<PAGE>
- ---------------------
ANNUAL
- ---------------------
REPORT
- ---------------------
California Tax-Free
Bond Fund
Index Allocation
Fund
Short-Term Government-
Corporate Income Fund
Short-Term Municipal
Income Fund
Strategic Growth Fund
U.S. Government
Income Fund
Variable Rate
Government Fund
DECEMBER 31, 1997
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 1
INVESTMENT ADVISER Q & A
California Tax-Free Bond Fund 3
Index Allocation Fund 6
Short-Term Government-Corporate Income Fund 11
Short-Term Municipal Income Fund 15
Strategic Growth Fund 18
U.S. Government Income Fund 23
Variable Rate Government Fund 27
PORTFOLIOS OF INVESTMENTS
California Tax-Free Bond Fund 30
Index Allocation Fund 52
Short-Term Government-Corporate Income Fund 67
Short-Term Municipal Income Fund 70
Strategic Growth Fund 74
U.S. Government Income Fund 80
Variable Rate Government Fund 84
STAGECOACH FUNDS
Statement of Assets and Liabilities 87
Statement of Operations 90
Statements of Changes in Net Assets 92
Financial Highlights 98
Notes to Financial Statements 112
INDEPENDENT AUDITORS' REPORT 129
PROXY VOTING RESULTS 131
LIST OF ABBREVIATIONS 133
STAGECOACH FUNDS:
-------------------------------------------------------------------------
- - ARE NOT FDIC INSURED
- - ARE NOT GUARANTEED BY WELLS FARGO BANK [NO FDIC]
- - ARE NOT DEPOSITS OR OBLIGATIONS OF WELLS FARGO
BANK
- - INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL
---------------------
i
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
ii
<PAGE>
LETTER TO SHAREHOLDERS
- ------------------
TO OUR SHAREHOLDERS:
1997 was a year full of exciting growth, changes and challenges for the
Stagecoach Funds. Among the most notable were the introduction of the New Plain
English Prospectus, the merger with Overland Express and a number of dramatic
market movements.
The Plain English Prospectus, which was mailed to shareholders beginning in
December 1997, is our latest attempt to help you understand your investments. We
invite your comments regarding its success and suggestions for its improvement.
On December 12, 1997, the Overland Express Fund Family merged with Stagecoach
Funds. This Annual Report, dated December 31, 1997, reflects the completion of
that merger.
For shareholders who held the STAGECOACH CALIFORNIA TAX-FREE BOND, U.S.
GOVERNMENT INCOME and STRATEGIC GROWTH FUNDS prior to the merger, the timing of
this report may cause confusion.
Each of these Funds was merged with an Overland Express Fund that had a similar
or identical investment objective. For accounting purposes, the Overland Express
Funds are considered the surviving entities of the merger. For this reason, the
performance information shown for periods prior to the merger reflects the prior
performance of the Overland Express Funds.
THE MERGER WILL NOT HAVE A SIGNIFICANT EFFECT ON THE WAY YOUR FUND IS MANAGED.
HOWEVER, THE MERGER WILL AFFECT THE PRESENTATION OF PRIOR PERFORMANCE.
This report closes out the 1997 fiscal year for the Funds listed on the cover.
The next Annual Report will be dated March 31, which will put these Funds on the
same fiscal year calendar as the rest of the Stagecoach Funds.
The merger of Stagecoach and Overland Express has resulted in a single Fund
Family with over 30 Funds and $23 billion in assets. Most of the changes for
former Overland Express shareholders should be minor. Both Fund families were
managed by Wells Fargo Bank, as is the newly combined Fund group. For the most
part, shareholder account servicing should be very similar to what you have
enjoyed in the past. Other changes resulting from the merger have been outlined
in the proxy materials sent to Overland shareholders when the merger was
proposed.
MARKET RECAP
The second half of 1997 saw more market volatility than we may have grown
accustomed to over the past few years. On October 27, for example, the stock
market suffered its worst one-day drop since 1987. As measured by the Dow Jones
Industrial Average, the market lost 7.2% of its value. By the end of November,
however, the Dow had recovered all that it had lost during the "crash," only to
slump again in mid-December.
---------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
Nevertheless, the stock market, as measured by the S&P 500, rose 33.17% in 1997.
The bond market, as measured by the Lehman Brothers Long-Term Treasury Index,
had a strong year, posting a 15.08% gain, compared to the 0.81% return for the
same index in 1996. The bond market's strength did not assert itself until
mid-April, however, after slumping earlier in the year.
Yet despite these strong overall returns, the dramatic stock market swings in
October received most of the attention from worried investors. What are the
lessons shareholders can learn from these events? The only certainty is that
there are no certainties when it comes to investing. Dramatic market movements
can occur at any time for a variety of reasons -- and the effects can last for
years or be balanced out in just a few days. Perhaps the most significant
lessons learned this October are the ones we have all heard before:
- - HAVE A SOLID, LONG-TERM STRATEGIC PLAN. What are your goals? When will you
need to spend the money you have invested? How much risk are you willing to
tolerate? A long-term strategic plan will help you keep your focus during
periods of short-term market volatility.
- - IF LONG-TERM GROWTH IS YOUR GOAL, STOCKS ARE HISTORICALLY THE BEST INVESTMENT.
While bonds or cash may have a greater return than stocks during certain
periods, over the long term stocks have outperformed every other investment
class.
- - USE ASSET ALLOCATION TO LIMIT MARKET VOLATILITY. The extent to which you
should allocate your assets to less volatile investment classes depends on
your individual circumstances, including such factors as how close you are to
your investment horizon and to what extent you need to preserve capital. Seek
the advice of an investment professional to help you determine your asset
allocation.
The following pages contain discussions of the individual Funds, including
specific commentary on some of the factors that affected Fund performance and
how each Fund tried to capture value or prepare for the future.
For those shareholders who have come to Stagecoach through the merger with
Overland Express, we thank you for your support of Overland Express. We also
thank all of our shareholders for your continued investment with the Stagecoach
Funds.
STAGECOACH FUNDS
FEBRUARY 1998
THE S&P 500 INDEX IS AN UNMANAGED INDEX OF 500 WIDELY HELD COMMON STOCKS
REPRESENTING, AMONG OTHERS, INDUSTRIAL, FINANCIAL, UTILITY AND TRANSPORTATION
COMPANIES LISTED OR TRADED ON NATIONAL EXCHANGES OR OVER-THE-COUNTER MARKETS.
THE LEHMAN BROTHERS LONG-TERM TREASURY INDEX IS AN UNMANAGED INDEX COMPOSED OF
U.S. TREASURY BONDS WITH 20-YEAR OR LONGER MATURITIES.
- ---------------------
2
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED DECEMBER 31, 1997?
Class A shares of the Fund recorded a 9.16% total return for the period,
exclusive of sales charges. The return for Class C shares for the same period,
also exclusive of sales charges, was 8.11%. The total returns for Class B and
Institutional shares for the period from December 15, 1997 to December 31, 1997,
exclusive of sales charges, were 0.45% and 0.49%, respectively.
HOW DID THE FEDERAL RESERVE'S ACTION IN RAISING INTEREST RATES, AND THE
SUBSEQUENT SPECULATION ABOUT ADDITIONAL INCREASES, AFFECT THE FUND THROUGHOUT
THE YEAR?
When the Fed increased the federal funds target rate at the end of March, it
sent a signal to the markets that the Fed intended to remain vigilant in
fighting inflation. This vigilance was received as good news by the bond market.
When subsequent economic data indicated a continuation of moderate economic
growth and subdued inflationary pressures, intermediate and long-term interest
rates responded positively, posting significant declines from April through the
end of 1997. As a result, the value of the investments in the Fund's portfolio
increased and the Fund's share price rose.
DO YOU FORESEE ADDITIONAL FED ACTION ON THE HORIZON?
Short-term rates will be vulnerable to swings in market expectations of Federal
Reserve monetary policy. We expect market rates to move lower as inflation fears
recede which may allow the Fed to ease monetary policy later in the year.
WHAT IS THE FUND'S CURRENT AVERAGE MATURITY AND HOW DID IT CHANGE THROUGHOUT THE
YEAR? WHY?
The Fund's average maturity, which measures its sensitivity to interest rate
fluctuations, declined modestly during the year. We shortened the Fund's average
maturity in order to reduce the Fund's interest rate sensitivity. Typically,
fund portfolios with a longer average maturity are affected more by moves in
interest rates than funds with shorter maturity portfolios. The Fund's average
maturity at the end of the year was 15.01 years, which is in the intermediate
range for this Fund.
WHAT IS YOUR CURRENT OUTLOOK FOR NEXT YEAR?
We will continue to emphasize credit quality and good call structure. We will
continue to look for opportunities to improve the Fund's call protection and
currently plan to sell bonds callable in 2003 or earlier, and buy bonds that are
not callable until 2006 or later. At present, we expect the Fund's average
maturity to remain within its current range.
---------------------
3
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 10/88
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
With Maximum 4.5% Sales Charge 4.29% 8.08% 6.42% 7.81%
- ----------------------------------------------------------------------------------------------
Without Sales Charge 9.16% 9.75% 7.40% 8.35%
- ----------------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 10/88
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 3.28% 8.07% 6.27% 7.61%
- ----------------------------------------------------------------------------------------------
Without Sales Charge 8.28% 8.92% 6.58% 7.61%
- ----------------------------------------------------------------------------------------------
(1)Assumes 12/31/97 Redemption
</TABLE>
CLASS C SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 10/88
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 7.11% 8.86% 6.55% 7.59%
- ----------------------------------------------------------------------------------------------
Without Sales Charge 8.11% 8.86% 6.55% 7.59%
- ----------------------------------------------------------------------------------------------
(1)Assumes 12/31/97 Redemption
</TABLE>
INSTITUTIONAL SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 10/88
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
This Share Class has No Sales Charge 9.17% 9.75% 7.40% 8.35%
- ----------------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach California Tax-Free Bond Fund commenced operations on October 6,
1988 as the California Tax-Free Bond Fund of Overland Express Funds, Inc.,
another investment company advised by Wells Fargo Bank.
On December 12, 1997, the Class A and Class D shares of the Overland Express
California Tax-Free Bond Fund were reorganized as the Class A and Class C
shares, respectively, of the California Tax-Free Bond Fund of Stagecoach Funds.
For accounting purposes, the Overland Express Fund is considered the surviving
entity of the reorganization. The Overland Fund did not offer Class B or
Institutional Class shares.
For periods prior to December 15, 1997, performance shown for the Class A shares
of the Stagecoach California Tax-Free Bond Fund reflects performance of the
Class A shares of the Overland Express Fund. Performance shown for the Class B
and Class C shares of the Fund for the period from July 1, 1993 to December 12,
1997, reflects performance of the Class D shares of the Overland Fund. For
periods prior to July 1, 1993, Class B share and Class C share performance
reflects performance of the Class A shares of the Overland Fund, adjusted to
reflect the expenses of the Class B or Class C shares, as applicable. For
periods prior to December 15, 1997, performance shown for the Institutional
Class shares reflects performance of the Class A shares of the Overland Fund.
