocation Funds
- ------------------------------------------------------------------------
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 U.S. Government Allocation Fund had net capital loss carryforwards at
December 31, 1997 of $23,046,376 and $712,094 which will expire in the years
2002 and 2004, respectively. The Company's Board of Directors intends to offset
net capital gains with each capital loss carryforward, and no capital gain
distribution shall be made until each such carryforward has been fully utilized
or expires.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) were recorded by a
Fund. The differences between the income or gains distributed on a book versus
tax basis are shown as excess distributions of net investment income and net
realized gain on sales of investments in the accompanying Statements of Changes
in Net Assets. The amount of distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations, which may differ from GAAP. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent that these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassifications.
DEFERRED ORGANIZATION COSTS
Certain costs incurred in connection with the organization of the Funds and
their initial registration with the Securities and Exchange Commission and with
the various states are amortized on a straight-line basis over 60 months from
the date each Fund commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into separate advisory contracts on behalf of the
Funds with Wells Fargo Bank, N.A. ("WFB"). Pursuant to the contracts, WFB has
agreed to provide the Funds with daily portfolio management. Under the contracts
with the Asset Allocation and U.S. Government Allocation Funds, WFB is entitled
to be paid a monthly advisory fee at an annual rate of 0.50% of the Funds'
average daily net assets up to $250 million, 0.40% of the next
75
<PAGE>
Allocation Funds NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------
$250 million, and 0.30% of the Funds' average daily net assets in excess of $500
million. Under the contract with the Index Allocation Fund, WFB is entitled to
be paid a monthly advisory fee at the annual rate of 0.70% of the Fund's average
daily net assets up to $500 million, and 0.60% of the Fund's average daily net
assets in excess of $500 million.
Prior to December 15, 1997, the Asset Allocation and U.S. Government
Allocation Funds did not directly retain an investment adviser because each Fund
invested all of its assets in a separate Master Portfolio which, in turn,
retained WFB as investment adviser. Advisory fees were charged to the Master
Portfolios at the same rates as listed above.
Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary of Barclays
Global Investors, N.A. ("BGI") and indirect subsidiary of Barclays Bank PLC,
acts as sub-adviser to the Funds. BGFA is entitled to receive from WFB, as
compensation for its sub-advisory services to the Asset Allocation and Index
Allocation Funds, a monthly fee at the annual rate of 0.15% of each such Fund's
average daily net assets up to $900 million and 0.10% of the average daily net
assets in excess of $900 million. For its sub-advisory services to the U.S.
Government Allocation Fund, BGFA is entitled to receive a monthly fee at the
annual rate of 0.05% of the Fund's average daily net assets up to $75 million,
0.04% for the next $75 million and 0.03% of the Fund's average daily net assets
in excess of $150 million.
Prior to November 1, 1997, BGFA was entitled to an annual fee of $60,000 and a
monthly fee at the annual rate of 0.20% of the Index Allocation Fund's average
daily net assets. Additionally, the predecessor Master Portfolios were
sub-advised by BGFA. BGFA was entitled to an annual payment of $40,000 from the
U.S. Government Allocation Master Portfolio and a monthly fee at the annual rate
of 0.20% and 0.15% of the average daily net assets of the Asset Allocation and
U.S. Government Allocation Master Portfolios, respectively.
The Company has entered into contracts on behalf of each Fund with WFB,
whereby WFB is responsible for providing portfolio accounting services for the
Funds. Pursuant to the contracts WFB is entitled to a monthly base fee from each
Fund of $2,000 plus an annual fee of 0.07% of the first $50 million of each
Fund's average daily net assets, 0.045% of the next $50 million, and 0.02% of
each Fund's average daily net assets in excess of $100 million. Prior to
December 15, 1997, the Funds were not charged for portfolio accounting services.
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Allocation Funds
- ------------------------------------------------------------------------
BGI, a wholly-owned subsidiary of Barclays Global Investors Holdings Inc.,
acts as custodian to the Funds. BGI will not be entitled to receive compensation
for its services as custodian to the Funds so long as BGFA is entitled to
receive fees for providing investment sub-advisory services to the Funds. Prior
to December 15, 1997, BGI was custodian to the predecessor Master Portfolios and
was not entitled to compensation for its custodial services for the same reasons
as listed above.
