<PAGE>
- ---------------------
ANNUAL
- ---------------------
REPORT
- ---------------------
ALLOCATION
- ---------------------
FUNDS
- ---------------------
Asset Allocation Fund
Index Allocation Fund
U.S. Government
Allocation Fund
MARCH 31, 1998
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 1
INVESTMENT ADVISER Q & A
Asset Allocation Fund 3
Index Allocation Fund 9
U.S. Government Allocation Fund 14
PORTFOLIOS OF INVESTMENTS
Asset Allocation Fund 18
Index Allocation Fund 34
U.S. Government Allocation Fund 49
STAGECOACH FUNDS
Statement of Assets and Liabilities 51
Statements of Operations 52
Statements of Changes in Net Assets 54
Financial Highlights 56
Notes to Financial Statements 63
Independent Auditors' Report 73
PROXY VOTING RESULTS 75
LIST OF ABBREVIATIONS 77
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- - ARE NOT FDIC INSURED
- - ARE NOT GUARANTEED BY WELLS FARGO BANK [NO FDIC]
- - ARE NOT DEPOSITS OR OBLIGATIONS OF WELLS FARGO
BANK
- - INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL
---------------------
i
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
ii
<PAGE>
LETTER TO SHAREHOLDERS
- ------------------
TO OUR SHAREHOLDERS:
Thank you for your investment with the Stagecoach Funds.
The Annual and Semi-Annual Reports provide us with an opportunity to speak
directly to you. This year, we are pleased to announce strong returns in the
investment markets and a continued commitment to improving the Stagecoach Funds
to better serve you.
A review of three key indexes shows that returns for the period from April 1,
1997 through March 31, 1998 have been strong. Equities, as measured by the S&P
500 Index, returned 47.96%. Bonds, as measured by the Lehman Brothers U.S.
Treasury Bond Index, returned 20.71%. Money market funds, as measured by the
IBC/Donoghue Money Market Average, returned 4.89%.
Among the key drivers of these returns were strong corporate earnings, high
investor confidence and a positive inflation picture. The Federal Open Market
Committee of the Federal Reserve Board raised the federal funds target rate by
0.25% before the beginning of the reporting period. This was interpreted by
investors as a sign that the Fed was going to remain vigilant against inflation,
and long-term interest rates declined as a result, boosting the bond market. The
U.S. economy had been growing at a steady pace and inflationary pressures have
remained in check.
There is no guarantee that this positive environment will continue unabated,
although we remain optimistic about the long-term investment picture. We believe
that an understanding of the historical returns for the various asset classes,
as well as a realistic appraisal of the risks involved in investing, can help
you earn the financial growth you need to meet your goals. We are confident that
a carefully considered long-term plan can help you through short-term
uncertainty.
Our goal is to present a Family of Funds able to meet the increasingly
sophisticated needs of our investors. We are committed to reviewing the
investment options we offer shareholders. Stagecoach Funds has introduced the
Corporate Bond Fund and the Strategic Income Fund. We have also proposed the
consolidation of two Funds with similar investment objectives, the Intermediate
Bond and the Short-Intermediate U.S. Government Income Funds. These changes
follow the consolidation of the Overland Express and Stagecoach Fund families
and the introduction of our new "Plain English" prospectus and represent part of
our ongoing effort to meet your needs.
---------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
The following pages provide commentary from the Portfolio Managers designed to
give you a clearer understanding of the returns earned over the period, the
investment policies pursued and what you can expect from your Funds. Please
discuss any questions you may have with your financial consultant.
We look forward to learning how we can better serve you in the future.
STAGECOACH FUNDS
MAY 1998
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. THE LEHMAN BROTHERS
LONG GOVERNMENT BOND INDEX IS AN UNMANAGED INDEX COMPOSED OF U.S. TREASURY BONDS
WITH 20-YEAR OR LONGER MATURITIES. THE IBC/DONOGHUE MONEY MARKET AVERAGE IS AN
AVERAGE OF 700 TAXABLE MONEY MARKET FUNDS.
- ---------------------
2
<PAGE>
ASSET ALLOCATION FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED MARCH 31, 1998?
Class A shares of the Fund recorded a 36.08% total return for the period
exclusive of sales charges. See the "Performance at a Glance" table for the
total returns for Class B shares.
WHAT WERE THE TOTAL RETURNS FOR THE AVAILABLE ASSET CLASSES?
The Fund allocates across three asset classes: equities representative of the
S&P 500 Index, bonds representative of the Lehman Brothers U.S. Treasury Bond
Index, and cash as measured by the IBC/Donoghue Money Market Average. For the
twelve-month period ended March 31, 1998, the returns for these unmanaged
indexes were as follows:
<TABLE>
<S> <C>
Equities 47.96%
Bonds 20.71%
Cash 4.89%
</TABLE>
HOW DID ALLOCATIONS FOR THE TACTICAL MODEL SHIFT THROUGHOUT THE PERIOD?
The tactical model analyzes extensive financial data from numerous sources. The
model recommends an asset mix on a daily basis. Changes are only made in 5%
increments, however. This means that an adjustment is made only when the
recommended mix is 5% greater or less than the current allocation. It is
important to keep in mind that the model's recommendation and the actual mix of
securities will generally differ for a number of reasons, including the uneven
growth of the asset classes. For example, a recommended mix of 60% bonds and 40%
equities may change to 59% bonds and 41% equities if equities grow faster than
bonds. The allocation recommendations at the start of the period (April 1, 1997)
showed 40% of the portfolio allocated to equities and 60% to bonds. With nine
changes throughout the fiscal year, the model ended the period with a
recommendation of 73% stocks and 27% bonds.
WHY DOES THE MODEL RECOMMEND ALLOCATION SHIFTS?
The strategy is based on the premise that at times asset classes are overvalued
or undervalued in comparison to each other and that undervalued investments over
time offer the best risk-adjusted returns. For example, the model may indicate
that an asset class that has been rising in value may now be overvalued. Or, as
a given asset class increases in value, it assumes more risk, making a less
risky alternative investment more attractive. The model examines a great deal of
quantitative information and makes its recommendation according to the built-in
risk tolerance.
WHY ARE THESE ALLOCATIONS DIFFERENT FROM THE RECOMMENDED ALLOCATIONS FOR THE
INDEX ALLOCATION FUND?
Part of what determines the allocation is the risk tolerance built-in to each
model. The Index Allocation Fund is more
---------------------
3
<PAGE>
ASSET ALLOCATION FUND
aggressive than the Asset Allocation Fund. It assumes that under normal
conditions it is invested in 100% stocks. The Asset Allocation Fund assumes a
normal investment of 60% stocks and 40% bonds. Both change from their normal
allocation in response to economic conditions and the relative attractiveness
and risks of each asset class.
WHAT IS THE OVERVIEW OF THE EQUITY MARKETS FOR THE PERIOD?
The stock market during the period continued its stellar performance, with the
S&P 500 Index posting a total return of 47.96%. As was the case during the
previous few years, strong economic growth, low inflation, and solid earnings
growth drove these spectacular returns. The best-performing sectors in the S&P
500 Index were communications services, telephone, and utilities. The worst
performing sectors were technology and basic materials, although technology
stocks have rebounded from their fall 1997 sell off. Merger and acquisition
activity experienced a third consecutive record year, driving stock prices in
the affected industries higher. The financial services sector is an example of
this trend, accounting for more than 30% of all U.S. merger activity.
WHAT IS THE FIXED-INCOME MARKET OVERVIEW?
For the 12-month period, the U.S. bond market benefited from the economic
backdrop of robust growth, low unemployment, and low inflation. Long-term
interest rates as of the end of the reporting period are at their lowest levels
since 1977, when the U.S. began regular auctions of 30-year Treasury bonds. In
addition, the yield curve has flattened out significantly, with the three-month
Treasury bill rising to a yield of 5.34% and the 30-year Treasury bond declining
to a yield of 5.92%. This spread is at its narrowest point since March of 1990.
These lower long-term yields and a flatter curve meant that long-term bonds
outperformed bonds of shorter maturities. While the two-year Treasury note
returned 6.6%, the 30-year Treasury bond had a return of 15.3%.
The Federal Reserve Board adjusted monetary policy only once in 1997, raising
the federal funds target rate 0.25% to 5.50% in March and keeping short-term
rates steady. This action was seen as preemptive, meant to sustain the strongest
growth rate possible while maintaining low inflation.
Declining inflation continues to be favorable for U.S. bonds. The Consumer Price
Index increased only 1.8% during the period, the lowest growth rate since 1986.
This seeming paradox of low inflation in the midst of strong economic growth and
low unemployment can be partially attributed to higher productivity keeping unit
labor costs under control and easing pressure on employers' profit margins. And
while Gross Domestic Product growth has been robust, 1997 saw it trending
downward from 4.9% to 3.3% to 3.1% in the first three quarters. The federal
budget deficit also has been reduced to 1974 levels due to higher tax receipts
resulting from the strong
econ-
- ---------------------
4
<PAGE>
ASSET ALLOCATION FUND
omy. These factors have all come together to create the most favorable economic
landscape in many years.
WHAT AFFECT DID THE ASIAN CURRENCY CRISIS HAVE ON THE FUND?
The Fund is focused domestically and did not have any direct exposure to Asian
securities. Nevertheless, some U.S. companies listed on the S&P 500 Index either
have significant sales in Asia or they have much of their future growth focused
on Asia. Many of these stocks suffered setbacks in October, but many also
rebounded. It is possible that the Asian crisis is not over and that earnings
disappointments may yet result.
---------------------
5
<PAGE>
ASSET ALLOCATION FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE
11/13/86
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 10 YEAR INCEPTION
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
With Maximum 4.50% Sales Charge 29.93% 19.81% 13.10% 12.73%
- --------------------------------------------------------------------------------------------
Without Sales Charge 36.08% 21.67% 13.62% 13.19%
- --------------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE
11/13/86
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 10 YEAR INCEPTION
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 30.16% 20.30% 13.02% 12.53%
- --------------------------------------------------------------------------------------------
Without Sales Charge 35.16% 20.99% 13.02% 12.53%
- --------------------------------------------------------------------------------------------
(1)Assumes 3/31/98 Redemption
</TABLE>
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 fund 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 sales charges and expenses; for periods prior to January 2, 1992, Class
B share performance reflects performance of the predecessor fund, adjusted to
reflect Class B sales charges and expenses. The Fund's Class C shares were not
yet in operation during this period, but their performance will be calculated in
the same way as Class B shares.
Average annual total returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gains distributions at net asset value. 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.
Wells Fargo Bank has voluntarily waived portions of its fees for some or all
classes of the Fund, which has reduced operating expenses for shareholders of
such classes. Without this reduction, the Fund's returns would have been lower.
- ---------------------
6
<PAGE>
ASSET ALLOCATION FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LEHMAN BROTHERS STAGECOACH ASSET IBC/DONOGHUE
U.S. TREASURY ALLOCATION FUND MONEY MARKET
BOND INDEX CLASS A SHARES AVERAGE S&P 500 INDEX
<S> <C> <C> <C> <C>
11/28/86 $10,000 $9,550 $10,000 $10,000
12/31/86 $9,990 $9,617 $10,045 $9,745
01/30/87 $10,166 $10,037 $10,091 $11,057
02/27/87 $10,301 $10,285 $10,136 $11,494
03/31/87 $10,108 $10,285 $10,182 $11,826
04/30/87 $9,622 $9,951 $10,228 $11,721
05/29/87 $9,509 $9,894 $10,278 $11,822
06/30/87 $9,616 $10,113 $10,329 $12,419
07/31/87 $9,447 $10,094 $10,381 $13,048
08/31/87 $9,292 $10,056 $10,433 $13,535
09/30/87 $8,885 $9,693 $10,487 $13,238
10/30/87 $9,529 $10,362 $10,544 $10,387
11/30/87 $9,532 $10,094 $10,601 $9,531
12/31/87 $9,723 $10,438 $10,659 $10,256
01/29/88 $10,313 $11,002 $10,717 $10,688
02/29/88 $10,424 $11,231 $10,772 $11,186
03/31/88 $10,108 $10,897 $10,826 $10,840
04/29/88 $9,931 $10,772 $10,881 $10,960
05/31/88 $9,781 $10,734 $10,938 $11,055
06/30/88 $10,193 $11,183 $10,998 $11,563
07/29/88 $9,992 $11,021 $11,060 $11,519
08/31/88 $10,034 $10,868 $11,126 $11,128
09/30/88 $10,406 $11,221 $11,195 $11,602
10/31/88 $10,722 $11,422 $11,265 $11,925
11/30/88 $10,482 $11,355 $11,337 $11,755
12/30/88 $10,617 $11,460 $11,413 $11,960
01/31/89 $10,841 $11,622 $11,493 $12,836
02/28/89 $10,616 $11,632 $11,574 $12,516
03/31/89 $10,729 $11,727 $11,660 $12,808
04/28/89 $11,002 $11,871 $11,749 $13,473
05/31/89 $11,407 $12,004 $11,838 $14,018
06/30/89 $12,058 $12,062 $11,927 $13,939
07/31/89 $12,344 $12,339 $12,013 $15,197
08/31/89 $12,014 $12,453 $12,096 $15,494
09/29/89 $12,049 $12,501 $12,179 $15,431
10/31/89 $12,534 $12,577 $12,262 $15,073
11/30/89 $12,649 $12,692 $12,344 $15,380
12/31/89 $12,626 $12,816 $12,426 $15,750
01/31/90 $12,171 $12,702 $12,506 $14,692
02/28/90 $12,136 $12,778 $12,586 $14,881
03/31/90 $12,086 $12,854 $12,666 $15,276
04/30/90 $11,797 $12,854 $12,747 $14,895
05/31/90 $12,345 $13,189 $12,828 $16,347
06/30/90 $12,629 $13,265 $12,910 $16,237
07/31/90 $12,749 $13,341 $12,992 $16,184
08/31/90 $12,211 $13,122 $13,074 $14,722
09/30/90 $12,352 $13,084 $13,155 $14,005
10/31/90 $12,635 $13,227 $13,237 $13,945
11/30/90 $13,162 $13,609 $13,318 $14,847
12/31/90 $13,423 $13,800 $13,398 $15,260
01/31/91 $13,581 $14,163 $13,475 $15,925
02/28/91 $13,641 $14,459 $13,547 $17,064
03/31/91 $13,695 $14,583 $13,615 $17,477
04/30/91 $13,869 $14,717 $13,682 $17,519
05/31/91 $13,857 $14,888 $13,745 $18,275
06/30/91 $13,754 $14,564 $13,808 $17,437
07/31/91 $13,959 $14,927 $13,871 $18,250
08/31/91 $14,441 $15,404 $13,933 $18,682
09/30/91 $14,896 $15,710 $13,994 $18,370
10/31/91 $14,928 $15,758 $14,052 $18,617
11/30/91 $15,012 $15,643 $14,108 $17,867
12/31/91 $15,907 $16,856 $14,162 $19,910
01/31/92 $15,407 $16,359 $14,211 $19,539
02/29/92 $15,498 $16,455 $14,256 $19,792
03/31/92 $15,328 $16,238 $14,300 $19,407
04/30/92 $15,312 $16,364 $14,344 $19,977
05/31/92 $15,738 $16,683 $14,386 $20,075
06/30/92 $15,966 $16,756 $14,427 $19,776
07/31/92 $16,630 $17,471 $14,466 $20,584
08/31/92 $16,745 $17,412 $14,503 $20,163
09/30/92 $17,010 $17,650 $14,538 $20,400
10/31/92 $16,653 $17,402 $14,572 $20,470
11/30/92 $16,716 $17,630 $14,605 $21,167
12/31/92 $17,174 $18,026 $14,640 $21,427
01/31/93 $17,663 $18,409 $14,674 $21,606
02/28/93 $18,253 $18,923 $14,707 $21,900
03/31/93 $18,299 $19,054 $14,740 $22,362
04/30/93 $18,440 $18,963 $14,773 $21,822
05/31/93 $18,501 $19,207 $14,805 $22,406
06/30/93 $19,283 $19,706 $14,837 $22,471
07/31/93 $19,594 $19,881 $14,870 $22,381
08/31/93 $20,381 $20,663 $14,903 $23,230
09/30/93 $20,453 $20,580 $14,936 $23,052
10/31/93 $20,600 $20,881 $14,969 $23,529
11/30/93 $20,073 $20,559 $15,002 $23,305
12/31/93 $20,137 $20,731 $15,036 $23,586
01/31/94 $20,620 $21,360 $15,070 $24,388
02/28/94 $19,775 $20,665 $15,104 $23,726
03/31/94 $18,907 $19,856 $15,141 $22,692
04/30/94 $18,683 $19,800 $15,179 $22,983
05/31/94 $18,560 $19,878 $15,222 $23,360
06/30/94 $18,384 $19,533 $15,268 $22,788
07/31/94 $19,007 $20,162 $15,316 $23,536
08/31/94 $18,866 $20,488 $15,366 $24,501
09/30/94 $18,272 $19,894 $15,419 $23,902
10/31/94 $18,208 $20,053 $15,475 $24,439
11/30/94 $18,316 $19,837 $15,535 $23,549
12/31/94 $18,598 $20,146 $15,600 $23,898
01/31/95 $19,075 $20,664 $15,668 $24,517
02/28/95 $19,615 $21,314 $15,739 $25,472
03/31/95 $19,785 $21,694 $15,811 $26,222
04/28/95 $20,138 $22,169 $15,884 $26,994
05/31/95 $21,683 $23,315 $15,957 $28,071
06/30/95 $21,935 $23,675 $16,030 $28,722
07/31/95 $21,585 $23,983 $16,101 $29,674
08/31/95 $22,064 $24,143 $16,172 $29,749
09/29/95 $22,469 $24,771 $16,243 $31,003
10/31/95 $23,098 $24,895 $16,313 $30,893
11/30/95 $23,676 $25,602 $16,385 $32,247
12/29/95 $24,305 $26,025 $16,456 $32,869
01/31/96 $24,305 $26,489 $16,525 $33,986
02/29/96 $23,131 $26,351 $16,592 $34,302
03/31/96 $22,671 $26,407 $16,659 $34,631
04/30/96 $22,292 $26,432 $16,725 $35,140
05/31/96 $22,177 $26,660 $16,792 $36,044
06/30/96 $22,649 $26,959 $16,860 $36,181
07/31/96 $22,658 $26,360 $16,927 $34,581
08/31/96 $22,375 $26,334 $16,995 $35,311
09/30/96 $22,992 $27,362 $17,063 $37,296
10/31/96 $23,896 $28,302 $17,131 $38,325
11/30/96 $24,694 $29,810 $17,199 $41,218
12/31/96 $24,089 $29,058 $17,268 $40,402
01/31/97 $23,918 $29,646 $17,337 $42,923
02/28/97 $23,928 $29,716 $17,407 $43,262
03/31/97 $23,315 $28,713 $17,476 $41,489
04/30/97 $23,877 $29,830 $17,548 $43,961
05/31/97 $24,144 $30,835 $17,620 $46,647
06/30/97 $24,610 $31,717 $17,694 $48,723
07/31/97 $26,055 $33,945 $17,768 $52,597
08/31/97 $25,331 $32,445 $17,843 $49,651
09/30/97 $26,027 $33,775 $17,918 $52,367
10/31/97 $26,904 $33,732 $17,993 $50,618
11/30/97 $27,262 $34,826 $18,069 $52,962
12/31/97 $27,720 $35,454 $18,144 $53,873
01/31/98 $28,283 $35,983 $18,221 $54,465
02/28/98 $28,079 $37,695 $18,297 $58,392
03/31/98 $28,138 $39,072 $18,374 $61,382
</TABLE>
THE RETURNS FOR OTHER CLASSES OF SHARES OF THE FUND WILL VARY FROM THE RESULTS
SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Asset
Allocation Fund Class A shares since inception of the predecessor fund with the
S&P 500 Index, the Lehman Brothers U.S. Treasury Bond Index, and the
IBC/Donoghue Money Market Average. The chart assumes a hypothetical $10,000
initial investment in Class A shares and reflects all operating expenses and
assumes the maximum initial sales charge of 4.5%. The S&P 500 Index is an
unmanaged index of 500 widely held common stocks representing, among others,
industrial, financial, utility and transportation companies listed or traded on
national exchanges or over-the-counter markets. The Lehman Brothers U.S.