While the Fund principally invests in obligations exempt from federal income
taxes, a portion of the Fund's distributions may be subject to state and local
taxes or the alternative minimum tax (AMT).
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
4
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
THE RETURNS FOR CLASS B, CLASS C AND INSTITUTIONAL SHARES OF THE CALIFORNIA
TAX-FREE BOND FUND WILL VARY FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES
AND SALES CHARGES.
The accompanying chart compares the performance of the Stagecoach California
Tax-Free Bond Fund Class A shares since inception with the Lehman Brothers
Municipal Bond Index. The chart assumes a hypothetical $10,000 initial
investment in Class A shares and reflects all operating expenses and assumes the
maximum initial sales charge of 4.5%. The Lehman Brothers Municipal Bond Index
is an unmanaged, broad-based index of municipal bonds. Please note that the Fund
is a professionally managed mutual fund. The index presented here is not
managed, does not incur expenses and is not available directly for investment.
Had this index incurred operating expenses, its performance would have been
lower.
---------------------
5
<PAGE>
INDEX ALLOCATION FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED DECEMBER 31, 1997?
Class A shares of the Fund recorded a 25.18% total return for the period,
exclusive of sales charges. The total return for Class C shares for the same
period, also exclusive of sales charges, was 24.07%. The total return for Class
B shares for the period from December 15, 1997 to December 31, 1997 was 1.69%,
exclusive of sales charges.
INCREASED CORPORATE EARNINGS AND LOW INFLATION HAVE FUELED THE GROWTH OF THE S&P
500 IN RECENT YEARS. WAS THIS THE CASE DURING 1997?
Yes, a strong economy with above-expected earnings and a low inflation rate were
once again the primary drivers of the S&P 500's rise of over 33% for the year.
Corporate earnings have continued to meet or exceed analysts' expectations.
Positive earnings surprises have surpassed negative surprises. Similarly,
inflation has been kept at bay. The annual inflation rate was measured at below
2.0% for the year.
WHAT IS YOUR CURRENT ANALYSIS: CAN THE EQUITY MARKET SUPPORT THESE CURRENT STOCK
PRICES?
Investor concerns that the stock market may be over-valued may have contributed
to the slackening of growth in the market over the last quarter of 1997. The
market's susceptibility to bad news was demonstrated in the reaction to the
crisis in the Asian markets. The S&P 500 forward price-to-earnings (P/E) ratio,
which measures stock prices against expected earnings over the next year,
reached a post-World War II high of 19.2 in July. The decline in the last
quarter helped nudge the P/E ratio down. If earnings continue at the current
pace and inflation remains low, we believe current equity valuations may be
justified. An increase in the inflation rate, which might cause the Fed to hike
interest rates, and/or any downturn in corporate earnings could cause a further
correction in the equities market, and lower valuations further.
HAVE THE SWINGS IN THE MARKET BEEN REFLECTED IN ADJUSTMENTS IN THE FUND'S
INVESTMENT ALLOCATION?
The Fund's investment allocation gradually increased in favor of equity holdings
throughout the second half of the year. As of June 30, 1997, the Fund's
investment allocation was 70% stocks and 30% bonds. By December 31, 1997, after
several progressive increases in equity weighting, the Fund's investment
allocation stood at 97% stocks, 3% bonds, and no cash. When the S&P 500 Index's
P/E ratio reached its July high, the Fund's investment allocation was slightly
defensive based on the model's analysis that equity valuations were too high. As
earnings reports emerged and the third quarter's market slump spurred by the
Asian crisis played itself out, equity valuations began to appear more
sustain-
- ---------------------
6
<PAGE>
INDEX ALLOCATION FUND
able. As equity valuations began to decline, we increased the Fund's equity
allocation.
WHAT WAS THE YIELD DIFFERENCE BETWEEN CASH AND BONDS AS OF DECEMBER 31, 1997?
The yield curve, which measures the differences in yields for bonds of different
maturity lengths, "flattened" throughout the year. This means that long-term
yields and short-term (cash) yields drew closer together. Thirty-year Treasury
yields were down to 5.92% by the end of 1997, while the three-month yield (cash)
ended at 5.34%. Typically, a narrow spread between long-term and short-term
yields would make cash a more favorable investment for this Fund. As the year
ended, however, the Fund's investment allocation was heavily tipped toward
stocks with only slight exposure to other investments.
---------------------
7
<PAGE>
INDEX ALLOCATION FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
With Maximum 4.50% Sales Charge 19.54% 23.54% 16.07% 13.28%
- ----------------------------------------------------------------------------------------------
Without Sales Charge 25.18% 25.44% 17.14% 13.81%
- ----------------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 19.02% 23.86% 16.12% 13.04%
- ----------------------------------------------------------------------------------------------
Without Sales Charge 24.02% 24.51% 16.34% 13.04%
- ----------------------------------------------------------------------------------------------
(1) Assumes 12/31/97 Redemption
</TABLE>
CLASS C SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 23.07% 24.52% 16.35% 13.04%
- ----------------------------------------------------------------------------------------------
Without Sales Charge 24.07% 24.52% 16.35% 13.04%
- ----------------------------------------------------------------------------------------------
(1) Assumes 12/31/97 Redemption
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the indicated periods
assuming reinvestment of dividends and capital gain distributions at net asset
value.
The Stagecoach Index Allocation Fund commenced operations on April 7, 1988 as
the Asset Allocation Fund of Overland Express Funds, Inc., another investment
company advised by Wells Fargo Bank. In February of 1997, the Fund changed its
name to the "Index Allocation Fund". On December 12, 1997, the Class A and Class
D shares of the Overland Express Index Allocation Fund were reorganized as the
Class A and Class C shares, respectively, of the Index Allocation Fund of
Stagecoach Funds.
For periods prior to December 15, 1997, performance shown for the Class A shares
of the Stagecoach Index Allocation Fund reflects performance of the Class A
shares of the Overland Express Fund. Performance shown for the Class B and Class
C shares of the Fund for the period from July 1, 1993 to December 12, 1997,
reflects performance of the Class D shares of the Overland Fund. For periods
prior to July 1, 1993, Class B share and Class C share performance reflects
performance of the Class A shares of the Overland Fund, adjusted to reflect the
expenses of the Class B or Class C shares, as applicable.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
8
<PAGE>
INDEX ALLOCATION FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
[CHART]
THE RETURNS FOR CLASS B AND CLASS C SHARES OF THE INDEX ALLOCATION FUND WILL
VARY FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND SALES CHARGES.
The accompanying chart compares the performance of the Stagecoach Index
Allocation Fund Class A shares since inception with the S&P 500 Index, the
Lehman Brothers U.S. 20+ 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 20+ Treasury 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 while the Fund is a professionally managed mutual fund. The indexes
presented here do not incur expenses and are not available directly for
investment. Had these indexes incurred operating expenses, their performances
would have been lower.
---------------------
9
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
10
<PAGE>
SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED DECEMBER 31, 1997?
The Fund recorded a 5.91% total return for the period, exclusive of sales
charges.
HOW DID THE FUND'S INVESTMENT ALLOCATION SHIFT BETWEEN GOVERNMENT AND CORPORATE
BONDS DURING THE PERIOD?
The Fund decreased its allocations to Treasury securities and cash, and
increased its allocation to corporate securities and U.S. Government agency
securities. The year ended with a corporate allocation of 35%. At present, we
expect the Fund's corporate exposure to range from approximately 35% to 45%.
DID FALLING YIELDS PLAY A ROLE IN THE FUND'S INVESTMENT ALLOCATION CHANGES?
The difference in yields between government and corporate bonds is very narrow
by historical standards and narrowed gradually in the last three quarters of
1997. We have emphasized high-quality corporate debt in an effort to gain better
yield. With the spread so narrow and the interest rate outlook relatively
stable, we believe there is less reward remaining in Treasury securities.
WHAT IS THE CURRENT OUTLOOK FOR INTEREST RATES?
We believe short-term rates will be vulnerable to swings in market expectations
of Federal Reserve policy. We expect rates to move lower as inflation fears
recede, and we may even see the Federal Reserve easing monetary policy later in
the year.
---------------------
11
<PAGE>
SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
- ---------------------
PERFORMANCE AT A GLANCE
PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 9/94
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS INCEPTION
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
With Maximum 3.0% Sales Charge 2.81% 5.20% 4.83%
- -------------------------------------------------------------------------------------------
Without Sales Charge 5.91% 6.26% 5.77%
- -------------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach Short-Term Government-Corporate Income Fund commenced operations
on September 9, 1994 as the Short-Term Government-Corporate Income Fund of
Overland Express Funds, Inc., another investment company advised by Wells Fargo
Bank. On December 12, 1997, the Overland Express Short-Term Government-Corporate
Income Fund was reorganized as the Short-Term Government-Corporate Income Fund
of Stagecoach Funds. Prior to December 12, 1997, the Fund invested in a master
portfolio with a corresponding investment objective. The Fund no longer invests
in a master portfolio and currently invests directly in a portfolio of
securities. Performance for the periods prior to December 15, 1997 reflects the
performance of the Overland Fund.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without these reductions, the Fund's returns would have been lower.
- ---------------------
12
<PAGE>
SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
The accompanying chart compares the performance of the Stagecoach Short-Term
Government-Corporate Income Fund since inception with the Merrill Lynch One Year
Treasury Bill Index. The chart assumes a hypothetical $10,000 initial investment
and reflects all operating expenses and assumes the maximum initial sales charge
of 3.0%. The Merrill Lynch One Year Treasury Bill Index is an unmanaged index
while the Fund is a professionally managed mutual fund. The index presented does
not incur expenses and is not available directly for investment. Had this index
incurred operating expenses, its performance would have been lower.
---------------------
13
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
14
<PAGE>
SHORT-TERM MUNICIPAL INCOME FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED DECEMBER 31, 1997?
The Fund recorded a 4.14% total return for the period, exclusive of sales
charges.
HOW DID THE FEDERAL RESERVE'S ACTION IN RAISING INTEREST RATES, AND THE
SUBSEQUENT SPECULATION ABOUT ADDITIONAL INCREASES, AFFECT THE FUND THROUGHOUT
THE YEAR?
When the Fed increased the federal funds target rate at the end of March, it
sent a signal to the markets that the Fed intended to remain vigilant in
fighting inflation. This vigilance was received as good news by the bond market.
Subsequent economic data indicated a continuation of moderate economic growth
and subdued inflationary pressures. The Fund's return improved from late April
through the remainder of the year.
DO YOU FORESEE ADDITIONAL FED ACTION ON THE HORIZON?
We expect market rates to move lower as inflation fears recede, which may allow
the Federal Reserve to ease monetary policy later in the year. Meanwhile, short-
term rates will be vulnerable to swings in market expectations of Federal
Reserve monetary policy.