The Company has entered into a contract on behalf of the Funds with WFB,
whereby WFB provides transfer agency services for the Funds. Under the transfer
agency contract, WFB is entitled to receive transfer agency fees at an annual
rate of 0.14% of the average daily net assets of the Funds.
The Company has entered into contracts on behalf of the Funds with WFB,
whereby WFB has agreed to provide shareholder services for the Funds. Pursuant
to the contracts, WFB is entitled to receive shareholder servicing fees at an
annual rate of 0.30% of the average daily net assets of the Class A and Class B
shares of the Asset Allocation and U.S. Government Allocation Funds and 0.25% of
the average daily net assets of the Class B shares of the Index Allocation Fund
and Class C shares of the Asset Allocation and Index Allocation Funds.
Shareholder servicing fees paid on behalf of the Funds for the five months
ended August 31, 1998 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund $ 1,657,934 $ 378,214 $ 1,238
Index Allocation Fund 0 5,287 62,261
U.S. Government Allocation Fund 100,319 19,448 N/A
</TABLE>
Shareholder servicing fees paid on behalf of the Funds for the year ended
March 31, 1998 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund $ 3,523,348 $ 492,801 N/A
Index Allocation Fund* 0 1,066 $ 30,615
U.S. Government Allocation Fund 252,309 28,412 N/A
</TABLE>
* REPRESENTS THE PERIOD FROM JANUARY 1, 1998 TO MARCH 31, 1998.
The Company has adopted a Shareholder Administrative Servicing Plan (the
"Administrative Servicing Plan") on behalf of the Class A shares of the Index
Allocation Fund. Pursuant to the Administrative Servicing Plan, the Fund may
enter into administrative servicing agreements with administrative servicing
77
<PAGE>
Allocation Funds NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------
agents who are dealers/holders of record, or that otherwise have a servicing
relationship with the beneficial owners of the Fund's Class A shares.
Administrative servicing agents are entitled to receive a fee which will not
exceed 0.25%, on an annualized basis, of the average daily net assets of the
Class A shares of the Fund. In no case will a shareholder be charged both 12b-1
and Administrative Servicing fees.
The Company has entered into administration agreements on behalf of the Funds
whereby WFB as administrator and Stephens Inc. ("Stephens") as co-administrator
provide each Fund with administration services. For these services, WFB and
Stephens are entitled to receive monthly fees at the annual rates of 0.03% and
0.04%, respectively, of each Fund's average daily net assets. Prior to February
1, 1998, WFB and Stephens were entitled to receive monthly fees at the annual
rates of 0.04% and 0.02%, respectively, of each Fund's average daily net assets.
The Company has adopted separate Distribution Plans for Class A and Class B
shares of the Funds and for Class C shares of the Index Allocation Fund pursuant
to Rule 12b-1 under the 1940 Act (each, a "Plan"). The Plan for Class A shares
of the Asset Allocation and U.S. Government Allocation Funds provides that each
such Fund may defray all or part of the cost of preparing, printing and
distributing prospectuses and other promotional materials by paying for costs
incurred on an annual basis of up to 0.05% of each such Fund's average daily net
assets attributable to the Class A shares. The Class A Plan for the Asset
Allocation and U.S. Government Allocation Funds provides only for the
reimbursement of actual expenses.
The Plan for Class A shares of the Index Allocation Fund provides that the
Fund may pay to Stephens, as compensation for distribution-related services or
as reimbursement for distribution-related expenses, up to 0.25% of its average
daily net assets attributable to the Class A shares.
Under the Plan for Class B shares of the Funds and Class C shares of the Asset
Allocation and Index Allocation Funds, each Fund may pay to Stephens, as
compensation for distribution-related services or as reimbursement for
distribution-related expenses, a monthly fee at an annual rate of up to 0.70% of
the average daily net assets attributable to the Class B shares of the Asset
Allocation and U.S. Government Allocation Funds, and 0.75% of the average daily
net assets attributable to the Class B shares of the Index Allocation Fund and
Class C shares of the Asset Allocation and Index Allocation Funds.