Treasury Bond Index is an unmanaged index composed of U.S. Treasury bonds with
10 year or longer maturities. The IBC/Donoghue Money Market Average is an
average of 700 taxable money market funds. The Fund is a professionally managed
mutual fund. The indexes presented here do not incur expenses and are not
available directly for investment. Had these indexes incurred operating
expenses, their performances would have been lower.
---------------------
7
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
8
<PAGE>
INDEX ALLOCATION FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED MARCH 31, 1998?
Class A shares of the Fund recorded a 40.10% total return for the period
exclusive of sales load. See the "Performance at a Glance" table for the total
returns for other share classes.
WHAT WERE THE TOTAL RETURNS FOR THE AVAILABLE ASSET CLASSES?
The Fund allocates across three asset classes: equities representative of the
S&P 500 Index, bonds representative of the Lehman Brothers U.S. Treasury Bond
Index, and cash as measured by the IBC/Donoghue Money Market Average. For the
twelve-month period ended March 31, 1998, the returns for these unmanaged
indexes were as follows:
<TABLE>
<S> <C>
Equities 47.96%
Bonds 20.71%
Cash 4.89%
</TABLE>
HOW DID ALLOCATIONS FOR THE TACTICAL MODEL SHIFT THROUGHOUT THE PERIOD?
The tactical model analyzes extensive financial data from numerous sources. The
model recommends an asset mix on a daily basis. Changes to the asset mix are
only made in 5% increments, however. This means that an adjustment is made only
when the recommended mix is 5% greater or less than the current allocation. It
is important to keep in mind that the model's recommendation and the actual mix
of securities will generally differ for a number of reasons, including the
uneven growth of the asset classes. For example, a recommended mix of 60% bonds
and 40% equities may change to 59% bonds and 41% equities if equities grow
faster than bonds. The allocation recommendations at the start of the period
(April 1, 1997) showed 60% of the portfolio allocated to equities and 40% to
bonds. With ten changes throughout the fiscal year, the model ended the period
with a recommendation of 99% stocks and 1% bonds.
WHY DOES THE MODEL RECOMMEND ALLOCATION SHIFTS?
The strategy is based on the premise that at times asset classes are overvalued
or undervalued in comparison to each other and that undervalued investments over
time offer the best risk-adjusted returns. For example, the model may indicate
that an asset class that has been rising in value may now be overvalued. Or as a
given asset class increases in value it assumes more risk, making a less risky
alternative investment more attractive. The model examines a great deal of
quantitative information and makes its recommendation according to the built-in
risk tolerance.
WHY ARE THESE ALLOCATIONS DIFFERENT FROM THE RECOMMENDED ALLOCATIONS FOR THE
ASSET ALLOCATION FUND?
Part of what determines the allocation is the risk tolerance built-in to each
model. The Asset Allocation Fund is a more
---------------------
9
<PAGE>
INDEX ALLOCATION FUND
conservative fund than the Index Allocation Fund. It assumes that under normal
conditions it is invested in 60% stocks and 40% bonds. The Index Allocation Fund
assumes a normal investment of 100% stocks. Both change from their normal
allocation in response to economic conditions and the relative attractiveness
and risks of each asset class.
WHAT IS THE OVERVIEW OF THE EQUITY MARKETS FOR THE PERIOD?
The stock market during the period continued its stellar performance, with the
S&P 500 Index posting a total return of 47.96%. As was the case the previous few
years, strong economic growth, low inflation, and solid earnings growth drove
these spectacular returns. The best-performing sectors in the S&P 500 Index were
communications services, telephone, and utilities. The worst performing sectors
were technology and basic materials, although technology stocks have rebounded
from their fall 1997 sell-off. Merger and acquisition activity experienced a
third consecutive record year, driving stock prices in the affected industries
higher. The financial services sector is an example, accounting for more than
30% of all U.S. merger activity.
WHAT IS THE FIXED-INCOME MARKET OVERVIEW?
For the 12-month period, the U.S. bond market benefited from the economic
backdrop of robust growth, low unemployment, and low inflation. Long-term
interest rates as of the end of the reporting period are at their lowest levels
since 1977, when the U.S. began regular auctions of 30-year Treasury bonds. In
addition, the yield curve has flattened out significantly, with the three-month
Treasury bill rising to a yield of 5.34% and the 30-year Treasury bond declining
to a yield of 5.92%. This spread is at its narrowest point since March of 1990.
These lower long-term yields and a flatter curve meant that long-term bonds
outperformed bonds of shorter maturities. While the two-year Treasury note
returned 6.6%, the 30-year Treasury bond had a return of 15.3%.
The Federal Reserve Board adjusted monetary policy only once in 1997, raising
the federal funds target rate 0.25% to 5.50% in March and keeping short-term
rates steady. This action was seen as preemptive, meant to sustain the strongest
growth rate possible while maintaining low inflation.
Declining inflation continues to be favorable for U.S. bonds. The Consumer Price
Index increased only 1.8% during the period, the lowest growth rate since 1986.
This seeming paradox of low inflation in the midst of strong economic growth and
low unemployment can be partially attributed to higher productivity keeping unit
labor costs under control and easing pressure on employers' profit margins. And
while Gross Domestic Product growth has been robust, 1997 saw it trending down
from 4.9% to 3.3% to 3.1% in the first three quarters. The federal budget
deficit also has been reduced to 1974 levels due to higher tax receipts
resulting from the strong
econ-
- ---------------------
10
<PAGE>
INDEX ALLOCATION FUND
omy. These factors have all come together to create the most favorable economic
landscape in many years.
WHAT AFFECT DID THE ASIAN CURRENCY CRISIS HAVE ON THE FUND?
The Fund is focused domestically and did not have any direct exposure to Asian
securities. Nevertheless, some U.S. companies listed on the S&P 500 Index either
have significant sales in Asia or they have much of their future growth focused
on Asia. Many of these stocks suffered setbacks in October, but many also
rebounded. It is possible that the Asian crisis is not over and that earnings
disappointments may yet result.
---------------------
11
<PAGE>
INDEX ALLOCATION FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/7/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
With Maximum 4.50% Sales Charge 33.82% 25.39% 17.64% 14.34%
- --------------------------------------------------------------------------------------------
Without Sales Charge 40.10% 27.33% 18.74% 14.87%
- --------------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/7/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 33.83% 25.73% 17.69% 14.07%
- --------------------------------------------------------------------------------------------
Without Sales Charge 38.83% 26.36% 17.90% 14.07%
- --------------------------------------------------------------------------------------------
(1)Assumes 3/31/98 Redemption
</TABLE>
CLASS C SHARE PERFORMANCE AS OF 3/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/7/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 37.94% 26.39% 17.92% 14.08%
- --------------------------------------------------------------------------------------------
Without Sales Charge 38.94% 26.39% 17.92% 14.08%
- --------------------------------------------------------------------------------------------
(1)Assumes 3/31/98 Redemption
</TABLE>
Performance shown for the Class A shares of the Stagecoach Index Allocation
Fund, reflects performance of the Class A shares of the Overland Express Index
Allocation Fund (the predecessor Portfolio, which was reorganized as the
Stagecoach Index Allocation Fund on December 12, 1997 and hereafter, the
"predecessor fund."). Performance shown or advertised for the Class B and Class
C shares of the Stagecoach Fund for periods prior to December 12, 1997 reflects
performance of the Class D shares of the Overland Fund; 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 respective sales charges and expenses of the Class B and Class C
shares.
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 at net asset value. 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.
Wells Fargo Bank has voluntarily waived portions of its fees for some or all
classes of the Fund, which has reduced operating expenses for shareholders of
such classes. Without this reduction, the Fund's returns would have been lower.
- ---------------------
12
<PAGE>
INDEX ALLOCATION FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH INDEX LEHMAN BROTHERS IBC/DONOGHUE
ALLOCATION FUND U.S. TREASURY MONEY MARKET S&P 500
CLASS A SHARES BOND INDEX AVERAGE INDEX
<S> <C> <C> <C> <C>
Inception $9,550 $10,000 $10,000 $10,000
04/29/88 $9,426 $9,825 $10,051 $10,111
05/31/88 $9,426 $9,677 $10,103 $10,198
06/30/88 $9,779 $10,084 $10,158 $10,666
07/29/88 $9,641 $9,885 $10,216 $10,626
08/31/88 $9,497 $9,927 $10,277 $10,265
09/30/88 $9,813 $10,294 $10,340 $10,702
10/31/88 $9,999 $10,607 $10,405 $11,000
11/30/88 $9,912 $10,370 $10,471 $10,843
12/30/88 $9,989 $10,503 $10,542 $11,033
01/31/89 $10,130 $10,725 $10,615 $11,841
02/28/89 $10,130 $10,502 $10,690 $11,546
03/31/89 $10,204 $10,614 $10,770 $11,815
04/28/89 $10,324 $10,884 $10,852 $12,428
05/31/89 $10,424 $11,284 $10,935 $12,931
06/30/89 $10,444 $11,929 $11,016 $12,858
07/31/89 $10,691 $12,211 $11,096 $14,019
08/31/89 $10,773 $11,885 $11,173 $14,293
09/29/89 $10,814 $11,920 $11,249 $14,235
10/31/89 $10,824 $12,400 $11,326 $13,904
11/30/89 $10,918 $12,513 $11,402 $14,188
12/31/89 $11,012 $12,490 $11,477 $14,528
01/31/90 $10,907 $12,041 $11,551 $13,553
02/28/90 $10,960 $12,006 $11,625 $13,728
03/31/90 $11,055 $11,957 $11,699 $14,091
04/30/90 $11,006 $11,671 $11,774 $13,740
05/31/90 $11,318 $12,212 $11,849 $15,080
06/30/90 $11,371 $12,493 $11,925 $14,978
07/31/90 $11,424 $12,612 $12,001 $14,930
08/31/90 $11,238 $12,080 $12,076 $13,580
09/30/90 $11,206 $12,220 $12,151 $12,919
10/31/90 $11,315 $12,500 $12,226 $12,864
11/30/90 $11,636 $13,021 $12,301 $13,696
12/31/90 $11,791 $13,279 $12,375 $14,077
01/31/91 $12,074 $13,436 $12,446 $14,690
02/28/91 $12,303 $13,495 $12,513 $15,741
03/31/91 $12,406 $13,549 $12,576 $16,122
04/30/91 $12,518 $13,721 $12,637 $16,160
05/31/91 $12,657 $13,708 $12,696 $16,858
06/30/91 $12,379 $13,607 $12,754 $16,085
07/31/91 $12,681 $13,810 $12,812 $16,835
08/31/91 $13,093 $14,286 $12,870 $17,234
09/30/91 $13,257 $14,736 $12,925 $16,946
10/31/91 $13,349 $14,768 $12,980 $17,173
11/30/91 $13,147 $14,851 $13,031 $16,481
12/31/91 $14,230 $15,736 $13,081 $18,366
01/31/92 $13,839 $15,242 $13,126 $18,024
02/29/92 $13,924 $15,332 $13,168 $18,258
03/31/92 $13,723 $15,163 $13,209 $17,903
04/30/92 $13,871 $15,148 $13,249 $18,428
05/31/92 $14,104 $15,569 $13,288 $18,519
06/30/92 $14,124 $15,795 $13,326 $18,243
07/31/92 $14,696 $16,452 $13,362 $18,988
08/31/92 $14,609 $16,566 $13,396 $18,599
09/30/92 $14,809 $16,828 $13,428 $18,818
10/31/92 $14,708 $16,474 $13,460 $18,883
11/30/92 $15,035 $16,537 $13,490 $19,526
12/31/92 $15,288 $16,990 $13,522 $19,766
01/31/93 $15,542 $17,474 $13,554 $19,931
02/28/93 $15,943 $18,058 $13,585 $20,202
03/31/93 $16,181 $18,103 $13,615 $20,629
04/30/93 $15,911 $18,242 $13,645 $20,130
05/31/93 $16,208 $18,302 $13,675 $20,669
06/30/93 $16,414 $19,077 $13,705 $20,729
07/31/93 $16,442 $19,384 $13,735 $20,646
08/31/93 $17,024 $20,163 $13,765 $21,429
09/30/93 $16,883 $20,234 $13,796 $21,265
10/31/93 $17,197 $20,379 $13,826 $21,705
11/30/93 $17,020 $19,858 $13,857 $21,498
12/31/93 $17,205 $19,921 $13,888 $21,758
01/31/94 $17,755 $20,399 $13,920 $22,498
02/28/94 $17,263 $19,563 $13,951 $21,887
03/31/94 $16,582 $18,704 $13,985 $20,933
04/30/94 $16,683 $18,483 $14,021 $21,201
05/31/94 $16,843 $18,361 $14,060 $21,549
06/30/94 $16,477 $18,187 $14,102 $21,021
07/31/94 $16,988 $18,803 $14,146 $21,711
08/31/94 $17,485 $18,664 $14,193 $22,601
09/30/94 $17,013 $18,076 $14,242 $22,049
10/31/94 $17,174 $18,013 $14,294 $22,544
11/30/94 $16,836 $18,119 $14,349 $21,723
12/31/94 $17,087 $18,398 $14,409 $22,045
01/31/95 $17,504 $18,870 $14,472 $22,616
02/28/95 $18,096 $19,405 $14,537 $23,497
03/31/95 $18,496 $19,573 $14,604 $24,189
04/28/95 $18,948 $19,922 $14,672 $24,901
05/31/95 $19,820 $21,450 $14,739 $25,894
06/30/95 $20,274 $21,700 $14,806 $26,495
07/31/95 $20,907 $21,354 $14,872 $27,374
08/31/95 $20,940 $21,827 $14,938 $27,442
09/29/95 $21,782 $22,229 $15,003 $28,600
10/31/95 $21,685 $22,851 $15,068 $28,497
11/30/95 $22,596 $23,422 $15,134 $29,747
12/29/95 $23,018 $24,045 $15,200 $30,320
01/31/96 $23,721 $24,045 $15,263 $31,351
02/29/96 $23,905 $22,884 $15,326 $31,643
03/31/96 $24,114 $22,428 $15,387 $31,946
04/30/96 $24,349 $22,054 $15,449 $32,416
05/31/96 $24,684 $21,939 $15,511 $33,249
06/30/96 $24,861 $22,406 $15,573 $33,375
07/31/96 $24,085 $22,415 $15,635 $31,900
08/31/96 $24,237 $22,135 $15,697 $32,573
09/30/96 $25,281 $22,746 $15,760 $34,404
10/31/96 $26,044 $23,640 $15,823 $35,353
11/30/96 $27,554 $24,429 $15,887 $38,023
12/31/96 $26,941 $23,831 $15,950 $37,270
01/31/97 $28,135 $23,662 $16,014 $39,599
02/28/97 $28,251 $23,672 $16,078 $39,908
03/31/97 $27,257 $23,066 $16,142 $38,268
04/30/97 $28,419 $23,622 $16,208 $40,552
05/31/97 $29,543 $23,886 $16,275 $43,022
06/30/97 $30,582 $24,347 $16,343 $44,954
07/31/97 $32,805 $25,777 $16,412 $48,528
08/31/97 $31,187 $25,060 $16,481 $45,810
09/30/97 $32,641 $25,749 $16,550 $48,320
10/31/97 $31,819 $26,625 $16,620 $46,707
11/30/97 $33,189 $26,971 $16,689 $48,869
12/31/97 $33,724 $27,429 $16,759 $49,710
01/31/98 $34,511 $27,986 $16,830 $50,256
02/28/98 $36,421 $27,785 $16,901 $53,880
03/31/98 $38,186 $27,843 $16,972 $56,639
</TABLE>
THE RETURNS FOR OTHER CLASSES OF SHARES OF THE FUND WILL VARY FROM THE RESULTS
SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach Asset
Allocation Fund Class A shares since inception of the predecessor fund, with the
S&P 500 Index, the Lehman Brothers U.S. Treasury Bond Index, and the
IBC/Donoghue Money Market Average. The chart assumes a hypothetical $10,000
initial investment in Class A shares and reflects all operating expenses and
assumes the maximum initial sales charge of 4.5%. The S&P 500 Index is an
unmanaged index of 500 widely held common stocks representing, among others,
industrial, financial, utility and transportation companies listed or traded on
national exchanges or over-the-counter markets. The Lehman Brothers U.S.
Treasury Bond Index is an unmanaged index composed of U.S. Treasury bonds with
10-year or longer maturities. The IBC/Donoghue Money Market Average is an
average of 700 taxable money market funds. The Fund is a professionally managed
mutual fund. The indexes presented here do not incur expenses and are not
available directly for investment. Had these indexes incurred operating
expenses, their performances would have been lower.
---------------------
13
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED MARCH 31, 1998?
Class A shares of the Fund recorded a 9.36% total return for the period
exclusive of sales charges. See the "Performance at a Glance" table for the
total returns for the other share class.