WHAT IS THE FUND'S CURRENT AVERAGE MATURITY AND HOW DID IT CHANGE THROUGHOUT THE
PERIOD?
The Fund's average maturity, which measures its sensitivity to interest rates,
increased modestly during the year, from 0.9 years early in 1997 to 1.62 years
at the end of the year. This expansion took advantage of yields in the
intermediate (2 to 5 years) maturity range, while still emphasizing high credit
quality.
---------------------
15
<PAGE>
SHORT-TERM MUNICIPAL INCOME FUND
- ---------------------
PERFORMANCE AT A GLANCE
PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 6/94
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 3 YEARS INCEPTION
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
With Maximum 3.0% Sales Charge 1.09% 3.57% 3.04%
- -------------------------------------------------------------------------------------------
Without Sales Charge 4.14% 4.62% 3.89%
- -------------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach Short-Term Municipal Income Fund commenced operations on June 3,
1994 as the Short-Term Municipal Income Fund of Overland Express Funds, Inc.,
another investment company advised by Wells Fargo Bank. On December 12, 1997,
the Overland Express Short-Term Municipal Income Fund was reorganized as the
Short-Term Municipal Income Fund of Stagecoach Funds. Prior to December 12,
1997, the Fund invested in a master portfolio with a corresponding investment
objective. The Fund no longer invests in a master portfolio and currently
invests directly in a portfolio of securities. Performance for the periods prior
to December 15, 1997 reflects the performance of the Overland Fund.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without these reductions, the Fund's returns would have been lower.
- ---------------------
16
<PAGE>
SHORT-TERM MUNICIPAL INCOME FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
The accompanying chart compares the performance of the Stagecoach Short-Term
Municipal Income Fund since its inception with the Lehman Brothers Municipal
Bond Index. The chart assumes a hypothetical $10,000 initial investment and
reflects all operating expenses and assumes the maximum initial sales charge of
3.0%. The Lehman Brothers Municipal Bond Index is an unmanaged, broad-based
index of municipal bonds while the Fund is a professionally managed mutual fund.
The index presented here does not incur expenses and is not available directly
for investment. Had this index incurred operating expenses, its performance
would have been lower.
---------------------
17
<PAGE>
STRATEGIC GROWTH FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED DECEMBER 31, 1997?
Class A shares of the Fund recorded a 7.73% total return for the period,
exclusive of sales charges. The total return for Class C shares for the same
period, also exclusive of sales charges, was 6.98%. The total return for Class B
shares for the period from December 15, 1997 to December 31, 1997 was 2.74%,
exclusive of sales charges.
MID-CAP GROWTH STOCKS WERE PARTICULARLY VOLATILE DURING THE YEAR. WHAT CAUSED
SOME OF THE UP AND DOWN SWINGS?
Much of the volatility during the year was the result of swings in investor
sentiment concerning the future level and direction of interest rates, the pace
of earnings growth and events in the Asian markets. Early in the year, investors
were fearful of rising interest rates and slower earnings growth and share
prices fell dramatically. Many investors responded to interest rate concerns by
moving into large company stocks, which are generally viewed as being safer than
small company stocks in an uncertain environment. As these fears subsided, the
share prices for smaller and mid-cap companies recovered and climbed to new
highs. The third quarter of 1997 in particular saw record increases. In the
fourth quarter, however, there was a dramatic sell-off in the small and mid-cap
growth sectors primarily caused by fears of a marked slow down in earnings. The
fears of slower earnings growth were caused by, among other things, the
confusion in Asia, the sell-off in the energy sector due to falling commodities
prices and earnings disappointments in the healthcare service sector.
TO WHAT EXTENT WAS THE CONTINUED UNCERTAINTY ABOUT INTEREST RATES A FACTOR IN
THE MARKET'S VOLATILITY DURING THE PERIOD?
The fear of rising interest rates was a major factor in the volatility in March
and April. Investors moved away from growth stocks in fear that higher rates
might lead to a slower economy and lower earnings. Projected future earnings are
one of the key supports for stock prices; if investors expect or fear
disappointments, values may decline. In the weeks after the Federal Reserve
raised the federal funds target rate in March, the market grew confident that
inflation would not become a major factor. The prevailing sentiment by the end
of the year was that the American economy had grown without triggering inflation
and therefore interest rates are expected by many to remain favorable.
WHICH SECTORS SHOWED STRENGTH? WHICH WERE DISAPPOINTING?
Over the whole of 1997, among the best performing sectors were the financial
industry, including bank, credit card and insurance companies, and healthcare
stocks. Basic materials and energy sectors were disappointing.
- ---------------------
18
<PAGE>
STRATEGIC GROWTH FUND
WHAT'S THE OUTLOOK FOR THE GROWTH SECTOR?
We feel that the current high equity prices make the equity market vulnerable as
investors continue to assess the potential impact of Asian -- especially
Japanese -- markets on U.S. corporate earnings. We expect only a moderate impact
from the Asian crisis, but combined with the natural slowing of the nearly seven
year long economic expansion, we expect that overall growth will be less than in
recent years. We believe that if earnings reports in 1998 demonstrate that the
Asian markets have not overly affected U.S. corporate growth, the growth sector
will rebound.
---------------------
19
<PAGE>
STRATEGIC GROWTH FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS INCEPTION
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
With Maximum 5.25% Sales Charge 2.87% 17.38% 18.32%
- -----------------------------------------------------------------------------------------
Without Sales Charge 7.73% 19.20% 19.42%
- -----------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS INCEPTION
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales Charge(1) 2.02% 17.64% 18.07%
- -----------------------------------------------------------------------------------------
Without Sales Charge 7.02% 18.36% 18.27%
- -----------------------------------------------------------------------------------------
(1)Assumes 12/31/97 Redemption
</TABLE>
CLASS C SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 1/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS INCEPTION
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales Charge(1) 5.98% 18.34% 18.26%
- -----------------------------------------------------------------------------------------
Without Sales Charge 6.98% 18.34% 18.26%
- -----------------------------------------------------------------------------------------
(1)Assumes 12/31/97 Redemption
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach Strategic Growth Fund commenced operations on January 20, 1993 as
the Strategic Growth Fund of Overland Express Inc., another investment company
advised by Wells Fargo Bank.
On December 12, 1997, the Class A and Class D shares of the Overland Express
Strategic Growth Fund were reorganized as the Class A and Class C shares,
respectively, of the Aggressive Growth Fund of Stagecoach Funds. The Aggressive
Growth Fund was renamed the "Strategic Growth Fund." For accounting purposes,
the Overland Express Fund is considered the surviving entity of the
reorganization. The Overland Fund did not offer Class B shares.
For periods prior to December 15, 1997, performance shown for the Class A shares
of the Stagecoach Strategic Growth Fund reflects performance of the Class A
shares of the Overland Express Fund. Performance shown for the Class B and Class
C shares of the Fund for the period from July 1, 1993 to December 12, 1997,
reflects performance of the Class D shares of the Overland Fund. For periods
prior to July 1, 1993, Class B share and Class C share performance reflects
performance of the Class A shares of the Overland Fund, adjusted to reflect the
expenses of the Class B or Class C shares, as applicable.
Prior to December 12, 1997, the Fund invested in a master portfolio with a
corresponding investment objective. The Fund no longer invests in a master
portfolio and currently invests directly in a portfolio of securities.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
20
<PAGE>
STRATEGIC GROWTH FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
THE RETURNS FOR CLASS B AND CLASS C SHARES OF THE STRATEGIC GROWTH FUND WILL
VARY FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND SALES CHARGES.
The accompanying chart compares the performance of the Stagecoach Strategic
Growth Fund Class A shares since inception with the S&P 500 Index. The chart
assumes a hypothetical $10,000 initial investment in Class A shares and reflects
all operating expenses and assumes the maximum initial sales charge of 5.25%.
The S&P 500 Index is an unmanaged index of 500 widely held common stocks
representing, among others, industrial, financial, utility and transportation
companies listed or traded on national exchanges or over-the-counter markets
while the Fund is a professionally managed mutual fund. The index presented here
does not incur expenses and is not available directly for investment. Had this
index incurred operating expenses, its performance would have been lower.
---------------------
21
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
22
<PAGE>
U.S. GOVERNMENT INCOME FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED DECEMBER 31, 1997?
Class A shares of the Fund recorded an 8.73% total return for the period,
exclusive of sales charges. The total return for Class C shares for the same
period, also exclusive of sales charges, was 7.56%. The total returns for Class
B and Institutional shares for the period from December 15, 1997 to December 31,
1997, exclusive of sales charges, were 0.08% and 0.18%, respectively.
AMONG THE PERMITTED INVESTMENTS FOR THE FUND ARE MORTGAGE-BACKED SECURITIES. ARE
MORTGAGE-BACKED SECURITIES AS SENSITIVE TO INTEREST RATE CHANGES AS OTHER BONDS?
Mortgage-backed securities generally move in tandem with Treasury securities
when there are small changes in interest rates. In the event of a large move in
rates, Treasury and mortgage-backed securities may diverge due to prepayment
risk. Prepayment risk is the risk that as interest rates drop, homeowners may
refinance their mortgages to take advantage of the lower rates. This can
potentially reduce the expected returns from mortgages and mortgage-backed
securities. 1997 ended with mortgage rates at a four-year low. Therefore, in
order to protect the Fund from the rising rate of prepayments, we have begun to
increase the percentage of Treasury securities and lower-coupon mortgage
securities in the Fund's portfolio.
DESCRIBE THE DIFFERENCES BETWEEN THE VARIOUS GOVERNMENT MORTGAGE-BACKED
SECURITIES, SUCH AS GINNIE MAES, FANNIE MAES AND FHLMC SECURITIES. DO THEY
GENERALLY HAVE YIELD DIFFERENCES?
The main difference between these securities is that the Ginnie Mae securities
issued by the Government National Mortgage Association are backed by the full
faith and credit of the United States Government, while Fannie Maes and FHLMC
securities are not backed by the U.S. Government. The U.S. Government has never
defaulted on Ginnie Mae securities. Fannie Mae and FHLMC securities are issued
by government agencies that guarantee the payment of interest and the repayment
of principal. There is no guarantee that the U.S. Government will back these
agencies. Nevertheless, Fannie Maes and FHLMC's are considered to have
outstanding credit quality. The superior credit quality of Ginnie Mae securities
allows them to trade at slightly lower yields.
WHAT IS THE CURRENT OUTLOOK FOR INTEREST RATES?
We believe short-term rates will be vulnerable to swings in market expectations
of Federal Reserve policy. We expect rates to move lower as inflation fears
recede, and we may even see the Federal Reserve easing monetary policy later in
the year.