78
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Allocation Funds
- ------------------------------------------------------------------------
Each Fund may participate in joint distribution activities with other Funds,
in which event, expenses reimbursed out of the assets of one of the Funds may be
attributable, in part, to the distribution-related activities of another Fund.
Generally, the expenses of joint distribution activities are allocated among the
Funds in proportion to their relative net asset sizes.
Distribution fees paid on behalf of the Funds for the five months ended
August 31, 1998 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund $ 18,862 $ 882,498 $ 3,714
Index Allocation Fund 97,261 15,861 186,785
U.S. Government Allocation Fund 2,947 45,379 N/A
</TABLE>
Distribution fees paid on behalf of the Funds for the year ended March 31,
1998 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund $ 557,702 $1,146,537 N/A
Index Allocation Fund* 52,642 3,199 $ 91,845
U.S. Government Allocation Fund 42,041 66,425 N/A
</TABLE>
* REPRESENTS THE PERIOD FROM JANUARY 1, 1998 TO MARCH 31, 1998.
The registration fees paid on behalf of the Funds for the five months ended
August 31, 1998 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund $ 58,685 $ 8,383 $ 4,192
Index Allocation Fund 6,288 8,383 4,989
U.S. Government Allocation Fund 10,479 6,288 N/A
</TABLE>
The registration fees paid on behalf of the Funds for the year ended March 31,
1998 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund $ 101,999 $ 17,063 N/A
Index Allocation Fund* 3,699 4,931 $ 2,713
U.S. Government Allocation Fund 25,793 15,742 N/A
</TABLE>
* REPRESENTS THE PERIOD FROM JANUARY 1, 1998 TO MARCH 31, 1998.
79
<PAGE>
Allocation Funds NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------
WAIVED FEES AND REIMBURSED EXPENSES
All amounts shown as waived fees and reimbursed expenses on the Statement of
Operations, for the five months ended August 31, 1998 and period ended March 31,
1998, were 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 August 31, 1998, Stephens owned 128 shares of the Asset
Allocation Fund, 241,031 shares of the Index Allocation Fund and 117 shares of
the U.S. Government Allocation Fund.
Stephens has retained approximately $2,353,038 as sales charges from the
proceeds of Class A shares sold, $613,815 from the proceeds of Class B shares
redeemed and $26,542 from the proceeds of Class C shares redeemed by the Company
for the five months ended August 31, 1998. Wells Fargo Securities Inc., a
subsidiary of WFB, received approximately $1,963,513 as sales charges from the
proceeds of Class A shares sold, $0 from the proceeds of Class B shares redeemed
and $0 from the proceeds of Class C shares redeemed by the Company for the five
months ended August 31, 1998.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities
(securities with maturities of one year or less at purchase date), for each Fund
for the five months ended August 31, 1998 were as follows:
AGGREGATE PURCHASES
AND SALES
<TABLE>
<CAPTION>
PURCHASES AT SALES
FUND COST PROCEEDS
- -------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Fund $372,167,153 $418,679,812
Index Allocation Fund 10,423,474 2,319,312
U.S. Government Allocation Fund 30,700,235 40,573,602
</TABLE>
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Allocation Funds
- ------------------------------------------------------------------------
Purchases and sales of investments, exclusive of short-term securities
(securities with maturities of one year or less at purchase date), for each Fund
for the year ended March 31, 1998 were as follows:
AGGREGATE PURCHASES
AND SALES
<TABLE>
<CAPTION>
PURCHASES AT SALES
FUND COST PROCEEDS
- -------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Fund $741,595,736 $677,435,873
Index Allocation Fund* 9,708,385 245,915
U.S. Government Allocation Fund 34,456,430 103,419,336
</TABLE>
* REPRESENTS THE PERIOD FROM JANUARY 1, 1998 TO MARCH 31, 1998.
4. CAPITAL SHARE TRANSACTIONS
As of August 31, 1998, there were over 242 billion shares of $0.001 par value
capital stock authorized by the Company. As of August 31, 1998, the Funds were
each authorized to issue 500 million shares of $0.001 par value capital stock
for each class of shares.