WHAT WERE THE TOTAL RETURNS FOR THE AVAILABLE ASSET CLASSES?
The Fund allocates across three asset classes: long-term Treasury Bonds through
the Lehman Brothers U.S. Treasury Bond Index, intermediate-term Treasury Bonds
through the Lehman Brothers Treasury Note Index and cash as measured by the
IBC/Donoghue Money Market Average. For the twelve-month period ended March 31,
1998, the returns for these unmanaged indexes were as follows:
<TABLE>
<S> <C>
Long Bonds 20.71%
Intermediate Bonds 9.38%
Cash 4.89%
</TABLE>
HOW DID ALLOCATIONS FOR THE TACTICAL MODEL SHIFT THROUGHOUT THE PERIOD?
The tactical model analyzes extensive financial data from numerous sources. The
model recommends an asset mix on a daily basis. Changes to the mix are only made
in 5% increments, however. This means that an adjustment is made only when the
recommended mix is 5% greater or less than the current allocation. It is
important to keep in mind that the model's recommendation and the actual mix of
securities will generally differ for a number of reasons, including the uneven
growth of the asset classes. For example, a recommended mix of 60% long bonds
and 40% intermediate bonds may change to 59% bonds and 41% equities if equities
grow faster than bonds. The allocation recommendations at the start of the
period (April 1, 1997) showed 100% of the portfolio allocated to intermediate
bonds. With four changes throughout the fiscal year, the model ended the period
with a recommendation of 10% long bonds, 20% intermediate bonds and 70% cash.
WHY DOES THE MODEL RECOMMEND ALLOCATION SHIFTS?
The strategy is based on the premise that at times asset classes are overvalued
or undervalued in comparison to each other and that undervalued investments over
time offer the best risk-adjusted returns. For example, the model may indicate
that an asset class that has been rising in value may now be overvalued. Or, as
a given asset class increases in value, it assumes more risk, making a less
risky alternative investment more attractive. The model examines a great deal of
quantitative information and makes its recommendation according to the built-in
risk tolerance.
- ---------------------
14
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
WHAT IS THE FIXED-INCOME MARKET OVERVIEW?
For the 12-month period, the U.S. bond market benefited from the economic
backdrop of robust growth, low unemployment, and low inflation. Long-term
interest rates as of the end of the reporting period are at their lowest levels
since 1977, when the U.S. began regular auctions of 30-year Treasury bonds. In
addition, the yield curve has flattened out significantly, with the three-month
Treasury bill rising to a yield of 5.34% and the 30-year Treasury bond declining
to a yield of 5.92%. This spread is at its narrowest point since March of 1990.
These lower long-term yields and a flatter curve meant that long-term bonds
outperformed bonds of shorter maturities. While the two-year Treasury note
returned 6.6%, the 30-year Treasury bond had a return of 15.3%.
The Federal Reserve Board adjusted monetary policy only once in 1997, raising
the federal funds target rate 0.25% to 5.50% in March and keeping short-term
rates steady. This action was seen as preemptive, meant to sustain the strongest
growth rate possible while maintaining low inflation.
Declining inflation continues to be favorable for U.S. bonds. The Consumer Price
Index increased only 1.8% during the period, the lowest growth rate since 1986.
This seeming paradox of low inflation in the midst of strong economic growth and
low unemployment can be partially attributed to higher productivity keeping unit
labor costs under control and easing pressure on employers' profit margins. And
while Gross Domestic Product growth has been robust, 1997 saw it trending down
from 4.9% to 3.3% to 3.1% in the first three quarters. The federal budget
deficit also has been reduced to 1974 levels due to higher tax receipts
resulting from the strong economy. These factors have all come together to
create the most favorable economic landscape in many years.
---------------------
15
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 3/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE
3/31/87
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 10 YEAR INCEPTION
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
With Maximum 4.50% Sales Charge 4.47% 5.40% 7.48% 7.43%
- ---------------------------------------------------------------------------------------------
Without Sales Charge 9.36% 7.03% 7.98% 7.88%
- ---------------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 3/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE
3/31/87
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR 5 YEAR INCEPTION
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
With Maximum Contingent Deferred Sales
Charge(1) 3.64% 5.39% 7.38% 7.28%
- ---------------------------------------------------------------------------------------------
Without Sales Charge 8.64% 6.29% 7.38% 7.28%
- ---------------------------------------------------------------------------------------------
(1)Assumes 3/31/98 Redemption
</TABLE>
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 fund 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 sales charges and expenses.
Average annual total returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gains distributions at net asset value. 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.
Wells Fargo Bank has voluntarily waived portions of its fees for some or all
classes of the Fund, which has reduced operating expenses for shareholders of
such classes. Without this reduction, the Fund's returns would have been lower.
- ---------------------
16
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STAGECOACH U.S. GOVERNMENT LEHMAN BROTHERS U.S. IBC/DONOGHUE LEHMAN BROTHERS U.S.
ALLOCATION FUND TREASURY MONEY MARKET TREASURY NOTE
CLASS A SHARES BOND INDEX AVERAGE INDEX
<S> <C> <C> <C> <C>
03/31/87 $9,550 $10,000 $10,000 $10,000
04/30/87 $9,588 $9,519 $10,046 $9,829
05/29/87 $9,636 $9,407 $10,094 $9,809
06/30/87 $9,674 $9,513 $10,145 $9,923
07/31/87 $9,607 $9,346 $10,196 $9,944
08/31/87 $9,540 $9,192 $10,247 $9,918
09/30/87 $9,330 $8,790 $10,300 $9,795
10/30/87 $9,731 $9,427 $10,356 $10,087
11/30/87 $9,789 $9,430 $10,412 $10,146
12/31/87 $9,884 $9,618 $10,469 $10,241
01/29/88 $10,285 $10,202 $10,526 $10,493
02/29/88 $10,324 $10,312 $10,580 $10,601
03/31/88 $10,209 $10,000 $10,633 $10,554
04/29/88 $10,113 $9,825 $10,687 $10,537
05/31/88 $10,075 $9,677 $10,743 $10,486
06/30/88 $10,285 $10,084 $10,802 $10,657
07/29/88 $10,209 $9,885 $10,863 $10,625
08/31/88 $10,228 $9,927 $10,927 $10,635
09/30/88 $10,467 $10,294 $10,995 $10,819
10/31/88 $10,610 $10,607 $11,064 $10,968
11/30/88 $10,515 $10,369 $11,134 $10,873
12/30/88 $10,553 $10,503 $11,209 $10,883
01/31/89 $10,686 $10,725 $11,288 $10,991
02/28/89 $10,591 $10,502 $11,367 $10,942
03/31/89 $10,620 $10,614 $11,452 $10,998
04/28/89 $10,839 $10,884 $11,539 $11,220
05/31/89 $11,107 $11,284 $11,627 $11,434
06/30/89 $11,470 $11,929 $11,714 $11,727
07/31/89 $11,670 $12,211 $11,798 $11,970
08/31/89 $11,498 $11,885 $11,880 $11,805
09/29/89 $11,536 $11,920 $11,962 $11,859
10/31/89 $11,813 $12,400 $12,043 $12,111
11/30/89 $11,899 $12,513 $12,124 $12,228
12/31/89 $11,928 $12,490 $12,204 $12,264
01/31/90 $11,747 $12,041 $12,283 $12,184
02/28/90 $11,785 $12,006 $12,361 $12,227
03/31/90 $11,766 $11,957 $12,440 $12,240
04/30/90 $11,651 $11,671 $12,519 $12,197
05/31/90 $11,842 $12,212 $12,600 $12,458
06/30/90 $11,928 $12,493 $12,680 $12,621
07/31/90 $12,014 $12,612 $12,761 $12,797
08/31/90 $12,014 $12,080 $12,840 $12,749
09/30/90 $12,138 $12,220 $12,920 $12,863
10/31/90 $12,262 $12,500 $13,000 $13,044
11/30/90 $12,425 $13,021 $13,080 $13,239
12/31/90 $12,549 $13,279 $13,159 $13,423
01/31/91 $12,673 $13,435 $13,234 $13,561
02/28/91 $12,721 $13,494 $13,305 $13,638
03/31/91 $12,759 $13,548 $13,372 $13,712
04/30/91 $12,883 $13,721 $13,438 $13,853
05/31/91 $12,940 $13,708 $13,500 $13,929
06/30/91 $12,912 $13,607 $13,562 $13,940
07/31/91 $13,064 $13,809 $13,624 $14,092
08/31/91 $13,399 $14,286 $13,684 $14,359
09/30/91 $13,704 $14,736 $13,744 $14,604
10/31/91 $13,828 $14,768 $13,801 $14,771
11/30/91 $13,895 $14,851 $13,856 $14,944
12/31/91 $14,717 $15,736 $13,909 $15,316
01/31/92 $14,229 $15,242 $13,957 $15,162
02/29/92 $14,259 $15,332 $14,002 $15,209
03/31/92 $14,105 $15,163 $14,045 $15,147
04/30/92 $14,091 $15,148 $14,088 $15,283
05/31/92 $14,444 $15,569 $14,129 $15,511
06/30/92 $14,602 $15,795 $14,169 $15,736
07/31/92 $15,222 $16,452 $14,208 $16,043
08/31/92 $15,275 $16,566 $14,244 $16,210
09/30/92 $15,486 $16,827 $14,279 $16,438
10/31/92 $15,160 $16,474 $14,312 $16,236
11/30/92 $15,233 $16,537 $14,345 $16,166
12/31/92 $15,634 $16,990 $14,379 $16,378
01/31/93 $16,035 $17,474 $14,412 $16,686
02/28/93 $16,594 $18,057 $14,445 $16,935
03/31/93 $16,578 $18,103 $14,477 $16,996
04/30/93 $16,692 $18,242 $14,509 $17,130
05/31/93 $16,749 $18,302 $14,541 $17,080
06/30/93 $17,457 $19,076 $14,572 $17,331
07/31/93 $17,769 $19,384 $14,604 $17,364
08/31/93 $18,507 $20,163 $14,637 $17,626
09/30/93 $18,551 $20,233 $14,669 $17,699
10/31/93 $18,745 $20,379 $14,702 $17,741
11/30/93 $18,282 $19,857 $14,734 $17,652
12/31/93 $18,364 $19,921 $14,768 $17,725
01/31/94 $18,736 $20,399 $14,801 $17,900
02/28/94 $18,019 $19,563 $14,835 $17,650
03/31/94 $17,471 $18,704 $14,870 $17,394
04/30/94 $17,225 $18,483 $14,908 $17,282
05/31/94 $17,183 $18,361 $14,950 $17,295
06/30/94 $17,123 $18,187 $14,995 $17,298
07/31/94 $17,400 $18,803 $15,042 $17,523
08/31/94 $17,437 $18,664 $15,092 $17,574
09/30/94 $17,168 $18,076 $15,144 $17,430
10/31/94 $17,132 $18,013 $15,199 $17,435
11/30/94 $17,025 $18,119 $15,258 $17,355
12/31/94 $17,081 $18,398 $15,322 $17,410
01/31/95 $17,373 $18,870 $15,388 $17,692
02/28/95 $17,811 $19,405 $15,458 $18,030
03/31/95 $17,938 $19,573 $15,529 $18,130
04/28/95 $18,150 $19,922 $15,600 $18,339
05/31/95 $18,718 $21,450 $15,672 $18,856
06/30/95 $18,840 $21,700 $15,744 $18,981
07/31/95 $18,789 $21,353 $15,814 $18,990
08/31/95 $18,948 $21,827 $15,883 $19,142
09/29/95 $19,105 $22,229 $15,953 $19,270
10/31/95 $19,296 $22,851 $16,022 $19,485
11/30/95 $19,460 $23,422 $16,092 $19,723
12/29/95 $19,628 $24,045 $16,162 $19,921
01/31/96 $19,677 $24,045 $16,230 $20,092
02/29/96 $19,484 $22,883 $16,296 $19,877
03/31/96 $19,434 $22,428 $16,361 $19,779
04/30/96 $19,327 $22,053 $16,427 $19,722
05/31/96 $19,243 $21,939 $16,493 $19,712
06/30/96 $19,452 $22,406 $16,559 $19,907
07/31/96 $19,482 $22,415 $16,625 $19,967
08/31/96 $19,472 $22,135 $16,691 $19,993
09/30/96 $19,762 $22,746 $16,758 $20,249
10/31/96 $20,202 $23,640 $16,825 $20,579
11/30/96 $20,468 $24,429 $16,892 $20,826
12/31/96 $20,311 $23,831 $16,960 $20,714
01/31/97 $20,336 $23,661 $17,028 $20,790
02/28/97 $20,359 $23,671 $17,096 $20,821
03/31/97 $20,108 $23,065 $17,164 $20,698
04/30/97 $20,395 $23,621 $17,235 $20,930
05/31/97 $20,559 $23,885 $17,305 $21,094
06/30/97 $20,782 $24,346 $17,378 $21,273
07/31/97 $21,219 $25,775 $17,451 $21,671
08/31/97 $21,098 $25,059 $17,524 $21,584
09/30/97 $21,314 $25,748 $17,598 $21,819
10/31/97 $21,557 $26,616 $17,672 $22,075
11/30/97 $21,580 $26,970 $17,746 $22,125
12/31/97 $21,725 $27,423 $17,821 $22,307
01/31/98 $21,932 $27,980 $17,895 $22,606
02/28/98 $21,937 $27,778 $17,971 $22,576
03/31/98 $21,991 $27,836 $18,046 $22,644
</TABLE>
THE RETURNS FOR CLASS B SHARES OF THE FUND WILL VARY FROM THE RESULTS SHOWN DUE
TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
The accompanying chart compares the performance of the Stagecoach U.S.
Government Allocation Fund Class A shares since inception of the predecessor
fund, with the Lehman Brothers U.S. Treasury Bond Index, the Lehman Brothers
U.S. Treasury Note Index and the IBC/Donoghue Money Market Average. The chart
assumes a hypothetical $10,000 initial investment in Class A shares and reflects
all operating expenses and assumes the maximum initial sales charge of 4.5%. The
Lehman Brothers U.S. Treasury Bond Index is an unmanaged index composed of U.S.
Treasury bonds with 10 year or longer maturities. The Lehman Brothers U.S.
Treasury Note Index is an unmanaged index of U.S. Treasury notes with 2 to 10
year maturities. The IBC/Donoghue Money Market Average is an average of 700
taxable money market funds. The Fund is a professionally managed mutual fund.
The indexes presented here do not incur expenses and are not available directly
for investment. Had these indexes incurred operating expenses, their
performances would have been lower.