---------------------
23
<PAGE>
U.S. GOVERNMENT INCOME FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
With Maximum 4.5% Sales Charge 3.80% 7.35% 5.44% 8.10%
- -------------------------------------------------------------------------------------------
Without Sales Charge 8.73% 9.03% 6.42% 8.61%
- -------------------------------------------------------------------------------------------
</TABLE>
CLASS B SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 2.69% 7.33% 5.30% 7.90%
- -------------------------------------------------------------------------------------------
Without Sales Charge 7.69% 8.19% 5.62% 7.90%
- -------------------------------------------------------------------------------------------
(1)Assumes 12/31/97 Redemption
</TABLE>
CLASS C SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 6.56% 8.15% 5.60% 7.89%
- -------------------------------------------------------------------------------------------
Without Sales Charge 7.56% 8.15% 5.60% 7.89%
- -------------------------------------------------------------------------------------------
(1)Assumes 12/31/97 Redemption
</TABLE>
INSTITUTIONAL SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 4/88
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
This Share Class has No Sales Charge 8.69% 9.01% 6.42% 8.61%
- -------------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach U.S. Government Income Fund commenced operations on April 7, 1988
as the U.S. Government Income Fund of Overland Express Funds Inc., another
investment company advised by Wells Fargo Bank.
On December 12, 1997, the Class A and Class D shares of the Overland Express
U.S. Government Income Fund were reorganized as the Class A and Class C shares,
respectively, of the Ginnie Mae Fund of Stagecoach Funds. The Ginnie Mae Fund
was renamed the "U.S. Government Income Fund." For accounting purposes, the
Overland Express Fund is considered the surviving entity of the reorganization.
The Overland Fund did not offer Class B or Institutional Class shares.
For periods prior to December 15, 1997, performance shown for the Class A shares
of the Stagecoach U.S. Government Income Fund reflects performance of the Class
A shares of the Overland Express Fund. Performance shown for the Class B and
Class C shares of the Fund for the period from July 1, 1993 to December 12,
1997, reflects performance of the Class D shares of the Overland Fund. For
periods prior to July 1, 1993, Class B share and Class C share performance
reflects performance of the Class A shares of the Overland Fund, adjusted to
reflect the expenses of the Class B or Class C shares, as applicable. For
periods prior to December 15, 1997, performance shown for the Institutional
Class shares reflects performance of the Class A shares of the Overland Fund.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without this reduction, the Fund's returns would have been lower.
- ---------------------
24
<PAGE>
U.S. GOVERNMENT INCOME FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
THE RETURNS FOR CLASS B, CLASS C AND INSTITUTIONAL SHARES OF THE U.S. GOVERNMENT
INCOME FUND WILL VARY FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND SALES
CHARGES.
The accompanying chart compares the performance of the Stagecoach U.S.
Government Income Fund Class A shares since inception with the Lehman Brothers
Long-Term Government Bond Index. The chart assumes a hypothetical $10,000
initial investment in Class A shares and reflects all operating expenses and
assumes the maximum initial sales charge of 4.5%. The Lehman Brothers Long-Term
Government Bond Index is comprised of publicly issued long-term government debt
securities and has an average maturity of 23-25 years while the Fund is a
professionally managed mutual fund. The index presented here does not incur
expenses and is not available directly for investment. Had this index incurred
operating expenses, its performance would have been lower.
---------------------
25
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ---------------------
26
<PAGE>
VARIABLE RATE GOVERNMENT FUND
- --------------------
INVESTMENT ADVISER Q&A
WHAT WAS THE TOTAL RETURN FOR THE FUND FOR THE YEAR ENDED DECEMBER 31, 1997?
Class A shares of the Fund recorded a 5.43% total return for the period
exclusive of sales charges. The total return for Class C shares for the same
period, also exclusive of sales charges, was 5.44%.
WHAT WAS THE INTEREST RATE ENVIRONMENT DURING 1997?
Early in the year, concern about Federal Reserve monetary policy dampened the
bond market. When the Fed finally did raise the federal funds target rate in
March, the market took a few weeks to fully absorb the change. Then, as economic
reports indicated that the economy was growing with little inflation, the bond
market rallied and yields fell.
WHAT EFFECT DID THIS HAVE ON THE FUND?
Short-term rates reached a 36-month low in April and the yield curve, which
measures the difference between short-term and long-term yields, was relatively
flat. The challenge facing a Fund that invests in mortgage-backed securities in
such an environment is to reduce prepayment risk. When mortgage rates are low,
homeowners often refinance, reducing the income available from mortgage-backed
securities. In order to reduce the Fund's exposure to prepayment risk we
increased the Fund's holdings of Collateralized Mortgage Obligations ("CMOs"),
which have a floating rate and are not as susceptible to prepayments as
mortgage-backed securities. In addition, we began to sell Adjustable Rate
Mortgage ("ARMs") obligations that originated in 1996 and 1997 and replaced them
with older ARMs that have gone through prepayment cycles and therefore are less
subject to prepayment risk.
DO YOU FORESEE ADDITIONAL FED ACTION ON THE HORIZON?
We expect market rates to move lower as inflation fears recede. We believe the
Federal Reserve may eventually ease monetary policy later in the year.
Meanwhile, short-term rates will be vulnerable to swings in market expectations
of Federal Reserve monetary policy. Protecting against prepayments will
therefore continue to be a major theme for the foreseeable future.
---------------------
27
<PAGE>
VARIABLE RATE GOVERNMENT FUND
- ---------------------
PERFORMANCE AT A GLANCE
CLASS A SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 11/90
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
With Maximum 3.0% Sales Charge 2.23% 4.78% 3.01% 4.27%
- ----------------------------------------------------------------------------------------------
Without Sales Charge 5.43% 5.83% 3.64% 4.71%
- ----------------------------------------------------------------------------------------------
</TABLE>
CLASS C SHARE PERFORMANCE AS OF 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE 11/90
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEARS 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
With Maximum Contingent Deferred Sales
Charge(1) 4.44% 5.48% 3.22% 4.26%
- ----------------------------------------------------------------------------------------------
Without Sales Charge 5.44% 5.48% 3.22% 4.26%
- ----------------------------------------------------------------------------------------------
(1)Assumes 12/31/97 Redemption
</TABLE>
Past performance is not predictive of future results. The investment return and
net asset value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may have a greater or lesser net asset
value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Stagecoach Variable Rate Government Fund commenced operations on November 3,
1990 as the Variable Rate Government Fund of Overland Express Funds, Inc.,
another investment company advised by Wells Fargo Bank. On December 12, 1997,
the Class A and Class D shares of the Overland Express Variable Rate Government
Fund were reorganized as the Class A and Class C shares, respectively, of the
Variable Rate Government Fund of Stagecoach Funds.
For periods prior to December 15, 1997, performance shown for the Class A shares
of the Stagecoach Variable Rate Government Fund reflects performance of the
Class A shares of the Overland Express Fund. Performance shown for the Class C
shares of the Fund for the period from July 1, 1993 to December 12, 1997,
reflects performance of the Class D shares of the Overland Fund. For periods
prior to July 1, 1993, Class C share performance reflects performance of the
Class A shares of the Overland Fund, adjusted to reflect the expenses of the
Class C shares.
The Fund's manager has voluntarily waived portions of its fees or has reimbursed
expenses to the Fund, which has reduced operating expenses for shareholders.
Without these reductions, the Fund's returns would have been lower.
- ---------------------
28
<PAGE>
VARIABLE RATE GOVERNMENT FUND
- --------------------------
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
THE RETURN FOR CLASS C SHARES OF THE VARIABLE RATE GOVERNMENT FUND WILL VARY
FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND SALES CHARGES.
The accompanying chart compares the performance of the Stagecoach Variable Rate
Government Fund Class A shares since inception with the Lehman Brothers U.S.
Government ARM Index. The chart assumes a hypothetical $10,000 initial
investment in Class A shares and reflects all operating expenses and assumes the
maximum initial sales charge of 3.0%. The Lehman Brothers U.S. Government ARM
Index is an unmanaged index comprised of agency-guaranteed securities with
coupons that periodically adjust based on a spread over a published index while
the Fund is a professionally managed mutual fund. The index presented does not
incur expenses and is not available directly for investment. Had this index
incurred operating expenses, its performance would have been lower.