81
<PAGE>
Allocation Funds NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------
Capital share transactions for the Funds were as follow:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
----------------------------------
(UNAUDITED)
FOR THE FOR THE
FIVE FOR THE SIX
MONTHS YEAR MONTHS
ENDED ENDED ENDED
AUGUST 31, MARCH 31, MARCH 31,
1998 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 1,890,640 5,404,941 2,045,161
Shares issued in reinvestment of
dividends -- Class A 492,566 5,339,741 4,753,733
Shares redeemed -- Class A (3,553,400) (9,806,181) (5,260,733)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A (1,170,194) 938,501 1,538,161
Shares sold -- Class B 4,471,299 10,545,390 2,222,248
Shares issued in reinvestment of
dividends -- Class B 107,671 1,176,235 518,569
Shares redeemed -- Class B (1,235,082) (1,371,398) (419,149)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B 3,343,888 10,350,227 2,321,668
Shares sold -- Class C(1) 166,807 N/A N/A
Shares issued in reinvestment of
dividends -- Class C(1) 143 N/A N/A
Shares redeemed -- Class C(1) (4,761) N/A N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS C(1) 162,189 N/A N/A
</TABLE>
(1) THIS CLASS OF SHARES COMMENCED OPERATIONS ON APRIL 1, 1998.
82
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Allocation Funds
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND
-----------------------------------------
FOR THE
(UNAUDITED) THREE
FOR THE FIVE MONTHS FOR THE
MONTHS ENDED ENDED YEAR ENDED
AUGUST 31, MARCH 31, DECEMBER 31,
1998 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 294,520 240,942 850,777
Shares issued in reinvestment of
dividends -- Class A 5,225 9,136 496,833
Shares redeemed -- Class A (340,121) (155,356) (470,768)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A (40,376) 94,722 876,842
Shares sold -- Class B(1) 188,829 133,842 18,462
Shares issued in reinvestment of
dividends -- Class B(1) 0 0 0
Shares redeemed -- Class B(1) (6,286) 0 0
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B(1) 182,543 133,842 18,462
Shares sold -- Class C 415,643 283,850 1,061,333
Shares issued in reinvestment of
dividends -- Class C 0 554 164,916
Shares redeemed -- Class C (248,544) (96,724) (255,583)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS C 167,099 187,680 970,666
</TABLE>
(1) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
83
<PAGE>
Allocation Funds NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
--------------------------------------
(UNAUDITED) FOR THE SIX
FOR THE FIVE FOR THE MONTHS
MONTHS ENDED YEAR ENDED ENDED
AUGUST 31, MARCH 31, MARCH 31,
1998 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 229,947 846,076 231,132
Shares issued in reinvestment of dividends
-- Class A 90,252 251,276 151,317
Shares redeemed -- Class A (685,691) (1,591,400) (1,126,961)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A (365,492) (494,048) (744,512)
Shares sold -- Class B 347,537 806,213 169,717
Shares issued in reinvestment of dividends
-- Class B 18,287 29,518 12,022
Shares redeemed -- Class B (132,845) (221,982) (96,322)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B 232,979 613,749 85,417
</TABLE>
84
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
85
<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>
86
<PAGE>
Wells Fargo provides investment advisory services, shareholder services, and
certain other services for Stagecoach Funds. The Funds are distributed by
STEPHENS INC., Member NYSE/SIPC. Wells Fargo is not affiliated with Stephens
Inc.
This report and the financial statements contained herein are submitted for
the general information of the shareholders of the Stagecoach Funds. If this
report is used for promotional purposes, distribution of the report must be
accompanied or preceded by a current prospectus. For a prospectus containing
more complete information, including charges and expenses, call
1-800-222-8222. Read the prospectus carefully before you invest or send money.
- -C- Stagecoach Funds
STAGECOACH FUNDS-Registered Trademark-
P.O. Box 7066
San Francisco, CA 94120-7066
DATED MATERIAL
PLEASE EXPEDITE
[GRAPHIC] SC AA SAR(10/98)