---------------------
17
<PAGE>
ASSET ALLOCATION FUND
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 73.03%
47,174 3Com Corp+ $ 2,113,736 $ 1,695,316
101,815 Abbott Laboratories 5,249,941 7,667,942
9,156 Adobe Systems Inc 404,399 413,737
18,821 Advanced Micro Devices+ 488,080 546,985
3,781 Aeroquip-Vickers Inc 156,692 218,589
19,819 Aetna Inc 1,864,719 1,653,648
14,541 Ahmanson (H F) & Co 594,973 1,126,928
15,631 Air Products & Chemicals Inc 1,043,424 1,295,419
67,247 Airtouch Communications Inc+ 2,095,594 3,290,900
7,425 Alberto-Culver Co Class B 167,377 225,998
32,724 Albertson's Inc 1,168,892 1,722,101
30,177 Alcan Aluminium Ltd 881,750 943,031
24,369 Allegheny Teledyne Inc 551,143 677,763
8,646 Allergan Inc 265,625 328,548
432 Allergan Specialty Therpeutics Inc+ 3,780 5,238
75,119 Allied Signal Inc 2,312,576 3,154,998
57,084 Allstate Corp 3,422,710 5,248,160
24,647 Alltel Corp 816,268 1,076,766
22,995 Aluminum Co of America 1,365,105 1,582,343
11,293 ALZA Corp+ 311,149 506,068
12,218 Amerada Hess Corp 646,587 712,462
18,280 Ameren Corp 727,857 770,045
25,244 American Electric Power Inc 1,057,885 1,268,511
61,887 American Express Corp 3,656,318 5,682,000
33,757 American General Corp 1,431,981 2,183,656
9,741 American Greetings Corp Class A 321,296 448,086
86,450 American Home Products Corp 5,209,737 8,245,169
93,423 American International Group Inc 7,251,013 11,765,459
36,264 American Stores Co 668,816 942,864
145,966 Ameritech Corp 4,350,954 7,216,194
35,011 Amgen Inc+ 1,638,837 2,131,295
64,795 Amoco Corp 4,927,224 5,596,668
29,308 AMP Inc 1,188,178 1,284,057
12,142 AMR Corp+ 1,164,121 1,738,583
</TABLE>
- ------------------------
18
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
7,999 Anadarko Petroleum Corp $ 532,385 $ 551,931
11,922 Andrew Corp+ 248,520 236,205
65,191 Anheuser-Busch Inc 2,349,013 3,019,158
22,319 Aon Corp 1,024,493 1,445,155
12,677 Apache Corp 459,046 465,880
17,658 Apple Computer Inc+ 442,692 485,595
48,704 Applied Materials Inc+ 1,245,088 1,719,860
76,038 Archer-Daniels-Midland Co 1,456,471 1,668,084
14,455 Armco Inc+ 83,911 84,923
5,364 Armstrong World Industries Inc 336,732 464,321
5,621 ASARCO Inc 152,355 150,010
10,006 Ashland Inc 433,454 566,590
216,295 AT & T Corp 9,417,161 14,194,359
42,679 Atlantic Richfield Corp 2,808,739 3,355,636
6,412 Autodesk Inc 232,572 276,518
39,764 Automatic Data Processing 1,741,760 2,706,437
20,264 AutoZone Inc+ 566,752 686,443
13,609 Avery Dennison Corp 425,421 726,380
17,609 Avon Products Inc 894,184 1,373,502
22,588 Baker Hughes Inc 758,762 909,167
4,001 Ball Corp 126,409 131,033
19,587 Baltimore Gas & Electric Co 526,052 640,250
85,957 Banc One Corp 3,430,723 5,436,780
50,142 Bank of New York Inc 1,798,853 3,149,544
92,282 BankAmerica Corp 4,572,186 7,624,800
19,318 BankBoston Corp 1,280,618 2,129,810
13,096 Bankers Trust N Y Corp 1,209,939 1,575,613
7,553 Bard (C R) Inc 228,879 277,573
49,571 Barrick Gold Corp 1,168,001 1,071,973
30,487 Battle Mountain Gold Co 220,614 194,355
7,341 Bausch & Lomb Inc 310,002 335,392
37,248 Baxter International Inc 1,591,363 2,053,296
29,320 Bay Networks Inc+ 1,108,896 795,305
18,960 BB&T Corp 1,222,735 1,283,355
16,251 Becton Dickinson & Co 661,757 1,106,084
103,396 Bell Atlantic Corp 7,201,640 10,598,090
132,030 BellSouth Corp 5,548,746 8,920,277
</TABLE>
---------------------
19
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
7,020 Bemis Co Inc $ 245,829 $ 316,778
7,077 Beneficial Corp 421,170 879,760
19,139 Bestfoods 1,433,247 2,236,871
14,934 Bethlehem Steel Corp+ 213,965 202,542
14,798 Biomet Inc+ 283,818 443,940
12,643 Black & Decker Corp 437,297 670,869
14,006 Block (H & R) Inc 568,169 666,160
133,119 Boeing Co 5,342,220 6,938,828
7,468 Boise Cascade Corp 265,840 269,315
25,950 Boston Scientific Corp+ 1,238,252 1,751,625
3,277 Briggs & Stratton Corp 148,498 150,128
132,414 Bristol-Myers Squibb Co 8,349,687 13,812,435
9,168 Brown-Forman Corp Class B 383,154 504,240
25,774 Browning-Ferris Industries Inc 874,341 840,877
13,220 Brunswick Corp 346,076 461,048
20,790 Burlington Northern Santa Fe 1,667,866 2,162,160
23,482 Burlington Resources Inc 955,984 1,125,668
21,014 Cabletron Systems Inc+ 586,297 306,016
60,922 Campbell Soup Co 2,318,000 3,457,324
14,556 Cardinal Health Inc 924,357 1,283,657
20,029 Carolina Power & Light Co 677,511 906,312
10,012 Case Corp 542,026 682,068
49,591 Caterpillar Inc 2,018,203 2,730,604
94,686 CBS Corp+ 2,207,470 3,213,406
107,812 Cendant Corp+ 2,937,414 4,272,051
7,868 Centex Corp 174,490 299,968
28,168 Central & South West Corp 718,339 753,494
10,516 Ceridian Corp+ 433,004 567,207
12,782 Champion International Corp 605,550 694,222
14,070 Charming Shoppes Inc+ 95,626 66,833
56,086 Chase Manhattan Bank 4,527,061 7,564,599
87,398 Chevron Corp 5,575,695 7,019,152
86,252 Chrysler Corp 2,584,665 3,584,849
22,687 Chubb Corp 1,289,788 1,778,094
9,818 CIGNA Corp 1,315,412 2,012,690
7,273 Cincinnati Financial Corp 1,014,541 910,943
5,336 Cincinnati Milacron Inc 129,970 170,085
</TABLE>
- ------------------------
20
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
20,951 Cinergy Corp $ 640,896 $ 775,187
13,152 Circuit City Stores Inc 403,687 562,248
135,443 Cisco Systems Inc+ 5,348,756 9,260,915
60,851 Citicorp 5,933,278 8,640,842
13,098 Clear Channel Communications Inc+ 893,609 1,283,604
13,802 Clorox Co 733,950 1,182,659
14,097 Coastal Corp 634,238 918,067
329,301 Coca-Cola Co 15,828,828 25,500,246
21,564 Cognizant Corp 797,560 1,237,235
39,376 Colgate-Palmolive Co 2,068,008 3,410,946
7,416 Columbia Gas System Inc 386,515 576,594
86,143 Columbia HCA Healthcare Corp 2,753,098 2,778,112
46,475 Comcast Corp Class A 1,051,720 1,641,148
14,028 Comerica Inc 829,874 1,484,338
201,588 Compaq Computer Corp 3,797,350 5,216,090
72,807 Computer Associates International Inc 2,475,387 4,204,604
20,832 Computer Sciences Corp+ 748,573 1,145,760
63,300 ConAgra Inc 1,656,247 2,033,513
25,094 Conseco Inc 1,005,677 1,420,948
31,260 Consolidated Edison Inc 1,030,655 1,461,405
12,687 Consolidated Natural Gas Co 629,571 731,881
14,307 Consolidated Stores Corp+ 623,305 614,307
16,088 Cooper Industries Inc 753,237 956,231
10,427 Cooper Tire & Rubber Co 258,187 247,641
4,919 Coors (Adolph) Co Class B 123,316 172,165
26,289 CoreStates Financial Corp 1,456,469 2,359,438
30,709 Corning Inc 1,150,160 1,358,873
28,514 Costco Companies Inc+ 795,965 1,525,499
14,403 Countrywide Credit Industries Inc 504,530 766,060
6,075 Crane Co 198,343 321,975
17,042 Crown Cork & Seal Co 822,429 911,747
29,013 CSX Corp 1,416,991 1,726,274
5,047 Cummins Engine Co Inc 272,558 278,216
22,898 CVS Corp 1,110,415 1,728,799
12,276 Cyprus Amax Minerals 294,502 204,089
13,927 Dana Corp 514,626 810,377
20,261 Darden Restaurants Inc 224,372 315,312
</TABLE>
---------------------
21
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,318 Data General Corp+ $ 116,935 $ 111,750
29,078 Dayton-Hudson Corp 1,265,972 2,558,864
33,558 Deere & Co 1,443,529 2,078,499
86,928 Dell Computer Corp+ 2,149,817 5,889,372
9,971 Delta Air Lines Inc 901,311 1,179,071
10,799 Deluxe Corp 354,704 355,692
19,467 Digital Equipment Corp + 859,731 1,018,367
14,875 Dillards Inc Class A 500,017 549,445
89,871 Disney (Walt) Co 6,835,929 9,593,729
25,698 Dominion Resources Inc 1,032,934 1,079,316
19,377 Donnelley (R R) & Sons Co 693,556 795,668
29,550 Dover Corp 764,009 1,122,900
30,179 Dow Chemical Co 2,454,143 2,934,908
12,852 Dow Jones & Co Inc 552,467 680,353
23,323 Dresser Industries Inc 736,044 1,120,962
15,664 DSC Communications Corp + 444,443 284,889
19,245 DTE Energy Co 597,754 756,569
47,885 Duke Power Co 2,023,113 2,852,150
22,589 Dun & Bradstreet Corp 574,116 772,261
150,654 DuPont (E I) de Nemours 7,069,825 10,244,472
2,653 Eastern Enterprises 89,086 114,079
10,433 Eastman Chemical Co 601,915 703,575
43,221 Eastman Kodak Co 2,705,777 2,803,962
10,274 Eaton Corp 756,789 977,956
8,335 Echlin Inc 288,130 437,067
17,130 Ecolab Inc 323,717 496,770
50,733 Edison International 1,098,329 1,490,282
6,140 EG & G Inc 117,327 178,444
65,951 EMC Corp+ 1,248,204 2,493,772
59,019 Emerson Electric Co 2,716,324 3,847,301
19,170 Engelhard Corp 372,863 364,230
41,365 Enron Corp 1,563,868 1,918,302
32,367 Entergy Corp 917,253 962,918
19,990 Equifax Inc 638,476 729,635
328,289 Exxon Corp 16,077,819 22,200,544
19,492 FDX Corp 1,015,412 1,386,369
92,527 Federal Home Loan Mortgage Corp 2,559,842 4,389,250
</TABLE>
- ------------------------
22
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
141,214 Federal National Mortgage Association $ 5,345,232 $ 8,931,786
27,876 Federated Department Stores Inc+ 968,190 1,444,325
20,722 Fifth Third Bancorp 1,118,154 1,771,731
38,774 First Chicago NBD Corp 2,050,119 3,416,959
56,877 First Data Corp 1,917,333 1,848,503
86,072 First Union Corp 3,359,680 4,884,586
30,639 First Energy Corp 743,883 944,064
36,275 Fleet Financial Group Inc 1,961,967 3,085,642
4,759 Fleetwood Enterprises Inc 135,413 221,591
11,164 Fluor Corp 552,828 555,409
4,866 FMC Corp+ 326,713 381,981
159,772 Ford Motor Co 5,916,779 10,355,223
27,827 Fort James Corp 1,035,153 1,274,824
22,783 Fortune Brands Inc 733,602 908,472
5,374 Foster Wheeler Corp 204,310 164,243
24,169 FPL Group Inc 1,102,571 1,552,858
26,094 Freeport McMoRan Copper & Gold Inc Class B 675,872 520,249
21,768 Frontier Corp 499,387 708,821
9,949 Fruit of the Loom Inc Class A+ 271,374 304,688
37,757 Gannett Co Inc 1,586,569 2,713,784
52,632 Gap Inc 1,213,185 2,368,440
8,331 General Dynamics Corp 557,099 717,507
435,725 General Electric Co 22,178,551 37,554,048
19,513 General Instrument Corp + 337,842 408,553
21,083 General Mills Inc 1,283,531 1,602,308
94,131 General Motors Corp 4,962,995 6,347,959
10,429 General Re Corp 1,774,742 2,300,898
6,685 General Signal Corp 264,028 312,524
23,727 Genuine Parts Co 716,961 904,592
12,371 Georgia-Pacific Corp 715,711 801,022
7,945 Giant Food Inc Class A 236,189 306,876
74,610 Gillette Co 5,639,880 8,855,274
7,542 Golden West Financial 484,092 722,618
9,516 Goodrich (B F) Co 352,465 485,911
20,837 Goodyear Tire & Rubber Co 1,104,063 1,578,403
16,834 GPU Inc 577,113 744,905
9,894 Grace W.R. & Co 600,816 828,004
</TABLE>
---------------------
23
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
6,651 Grainger (W W) Inc $ 524,214 $ 683,806
5,070 Great Atlantic & Pacific Tea Co 133,554 153,368
7,916 Great Lakes Chemical Corp 475,788 427,464
18,086 Green Tree Financial Corp 630,725 514,321
127,449 GTE Corp 5,420,716 7,631,009
20,033 Guidant Corp 826,608 1,469,921
34,878 Halliburton Co 1,262,909 1,750,440
9,414 Harcourt General Inc 423,086 521,300
4,121 Harland (John H) Co 92,579 64,133
6,559 Harnischfeger Industries Inc 230,363 224,236
13,635 Harrah's Entertainment Inc+ 348,565 334,910
10,658 Harris Corp 377,874 555,548
15,755 Hartford Financial Services Group 1,051,730 1,709,418
16,834 Hasbro Inc 454,726 594,451
28,147 HBO & Co 1,304,706 1,699,375
52,374 Healthsouth Corp+ 1,250,282 1,469,745
48,885 Heinz (H J) Co 1,889,526 2,853,662
6,612 Helmerich & Payne Inc 160,565 206,625
13,185 Hercules Inc 636,827 651,009
19,034 Hershey Foods Corp 842,841 1,363,310
138,501 Hewlett Packard Co 6,623,503 8,777,501
33,328 Hilton Hotels Corp 777,391 1,062,330
97,444 Home Depot Inc 4,028,769 6,571,380
19,357 Homestake Mining Co 307,847 210,507
16,898 Honeywell Inc 957,839 1,397,253
14,291 Household International Inc 1,250,592 1,968,585
37,879 Houston Industries Inc 844,521 1,089,021
21,705 Humana Inc+ 553,209 538,555
25,441 Huntington Bancshares Inc 884,012 927,006
17,902 IKON Office Solutions 546,471 618,738
33,212 Illinois Tool Works Inc 1,311,973 2,150,477
22,181 Inco Ltd 600,747 414,507
22,068 Ingersoll-Rand Co 728,353 1,057,885
6,588 Inland Steel Industries Inc 169,435 181,994
217,834 Intel Corp 11,220,470 17,004,667
129,438 International Business Machines Corp 9,503,832 13,445,372
14,482 International Flavors & Fragrances 689,572 682,464
</TABLE>
- ------------------------
24
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
40,221 International Paper Co $ 1,773,984 $ 1,882,846
16,736 Interpublic Group Cos Inc 597,612 1,039,724
15,742 ITT Industries Inc 396,702 599,180
9,478 Jefferson-Pilot Corp 551,798 842,950
179,097 Johnson & Johnson 8,809,747 13,130,049
11,145 Johnson Controls Inc 416,440 676,362
5,146 Jostens Inc 115,611 123,504
64,788 K Mart Corp 878,668 1,081,150
5,175 Kaufman & Broad Home Corp 96,170 168,511
54,727 Kellogg Co 2,122,227 2,360,102
6,393 Kerr-McGee Corp 375,721 444,713
58,414 KeyCorp 1,423,541 2,208,779
73,937 Kimberly-Clark Corp 3,042,501 3,706,092
9,738 King World Productions+ 212,240 284,837
11,196 KLA Instruments Corp + 718,472 428,247
11,474 Knight-Ridder Inc 468,670 641,110
33,908 Kroger Co+ 809,581 1,566,126
43,663 Laidlaw Inc 525,591 693,150
13,530 Lehman Brothers Holdings 695,947 1,013,059
147,680 Lilly (Eli) & Co 6,243,518 8,805,420
36,157 Limited Inc 744,572 1,037,254
13,570 Lincoln National Corp 781,678 1,151,754
8,836 Liz Claiborne Inc 318,624 440,696
25,848 Lockheed Martin Corp 2,084,274 2,907,900
15,321 Loews Corp 1,296,540 1,597,214
5,142 Longs Drug Stores Corp 117,590 156,510
14,548 Louisiana-Pacific Corp 391,685 338,241
23,252 Lowe's Co Inc 886,040 1,632,000
18,790 LSI Logic Corp+ 574,136 474,448
86,613 Lucent Technologies Inc 5,615,819 11,075,637
9,644 Mallinckrodt Inc 355,922 380,938
8,438 Manor Care Inc 232,514 312,206
16,961 Marriott International Inc 217,374 630,737
16,961 Marriott International Inc Class A 210,852 607,416
22,609 Marsh & McLennan Companies Inc 1,358,512 1,974,048
21,997 Masco Corp 844,065 1,308,822
38,716 Mattel Inc 1,116,242 1,534,122
</TABLE>
---------------------
25
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
30,787 May Department Stores Co $ 1,372,558 $ 1,954,975
12,838 Maytag Corp 321,361 613,817
13,065 MBIA Inc 761,554 1,012,538
66,726 MBNA Corp 1,233,791 2,389,625
7,467 McDermott International Inc 215,282 308,480
91,649 McDonald's Corp 3,982,089 5,498,940
13,220 McGraw-Hill Inc 696,817 1,005,546
92,713 MCI Communications 3,013,191 4,589,294
13,908 Mead Corp 402,317 498,080
62,403 Medtronic Inc 2,114,770 3,237,156
33,858 Mellon Bank Corp 1,304,971 2,149,983
17,499 Mercantile Bancorporation 988,725 959,164
4,913 Mercantile Stores Co Inc 254,704 330,092
159,499 Merck & Co Inc 12,106,000 20,475,684
7,067 Meredith Corp 170,081 297,697
44,364 Merrill Lynch & Co Inc 2,053,623 3,682,212
15,192 MGIC Investment Corp 677,571 997,925
28,109 Micron Technology Inc + 916,747 816,918
324,126 Microsoft Corp+ 14,407,827 29,009,277
5,719 Millipore Corp 202,249 198,735
54,399 Minnesota Mining & Manufacturing Co 4,106,349 4,960,509
23,862 Mirage Resorts Inc + 624,080 580,145
104,466 Mobil Corp 6,253,443 8,004,707
78,948 Monsanto Co 2,415,898 4,105,296
11,804 Moore Corp Ltd 219,296 196,242
23,670 Morgan (J P) & Co Inc 2,177,591 3,179,177
78,867 Morgan St Dean Witter Discover 3,128,839 5,747,433
17,345 Mortan International Inc 505,575 569,133
79,500 Motorola Inc 4,793,255 4,819,688
1,111 NACCO Industries Inc Class A 78,506 148,874
8,832 Nalco Chemical Co 323,440 358,248
28,068 National City Corp 1,347,207 2,057,735
21,700 National Semiconductor + 541,428 454,344
5,871 National Service Industries Inc 223,785 345,288
125,686 NationsBank Corp 5,742,713 9,167,223
10,027 Navistar International + 200,043 350,945
12,735 New York Times Co Class A 530,758 891,450
</TABLE>
- ------------------------
26
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
21,149 Newell Co $ 683,959 $ 1,024,405
20,726 Newmont Mining Corp 793,939 633,438
19,158 Niagara Mohawk Power Corp+ 251,069 249,054
6,488 NICOR Inc 210,098 274,118