---------------------
29
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 97.99%
$ 2,000,000 ABAG Finance Authority for Nonprofit Corp CA
Stanford University Hospital 5.50 % 11/01/13 $ 2,050,000
1,000,000 ABAG Finance Authority for Nonprofit Corp CA
State Insured 7.10 12/01/20 1,075,700
1,000,000 Alameda CA USD AMBAC Insured 5.95 07/01/09 1,075,550
2,000,000 Alameda CA USD AMBAC Insured 6.05 07/01/11 2,154,900
1,000,000 Alameda County CA Water District Revenue COP
Water System Project MBIA Insured 6.20 06/01/13 1,070,020
2,500,000 Anaheim CA Public Financing Authority Tax
Authority Revenue Redevelopment Project 5.25 02/01/18 2,523,975
3,620,000 Antioch CA Public FA Water Revenue Water
Treatment Plant Project MBIA Insured 5.63 07/01/14 3,741,487
1,330,000 Arcadia CA USD Capital Appreciation Series A
MBIA Insured (zero coupon) 7.97 (F) 09/01/06 907,113
810,000 Benicia CA USD 5.13 08/01/12 818,473
2,545,000 Bonita CA USD COP MBIA Insured 5.63 05/01/10 2,702,179
1,300,000 Burbank Glendale Pasadena Airport Authority CA
Airport Revenue AMBAC Insured 6.40 06/01/10 1,390,064
1,000,000 California State DWR Central Valley Project
Revenue 4.75 09/01/12 995,550
1,000,000 California State DWR Central Valley Project
Revenue 5.00 10/01/11 1,010,000
1,500,000 California State DWR Central Valley Project
Revenue 5.00 12/01/12 1,505,865
400,000 California State DWR Central Valley Project
Revenue Series F 6.00 12/01/11 403,776
5,000,000 California State DWR Central Valley Project
Revenue Series J 6.00 12/01/07 5,630,100
1,830,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/13 1,913,228
</TABLE>
- ------------------------
30
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 4,550,000 California State DWR Central Valley Project
Revenue Series L 5.75 % 12/01/14 $ 4,756,934
2,300,000 California State DWR Central Valley Project
Revenue Series M 5.00 12/01/15 2,280,887
3,235,000 California State DWR Central Valley Project
Series O 4.75 12/01/17 3,090,266
1,540,000 California State EDFA Revenue Chapman College
Refunding Pending 7.30 01/01/02 1,660,120
1,000,000 California State EDFA Revenue Claremont
Colleges Pooled Facilities 6.38 05/01/22 1,079,820
350,000 California State EDFA Revenue Loyola Marymount
University 6.00 10/01/14 365,516
710,000 California State EDFA Revenue Loyola Marymount
University Series B 6.55 10/01/12 792,587
50,000 California State EDFA Revenue Pomona College 6.13 02/15/08 54,079
1,000,000 California State EDFA Revenue Pomona College GO 5.60 12/01/14 1,040,000
3,200,000 California State EDFA Revenue Pomona College GO 6.00 02/15/17 3,393,792
1,950,000 California State EDFA Revenue University of San
Diego Project 6.50 10/01/08 2,143,655
1,000,000 California State EDFA Revenue University of San
Francisco MBIA Insured 5.60 10/01/10 1,094,250
1,500,000 California State Educational Facility Authority
Revenue Pooled College and University Project
Series C 5.13 03/01/15 1,503,705
1,110,000 California State Educational Facility Revenue
Project 5.00 09/01/12 1,114,385
1,000,000 California State GO 4.75 09/01/11 1,000,680
4,355,000 California State GO AMBAC Insured 5.75 03/01/15 4,574,187
1,910,000 California State GO Eagles II Series 6 (zero
coupon) 6.24 (F) 04/01/10 1,050,118
3,000,000 California State GO MBIA Insured 6.00 10/01/10 3,391,230
375,000 California State HFA Home Mortgage Revenue AMT
Series B Multiple Credit Enhancements 8.00 08/01/29 391,286
</TABLE>
---------------------
31
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 955,000 California State HFA Home Mortgage Revenue AMT
Series D Multiple Credit Enhancements 7.75 % 08/01/10 $ 1,014,821
260,000 California State HFA Home Mortgage Revenue AMT
Series G Multiple Credit Enhancements 8.15 08/01/19 267,257
1,535,000 California State HFA Home Mortgage Revenue
Series A Multiple Credit Enhancements 7.35 08/01/11 1,635,159
40,000 California State HFA Home Mortgage Revenue
Series B FHA Collateralized 6.90 08/01/16 40,458
180,000 California State HFA Home Mortgage Revenue
Series B MBIA Insured 6.90 08/01/16 182,065
355,000 California State HFA Home Mortgage Revenue
Series B Multiple Credit Enhancements 7.25 08/01/10 375,327
110,000 California State HFA Home Mortgage Revenue
Series F Multiple Credit Enhancements 7.75 08/01/08 112,925
135,000 California State HFA Home Mortgage Revenue
Series G AMT Multiple Credit Enhancements 6.95 08/01/11 144,254
500,000 California State HFA Home Multi Unit Rental
Mortgage Revenue Series B-II 6.70 08/01/15 535,095
500,000 California State HFA Home Multi-Unit Rental
Mortgage Revenue Series C-II AMT 6.85 08/01/15 534,940
140,000 California State HFA Insured Housing Revenue
AMT Series C MBIA Insured 7.00 08/01/23 149,292
2,825,000 California State HFA Multi-Unit Rental Housing
Revenue Series A AMT 5.50 08/01/15 2,830,594
1,000,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.75 07/01/18 1,022,130
400,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.85 07/01/15 409,236
1,000,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.25 04/01/10 1,083,920
</TABLE>
- ------------------------
32
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,250,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.30 % 04/01/20 $ 1,356,513
2,000,000 California State HFFA Revenue Catholic
Healthcare West AMBAC Insured 5.75 07/01/15 2,111,240
1,000,000 California State HFFA Revenue Insured Health
Facilities Valleycare Series State Insured 6.50 05/01/05 1,088,760
1,500,000 California State HFFA Revenue Kaiser Permanente
Series A 6.25 03/01/21 1,591,365
2,000,000 California State HFFA Revenue Scripps Memorial
Hospital MBIA Insured 6.40 10/01/12 2,177,640
2,000,000 California State HFFA Revenue Scripps Research
Institute 6.63 07/01/14 2,221,140
1,750,000 California State HFFA Revenue Small Insured
Health Facilities Series A 6.75 03/01/20 1,887,673
1,000,000 California State HFFA Revenue Special Episcopal
Homes Mortgage 7.30 07/01/00 1,020,470
6,000,000 California State HFFA San Diego Hospital
Association MBIA Insured 6.20 08/01/12 6,458,100
1,795,000 California State HFFA Scripps Memorial Hospital
Series A MBIA Insured 6.25 10/01/13 1,913,596
1,000,000 California State Maritime Infrastructure
Authority Revenue Port of San Diego Project
AMBAC Insured 5.25 11/01/15 1,000,950
2,500,000 California State PCFA Pacific Gas & Electric Co
AMT 6.35 06/01/09 2,732,600
1,445,000 California State PCFA Pacific Gas & Electric Co
AMT 6.63 06/01/09 1,583,402
1,000,000 California State PCFA Resource Recovery Revenue
Waste Management AMT Series A 7.15 02/01/11 1,092,510
1,000,000 California State PCFA San Diego Gas & Electric
Co AMT 6.80 06/01/15 1,201,030
65,000 California State Public Capital Improvements FA
Revenue Joint Powers Agency Pooled Projects
Series 8.25 03/01/98 65,311
</TABLE>
---------------------
33
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,500,000 California State Public Works Board Lease
Revenue California State University Project
Series A 5.38 % 10/01/17 $ 1,526,805
2,000,000 California State Public Works Board Lease
Revenue Community Colleges AMBAC Insured 6.63 09/01/07 2,174,120
1,000,000 California State Public Works Board Lease
Revenue Department of Corrections AMBAC
Insured 5.25 01/01/21 1,000,670
3,000,000 California State Public Works Board Lease
Revenue Department of Corrections AMBAC
Insured 6.40 11/01/10 3,362,400
4,000,000 California State Public Works Board Lease
Revenue Department of Corrections Series A
AMBAC Insured 5.40 01/01/09 4,232,440
2,000,000 California State Public Works Board Lease
Revenue Department of Corrections Series A
AMBAC Insured 5.50 01/01/15 2,076,920
1,000,000 California State Public Works Board Lease
Revenue University Of California Project
Series A AMBAC Insured 6.00 12/01/12 1,066,870
2,755,000 California State Public Works Board Lease
Revenue University Of California Project
Series A AMBAC Insured 6.30 12/01/09 3,030,941
5,000,000 California State Universities & Colleges
Revenue HSG System FGIC Insured 5.80 11/01/17 5,324,700
1,500,000 California Statewide CDA Lease Revenue Oakland
Convention Centers Project AMBAC Insured 5.50 10/01/14 1,533,075
6,800,000 California Statewide CDA Lease Revenue Oakland
Convention Centers Project AMBAC Insured 6.00 10/01/10 7,316,664
1,000,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.20 01/01/11 1,018,370
</TABLE>
- ------------------------
34
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,750,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 % 01/01/12 $ 1,778,613
1,590,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/13 1,610,765
1,500,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/04 1,514,670
500,000 California Statewide CDA Revenue COP Health
Facilities Barton Memorial Hospital LOC -
Banque Nationale de Paris 6.40 12/01/05 540,435
3,310,000 California Statewide CDA Revenue COP Hospital
Cedars Sinai Medical Center 6.50 08/01/12 3,841,321
1,500,000 California Statewide CDA Revenue COP Sutter
Health Obligated Group AMBAC Insured 6.00 08/15/09 1,605,435
1,935,000 California Statewide CDA Water Revenue Series A 6.00 07/01/10 2,074,726
3,100,000 Capistrano CA Unified PFA Special Tax Revenue
AMBAC Insured 5.25 09/01/09 3,235,625
200,000 Capitol Area Development Authority Sacramento
CA Lease Revenue Series A MBIA Insured 6.50 04/01/12 218,804
3,840,000 Cathedral City CA PFA Revenue Tax Allocation
Redevelopment Projects Series A MBIA Insured 5.25 08/01/13 3,913,190
1,800,000 Chino Basin CA Regional Financial Authority
Revenue Municipal Water District Sewer
Systems Project AMBAC Insured 6.00 08/01/16 1,929,654
7,500,000 Chino CA Electric Water Facility Authority
Certificates Series A 5.20 10/01/15 7,541,250
400,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/07 428,900
</TABLE>
---------------------
35
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 735,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 % 09/01/08 $ 784,326
570,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/11 605,118