38,668 Nike Inc Class B 1,426,543 1,711,059
10,272 Nordstrom Inc 485,438 655,482
50,165 Norfolk Southern Corp 1,446,942 1,874,917
9,881 Northern States Power Co 484,193 582,979
69,310 Northern Telecom Ltd 2,339,134 4,479,159
14,912 Northern Trust Corp 1,032,651 1,114,672
8,867 Northrop Grumman Corp 763,864 952,648
100,550 Norwest Corp 2,466,422 4,179,109
46,304 Novell Inc+ 594,461 496,321
11,696 Nucor Corp 630,053 636,701
45,047 Occidental Petroleum Corp 1,066,739 1,320,440
21,498 Omnicom Group 846,604 1,011,750
4,140 ONEOK Inc 117,205 168,705
130,968 Oracle Systems Corp+ 3,132,688 4,133,678
13,971 Oryx Energy Co+ 271,792 363,246
7,043 Owens Corning Fiberglass Corp 272,622 253,108
18,706 Owens-Illinois Inc+ 672,497 809,035
10,321 PACCAR Inc 379,975 614,745
11,071 Pacific Enterprises 330,908 451,835
39,476 PacifiCorp 841,518 972,097
16,816 Pall Corp 376,801 361,544
34,152 Parametric Technology Corp+ 754,075 1,137,689
14,867 Parker Hannifin Corp 468,890 761,934
29,549 PECO Energy Co 736,305 653,772
33,321 Penney (J C) Co Inc 1,772,196 2,521,983
6,319 Pennzoil Co 374,987 408,365
4,628 Peoples Energy Corp 152,973 168,344
8,414 Pep Boys-Manny Moe & Jack 244,141 195,100
201,940 Pepsico Inc 5,874,886 8,620,314
6,442 Perkin-Elmer Corp 360,933 465,837
172,142 Pfizer Inc 8,176,829 17,160,406
58,335 PG&E Corp 1,636,278 1,925,055
67,597 Pharmacia and Upjohn Inc 2,451,999 2,957,369
</TABLE>
---------------------
27
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
7,894 Phelps Dodge Corp $ 528,535 $ 509,656
322,703 Philip Morris Co Inc 11,101,258 13,452,681
35,008 Phillips Petroleum Co 1,391,516 1,748,212
8,803 Pioneer Hi Bred International Inc 608,460 858,843
38,544 Pitney Bowes Inc 1,197,316 1,934,427
32,950 Placer Dome Inc 653,479 434,528
40,580 PNC Bank Corp 1,634,672 2,432,264
5,993 Polaroid Corp 260,789 263,692
3,823 Potlatch Corp 171,296 164,628
22,111 PP & L Resources Inc 526,887 522,372
23,664 PPG Industries Inc 1,176,248 1,607,673
21,015 Praxair Inc 821,701 1,080,959
178,767 Procter & Gamble Co 10,091,671 15,083,466
9,616 Progressive Corp Ohio 1,053,847 1,295,155
12,616 Providian Financial Corp 324,563 724,632
30,789 Public Services Enterprise Group 892,329 1,166,133
2,818 Pulte Corp 94,772 131,037
18,419 Quaker Oats Co 761,635 1,054,488
14,225 Ralston-Purina Group 1,015,455 1,507,850
11,577 Raychem Corp 390,860 481,169
45,134 Raytheon Co Class B 2,170,541 2,634,697
7,477 Reebok International Ltd 262,044 228,049
7,286 Republic New York Corp 619,136 971,770
9,859 Reynolds Metals Co 581,331 605,712
34,422 Rite Aid Corp 786,659 1,178,954
26,754 Rockwell International Corp 1,225,996 1,535,011
8,116 Rohm & Haas Co 605,533 838,484
11,523 Rowan Co Inc+ 233,721 334,167
285,460 Royal Dutch Petroleum Co 11,996,396 16,217,696
19,896 Rubbermaid Inc 589,393 567,036
4,827 Russell Corp 137,507 129,424
10,118 Ryder System Inc 298,024 384,484
18,743 SAFECO Corp 752,748 1,024,422
7,748 Safety-Kleen Corp 146,857 219,850
62,921 Sara Lee Corp 2,507,720 3,877,507
244,038 SBC Communication Inc 6,778,079 10,646,158
97,483 Schering-Plough Corp 3,837,741 7,963,143
</TABLE>
- ------------------------
28
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
66,291 Schlumberger Ltd $ 3,652,035 $ 5,021,543
35,303 Schwab (Charles) Corp 1,077,376 1,341,514
10,446 Scientific-Atlanta Inc 197,357 204,350
32,493 Seagate Technology Inc+ 976,341 820,448
47,583 Seagram Co Ltd 1,634,808 1,817,076
52,219 Sears Roebuck & Co 2,133,149 2,999,329
33,558 Service Corp International 919,168 1,424,118
3,377 Shared Medical System Corp 168,075 264,672
22,981 Sherwin Williams Co 556,832 815,826
13,293 Sigma-Aldrich Corp 379,638 495,164
24,846 Silicon Graphics Inc+ 591,824 346,291
8,120 Snap-On Inc 281,393 370,482
14,589 Sonat Inc 591,985 634,622
91,800 Southern Co 2,093,607 2,541,713
29,355 Southwest Airlines Co 561,159 867,807
2,677 Springs Industries Inc Class A 118,694 147,068
57,268 Sprint Corp 2,574,996 3,876,328
12,212 St Jude Medical Inc+ 401,777 408,339
11,144 St Paul Co Inc 738,403 993,209
11,855 Stanley Works 394,592 660,916
21,410 State Street Corp 1,122,482 1,457,218
13,141 Stone Container Corp 203,271 164,263
23,381 Summit Bancorp 1,168,717 1,170,511
9,545 Sun Co Inc 311,790 390,152
50,299 Sun Microsystems Inc+ 1,336,325 2,098,411
25,916 Sunamerica Inc 989,882 1,240,729
28,108 SunTrust Banks Inc 1,333,240 2,118,641
7,965 Supervalu Inc 275,739 371,368
23,311 Synovus Financial Corp 753,927 865,421
45,762 Sysco Corp 789,600 1,172,651
13,891 Tandy Corp 390,638 652,877
6,757 Tektronix Inc 226,500 301,531
67,513 Tele-Communication Inc Class A+ 1,341,626 2,099,232
24,141 Tellabs Inc+ 944,558 1,620,465
7,507 Temple-Inland Inc 398,672 466,372
40,770 Tenet Healthcare Corp+ 1,079,366 1,480,461
22,607 Tenneco 996,916 965,036
</TABLE>
---------------------
29
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
72,931 Texaco Inc $ 3,373,116 $ 4,394,093
51,926 Texas Instruments Inc 1,895,427 2,810,495
32,738 Texas Utilities Co 1,272,778 1,287,013
21,882 Textron Inc 1,041,165 1,684,914
20,090 Thermo Electron Corp+ 784,137 811,134
7,355 Thomas & Betts Corp 333,744 470,720
77,004 Time Warner Inc 3,784,892 5,544,288
11,728 Times Mirror Co Class A 516,779 743,262
8,317 Timken Co 221,160 281,219
21,755 TJX Companies Inc 468,873 984,414
18,637 Torchmark Corp 587,377 853,808
37,956 Toys R Us Inc+ 1,273,225 1,141,052
8,324 Transamerica Corp 684,908 969,746
152,710 Travelers Group Inc 5,008,128 9,162,600
16,375 Tribune Co 694,053 1,154,438
20,163 Tricon Global Restaurants+ 491,853 606,150
16,370 TRW Inc 774,830 902,396
8,099 Tupperware Corp 259,081 215,636
76,184 Tyco International Ltd+ 3,028,308 4,161,551
32,640 U.S. Bancorp 2,455,360 4,071,840
64,324 U.S. West Inc+ 2,234,810 3,521,739
80,837 U.S. West Media Group+ 1,799,290 2,809,086
28,745 Unicom Corp 791,137 1,006,075
85,217 Unilever NV 3,805,073 5,848,017
9,283 Union Camp Corp 488,323 554,659
16,350 Union Carbide Corp 667,898 819,544
32,887 Union Pacific Corp 1,799,045 1,847,838
33,748 Union Pacific Resources Group Inc 852,916 805,734
33,129 Unisys Corp+ 452,313 629,451
25,068 United Healthcare Corp 1,291,664 1,623,153
10,002 United States Surgical 283,175 330,066
31,041 United Technologies Corp 1,819,139 2,865,472
32,823 Unocal Corp 1,131,680 1,269,840
18,452 UNUM Corp 694,302 1,018,320
12,137 USAir Group Inc+ 414,442 899,655
14,929 USF & G Corp 287,755 372,292
24,503 UST Inc 764,042 790,222
</TABLE>
- ------------------------
30
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
38,410 USX - Marathon Group $ 979,862 $ 1,445,176
11,411 USX - US Steel Group 395,272 430,765
16,463 VF Corp 567,627 865,336
47,055 Viacom Inc Class B+ 1,816,771 2,529,206
6,092 Vlasic Foods International Inc+ 105,850 155,732
27,375 Wachovia Corp 1,688,792 2,321,742
298,962 Wal Mart Stores Inc 9,142,446 15,191,007
65,919 Walgreen Co 1,413,034 2,319,525
36,218 Warner Lambert Co 3,195,475 6,168,378
34,263 Washington Mutual Inc 1,874,401 2,457,300
60,497 Waste Management Inc 1,733,934 1,864,064
11,501 Wells Fargo & Co 2,696,632 3,809,706
17,482 Wendy's International Inc 364,857 390,067
7,210 Western Atlas Inc+ 370,351 557,874
13,600 Westvaco Corp 403,517 418,200
26,554 Weyerhaeuser Co 1,261,185 1,500,301
9,969 Whirlpool Corp 570,188 683,500
14,725 Willamette Industries Inc 495,162 553,108
56,449 Williams Co Inc 1,238,163 1,806,368
19,864 Winn-Dixie Stores Inc 694,004 921,193
17,839 Woolworth Corp+ 362,045 445,975
134,911 WorldCom Inc+ 3,982,285 5,809,605
12,858 Worthington Industries Inc 252,145 233,051
15,457 Wrigley (Wm) Jr Co 951,675 1,263,610
43,356 Xerox Corp 2,529,697 4,614,678
------------ --------------
TOTAL COMMON STOCKS $790,952,929 $1,148,557,765
</TABLE>
---------------------
31
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 27.04%
U.S. TREASURY BILLS - 0.46%
$ 305,000 U.S. Treasury Bills 5.16%(F) 04/30/98 $ 303,713
925,000 U.S. Treasury Bills 5.32(F) 04/02/98 924,749
348,000 U.S. Treasury Bills 5.32(F) 04/16/98 347,226
5,705,000 U.S. Treasury Bills 5.32(F) 04/23/98 5,685,644
--------------
$ 7,261,332
U.S. TREASURY BONDS - 26.58%
$13,775,000 U.S. Treasury Bonds 6.00% 02/15/26 $ 13,749,172
17,200,000 U.S. Treasury Bonds 6.13 11/15/27 17,628,968
25,675,000 U.S. Treasury Bonds 6.25 08/15/23 26,453,286
8,950,000 U.S. Treasury Bonds 6.38 08/15/27 9,455,765
11,800,000 U.S. Treasury Bonds 6.50 11/15/26 12,585,443
12,150,000 U.S. Treasury Bonds 6.63 02/15/27 13,177,283
7,750,000 U.S. Treasury Bonds 6.75 08/15/26 8,522,582
13,650,000 U.S. Treasury Bonds 6.88 08/15/25 15,211,219
20,425,000 U.S. Treasury Bonds 7.13 02/15/23 23,303,659
11,850,000 U.S. Treasury Bonds 7.25 08/15/22 13,686,750
9,575,000 U.S. Treasury Bonds 7.50 11/15/24 11,448,109
12,275,000 U.S. Treasury Bonds 7.63 11/15/22 14,772,201
13,100,000 U.S. Treasury Bonds 7.63 02/15/25 15,893,444
12,200,000 U.S. Treasury Bonds 7.88 02/15/21 14,971,694
34,250,000 U.S. Treasury Bonds 8.00 11/15/21 42,684,063
21,799,000 U.S. Treasury Bonds 8.13 08/15/19 27,255,573
12,175,000 U.S. Treasury Bonds 8.13 05/15/21 15,332,891
13,600,000 U.S. Treasury Bonds 8.13 08/15/21 17,144,500
11,150,000 U.S. Treasury Bonds 8.50 02/15/20 14,477,584
8,000,000 U.S. Treasury Bonds 8.75 05/15/20 10,644,960
23,750,000 U.S. Treasury Bonds 8.75 08/15/20 31,646,875
18,815,000 U.S. Treasury Bonds 8.88 02/15/19 25,147,433
10,349,000 U.S. Treasury Bonds 9.00 11/15/18 13,964,682
6,600,000 U.S. Treasury Bonds 9.13 05/15/18 8,978,066
--------------
$ 418,136,202
TOTAL U.S. TREASURY SECURITIES $ 425,397,534
(Cost $383,473,943)
</TABLE>
- ------------------------
32
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $1,174,426,872)* (Notes 1 and 3) 100.07% $1,573,955,299
Other Assets and Liabilities, Net (0.07) (1,047,039)
------ --------------
TOTAL NET ASSETS 100.00% $1,572,908,260
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $410,481,876
Gross Unrealized Depreciation (10,953,449)
------------
NET UNREALIZED APPRECIATION $399,528,427
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
33
<PAGE>
INDEX ALLOCATION FUND
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 98.62%
6,121 3Com Corp+ $ 295,177 $ 219,973
13,308 Abbott Laboratories 756,904 1,002,259
1,205 Adobe Systems Inc 54,175 54,451
2,404 Advanced Micro Devices+ 65,726 69,866
521 Aeroquip-Vickers Inc 23,202 30,120
2,584 Aetna Inc 219,038 215,603
1,913 Ahmanson (H F) & Co 84,843 148,258
2,089 Air Products & Chemicals Inc 150,239 173,126
8,780 Airtouch Communications Inc+ 273,279 429,671
977 Alberto-Culver Co Class B 24,668 29,737
4,239 Albertson's Inc 153,872 223,077
3,984 Alcan Aluminium Ltd 130,603 124,500
3,191 Allegheny Teledyne Inc 79,429 88,750
1,115 Allergan Inc 35,939 42,370
55 Allergan Specialty TherapeuticsInc+ 481 667
9,774 Allied Signal Inc 341,637 410,508
7,490 Allstate Corp 480,453 688,612
3,242 Alltel Corp 105,175 141,635
2,983 Aluminum Co of America 196,466 205,268
1,440 ALZA Corp+ 38,001 64,530
1,603 Amerada Hess Corp 89,570 93,475
2,342 Ameren Corp 92,071 98,657
3,323 American Electric Power Inc 139,607 166,981
8,102 American Express Corp 511,425 743,865
4,397 American General Corp 195,549 284,431
1,272 American Greetings Corp Class A 40,851 58,512
11,341 American Home Products Corp 745,821 1,081,648
12,189 American International Group Inc 1,027,110 1,535,052
4,699 American Stores Co 96,462 122,174
19,064 Ameritech Corp 591,403 942,477
4,576 Amgen Inc+ 239,720 278,564
8,464 Amoco Corp 696,608 731,078
3,838 AMP Inc 164,352 168,152
1,544 AMR Corp+ 154,319 221,082
</TABLE>
- ------------------------
34
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,045 Anadarko Petroleum Corp $ 70,073 $ 72,105
1,517 Andrew Corp+ 42,293 30,056
8,483 Anheuser-Busch Inc 333,041 392,869
2,922 Aon Corp 139,133 189,200
1,630 Apache Corp 59,502 59,903
2,305 Apple Computer Inc+ 60,226 63,388
6,411 Applied Materials Inc+ 187,392 226,388
9,976 Archer-Daniels-Midland Co 201,146 218,849
1,759 Armco Inc+ 9,601 10,334
732 Armstrong World Industries Inc 49,224 63,364
667 ASARCO Inc 19,437 17,801
1,317 Ashland Inc 60,414 74,575
28,251 AT & T Corp 1,170,677 1,853,972
5,600 Atlantic Richfield Corp 393,926 440,300
868 Autodesk Inc 32,667 37,433
5,198 Automatic Data Processing 239,072 353,789
2,656 AutoZone Inc+ 76,022 89,972
1,741 Avery Dennison Corp 58,442 92,926
2,275 Avon Products Inc 132,527 177,450
2,903 Baker Hughes Inc 109,040 116,846
518 Ball Corp 15,352 16,965
2,556 Baltimore Gas & Electric Co 69,034 83,549
11,268 Banc One Corp 489,133 712,701
6,535 Bank of New York Inc 253,000 410,480
12,072 BankAmerica Corp 669,464 997,449
2,495 BankBoston Corp 181,792 275,074
1,657 Bankers Trust N Y Corp 159,730 199,358
1,025 Bard (C R) Inc 31,885 37,669
6,435 Barrick Gold Corp 150,980 139,157
3,764 Battle Mountain Gold Co 25,811 23,996
919 Bausch & Lomb Inc 37,044 41,987
4,876 Baxter International Inc 227,512 268,790
3,866 Bay Networks Inc+ 127,241 104,865
2,516 BB&T Corp 163,472 170,302
2,161 Becton Dickinson & Co 93,297 147,083
13,545 Bell Atlantic Corp 955,216 1,388,363
17,253 BellSouth Corp 750,753 1,165,656
</TABLE>
---------------------
35
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
964 Bemis Co Inc $ 36,854 $ 43,501
880 Beneficial Corp 58,217 109,395
2,480 Bestfoods 196,416 289,850
1,960 Bethlehem Steel Corp+ 22,862 26,583
1,907 Biomet Inc+ 36,575 57,210
1,696 Black & Decker Corp 63,245 89,994
1,835 Block (H & R) Inc 68,450 87,277
17,373 Boeing Co 795,245 905,568
979 Boise Cascade Corp 34,940 35,305
3,392 Boston Scientific Corp+ 184,139 228,960
397 Briggs & Stratton Corp 17,181 18,188
17,268 Bristol-Myers Squibb Co 1,172,511 1,801,268
1,214 Brown-Forman Corp Class B 56,422 66,770
3,341 Browning-Ferris Industries Inc 110,770 109,000
1,771 Brunswick Corp 48,955 61,764
2,715 Burlington Northern Santa Fe 230,084 282,360
3,090 Burlington Resources Inc 134,844 148,127
2,785 Cabletron Systems Inc+ 85,199 40,557
7,946 Campbell Soup Co 321,230 450,936
1,884 Cardinal Health Inc 119,753 166,145
2,651 Carolina Power & Light Co 91,919 119,958
1,298 Case Corp 73,177 88,426
6,479 Caterpillar Inc 287,295 356,750
12,382 CBS Corp+ 289,744 420,214
14,071 Cendant Corp+ 385,893 557,563
1,046 Centex Corp 23,561 39,879
3,698 Central & South West Corp 89,909 98,922
1,347 Ceridian Corp+ 57,756 72,654
1,720 Champion International Corp 85,518 93,418
1,717 Charming Shoppes Inc+ 9,039 8,156
7,373 Chase Manhattan Bank 675,970 994,433
11,449 Chevron Corp 791,122 919,498
11,344 Chrysler Corp 366,632 471,485
2,986 Chubb Corp 177,640 234,028
1,302 CIGNA Corp 189,311 266,910
995 Cincinnati Financial Corp 138,015 124,624
707 Cincinnati Milacron Inc 17,788 22,536
</TABLE>
- ------------------------
36
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
2,789 Cinergy Corp $ 89,543 $ 103,193
1,741 Circuit City Stores Inc 58,923 74,428
17,713 Cisco Systems Inc+ 775,943 1,211,126
7,979 Citicorp 877,159 1,133,018
1,746 Clear Channel Communications Inc+ 121,006 171,108
1,799 Clorox Co 102,749 154,152
1,885 Coastal Corp 92,974 122,761
43,053 Coca-Cola Co 2,334,610 3,333,917
2,854 Cognizant Corp 105,926 163,748
5,136 Colgate-Palmolive Co 294,110 444,906
945 Columbia Gas System Inc 60,939 73,474
11,226 Columbia HCA Healthcare Corp 371,859 362,039
6,079 Comcast Corp Class A 130,157 214,665
1,839 Comerica Inc 121,365 194,589
26,346 Compaq Computer Corp 551,839 681,703
9,521 Computer Associates International Inc 362,906 549,838
2,776 Computer Sciences Corp+ 107,697 152,680
8,322 ConAgra Inc 229,515 267,344
3,326 Conseco Inc 134,510 188,335
4,120 Consolidated Edison Inc 132,250 192,610
1,669 Consolidated Natural Gas Co 89,787 96,280
1,852 Consolidated Stores Corp+ 80,204 79,520