820,000 Chula Vista CA COP Town Centre II Package
Project Redevelopment Agency 6.00 09/01/10 872,669
2,000,000 Coachella CA Water Revenue COP FSA Insured 6.10 03/01/22 2,127,820
2,500,000 Concord CA RDFA Tax Allocation 5.75 07/01/10 2,537,825
270,000 Contra Costa County CA Home Mortgage Revenue
AMT Escrowed to Maturity 7.75 05/01/22 348,908
2,755,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A Escrowed to
Maturity 6.50 03/01/09 3,085,600
4,000,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A FGIC Insured 5.50 03/01/08 4,224,520
3,240,000 Contra Costa County CA Water District Revenue
FGIC Insured 6.00 10/01/13 3,453,062
3,655,000 Contra Costa County CA Water District Water
Revenue Series G MBIA Insured 5.75 10/01/14 3,910,850
2,505,000 Contra Costa County CA Water Treatment Revenue
FGIC Insured 5.70 10/01/12 2,631,578
1,000,000 Contra Costa County CA Water Treatment Revenue
Series A FGIC Insured 5.60 10/01/10 1,047,180
1,045,000 Corona CA PFA Public Improvement Revenue 5.95 07/01/07 1,088,765
1,075,000 Cotati CA Facilities Financing Authority Tax
Allocation Series A 5.60 09/01/12 1,085,557
2,400,000 Covina CA Redevelopment Project Series B 5.25 12/01/18 2,411,640
1,250,000 Cucamonga County CA Water District COP
Refinancing Facilities FGIC Insured 6.30 09/12/12 1,340,025
15,000 Culver City CA RDFA AMBAC Insured 6.75 11/01/15 15,929
3,000,000 Cupertino CA Series A AMBAC Insured 5.75 07/01/16 3,129,660
1,450,000 Cupertino CA Series B AMBAC Insured 6.25 07/01/10 1,540,422
</TABLE>
- ------------------------
36
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,355,000 Duarte CA COP City of Hope National Medical
Center 6.13 % 04/01/13 $ 1,425,446
7,480,000 East Bay CA MUD Wastewater Treatment Revenue
FGIC Insured 5.00 06/01/16 7,372,812
5,000,000 East Bay CA MUD Wastewater Treatment Revenue
MBIA Insured 5.00 06/01/14 4,960,300
1,500,000 East Bay CA MUD Wastewater Treatment System
Revenue AMBAC Insured 6.00 06/01/09 1,614,795
1,000,000 East Bay CA MUD Water System Revenue FGIC
Insured 6.00 06/01/12 1,074,860
2,675,000 East Bay CA MUD Water System Revenue MBIA
Insured 6.00 06/01/12 2,875,251
2,000,000 East Bay CA Regional Park District Series B 5.75 09/01/13 2,075,340
1,195,000 East Bay CA Regional Park District Series B 5.75 09/01/14 1,238,498
500,000 Eastern Municipal Water District CA Water &
Sewer Revenue Certificates FGIC Insured 6.30 07/01/20 530,690
5,000,000 Elsinore Valley CA Municipal Water District COP
Series A FGIC Insured 5.75 07/01/19 5,188,000
1,000,000 Elsinore Valley CA Municipal Water District COP
Series A FGIC Insured 6.00 07/01/12 1,124,100
4,000,000 Emeryville CA PFA Housing Increment Revenue
Series A 6.35 05/01/10 4,292,360
1,725,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 5.80 09/01/09 1,867,675
2,000,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 6.00 09/01/18 2,158,540
2,000,000 Escondido CA PFA Lease Revenue Escondido Civic
Center Project Series B AMBAC Insured 6.13 09/01/11 2,154,860
4,330,000 Escondido CA USD Series A FGIC Insured 5.13 09/01/15 4,356,413
1,410,000 Fairfield CA PFA CGIC Insured 5.20 08/01/08 1,457,193
1,110,000 Folsom CA PFA Revenue AMBAC Insured 6.00 10/01/12 1,182,561
3,000,000 Fontana CA USD Convertible Series C FGIC
Insured 6.15 05/01/20 3,288,360
</TABLE>
---------------------
37
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Foothill CA De Anza Community College Connie
Lee Insured 5.25 % 09/01/21 $ 998,670
1,270,000 Fremont CA USD Alameda County Series E FGIC
Insured 5.90 09/01/15 1,370,140
3,940,000 Fremont CA USD Alameda County Series F MBIA
Insured 5.88 08/01/16 4,232,033
3,800,000 Fresno CA Conference Center 5.00 04/01/13 3,806,080
1,000,000 Fresno CA COP Street Improvement Project 6.63 12/01/11 1,078,950
2,000,000 Fresno CA Joint Powers Financing Authority
Street Light Acquisition Project Series A 5.50 08/01/12 2,023,780
1,000,000 Fresno CA Sewer Revenue Series A MBIA Insured 5.00 09/01/15 996,360
2,000,000 Fresno CA USD Series A MBIA Insured 5.70 08/01/15 2,097,580
3,000,000 Fresno CA Water System Revenue FGIC Insured 6.00 06/01/16 3,190,770
1,250,000 Fresno County CA Solid Waste Revenue American
Avenue Landfill Project MBIA Insured 5.75 05/15/14 1,318,688
1,500,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.50 12/01/09 1,576,500
1,000,000 Glendale CA RDFA Tax Allocation Revenue AMBAC
Insured 5.50 12/01/11 1,040,940
1,000,000 Glendale CA USD Series A 5.75 09/01/17 1,064,300
1,650,000 Haywood CA Certificates Participation Civic
Center Project MBIA Insured 5.50 08/01/17 1,702,635
575,000 Huntington Beach CA PFA Revenue Bond 6.55 08/01/01 587,575
2,800,000 Huntington Beach CA PFA Revenue Bond 7.00 08/01/10 2,985,444
1,000,000 Indian Wells CA RDFA Tax Allocation Whitewater
Project MBIA Insured 6.00 12/01/14 1,064,600
1,000,000 Indian Wells CA Redevelopment Agency Tax
Allocation MBIA Insured 5.38 12/01/15 1,020,650
500,000 Industry CA Urban Development Agency 6.70 11/01/03 550,205
1,280,000 Industry CA Urban Development Agency 6.85 11/01/04 1,412,800
500,000 Industry CA Urban Development Agency Project 3 6.60 11/01/02 547,545
</TABLE>
- ------------------------
38
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 2,270,000 Industry CA Urban Development Agency Tax
Allocation MBIA Insured 5.80 % 05/01/09 $ 2,384,363
1,000,000 Industry CA Urban Development Agency Tax
Allocation MBIA Insured 6.00 05/01/15 1,058,620
1,350,000 Jackson CA COP Water System Acquisition Project 6.80 09/01/23 1,426,613
270,000 Jamul-Dulzura CA USD 6.40 08/01/16 294,330
2,000,000 Kern CA High School District MBIA Insured 5.60 08/01/12 2,156,540
1,185,000 La Verne CA COP Capital Improvements Projects 5.70 06/01/15 1,208,250
1,000,000 Lancaster CA USD Certificates Participation
Project 4.90 04/01/10 1,003,250
1,000,000 Lancaster CA USD Certificates Participation
Project 5.13 04/01/14 998,120
3,000,000 Long Beach CA Finance Authority Revenue 6.00 11/01/08 3,391,890
1,000,000 Long Beach CA Finance Authority Revenue AMBAC
Insured 6.00 11/01/17 1,138,520
1,000,000 Long Beach CA Water Revenue 6.13 05/01/19 1,115,260
2,900,000 Los Angeles CA Airport Revenue Series A FGIC
Insured 5.50 05/15/08 3,097,026
1,000,000 Los Angeles CA Community College District COP
Series A CGIC Insured 5.90 08/15/07 1,079,190
1,000,000 Los Angeles CA Community College District COP
Series A CGIC Insured 6.00 08/15/08 1,078,960
4,695,000 Los Angeles CA DW&P Electric Plant Revenue 5.70 09/01/11 4,956,746
200,000 Los Angeles CA DW&P Electric Plant Revenue 6.38 02/01/20 212,568
2,000,000 Los Angeles CA DW&P Electric Plant Revenue
Second Issue 5.75 08/15/11 2,098,120
3,000,000 Los Angeles CA DW&P Waterworks Revenue 5.70 04/15/09 3,169,560
2,775,000 Los Angeles CA Harbor Revenue Series B AMT 6.50 08/01/13 3,017,147
340,000 Los Angeles CA Municipal Improvement Corp Lease
Revenue Central Library Project Series A 6.30 06/01/16 361,049
</TABLE>
---------------------
39
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 105,000 Los Angeles CA SFMR Series A AMT Multiple
Credit Enhancements 7.55 % 12/01/23 $ 110,019
1,950,000 Los Angeles CA Unified School District
Certificates Participation Multiple
Properties Project Series A FSA Insured 5.50 10/01/16 2,012,888
2,800,000 Los Angeles CA USD Certificates Participation
Multiple Properties Project Series A FSA
Insured 5.40 10/01/09 2,960,048
2,200,000 Los Angeles CA USD Certificates Participation
Multiple Properties Project Series A FSA
Insured 5.50 10/01/20 2,315,654
2,070,000 Los Angeles CA Wastewater System Redevelopment
Series A 4.90 12/01/10 2,095,295
4,000,000 Los Angeles CA Wastewater System Revenue AMBAC
Insured 6.25 06/01/12 4,313,920
1,300,000 Los Angeles CA Wastewater System Revenue Series
A MBIA Insured 5.70 06/01/13 1,354,847
1,000,000 Los Angeles CA Wastewater System Revenue Series
C MBIA Insured 5.50 06/01/13 1,036,200
2,000,000 Los Angeles County CA Metropolitan
Transportation Authority Revenue Series A 5.00 07/01/09 2,053,380
1,975,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
Series A 5.50 07/01/13 1,997,871
2,500,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
Series A AMBAC Insured 5.50 07/17/17 2,571,875
1,500,000 Los Angeles County CA Public Financing
Authority Revenue District A 5.00 10/01/19 1,478,430
2,700,000 Los Angeles County CA Regional Apartment
Improvement Corp Lease Revenue 3.64 12/01/25 2,700,000
480,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series B FGIC Insured 6.50 07/01/15 519,034
</TABLE>
- ------------------------
40
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 2,000,000 Los Angeles USD COP Dr Francisco Bravo Medical
Hospital 6.60 % 06/01/05 $ 2,188,740
1,200,000 Los Angeles USD Series A 6.00 07/01/13 1,353,156
1,370,000 Madera CA RDFA Tax Allocation Revenue CGIC
Insured 5.75 09/01/11 1,446,227
2,000,000 Menlo Park CA CDA Tax Allocation Revenue MBIA
Insured 5.38 06/01/16 2,034,900
2,485,000 Merced County CA Certificates Participation
Revenue 6.00 10/01/12 2,658,743
6,000,000 Metropolitan Water District Southern CA Water
Works Revenue 5.75 07/01/13 6,293,460
2,000,000 Metropolitan Water District Southern CA Water
Works Revenue MBIA Insured 5.75 07/01/15 2,118,980
2,000,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 7.00 09/01/14 2,275,780
1,000,000 Modesto CA Irrigation District Financing
Authority Domestic Water Project Revenue
Series A AMBAC Insured 6.00 09/01/09 1,079,470
975,000 Montclair CA RDFA Lease Revenue Series A 5.80 11/01/10 1,009,115
100,000 Montclair CA RDFA Lease Revenue Series A 6.63 11/01/11 104,089
2,835,000 Mountain View CA Shoreline Regional Park
Community Tax Allocation MBIA Insured 5.50 08/01/13 2,960,846
1,000,000 National City CA CDA Tax Allocation Downtown
Redevelopment Project Series A AMBAC Insured 6.25 08/01/12 1,080,530
1,230,000 National City CA CDA Tax Allocation Downtown
Redevelopment Project Series B AMT AMBAC
Insured 6.63 08/01/12 1,345,177
1,405,000 Natomas CA USD Series A MBIA Insured 5.10 09/01/13 1,413,571
1,945,000 Natomas CA USD Series A MBIA Insured 5.20 09/01/14 1,967,640
2,060,000 Natomas CA USD Series A MBIA Insured 5.25 09/01/15 2,083,896
2,000,000 Natomas CA USD Series A MBIA Insured 5.25 09/01/16 2,017,620
720,000 Natomas CA USD Series A MBIA Insured 5.75 09/01/12 764,791
2,200,000 Nevada County CA Solid Waste Revenue 6.50 10/01/06 2,393,490
</TABLE>
---------------------
41
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 North City West CA School Facility Authority
Special Tax Refunded Series B FSA Insured 5.75 % 09/01/15 $ 1,061,250
1,000,000 Northern California Power Agency Multiple
Capital Facilities Revenue Series A MBIA
Insured 6.50 08/01/12 1,099,420
7,000,000 Northern California Transmission Revenue
Transmission Project A MBIA Insured 5.50 05/01/14 7,207,340
1,035,000 Northridge CA Water District AMBAC Insured 5.40 02/01/11 1,071,297
4,280,000 Northridge CA Water District Revenue AMBAC
Insured 5.25 02/01/14 4,348,138
1,000,000 Nuview CA USD COP 7.25 02/01/16 1,067,180
1,465,000 Oakland CA FGIC Insured 6.00 06/15/12 1,559,449
2,000,000 Oceanside CA Water Reuse Finance Project A
AMBAC Insured 6.40 10/01/12 2,186,580
1,560,000 Olivenhain CA Municipal Water District Revenue
Series A 5.13 06/01/19 1,556,958
1,500,000 Ontario CA RDFA Revenue Project One MBIA
Insured 6.00 08/01/15 1,567,575
4,400,000 Orange County CA LOC TRANS Authority Sales Tax
Revenue MBIA Insured 6.00 02/15/08 4,944,588
800,000 Orange County CA Local Transportation Authority
Sales Tax Revenue First Series Measure M 6.00 02/15/09 884,496
360,000 Orange County CA Sanitation District COP FGIC
Insured 6.40 08/01/07 389,693
1,000,000 Orange County CA Water District Series A 5.50 08/15/10 1,042,870
1,000,000 Palm Springs CA Certificates Participation
Refunded Multiple Capital Facilities Project
AMBAC Insured 5.75 04/01/17 1,059,000
1,240,000 Parlier CA RDFA Tax Allocation Series A 6.95 08/01/23 1,315,020
2,400,000 Pittsburg CA RDFA Tax Allocation Los Medanos
Community Project FGIC Insured 5.50 08/01/07 2,544,456
3,285,000 Pittsburg CA Redevelopment Agency Tax
Allocation V/R Series A AMBAC Insured 5.00 08/01/13 3,277,247
</TABLE>
- ------------------------
42
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Port of Oakland CA Special Facilities Revenue
Mitsui OSK Lines Limited Series A AMT LOC -
Industrial Bank of Japan Ltd 6.70 % 01/01/07 $ 1,085,270
3,380,000 Port of Oakland CA Special Facilities Revenue
Mitsui OSK Lines Ltd Series A AMT LOC -
Industrial Bank of Japan Ltd 6.80 01/01/19 3,609,671
1,000,000 Rancho CA Water Utility District Revenue 5.00 08/18/14 997,570
1,325,000 Redding CA Joint Powers Financing Authority
Wastewater Revenue Series A FGIC Insured 6.00 12/01/11 1,419,022
1,310,000 Rialto CA RDFA Tax Allocation Series A 5.80 09/01/08 1,374,216
1,100,000 Richmond CA Joint Powers Financing Authority
Lease and Gas Tax Revenue Series A 5.25 05/15/13 1,099,417
1,055,000 Riverside CA Sewer Revenue FGIC Insured 5.00 08/01/10 1,088,486
5,750,000 Riverside County CA Asset Leasing Corp Revenue
Riverside County Hospital Project A 6.38 06/01/09 6,202,813
1,170,000 Riverside County CA Certificates Participation
Project 5.00 11/01/12 1,172,597
1,045,000 Riverside County CA PFA Special Tax Revenue
Series A MBIA Insured 5.25 09/01/10 1,083,696
1,000,000 Riverside County CA PFA Special Tax Revenue
Series A MBIA Insured 5.25 09/01/13 1,015,340
250,000 Riverside County CA SFMR Project A AMT GNMA
Collateralized 6.85 10/01/16 290,763
1,000,000 Rocklin CA USD Community Facility District
Special Tax MBIA Insured 5.75 09/01/18 1,052,430
1,000,000 Roseville CA Certificates Participation Revenue 5.25 02/01/17 1,004,930
1,335,000 Roseville CA Joint USD Capital Appreciation
Series A (zero coupon) 10.39 (F) 08/01/06 900,177
1,000,000 Sacramento CA Airport Commission International
Airport Revenue AMBAC Insured 6.00 07/01/16 1,084,680
</TABLE>
---------------------
43
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,500,000 Sacramento CA Area Flood Control Authority
Special Assessment FGIC Insured 5.38 % 10/01/15 $ 1,530,495
1,125,000 Sacramento CA Certificates Participation
Facilities Project 5.00 10/01/12 1,122,334
5,000 Sacramento CA Financing Authority Revenue
Prerefunded 6.70 11/01/11 5,378
2,300,000 Sacramento CA Light Rail Transportation Project 6.00 07/01/12 2,415,874
1,900,000 Sacramento CA Light Rail Transportation Project 6.75 07/01/07 2,068,625
2,500,000 Sacramento CA MUD Electric Revenue MBIA Insured 6.25 08/15/10 2,888,050
2,400,000 Sacramento CA MUD Electric Revenue Series E
MBIA-IBC Insured 5.70 05/15/12 2,546,208
1,000,000 Sacramento CA MUD Electric Revenue Series L 5.00 07/01/12 1,002,210
7,475,000 Sacramento CA MUD Electric Revenue Series L 5.10 07/01/14 7,478,439
50,000 Sacramento CA MUD Electric Revenue Series Z
FGIC Insured 6.45 07/01/10 53,801
500,000 Sacramento CA MUD Revenue Series C 5.75 11/15/08 543,250
1,000,000 Sacramento CA RDFA Tax Allocation Merged
Downtown Project A MBIA Insured 6.50 11/01/13 1,073,000
2,000,000 Sacramento County CA Airport System Revenue
Series A AMT FGIC Insured 6.00 07/01/12 2,102,040
3,000,000 Sacramento County Main Detention Facility MBIA
Insured 5.75 06/01/15 3,145,200
1,000,000 San Bernardino CA Municipal Water Department
COP FGIC Insured 6.25 02/01/12 1,061,420
380,000 San Bernardino County CA West Valley Detention
Center MBIA Insured 6.50 11/01/12 418,399
200,000 San Bernardino County CA Transportation
Authority Sales Tax Revenue FGIC Insured 6.00 03/01/10 213,914
</TABLE>
- ------------------------
44
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,775,000 San Bernardino County CA Transportation
Authority Sales Tax Revenue Series A 4.88 % 03/01/10 $ 1,792,981
2,000,000 San Bernardino County Medical Center Project 4.90 08/01/08 2,055,000
4,000,000 San Buenaventura CA COP AMBAC Insured 6.00 01/01/12 4,260,000
8,195,000 San Diego CA PFA Sewer Revenue FGIC Insured 5.00 05/15/15 8,127,801
1,000,000 San Diego CA PFA Sewer Revenue FGIC Insured 5.00 05/15/20 975,010
3,000,000 San Diego CA Public Safety Commission Project
GO 5.50 04/01/08 3,252,750
1,000,000 San Diego CA Public Safety Commission Project
GO 6.50 07/15/07 1,172,650
4,500,000 San Diego County CA Regional Transportation
Community Sales Tax Revenue Series A Escrowed
to Maturity 6.00 04/01/08 4,976,595
3,950,000 San Elijo Joint Powers Authority San Diego
County CA Water Pollution Control Facility
FGIC Insured 5.38 03/01/13 4,023,391
2,250,000 San Francisco CA BART Sales Tax Revenue FGIC
Insured 5.50 07/01/15 2,325,758
1,250,000 San Francisco CA Building Authority Revenue
Series A 5.25 12/01/21 1,252,488
200,000 San Francisco CA City & County Public Utilities
Commission Water Revenue Series A 6.50 11/01/09 221,498
700,000 San Francisco CA City & County RDFA Tax
Allocation Capital Appreciation Project MBIA
Insured (zero coupon) 8.06 (F) 08/01/08 429,744
4,500,000 San Francisco CA City & County Sewer Revenue 6.00 10/01/11 4,831,920
500,000 San Francisco CA RDA Tax Allocation MBIA
Insured 5.00 08/01/15 495,890
4,000,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road Revenue Capital Appreciation
(zero coupon) 5.51 (F) 01/01/10 3,885,000
</TABLE>
---------------------
45
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 6,000,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road Revenue Series A (zero
coupon) 4.83 %(F) 01/15/05 $ 4,402,500
1,345,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road Revenue Series A (zero
coupon) 5.13 (F) 01/15/07 890,525
1,200,000 San Mateo CA Joint Powers Financing Authority
Redevelopment Downtown & Shoreline Project A
AMBAC Insured 5.50 08/01/07 1,265,172
1,130,000 San Mateo CA Sewer Revenue FSA Insured 5.50 08/01/14 1,180,161
1,935,000 San Mateo County CA Board of Education COP 7.10 05/01/21 2,041,986
1,000,000 San Mateo County CA Flood Control District 5.25 08/01/17 1,003,870
1,500,000 San Mateo County CA Power Authority Revenue
Series A 5.00 07/15/14 1,488,090
1,500,000 San Mateo County CA Power Authority Revenue
Series A 5.00 07/15/18 1,477,275
4,010,000 Santa Clara CA RDFA Tax Allocation Bayshore
North Project AMBAC Insured 5.75 07/01/14 4,194,661
4,200,000 Santa Clara County CA COP Multiple Facilities
Project AMBAC Insured 6.00 05/15/12 4,452,000
1,000,000 Santa Clara County CA Financing Authority Lease
Revenue Series A 4.85 11/15/10 1,003,170
1,185,000 Santa Clara County CA Transportation District
Sales Tax Revenue 5.25 06/01/17 1,197,656
1,575,000 Santa Fe Springs CA Tax Allocation
Redevelopment Project Series A 5.13 09/01/16 1,562,636
3,020,000 Santa Fe Springs CA Tax Allocation
Redevelopment Project Series A 5.13 09/01/22 2,972,344
1,750,000 Santa Maria CA RDFA Town Center West Side
Parking Facilities FSA Insured 5.25 06/01/11 1,790,828
1,000,000 Santa Monica - Malibu CA USD Facilities
Reconstruction Projects 5.50 08/01/15 1,031,170
1,195,000 Santa Rosa CA High School District FGIC Insured 5.90 05/01/13 1,278,471
</TABLE>
- ------------------------
46
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 2,575,000 Santa Rosa CA Wastewater Revenue FGIC Insured 4.90 % 09/01/11 $ 2,582,210
3,450,000 Santa Rosa CA Wastewater Treatment Plant FGIC
Insured 4.75 09/01/16 3,305,238
1,000,000 Saratoga USD Series A 5.38 09/01/17 1,025,260
1,750,000 Shasta CA Joint Powers Financing Authority
Lease Revenue County Courthouse Improvement
Project Series 6.70 06/01/23 1,867,023
1,000,000 Sonoma Valley CA USD FSA Insured 6.00 07/15/21 1,081,250
5,720,000 South County CA Regional Wastewater Authority
Revenue Capital Improvement FGIC Insured 5.75 08/01/10 6,032,140
1,000,000 Southern CA Public Power Project Revenue 6.75 07/01/11 1,183,020
2,000,000 Southern California State Public Power
Authority 5.50 07/01/12 2,094,400
3,000,000 Southern California State Rapid Transit
District Special Benefit Assessment District
A1 AMBAC Insured 6.00 09/01/08 3,238,410
730,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 10/01/22 766,464