2,123 Cooper Industries Inc 101,869 126,186
1,339 Cooper Tire & Rubber Co 31,109 31,801
651 Coors (Adolph) Co Class B 16,963 22,785
3,439 CoreStates Financial Corp 198,324 308,650
3,992 Corning Inc 162,087 176,646
3,775 Costco Companies Inc+ 114,862 201,963
1,840 Countrywide Credit Industries Inc 63,614 97,865
819 Crane Co 29,425 43,407
2,249 Crown Cork & Seal Co 112,570 120,322
3,797 CSX Corp 187,695 225,922
683 Cummins Engine Co Inc 39,390 37,650
2,998 CVS Corp 154,114 226,349
1,572 Cyprus Amax Minerals 37,516 26,135
1,870 Dana Corp 70,570 108,811
2,509 Darden Restaurants Inc 25,772 39,046
</TABLE>
---------------------
37
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
784 Data General Corp+ $ 18,139 $ 13,867
3,793 Dayton-Hudson Corp 181,493 333,784
4,357 Deere & Co 199,497 269,862
11,410 Dell Computer Corp+ 312,025 773,028
1,326 Delta Air Lines Inc 123,906 156,800
1,420 Deluxe Corp 46,014 46,771
2,515 Digital Equipment Corp+ 105,974 131,566
1,968 Dillards Inc Class A 63,877 72,693
11,782 Disney (Walt) Co 915,926 1,257,729
3,359 Dominion Resources Inc 126,771 141,078
2,530 Donnelley (R R) & Sons Co 90,117 103,888
3,842 Dover Corp 110,089 145,996
3,913 Dow Chemical Co 327,990 380,539
1,682 Dow Jones & Co Inc 71,561 89,041
3,037 Dresser Industries Inc 104,548 145,966
1,986 DSC Communications Corp+ 55,169 36,120
2,555 DTE Energy Co 78,313 100,443
6,269 Duke Power Co 276,287 373,397
2,984 Dun & Bradstreet Corp 75,751 102,016
19,701 DuPont (E I) de Nemours 1,016,537 1,339,668
305 Eastern Enterprises 10,490 13,115
1,364 Eastman Chemical Co 80,961 91,985
5,654 Eastman Kodak Co 391,255 366,803
1,345 Eaton Corp 103,504 128,027
1,076 Echlin Inc 36,714 56,423
2,208 Ecolab Inc 44,270 64,032
6,622 Edison International 144,076 194,521
795 EG & G Inc 14,927 23,105
8,593 EMC Corp+ 172,296 324,923
7,698 Emerson Electric Co 384,624 501,813
2,472 Engelhard Corp 53,971 46,968
5,484 Enron Corp 222,777 254,321
4,283 Entergy Corp 112,544 127,419
2,574 Equifax Inc 82,008 93,951
42,940 Exxon Corp 2,274,536 2,903,818
2,532 FDX Corp 133,152 180,089
12,077 Federal Home Loan Mortgage Corp 369,065 572,903
</TABLE>
- ------------------------
38
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
18,503 Federal National Mortgage Association $ 766,261 $ 1,170,315
3,652 Federated Department Stores Inc+ 134,789 189,219
2,749 Fifth Third Bancorp 152,495 235,040
5,026 First Chicago NBD Corp 289,031 442,916
7,439 First Data Corp 270,501 241,768
11,247 First Union Corp 469,167 638,267
4,031 First Energy Corp 97,803 124,205
4,713 Fleet Financial Group Inc 277,791 400,900
642 Fleetwood Enterprises Inc 19,806 29,893
1,496 Fluor Corp 84,639 74,426
594 FMC Corp+ 45,380 46,629
20,914 Ford Motor Co 809,448 1,355,489
3,602 Fort James Corp 145,571 165,017
2,993 Fortune Brands Inc 101,756 119,346
696 Foster Wheeler Corp 27,495 21,272
3,123 FPL Group Inc 145,620 200,653
3,335 Freeport McMoRan Copper & Gold Inc Class B 91,608 66,492
2,856 Frontier Corp 64,731 92,999
1,270 Fruit of the Loom Inc Class A+ 37,700 38,894
4,913 Gannett Co Inc 218,608 353,122
6,892 Gap Inc 168,624 310,140
1,111 General Dynamics Corp 80,603 95,685
56,984 General Electric Co 3,188,737 4,911,309
2,577 General Instrument Corp+ 44,297 53,956
2,761 General Mills Inc 173,370 209,836
12,259 General Motors Corp 670,122 826,716
1,409 General Re Corp 243,739 310,861
881 General Signal Corp 36,440 41,187
3,070 Genuine Parts Co 95,587 117,044
1,617 Georgia-Pacific Corp 96,478 104,701
1,069 Giant Food Inc Class A 35,844 41,290
9,698 Gillette Co 803,110 1,151,031
945 Golden West Financial 63,971 90,543
1,273 Goodrich (B F) Co 51,987 65,003
2,745 Goodyear Tire & Rubber Co 152,313 207,934
2,231 GPU Inc 77,677 98,722
1,318 Grace W.R. & Co 80,918 110,300
</TABLE>
---------------------
39
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
903 Grainger (W W) Inc $ 73,928 $ 92,840
664 Great Atlantic & Pacific Tea Co 18,403 20,086
1,009 Great Lakes Chemical Corp 54,088 54,486
2,383 Green Tree Financial Corp 88,257 67,767
16,635 GTE Corp 728,448 996,021
2,616 Guidant Corp 109,710 191,949
4,519 Halliburton Co 177,750 226,797
1,268 Harcourt General Inc 60,516 70,216
538 Harland (John H) Co 12,629 8,373
861 Harnischfeger Industries Inc 33,995 29,435
1,750 Harrah's Entertainment Inc+ 40,146 42,984
1,416 Harris Corp 53,732 73,809
2,068 Hartford Financial Services Group 148,836 224,378
2,225 Hasbro Inc 60,124 78,570
3,695 HBO & Co 175,062 223,086
6,866 Healthsouth Corp+ 166,688 192,677
6,317 Heinz (H J) Co 260,180 368,755
886 Helmerich & Payne Inc 25,603 27,688
1,655 Hercules Inc 82,125 81,716
2,456 Hershey Foods Corp 120,417 175,911
18,109 Hewlett Packard Co 984,040 1,147,658
4,363 Hilton Hotels Corp 117,322 139,071
12,725 Home Depot Inc 544,017 858,142
2,535 Homestake Mining Co 36,163 27,568
2,222 Honeywell Inc 141,242 183,732
1,898 Household International Inc 191,579 261,450
4,901 Houston Industries Inc 106,966 140,904
2,844 Humana Inc+ 67,419 70,567
3,308 Huntington Bancshares Inc 115,151 120,535
2,389 IKON Office Solutions 78,490 82,570
4,300 Illinois Tool Works Inc 185,431 278,425
2,854 Inco Ltd 80,736 53,334
2,882 Ingersoll-Rand Co 100,416 138,156
840 Inland Steel Industries Inc 18,904 23,205
28,513 Intel Corp 1,824,982 2,225,796
16,880 International Business MachinesCorp 1,370,747 1,753,410
1,876 International Flavors & Fragrances 90,478 88,407
</TABLE>
- ------------------------
40
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
5,217 International Paper Co $ 241,005 $ 244,221
2,187 Interpublic Group Cos Inc 83,853 135,867
2,070 ITT Industries Inc 54,719 78,789
1,238 Jefferson-Pilot Corp 76,303 110,105
23,372 Johnson & Johnson 1,264,453 1,713,460
1,500 Johnson Controls Inc 64,818 91,031
673 Jostens Inc 15,560 16,152
8,532 K Mart Corp 108,039 142,378
680 Kaufman & Broad Home Corp 11,785 22,143
7,140 Kellogg Co 281,837 307,913
804 Kerr-McGee Corp 51,262 55,928
7,682 KeyCorp 202,111 290,476
9,689 Kimberly-Clark Corp 436,039 485,661
1,274 King World Productions+ 27,725 37,265
1,444 KLA Instruments Corp+ 97,850 55,233
1,452 Knight-Ridder Inc 62,024 81,131
4,483 Kroger Co+ 117,991 207,059
5,729 Laidlaw Inc 73,442 90,948
1,770 Lehman Brothers Holdings 92,474 132,529
19,347 Lilly (Eli) & Co 881,501 1,153,565
4,759 Limited Inc 102,519 136,524
1,798 Lincoln National Corp 110,852 152,605
1,149 Liz Claiborne Inc 47,270 57,306
3,423 Lockheed Martin Corp 304,929 385,088
2,014 Loews Corp 185,781 209,960
699 Longs Drug Stores Corp 16,850 21,276
1,897 Louisiana-Pacific Corp 44,400 44,105
3,030 Lowe's Co Inc 117,841 212,668
2,445 LSI Logic Corp+ 76,447 61,736
11,301 Lucent Technologies Inc 759,478 1,445,115
1,222 Mallinckrodt Inc 46,616 48,269
1,138 Manor Care Inc 32,441 42,106
2,249 Marriott International Inc 31,234 83,635
2,249 Marriott International Inc Class A 30,297 80,542
2,924 Marsh & McLennan Companies Inc 181,697 255,302
2,873 Masco Corp 112,531 170,944
5,030 Mattel Inc 157,094 199,314
</TABLE>
---------------------
41
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
4,004 May Department Stores Co $ 189,969 $ 254,254
1,604 Maytag Corp 38,833 76,691
1,740 MBIA Inc 103,554 134,850
8,708 MBNA Corp 183,734 311,855
988 McDermott International Inc 27,613 40,817
11,970 McDonald's Corp 550,042 718,200
1,695 McGraw-Hill Inc 93,078 128,926
12,156 MCI Communications 400,202 601,722
1,802 Mead Corp 54,456 64,534
8,122 Medtronic Inc 302,623 421,329
4,423 Mellon Bank Corp 185,352 280,861
2,258 Mercantile Bancorporation 127,410 123,767
621 Mercantile Stores Co Inc 33,709 41,723
20,801 Merck & Co Inc 1,753,123 2,670,328
932 Meredith Corp 23,317 39,261
5,789 Merrill Lynch & Co Inc 295,180 480,487
2,007 MGIC Investment Corp 91,591 131,835
3,680 Micron Technology Inc+ 139,563 106,950
42,320 Microsoft Corp+ 2,139,801 3,787,640
719 Millipore Corp 29,272 24,985
7,122 Minnesota Mining & Manufacturing Co 588,688 649,437
3,104 Mirage Resorts Inc+ 82,734 75,466
13,635 Mobil Corp 884,421 1,044,782
10,271 Monsanto Co 359,379 534,092
1,544 Moore Corp Ltd 30,944 25,669
3,095 Morgan (J P) & Co Inc 300,347 415,697
10,329 Morgan St Dean Witter Discover 442,689 752,726
2,297 Mortan International Inc 70,679 75,370
10,360 Motorola Inc 653,107 628,075
129 NACCO Industries Inc Class A 8,392 17,286
1,179 Nalco Chemical Co 44,650 47,823
3,637 National City Corp 182,898 266,638
2,811 National Semiconductor+ 79,396 58,855
790 National Service Industries Inc 30,788 46,462
16,404 NationsBank Corp 837,718 1,196,467
1,291 Navistar International+ 23,994 45,185
1,690 New York Times Co Class A 78,660 118,300
</TABLE>
- ------------------------
42
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
2,813 Newell Co $ 97,973 $ 136,255
2,685 Newmont Mining Corp 101,667 82,060
2,540 Niagara Mohawk Power Corp+ 28,204 33,020
812 NICOR Inc 27,963 34,307
5,057 Nike Inc Class B 236,450 223,772
1,391 Nordstrom Inc 68,990 88,763
6,609 Norfolk Southern Corp 200,050 247,011
1,292 Northern States Power Co 64,050 76,228
9,028 Northern Telecom Ltd 335,199 583,435
1,950 Northern Trust Corp 135,299 145,763
1,154 Northrop Grumman Corp 108,759 123,983
13,131 Norwest Corp 348,114 545,757
6,146 Novell Inc+ 79,367 65,877
1,495 Nucor Corp 78,033 81,384
5,851 Occidental Petroleum Corp 146,780 171,507
2,842 Omnicom Group 112,459 133,752
580 ONEOK Inc 17,498 23,635
17,079 Oracle Systems Corp+ 491,912 539,056
1,794 Oryx Energy Co+ 38,510 46,644
961 Owens Corning Fiberglass Corp 37,975 34,536
2,490 Owens-Illinois Inc+ 90,470 107,693
1,341 PACCAR Inc 54,008 79,873
1,402 Pacific Enterprises 43,039 57,219
5,150 PacifiCorp 109,501 126,819
2,165 Pall Corp 50,672 46,548
4,502 Parametric Technology Corp+ 100,160 149,973
1,907 Parker Hannifin Corp 65,466 97,734
3,823 PECO Energy Co 93,646 84,584
4,302 Penney (J C) Co Inc 232,167 325,608
873 Pennzoil Co 53,006 56,418
598 Peoples Energy Corp 20,518 21,752
1,078 Pep Boys-Manny Moe & Jack 32,988 24,996
26,414 Pepsico Inc 810,204 1,127,548
890 Perkin-Elmer Corp 55,693 64,358
22,488 Pfizer Inc 1,159,430 2,241,773
7,591 PG&E Corp 195,133 250,503
8,834 Pharmacia and Upjohn Inc 324,297 386,488
</TABLE>
---------------------
43
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,067 Phelps Dodge Corp $ 73,365 $ 68,888
42,211 Philip Morris Co Inc 1,555,876 1,759,671
4,575 Phillips Petroleum Co 198,426 228,464
1,159 Pioneer Hi Bred International Inc 90,534 113,075
5,074 Pitney Bowes Inc 170,141 254,651
4,269 Placer Dome Inc 84,878 56,297
5,302 PNC Bank Corp 220,799 317,789
759 Polaroid Corp 33,899 33,396
500 Potlatch Corp 22,685 21,531
2,843 PP & L Resources Inc 65,547 67,166
3,063 PPG Industries Inc 164,128 208,093
2,770 Praxair Inc 124,293 142,482
23,330 Procter & Gamble Co 1,422,380 1,968,469
1,234 Progressive Corp Ohio 134,291 166,204
1,636 Providian Financial Corp 43,779 93,968
4,057 Public Services Enterprise Group 112,476 153,659
370 Pulte Corp 11,540 17,205
2,388 Quaker Oats Co 101,631 136,713
1,913 Ralston-Purina Group 149,906 202,778
1,492 Raychem Corp 58,798 62,011
5,935 Raytheon Co Class B 301,844 346,456
929 Reebok International Ltd 37,110 28,335
901 Republic New York Corp 80,766 120,171
1,242 Reynolds Metals Co 78,783 76,305
4,472 Rite Aid Corp 109,375 153,166
3,549 Rockwell International Corp 172,891 203,624
1,051 Rohm & Haas Co 82,701 108,581
1,523 Rowan Co Inc+ 36,491 44,167
37,280 Royal Dutch Petroleum Co 1,703,410 2,117,970
2,645 Rubbermaid Inc 70,226 75,383
634 Russell Corp 18,509 16,999
1,328 Ryder System Inc 40,862 50,464
2,451 SAFECO Corp 104,618 133,962
1,028 Safety-Kleen Corp 19,861 29,170
8,256 Sara Lee Corp 340,781 508,776
31,900 SBC Communication Inc 902,825 1,391,638
12,732 Schering-Plough Corp 542,190 1,040,045
</TABLE>
- ------------------------
44
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,670 Schlumberger Ltd $ 532,345 $ 656,753
4,619 Schwab (Charles) Corp 140,286 175,522
1,347 Scientific-Atlanta Inc 26,400 26,351
4,219 Seagate Technology Inc+ 141,936 106,530
6,195 Seagram Co Ltd 219,989 236,572
6,825 Sears Roebuck & Co 319,140 392,011
4,339 Service Corp International 128,230 184,136
451 Shared Medical System Corp 24,834 35,347
3,005 Sherwin Williams Co 81,819 106,678
1,717 Sigma-Aldrich Corp 52,912 63,958
3,213 Silicon Graphics Inc+ 75,300 44,781
1,101 Snap-On Inc 40,335 50,240
1,917 Sonat Inc 87,743 83,390
11,985 Southern Co 269,467 331,835
3,852 Southwest Airlines Co 74,284 113,875
386 Springs Industries Inc Class A 18,839 21,206
7,463 Sprint Corp 343,937 505,152
1,576 St Jude Medical Inc+ 56,362 52,698
1,439 St Paul Co Inc 96,852 128,251
1,575 Stanley Works 57,661 87,806
2,749 State Street Corp 145,016 187,104
1,624 Stone Container Corp 25,791 20,300
3,016 Summit Bancorp 150,794 150,989
1,261 Sun Co Inc 41,182 51,543
6,531 Sun Microsystems Inc+ 201,304 272,465
3,401 Sunamerica Inc 131,038 162,823
3,647 SunTrust Banks Inc 188,506 274,893
1,056 Supervalu Inc 36,781 49,236
3,033 Synovus Financial Corp 98,851 112,600
5,926 Sysco Corp 106,800 151,854
1,846 Tandy Corp 53,570 86,762
851 Tektronix Inc 30,555 37,954
8,866 Tele-Communication Inc Class A+ 164,304 275,677
3,175 Tellabs Inc+ 143,263 213,122
1,017 Temple-Inland Inc 57,876 63,181
5,299 Tenet Healthcare Corp+ 142,796 192,420
3,001 Tenneco 130,764 128,105
</TABLE>
---------------------
45
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
9,556 Texaco Inc $ 482,956 $ 575,749
6,838 Texas Instruments Inc 280,264 370,107
4,310 Texas Utilities Co 160,230 169,437
2,883 Textron Inc 150,809 221,991
2,643 Thermo Electron Corp+ 105,100 106,711
1,007 Thomas & Betts Corp 49,170 64,448
10,091 Time Warner Inc 495,543 726,552
1,567 Times Mirror Co Class A 70,367 99,309
1,121 Timken Co 32,620 37,904
2,855 TJX Companies Inc 66,267 129,189
2,450 Torchmark Corp 76,059 112,241
4,933 Toys R Us Inc+ 153,112 148,298
1,074 Transamerica Corp 94,455 125,121
19,908 Travelers Group Inc 708,307 1,194,480
2,149 Tribune Co 96,490 151,505
2,661 Tricon Global Restaurants Inc+ 68,776 79,996
2,101 TRW Inc 107,217 115,818
1,001 Tupperware Corp 38,126 26,652
9,987 Tyco International Ltd+ 401,295 545,540
4,267 U.S. Bancorp 336,574 532,308
8,399 U.S. West Inc+ 295,718 459,845
10,582 U.S. West Media Group+ 228,321 367,725
3,730 Unicom Corp 96,039 130,550
11,135 Unilever NV 524,110 764,139
1,187 Union Camp Corp 63,067 70,923
2,119 Union Carbide Corp 91,850 106,215
4,272 Union Pacific Corp 247,139 240,033
4,389 Union Pacific Resources Group Inc 116,204 104,787
4,323 Unisys Corp+ 57,435 82,137
3,285 United Healthcare Corp 163,345 212,704
1,293 United States Surgical 41,608 42,669
4,074 United Technologies Corp 275,384 376,081
4,259 Unocal Corp 158,617 164,770
2,429 UNUM Corp 92,868 134,050
1,609 USAir Group Inc+ 63,259 119,267
1,941 USF & G Corp 39,589 48,404
3,182 UST Inc 97,197 102,620
</TABLE>
- ------------------------
46
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
5,042 USX - Marathon Group $ 137,883 $ 189,705
1,516 USX - US Steel Group 50,407 57,229
2,085 VF Corp 77,812 109,593
6,150 Viacom Inc Class B+ 234,826 330,563
795 Vlasic Foods International Inc+ 14,669 20,312
3,584 Wachovia Corp 233,639 303,968
39,106 Wal Mart Stores Inc 1,227,433 1,987,074
8,597 Walgreen Co 197,995 302,507
4,707 Warner Lambert Co 459,786 801,661
4,527 Washington Mutual Inc 262,655 324,671
7,883 Waste Management Inc 243,182 242,895
1,504 Wells Fargo & Co 368,979 498,200
2,261 Wendy's International Inc 49,066 50,449
936 Western Atlas Inc+ 53,665 72,423
1,758 Westvaco Corp 54,423 54,059
3,426 Weyerhaeuser Co 169,697 193,569
1,295 Whirlpool Corp 69,711 88,788
1,944 Willamette Industries Inc 68,914 73,022
7,378 Williams Co Inc 170,882 236,096
2,537 Winn-Dixie Stores Inc 91,411 117,653
2,330 Woolworth Corp+ 49,578 58,250
17,659 WorldCom Inc+ 536,774 760,441
1,610 Worthington Industries Inc 31,261 29,181
2,047 Wrigley (Wm) Jr Co 128,347 167,342
5,627 Xerox Corp 347,487 598,883
------------ --------------
TOTAL COMMON STOCKS $110,431,739 $ 150,118,316
</TABLE>
---------------------
47
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY BILLS - 1.45%
$ 83,000 U.S. Treasury Bills 5.16 %(F) 04/30/98 $ 82,650
1,600,000 U.S. Treasury Bills 5.32 (F) 04/16/98 1,596,355
532,000 U.S. Treasury Bills 5.32 (F) 04/23/98 530,207
--------------
TOTAL U.S. TREASURY BILLS $ 2,209,212
(Cost $2,209,450)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $112,641,189)* (Notes 1 and 3) 100.07% $ 152,327,528
Other Assets and Liabilities, Net (0.07) (108,038)
------ --------------
TOTAL NET ASSETS 100.00% $ 152,219,490
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 41,337,966
Gross Unrealized Depreciation (1,651,627)
------------
NET UNREALIZED APPRECIATION $ 39,686,339
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
48
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
- -------------------------------------------------
PORTFOLIO OF INVESTMENTS - MARCH 31, 1998
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 99.97%
U.S. TREASURY BILLS - 70.42%
$ 63,000 U.S. Treasury Bills 5.16 %(F) 04/30/98 $ 62,734
30,000 U.S. Treasury Bills 5.32 (F) 04/02/98 29,992
1,320,000 U.S. Treasury Bills 5.32 (F) 04/16/98 1,316,887
67,187,000 U.S. Treasury Bills 5.32 (F) 04/23/98 66,966,818
--------------
$ 68,376,431
U.S. TREASURY NOTES - 10.88%
$ 1,200,000 U.S. Treasury Notes 5.75 % 08/15/03 $ 1,203,750
150,000 U.S. Treasury Notes 5.88 02/15/04 151,500
1,450,000 U.S. Treasury Notes 6.25 02/15/04 1,484,891
2,300,000 U.S. Treasury Notes 7.25 05/15/04 2,481,845
1,600,000 U.S. Treasury Notes 7.25 08/15/04 1,730,501
2,300,000 U.S. Treasury Notes 7.88 11/15/04 2,569,531
700,000 U.S. Treasury Notes 12.38 05/15/04 937,125
--------------
$ 10,559,143
U.S. TREASURY BONDS - 18.67%
$ 1,700,000 U.S. Treasury Bonds 6.00 % 02/15/26 $ 1,696,813
1,700,000 U.S. Treasury Bonds 6.25 08/15/23 1,751,532
1,750,000 U.S. Treasury Bonds 8.00 11/15/21 2,180,938
1,500,000 U.S. Treasury Bonds 8.13 08/15/04 1,875,470
1,400,000 U.S. Treasury Bonds 8.75 11/15/04 1,865,500
950,000 U.S. Treasury Bonds 10.75 05/15/04 1,160,485
900,000 U.S. Treasury Bonds 11.13 08/15/03 1,123,032
1,300,000 U.S. Treasury Bonds 11.63 11/15/04 1,716,407
2,200,000 U.S. Treasury Bonds 11.88 11/15/03 2,842,125
1,350,000 U.S. Treasury Bonds 13.75 08/15/04 1,921,219
--------------
$ 18,133,521
TOTAL U.S. TREASURY SECURITIES $ 97,069,095
(Cost $97,242,828)
</TABLE>
---------------------
49
<PAGE>
U.S. GOVERNMENT ALLOCATION FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $97,242,828)* (Note 1) 99.97% $ 97,069,095
Other Assets and Liabilities, Net 0.03 33,076
------ --------------
TOTAL NET ASSETS 100.00% $ 97,102,171
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 213,017
Gross Unrealized Depreciation (386,750)
------------
NET UNREALIZED APPRECIATION $ (173,733)
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
50
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES - MARCH 31, 1998
<TABLE>
<CAPTION>
U.S.
ASSET INDEX GOVERNMENT
ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
ASSET
INVESTMENTS:
In securities, at market value
(see cost below) $1,573,955,299 $152,327,528 $97,069,095
Cash 904 238 710
Receivables:
Dividends and Interest 6,933,112 157,756 539,281
Fund shares sold 1,589,234 450,198 90,188
Investment securities sold 110,699 14,673 0
Organization expenses, net of
amortization 2,393 0 5,276
Prepaid expenses 125,714 0 235
TOTAL ASSETS 1,582,717,355 152,950,393 97,704,785
LIABILITIES
Payables:
Investment securities purchased 441,167 56,694 0
Distribution to shareholders 6,709,563 63,008 346,306
Fund shares redeemed 255,452 133,972 3,000
Due to sponsor and distributor (Note
2) 1,122,308 167,870 37,080
Due to adviser (Note 2) 1,104,372 124,452 66,997
Other 176,233 184,907 149,231
TOTAL LIABILITIES 9,809,095 730,903 602,614
TOTAL NET ASSETS $1,572,908,260 $152,219,490 $97,102,171
NET ASSETS CONSIST OF:
Paid-in capital $1,151,714,900 $110,961,020 $119,857,528
Undistributed (overdistributed) net
investment income 0 (56,415) 0
Undistributed net realized gain (loss)
on investments 21,664,933 1,628,546 (22,581,624)
Net unrealized appreciation
(depreciation) of investments 399,528,427 39,686,339 (173,733)
TOTAL NET ASSETS $1,572,908,260 $152,219,490 $97,102,171
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A $1,305,848,087 $ 92,733,434 $82,957,930
Shares outstanding - Class A 52,257,872 5,284,329 5,578,396
Net asset value per share - Class A $ 24.99 $ 17.55 $ 14.87
Maximum offering price per
share - Class A (1) $ 26.17 $ 18.38 $ 15.57
Net Assets - Class B $ 267,060,173 $ 3,322,374 $14,144,241
Shares outstanding - Class B 17,614,333 152,304 1,306,824
Net asset value and offering price per
share - Class B $ 15.16 $ 21.81 $ 10.82
Net Assets - Class C N/A $ 56,163,682 N/A
Shares outstanding - Class C N/A 2,573,524 N/A
Net asset value and offering price per
share - Class C N/A $ 21.82 N/A
INVESTMENT AT COST (NOTE 3) $1,174,426,872 $112,641,189 $97,242,828
- --------------------------------------------------------------------------------------------
</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.
---------------------
51
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ASSET
ALLOCATION
FUND (1)
-----------
FOR THE
YEAR ENDED
MARCH 31,
1998
<S> <C>
- --------------------------------------------------------
INVESTMENT INCOME
Dividends $12,275,848
Interest 40,153,342
TOTAL INVESTMENT INCOME 52,429,190
EXPENSES (NOTE 2)
Advisory fees 4,754,399
Administration fees 826,553
Shareholder servicing fees 4,016,149
Portfolio accounting fees 103,995
Transfer agency fees 1,874,203
Distribution fees 1,704,239
Organization costs 1,500
Legal and audit fees 89,661
Registration fees 119,062
Directors' fees 4,213
Shareholder reports 206,000
Other 50,992
TOTAL EXPENSES 13,750,966
Less:
Waived fees and reimbursed expenses (7,060)
Net Expenses 13,743,906
NET INVESTMENT INCOME 38,685,284
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 107,023,056
Net change in unrealized appreciation
of investments 266,073,223
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 373,096,279
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $411,781,563
- --------------------------------------------------------
</TABLE>
(1) INCLUDES AMOUNTS ALLOCATED FROM THE MASTER PORTFOLIO PRIOR TO DECEMBER 15,
1997. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
- ---------------------
52
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
INDEX ALLOCATION FUND ALLOCATION
---------------------------- FUND (1)
FOR THE -----------
THREE FOR THE FOR THE
MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, DEC. 31, MARCH 31,
1998 1997 1998
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 490,640 $ 1,379,317 $ 0
Interest 53,339 1,887,595 5,944,916
TOTAL INVESTMENT INCOME 543,979 3,266,912 5,944,916
EXPENSES (NOTE 2)
Advisory fees 236,106 747,203 467,948
Administration fees 22,424 76,575 56,777
Shareholder servicing fees 31,681 86,290 280,721
Portfolio accounting fees 21,910 4,018 23,326
Transfer agency fees 47,221 144,971 131,004
Distribution fees 147,686 439,440 108,466
Organization costs 12,575 5,305 2,689
Legal and audit fees 7,801 38,051 44,184
Registration fees 11,343 34,822 41,535
Directors' fees 1,103 4,033 4,218
Shareholder reports 9,863 52,082 83,566
Other 3,326 10,775 11,732
TOTAL EXPENSES 553,039 1,643,565 1,256,166
Less:
Waived fees and reimbursed expenses (15,653) (33,242) (108,847)
Net Expenses 537,386 1,610,323 1,147,319
NET INVESTMENT INCOME 6,593 1,656,589 4,797,597
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments (5,156) 12,775,977 1,537,644
Net change in unrealized appreciation
of investments 17,255,641 8,758,372 1,998,550
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 17,250,485 21,534,349 3,536,194
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 17,257,078 $23,190,938 $ 8,333,791
- -----------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES AMOUNTS ALLOCATED FROM THE MASTER PORTFOLIO PRIOR TO DECEMBER 15,
1997. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
---------------------
53
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
----------------------------------------------------
FOR THE FOR THE SIX FOR THE NINE
YEAR ENDED MONTHS ENDED MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997 SEPT. 30, 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 38,685,284 $ 22,799,885 $ 30,296,812
Net realized gain (loss) on sale of
investments 107,023,056 16,581,561 75,454,709
Net change in unrealized appreciation
(depreciation) of investments 266,073,223 16,935,058 (48,004,058)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 411,781,563 56,316,504 57,747,463
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (35,147,512) (21,499,154) (29,059,204)
CLASS B (3,537,772) (1,300,731) (1,237,608)
CLASS C N/A N/A N/A
From net realized gain on sale of
investments
CLASS A (82,707,854) (77,923,468) 0
CLASS B (13,021,038) (5,356,143) 0
CLASS C N/A N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 124,090,392 43,986,740 125,947,664
Reinvestment of dividends - Class A 120,926,511 99,267,295 25,929,821
Cost of shares redeemed - Class A (224,954,049) (113,370,104) (198,735,389)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 20,062,854 29,883,931 (46,857,904)
Proceeds from shares sold - Class B 147,505,581 28,861,527 41,385,524
Reinvestment of dividends - Class B 16,241,731 6,539,212 691,311
Cost of shares redeemed - Class B (19,143,117) (5,436,423) (6,086,896)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 144,604,195 29,964,316 35,989,939
Proceeds from shares sold - Class C N/A N/A N/A
Reinvestment of dividends - Class C N/A N/A N/A
Cost of shares redeemed - Class C N/A N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A N/A N/A
INCREASE (DECREASE) IN NET ASSETS 442,034,436 10,085,255 16,582,686
NET ASSETS:
Beginning net assets 1,130,873,824 1,120,788,569 1,104,205,883
ENDING NET ASSETS $1,572,908,260 $1,130,873,824 $1,120,788,569
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
- ---------------------
54
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND U.S. GOVERNMENT ALLOCATION
--------------------------------------------- FUND
FOR THE ----------------------------
THREE FOR THE FOR THE FOR THE FOR THE SIX
MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED MONTHS ENDED
MARCH 31, DEC. 31, DEC. 31, MARCH 31, MARCH 31,
1998 1997 1996 1998 1997
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 6,593 $ 1,656,589 $ 1,402,424 $ 4,797,597 $ 2,874,874
Net realized gain (loss) on sale of
investments (5,156) 12,775,977 10,067,335 1,537,644 1,030,525
Net change in unrealized appreciation
(depreciation) of investments 17,255,641 8,758,372 460,902 1,998,550 (2,042,135)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 17,257,078 23,190,938 11,930,661 8,333,791 1,863,264
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (63,008) (1,312,200) (1,128,185) (4,378,902) (2,697,855)
CLASS B 0 0(1) N/A (418,695) (177,019)
CLASS C 0 (344,406) (274,239) N/A N/A
From net realized gain on sale of
investments
CLASS A 0 (8,070,952) (6,814,078) 0 0
CLASS B 0 0(1) N/A 0 0
CLASS C 0 (4,429,345) (2,767,279) N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A 3,920,461 13,097,927 9,154,800 12,501,406 3,383,948
Reinvestment of dividends - Class A 141,708 7,755,142 6,367,210 3,688,770 2,218,226
Cost of shares redeemed - Class A (2,572,600) (7,305,205) (8,048,045) (23,411,657) (16,500,755)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A 1,489,569 13,547,864 7,473,965 (7,221,481) (10,898,581)
Proceeds from shares sold - Class B 2,711,120 349,731(1) N/A 8,698,249 1,811,816
Reinvestment of dividends - Class B 0 0(1) N/A 316,321 128,252
Cost of shares redeemed - Class B 0 0(1) N/A (2,377,863) (1,026,305)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 2,711,120 349,731(1) N/A 6,636,707 913,763
Proceeds from shares sold - Class C 5,805,673 20,805,099 9,098,246 N/A N/A
Reinvestment of dividends - Class C 10,699 3,210,184 1,942,667 N/A N/A
Cost of shares redeemed - Class C (1,944,342) (5,001,988) (2,535,609) N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C 3,872,030 19,013,295 8,505,304 N/A N/A
INCREASE (DECREASE) IN NET ASSETS 25,266,789 41,944,925 16,926,149 2,951,420 (10,996,428)
NET ASSETS:
Beginning net assets 126,952,701 85,007,776 68,081,627 94,150,751 105,147,179
ENDING NET ASSETS $152,219,490 $126,952,701 $85,007,776 $97,102,171 $ 94,150,751
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPT. 30, 1996
<S> <C>
- -----------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 5,852,121
Net realized gain (loss) on sale of
investments (1,945,578)
Net change in unrealized appreciation
(depreciation) of investments (2,769,255)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 1,137,288
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (5,670,237)
CLASS B (181,884)
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 36,933,631
Reinvestment of dividends - Class A 4,748,739
Cost of shares redeemed - Class A (73,965,970)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (32,283,600)
Proceeds from shares sold - Class B 3,581,868
Reinvestment of dividends - Class B 132,888
Cost of shares redeemed - Class B (1,222,836)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 2,491,920
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 (34,506,513)
NET ASSETS:
Beginning net assets 139,653,692
ENDING NET ASSETS $ 105,147,179
- --------------------------------------------------------------------------------------
</TABLE>
(1) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
---------------------
55
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
-----------------------------------
CLASS A
-----------------------------------
SIX NINE
YEAR MONTHS MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, SEPT. 30,
1998 1997 (2) 1996 (3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $20.30 $21.24 $20.74
--------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) 0.69 0.41 0.57
Net realized and unrealized
gain (loss) on investments 6.37 0.65 0.50
--------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 7.06 1.06 1.07
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.69) (0.41) (0.57)
Distributions from net
realized gain (1.68) (1.59) 0.00
--------- --------- ---------
TOTAL FROM DISTRIBUTIONS (2.37) (2.00) (0.57)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $24.99 $20.30 $21.24
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN (NOT ANNUALIZED) 36.08% 4.94% 5.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $1,305,848 $1,041,622 $1,057,346
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average
net assets 0.95%(5) 0.92%(5) 0.90%(5)
Ratio of net investment income
to average net assets 2.99%(5) 3.91%(5) 3.53%(5)
Portfolio turnover 51%(6) 5%(6) 1%(7)
Average commission rate paid(1) $0.03(6) $0.03(6) $0.03(7)
- -----------------------------------------------------------------------
Ratio of expenses to average net
assets prior to waived fees
and reimbursed expenses 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
- -----------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(4) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(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.
- ---------------------
56
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.)
---------------------------------------------------------------------------------------
CLASS B
CLASS A (CONT.) ------------------------------------------------
----------------------------------- SIX NINE
YEAR YEAR YEAR YEAR MONTHS MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, MARCH 31, MARCH 31, SEPT. 30, DEC. 31,
1995 1994 1993 1998 1997 (2) 1996 (3) 1995 (4)
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $16.73 $18.80 $17.89 $12.29 $12.84 $12.50 $10.00
--------- --------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.74 0.77 0.77 0.29 0.19 0.28 0.22
Net realized and
unrealized gain (loss)
on investments 4.07 (1.31) 1.88 3.89 0.41 0.34 2.53
--------- --------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 4.81 (0.54) 2.65 4.18 0.60 0.62 2.75
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.74) (0.77) (0.77) (0.29) (0.19) (0.28) (0.22)
Distributions from net
realized gain (0.06) (0.76) (0.97) (1.02) (0.96) 0.00 (0.03)
--------- --------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (0.80) (1.53) (1.74) (1.31) (1.15) (0.28) (0.25)
--------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $20.74 $16.73 $18.80 $15.16 $12.29 $12.84 $12.50
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) 29.18% (2.82)% 15.00% 35.16% 4.62% 4.96% 27.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $1,077,935 $896,943 $1,048,667 $267,060 $89,252 $63,443 $26,271
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.84% 0.84% 0.86% 1.60%(5) 1.53%(5) 1.14%(5) 1.53%
Ratio of net investment
income to average net
assets 3.81% 4.30% 4.20% 2.15%(5) 3.30%(5) 3.37%(5) 2.71%
Portfolio turnover 15% 49% 40% 51%(6) 5%(6) 1%(7) 15%
Average commission rate
paid(1) N/A N/A N/A $0.03(6) $0.03(6) $0.03(7) N/A
- -----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses N/A N/A N/A N/A 1.58%(5) 1.56%(5) 1.76%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses N/A N/A N/A N/A 3.25%(5) 2.95%(5) 2.48%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(4) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(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.
---------------------
57
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND
----------------------------------------------
CLASS A
----------------------------------------------
THREE
MONTHS
ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, DEC. 31, DEC. 31, DEC. 31,
1998 (3) 1997 1996 1995
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $15.51 $13.99 $13.76 $10.67
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.01 0.28 0.29 0.28
Net realized and unrealized gain (loss) on
investments 2.04 3.23 2.02 3.42
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 2.05 3.51 2.31 3.70
LESS DISTRIBUTIONS:
Dividends from net investment income (0.01) (0.28) (0.29) (0.28)
Distributions from net realized gain 0.00 (1.71) (1.79) (0.33)
---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.01) (1.99) (2.08) (0.61)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $17.55 $15.51 $13.99 $13.76
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED) 13.23% 25.18% 17.04% 34.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $92,733 $80,512 $60,353 $52,007
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.31% 1.26% 1.31% 1.30%
Ratio of net investment income to average
net assets 0.30% 1.82% 2.06% 2.07%
Portfolio turnover 0% 80% 67% 47%
Average commission rate paid(1) $0.02 $0.03 $0.02 N/A
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses 1.32% 1.29% 1.44% 1.35%
Ratio of net investment income to average net
assets prior to waived fees and reimbursed
expenses 0.29% 1.79% 1.93% 2.02%
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) 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 CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
- ---------------------
58
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND (CONT.)
---------------------------------------------------------------------------------------
CLASS B CLASS C (2)
CLASS A (CONT.) ---------------------- -----------------------------------
---------------------- THREE THREE
YEAR YEAR MONTHS PERIOD MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, MARCH 31, DEC. 31, MARCH 31, DEC. 31, DEC. 31,
1994 1993 1998 (3) 1997 (4) 1998 (3) 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $11.90 $11.45 $19.31 $18.99 $19.32 $17.42 $17.10
--------- --------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.31 0.30 (0.01) 0.00 (0.02) 0.20 0.22
Net realized and
unrealized gain (loss)
on investments (0.39) 1.12 2.51 0.32 2.52 4.00 2.54
--------- --------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS (0.08) 1.42 2.50 0.32 2.50 4.20 2.76
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.31) (0.30) 0.00 0.00 0.00 (0.20) (0.22)
Distributions from net
realized gain (0.84) (0.67) 0.00 0.00 0.00 (2.10) (2.22)
--------- --------- --------- --------- --------- --------- ---------
TOTAL FROM DISTRIBUTIONS (1.15) (0.97) 0.00 0.00 0.00 (2.30) (2.44)
--------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $10.67 $11.90 $21.81 $19.31 $21.82 $19.32 $17.42
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (NOT
ANNUALIZED) (0.68)% 12.54% 12.95% 1.69% 13.00% 24.07% 16.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $40,308 $53,124 $3,322 $356 $56,164 $46,084 $24,655
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.30% 1.36% 2.06% 2.05% 2.05% 2.02% 2.05%
Ratio of net investment
income to average net
assets 2.41% 2.64% (0.43)% (0.17)% (0.44)% 1.00% 1.35%
Portfolio turnover 50% 53% 0% 80% 0% 80% 67%
Average commission rate
paid(1) N/A N/A $0.02 $0.03 $0.02 $0.03 $0.02
- -----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.38% 1.47% 4.03% 15.17% 2.09% 2.05% 2.20%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 2.33% 2.53% (2.40)% (13.29)% (0.48)% 0.97% 1.20%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) 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 CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
---------------------
59
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND (CONT.)
----------------------------------
CLASS C (2) (CONT.)
----------------------------------
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $13.26 $14.75 $15.00
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.20 0.25 0.07
Net realized and unrealized gain (loss) on investments 4.24 (0.45) 0.61
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 4.44 (0.20) 0.68
LESS DISTRIBUTIONS:
Dividends from net investment income (0.20) (0.25) (0.10)
Distributions from net realized gain (0.40) (1.04) (0.83)
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.60) (1.29) (0.93)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $17.10 $13.26 $14.75
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED) 33.72% (1.38)% 4.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $16,075 $9,798 $8,996
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 2.05% 2.01% 0.96%
Ratio of net investment income to average net assets 1.30% 1.75% 0.53%
Portfolio turnover 47% 50% 53%
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 2.17% 2.20% 1.12%
Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 1.18% 1.56% 0.37%
- --------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) 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 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 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.
- ---------------------
60
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
----------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------
NINE
SIX MONTHS MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, SEPT. 30, DEC. 31, DEC. 31, DEC. 31,
1998 1997 (3) 1996 (4) 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $14.32 $14.48 $14.98 $13.76 $15.71 $15.41
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.77 0.42 0.59 0.79 0.87 0.96
Net realized and
unrealized gain (loss)
on investments 0.55 (0.16) (0.50) 1.22 (1.95) 1.69
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 1.32 0.26 0.09 2.01 (1.08) 2.65
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.77) (0.42) (0.59) (0.79) (0.87) (0.96)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00 (1.39)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.77) (0.42) (0.59) (0.79) (0.87) (2.35)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $14.87 $14.32 $14.48 $14.98 $13.76 $15.71
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (NOT
ANNUALIZED) 9.36% 1.75% 0.69% 14.91% (6.99)% 17.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s) $82,958 $86,930 $98,741 $135,577 $140,066 $283,206
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.16%(5) 1.00%(5) 1.12%(5) 1.04% 1.01% 0.99%
Ratio of net investment
income to average net
assets 5.21%(5) 5.70%(5) 5.45%(5) 5.41% 5.94% 5.92%
Portfolio turnover 62%(6) 113%(6) 31%(7) 292% 112% 150%
Average commission rate
paid(1) N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.26%(5) 1.31%(5) 1.20%(5) 1.07% 1.08% 1.02%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 5.11%(5) 5.39%(5) 5.37%(5) 5.38% 5.87% 5.89%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) 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 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 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.
---------------------
61
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND (CONT.)
----------------------------------------------
CLASS B
----------------------------------------------
NINE
SIX MONTHS MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
MARCH 31, MARCH 31, SEPT. 30, DEC. 31,
1998 1997 (2) 1996 (3) 1995 (4)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.42 $10.54 $10.91 $10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.49 0.27 0.36 0.49
Net realized and unrealized gain (loss) on
investments 0.40 (0.12) (0.37) 0.91
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.89 0.15 (0.01) 1.40
LESS DISTRIBUTIONS:
Dividends from net investment income (0.49) (0.27) (0.36) (0.49)
Distributions from net realized gain 0.00 0.00 0.00 0.00
---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.49) (0.27) (0.36) (0.49)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $10.82 $10.42 $10.54 $10.91
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (NOT ANNUALIZED) 8.64% 1.42% 0.11% 14.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $14,144 $7,221 $6,406 $4,077
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.82%(5) 1.61%(5) 1.92%(5) 1.65%
Ratio of net investment income to average
net assets 4.40%(5) 5.12%(5) 4.60%(5) 4.31%
Portfolio turnover 62%(6) 113%(6) 31%(7) 292%
Average commission rate paid(1) N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses 2.08%(5) 2.28%(5) 2.21%(5) 2.36%
Ratio of net investment income to average net
assets prior to waived fees and reimbursed
expenses 4.14%(5) 4.45%(5) 4.31%(5) 3.60%
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(2) THE FUND CHANGED ITS FISCAL YEAR-END FROM SEPTEMBER 30 TO MARCH 31.
(3) THE FUND CHANGED ITS FISCAL YEAR-END FROM DECEMBER 31 TO SEPTEMBER 30.
(4) THE CLASS B SHARES COMMENCED OPERATIONS ON JANUARY 1, 1995.
(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 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.
- ---------------------
62
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Stagecoach Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company. The Company commenced operations on January 1,
1992, and currently offers thirty-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 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>
---------------------
63
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Each Fund offers Class A and Class B shares. The Asset Allocation and Index
Allocation Funds also offer C shares. The Class C shares of the Asset Allocation
Fund commenced operations on April 1, 1998. 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
Quotation ("NASDAQ") National Market System 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.
- ---------------------
64
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 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
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 March 31, 1998.
The U.S. Government Allocation Fund had net capital loss carryforwards at
December 31, 1997, the end of the most recent tax year, 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.
---------------------
65
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 $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,
- ---------------------
66
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
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 and Class C shares of the Index
Allocation Fund.
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.
Shareholder servicing fees paid on behalf of the Index Allocation Fund for the
year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B** CLASS C
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Index Allocation Fund $ 0 $ 22 $86,268
</TABLE>
** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
---------------------
67
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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
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.
Prior to May 1, 1997, Stephens provided substantially the same services as sole
administrator to the Index Allocation Fund. Under the previous agreement, the
Index Allocation Fund had agreed to pay Stephens a monthly fee at the annual
rate of 0.10% of its average daily net assets up to $200 million and 0.05% of
the average daily net assets in excess of $200 million.
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 Index
Allocation Fund, 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
- ---------------------
68
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Allocation Funds, and 0.75% of the average daily net assets attributable to the
Class B and Class C shares of the Index Allocation Fund.
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 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.
Distribution fees paid on behalf of the Index Allocation Fund for the year ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B** CLASS C
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Index Allocation Fund $ 180,571 $ 68 $ 258,801
</TABLE>
** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
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.
The registration fees paid on behalf of the Index Allocation Fund for the year
ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
FUND CLASS A CLASS B** CLASS C
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Index Allocation Fund $ 21,905 $ 1,508 $ 11,409
</TABLE>
** REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
---------------------
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS
WAIVED FEES AND REIMBURSED EXPENSES
All amounts shown as waived fees and reimbursed expenses on the Statement of
Operations for the year 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 March 31, 1998, Stephens owned 128 shares of the Asset Allocation Fund, 9
shares of the Index Allocation Fund and 116 shares of the U.S. Government
Allocation Fund.
Stephens has retained $5,404,593 as sales charges from the proceeds of Class A
shares sold, $1,120,619 from the proceeds of Class B shares redeemed and $12,732
from the proceeds of Class C shares redeemed by the Company for the year ended
March 31, 1998. Wells Fargo Securities Inc., a subsidiary of WFB, received
$4,508,566 as sales charges from the proceeds of Class A shares sold, $840,060
from the proceeds of Class B shares redeemed and $0 from the proceeds of Class C
shares redeemed by the Company for the year ended March 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 year ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
U.S.
ASSET INDEX GOVERNMENT
AGGREGATE PURCHASES ALLOCATION ALLOCATION ALLOCATION
AND SALES FUND FUND* FUND
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
Total purchases at cost $741,595,736 $ 9,708,385 $34,456,430
Total sales proceeds 677,435,873 245,915 103,419,336
</TABLE>
* REPRESENTS THE PERIOD FROM JANUARY 1, 1998 TO MARCH 31, 1998.
Purchases and sales of investments, exclusive of short-term securities for the
Index Allocation Fund for the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
INDEX
AGGREGATE PURCHASES ALLOCATION
AND SALES FUND
<S> <C>
- -----------------------------------------------------
Total purchases at cost $101,448,355
Total sales proceeds 81,829,212
</TABLE>
- ---------------------
70
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. CAPITAL SHARE TRANSACTIONS
As of March 31, 1998, there were over 108 billion shares of $0.001 par value
capital stock authorized by the Company. As of March 31, 1998, the Asset
Allocation and Index Allocation Funds were each authorized to issue 100 million
shares of $0.001 par value capital stock for each class of shares. The U.S.
Government Allocation Fund was authorized to issue 300 million shares of $0.001
par value capital stock for each class of its shares.
Capital share transactions for the Funds were as follow:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
---------------------------------------------------
FOR THE YEAR FOR THE SIX FOR THE NINE
ENDED MONTHS ENDED MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997 SEPT. 30, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 5,404,941 2,045,161 6,007,551
Shares issued in reinvestment of
dividends -- Class A 5,339,741 4,753,733 1,238,174
Shares redeemed -- Class A (9,806,181) (5,260,733) (9,426,837)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A 938,501 1,538,161 (2,181,112)
Shares sold -- Class B 10,545,390 2,222,248 3,267,959
Shares issued in reinvestment of
dividends -- Class B 1,176,235 518,569 54,554
Shares redeemed -- Class B (1,371,398) (419,149) (481,023)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B 10,350,227 2,321,668 2,841,490
</TABLE>
---------------------
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND
---------------------------------
FOR THE
THREE FOR THE
MONTHS FOR THE YEAR
ENDED YEAR ENDED ENDED
MARCH 31, DEC. 31, DEC. 31,
1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 240,942 850,777 626,835
Shares issued in reinvestment of
dividends -- Class A 9,136 496,833 455,598
Shares redeemed -- Class A (155,356) (470,768) (547,890)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS A 94,722 876,842 534,543
Shares sold -- Class B(1) 133,842 18,462 N/A
Shares issued in reinvestment of
dividends -- Class B(1) 0 0 N/A
Shares redeemed -- Class B(1) 0 0 N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS B(1) 133,842 18,462 N/A
Shares sold -- Class C 283,850 1,061,333 501,829
Shares issued in reinvestment of
dividends -- Class C 554 164,916 112,003
Shares redeemed -- Class C (96,724) (255,583) (138,443)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING -- CLASS C 187,680 970,666 475,389
</TABLE>
(1) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
<TABLE>
<CAPTION>
U.S. GOVERNMENT ALLOCATION FUND
-------------------------------------
FOR THE
FOR THE FOR THE SIX NINE
YEAR MONTHS MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, SEPT. 30,
1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 846,076 231,132 2,528,521
Shares issued in reinvestment of dividends
-- Class A 251,276 151,317 325,965
Shares redeemed -- Class A (1,591,400) (1,126,961) (5,085,090)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING
-- CLASS A (494,048) (744,512) (2,230,604)
Shares sold - Class B 806,213 169,717 336,746
Shares issued in reinvestment of dividends
-- Class B 29,518 12,022 12,543
Shares redeemed -- Class B (221,982) (96,322) (115,493)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING
-- CLASS B 613,749 85,417 233,796
</TABLE>
5. SUBSEQUENT EVENTS
The Funds have changed their fiscal year-ends to February 28.
- ---------------------
72
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
STAGECOACH FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Asset Allocation Fund, Index Allocation
Fund and U.S. Government Allocation Fund (three of the funds comprising
Stagecoach Funds, Inc.) as of March 31, 1998, and the related statements of
operations of the Asset Allocation Fund and U.S. Government Allocation Fund for
the year ended March 31, 1998, and the Index Allocation Fund for the three
months ended March 31, 1998 and the year ended December 31, 1997, the statements
of changes in net assets of the Asset Allocation Fund and U.S. Government
Allocation Fund for the year ended March 31, 1998, the six months ended March
31, 1997, and the nine months ended September 30, 1996, and the Index Allocation
Fund for the three months ended March 31, 1998, and each of the years in the
two-year period ended December 31, 1997, and financial highlights for the
periods indicated herein. These financial statements and financial highlights
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds of Stagecoach Funds, Inc. as of March 31, 1998, the
results of their operations, the changes in their net assets and their financial
highlights for the periods indicated herein in conformity with generally
accepted accounting principles.
[SIG]
[KPMG Peat Marwick LLP]
SAN FRANCISCO, CALIFORNIA
MAY 1, 1998
---------------------
73
<PAGE>
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- ---------------------
74
<PAGE>
STAGECOACH FUNDS
- -----------------------------------------
SHAREHOLDERS' MEETING AND PROXY VOTING RESULTS
The following proposal was passed by the required majority of shareholders of
the indicated Predecessor Fund at Special Shareholders' meetings held on
November 20, (as adjourned to) November 26, 1997, for the purpose of voting on
the proposal.
To approve a proposed Agreement and Plan of Consolidation providing for the
transfer of the assets and stated liabilities of specific Overland portfolios to
corresponding investment portfolios of Stagecoach Funds, Inc., in exchange for
shares of equal value of designated classes of the Stagecoach Funds.
INDEX ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,427,823 156,356 280,436
</TABLE>
---------------------
75
<PAGE>
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- ---------------------
76
<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>
---------------------
77
<PAGE>
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- ---------------------
78
<PAGE>
Wells Fargo provides investment advisory services, shareholder services, and
certain other services for the Stagecoach Funds. The Funds are sponsored and
distributed by STEPHENS INC., Member NYSE/SIPC. Wells Fargo is not affiliated
with Stephens Inc.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Stagecoach Funds. If this report
is used for promotional purposes, distribution of the report must be accompanied
or preceded by a current prospectus. For a prospectus containing more complete
information, including charges and expenses, call 1-800-222-8222. Read the
prospectus carefully before you invest or send money.
SC AA R (5/98)
<TABLE>
<S> <C>
STAGECOACH
FUNDS-REGISTERED TRADEMARK-
P.O. Box 7066
San Francisco, CA 94120-7066
DATED MATERIAL
PLEASE EXPEDITE
</TABLE>
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-C- 1998 Stagecoach Funds