415,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 10/01/23 439,900
660,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 6.75 09/01/22 701,620
695,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 7.35 09/01/24 732,447
2,000,000 Stanislaus County CA Capital Improvement
Program Series A MBIA Insured 5.25 05/01/14 2,032,420
1,600,000 Stanislaus County CA COP Capital Improvement
Project AMBAC Insured 5.25 05/01/18 1,608,000
2,720,000 Stanislaus County CA COP Capital Improvement
Project Series A MBIA Insured 5.00 05/01/10 2,771,381
2,000,000 Stanislaus County CA COP Series B AMBAC Insured 6.13 06/01/12 2,190,740
</TABLE>
---------------------
47
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 20,000 Stockton CA SFMR Government Agency
Collateralized 7.50 % 02/01/23 $ 22,926
5,690,000 Sulphur Springs CA USD Series A MBIA Insured
(zero coupon) 9.68 (F) 09/01/13 2,579,675
1,465,000 Sunnyvale CA Elementary School District Series
A 5.70 09/01/20 1,516,290
1,000,000 Sunnyvale CA Financing Authority Utilities
Revenue Solid Waste Materials Series B AMT
MBIA Insured 6.00 10/01/08 1,073,760
1,000,000 Temecula CA Community Services Recreational
Center Project 7.13 10/01/12 1,111,620
1,000,000 Temecula Valley CA USD Series D FGIC Insured 6.00 09/01/14 1,059,910
1,000,000 Three Valleys CA Municipal Water District COP
FGIC Insured 5.00 11/01/14 997,550
2,000,000 Three Valleys CA Municipal Water District
Revenue COP FGIC Insured 5.25 11/01/10 2,062,040
1,000,000 Torrance CA COP AMBAC Insured 5.50 04/01/11 1,055,220
1,900,000 Torrance CA COP AMBAC Insured 5.50 04/01/12 2,000,130
2,705,000 Torrance CA COP AMBAC Insured 5.75 04/01/16 2,862,837
1,100,000 Travis CA USD Certificates Participation
Revenue 5.40 09/01/19 1,124,904
1,000,000 Truckee-Donner Public Utility District
Certificates Participation Water System
Improvement Project 5.50 11/15/16 1,036,780
2,000,000 Tulare County CA COP Public Facilities
Corporation Series A MBIA Insured 6.10 11/15/07 2,181,600
2,250,000 Twentynine Palms CA Water District CA COP 7.00 08/01/17 2,415,015
1,000,000 Union City CA Community RDFA Tax Allocation
Revenue Community Redevelopment Project AMBAC
Insured 5.65 10/01/14 1,040,590
1,000,000 University of California Housing System Revenue
Series A MBIA Insured 5.00 11/01/13 997,590
1,645,000 University of California Revenue Housing System
Series A AMBAC Insured 5.50 11/01/11 1,717,150
</TABLE>
- ------------------------
48
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 9,900,000 University of California Revenue Multiple
Purpose Project C AMBAC Insured 5.25 % 09/01/11 $ 10,137,600
1,000,000 University of California Revenue Multiple
Purpose Projects AMBAC Insured 4.75 09/01/15 959,390
2,300,000 University of California Revenue Multiple
Purpose Projects Series C AMBAC Insured 5.25 09/01/12 2,336,064
1,000,000 University of California Revenue Residential
Housing Projects AMBAC Insured 6.10 09/01/10 1,073,540
2,000,000 University of California Revenue Residential
Housing Projects AMBAC Insured 6.30 09/01/13 2,179,080
3,200,000 University of California Revenue Seismic Safety
Project MBIA Insured 5.50 11/01/10 3,352,000
990,000 Upland CA HFA Revenue Issue A 7.85 07/01/20 1,024,224
1,000,000 Vacaville CA PFA Tax Allocation Redevelopment
Project MBIA Insured 6.35 09/01/22 1,057,270
3,275,000 Vallejo CA Revenue Water Improvement Project
FSA Insured 5.70 05/01/16 3,442,909
2,000,000 Ventura CA COP Public Facilities 5.75 12/01/06 2,153,240
2,000,000 Ventura CA COP Public Facilities Corporation IV 5.75 12/01/07 2,125,180
4,250,000 Walnut Creek CA John Muir Medical Center MBIA
Insured 5.00 02/15/16 4,179,790
1,135,000 Walnut Valley CA USD Series C FGIC Insured 5.75 08/01/15 1,193,929
1,000,000 West & Century Basin Finance Authority CA
Revenue West Basin Project AMBAC Insured 5.00 08/01/13 997,640
1,170,000 West Sacramento CA Financing Authority Revenue
Water System Improvement Project FGIC Insured 5.50 08/01/15 1,198,267
1,200,000 Westminster CA RDFA AMT 6.50 08/01/10 1,262,964
1,000,000 Whittier CA Educational Facilities Revenue
Whittier College Connie Lee Insured 5.40 12/01/18 1,008,940
</TABLE>
---------------------
49
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS (CONTINUED)
$ 1,000,000 Yolo County CA HFA Mortgage Revenue AMT FHA
Collateralized 7.20 % 08/01/33 $ 1,087,870
1,040,000 Yolo County CA Library Special Tax Community
Facilities 6.25 12/01/22 1,093,889
--------------
TOTAL CALIFORNIA MUNICIPAL BONDS $ 663,998,729
(Cost $619,265,179)
SHORT-TERM INSTRUMENTS - 1.55%
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES+ - 1.22%
$ 1,250,000 California HFFA V/R FSA Insured 4.80 % 07/01/22 $ 1,250,000
1,000,000 California State PCFA Shell Oil Company Project
V/R Series C 4.90 11/01/00 1,000,000
1,800,000 California State PCFA Southern California
Edison V/R Series A 4.20 02/28/08 1,800,000
1,000,000 Orange County CA Improvement Bond V/R Multiple
LOC's 4.80 09/02/18 1,000,000
1,700,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 5.00 08/01/05 1,700,000
1,500,000 Orange County CA Water District LOC - National
Westminster Bank Plc 4.85 08/15/15 1,500,000
--------------
$ 8,250,000
</TABLE>
- ------------------------
50
<PAGE>
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
SHARES SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS (CONTINUED)
MONEY MARKET FUNDS - 0.33%
2,226,000 Provident Institutional California Municipal Money Market
Fund
$ 2,226,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 10,476,000
(Cost $13,176,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $632,441,179)* (Notes 1 and 3) 99.54% $ 674,474,729
Other Assets and Liabilities, Net 0.46 3,132,914
------ --------------
TOTAL NET ASSETS 100.00% $ 677,607,643
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH
REDUCES THE REMAINING 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 $ 42,038,162
Gross Unrealized Depreciation (4,612)
------------
NET UNREALIZED APPRECIATION $ 42,033,550
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
51
<PAGE>
INDEX ALLOCATION FUND
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 97.21%
5,621 3Com Corp+ $ 277,382 $ 196,384
12,608 Abbott Laboratories 704,798 826,612
1,205 Adobe Systems Inc 54,175 49,706
2,304 Advanced Micro Devices+ 63,758 41,328
421 Aeroquip-Vickers Inc 17,483 20,655
2,484 Aetna Inc 210,748 175,277
1,543 Ahmanson (H F) & Co 62,245 103,285
1,789 Air Products & Chemicals Inc 124,841 147,145
8,280 Airtouch Communications Inc+ 250,911 344,138
977 Alberto-Culver Co Class B 24,668 31,325
3,939 Albertson's Inc 139,164 186,610
3,684 Alcan Aluminium Ltd 121,030 101,771
2,931 Allegheny Teledyne Inc 71,848 75,840
1,115 Allergan Inc 35,939 37,422
9,274 Allied Signal Inc 321,186 361,106
7,090 Allstate Corp 442,911 644,304
3,042 Alltel Corp 96,434 124,912
2,883 Aluminum Co of America 189,239 202,891
1,440 ALZA Corp+ 38,001 45,810
1,503 Amerada Hess Corp 83,871 82,477
3,123 American Electric Power Inc 129,609 161,225
7,702 American Express Corp 474,315 687,404
4,110 American General Corp 177,783 222,197
1,272 American Greetings Corp Class A 40,851 49,767
10,541 American Home Products Corp 671,981 806,387
11,389 American International Group Inc 933,140 1,238,554
4,399 American Stores Co 89,236 90,454
8,982 Ameritech Corp 542,790 723,051
4,376 Amgen Inc+ 228,142 236,851
8,064 Amoco Corp 662,733 686,448
3,638 AMP Inc 155,703 152,796
1,544 AMR Corp+ 154,319 198,404
945 Anadarko Petroleum Corp 64,031 57,350
1,517 Andrew Corp+ 42,293 36,408
</TABLE>
- ------------------------
52
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
8,083 Anheuser-Busch Inc $ 314,409 $ 355,652
2,722 Aon Corp 126,923 159,577
1,530 Apache Corp 56,121 53,646
2,105 Apple Computer Inc+ 54,932 27,628
5,911 Applied Materials Inc+ 170,371 178,069
9,176 Archer-Daniels-Midland Co 183,373 199,005
1,759 Armco Inc+ 9,601 8,685
632 Armstrong World Industries Inc 41,925 47,242
667 ASARCO Inc 19,437 14,966
1,217 Ashland Inc 54,821 65,338
26,551 AT & T Corp 1,060,946 1,626,249
5,200 Atlantic Richfield Corp 362,824 416,650
768 Autodesk Inc 28,063 28,416
4,798 Automatic Data Processing 212,758 294,477
2,456 AutoZone Inc+ 69,760 71,224
1,741 Avery Dennison Corp 58,442 77,910
2,075 Avon Products Inc 119,383 127,353
2,803 Baker Hughes Inc 105,260 122,281
518 Ball Corp 15,352 18,292
2,456 Baltimore Gas & Electric Co 65,870 83,658
9,499 Banc One Corp 442,899 515,914
6,135 Bank of New York Inc 229,482 354,680
11,372 BankAmerica Corp 614,998 830,156
2,295 BankBoston Corp 163,087 215,587
1,557 Bankers Trust N Y Corp 149,212 175,065
925 Bard (C R) Inc 28,180 28,964
3,198 Barnett Banks Inc 153,211 229,856
6,135 Barrick Gold Corp 145,133 114,264
3,764 Battle Mountain Gold Co 25,811 22,114
919 Bausch & Lomb Inc 37,044 36,415
4,576 Baxter International Inc 210,470 230,802
3,366 Bay Networks Inc+ 110,995 86,043
2,316 BB&T Corp 150,287 148,369
2,061 Becton Dickinson & Co 86,323 103,050
12,645 Bell Atlantic Corp 869,066 1,150,695
16,253 BellSouth Corp 689,856 915,247
864 Bemis Co Inc 32,405 38,070
</TABLE>
---------------------
53
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
880 Beneficial Corp $ 58,217 $ 73,150
1,860 Bethlehem Steel Corp+ 21,375 16,043
1,807 Biomet Inc+ 33,520 46,304
1,596 Black & Decker Corp 58,015 62,344
1,735 Block (H & R) Inc 63,719 77,750
16,273 Boeing Co 741,077 796,360
879 Boise Cascade Corp 31,577 26,590
3,092 Boston Scientific Corp+ 166,367 141,846
397 Briggs & Stratton Corp 17,181 19,279
16,268 Bristol-Myers Squibb Co 1,070,973 1,539,360
1,114 Brown-Forman Corp Class B 50,892 61,549
3,141 Browning-Ferris Industries Inc 103,870 116,217
1,671 Brunswick Corp 45,406 50,652
2,615 Burlington Northern Santa Fe 219,932 243,032
2,790 Burlington Resources Inc 121,514 125,027
2,585 Cabletron Systems Inc+ 82,188 38,775
655 Caliber System Inc 23,953 31,890
7,546 Campbell Soup Co 312,612 438,611
1,684 Cardinal Health Inc 104,518 126,511
2,551 Carolina Power & Light Co 87,345 108,258
1,198 Case Corp 66,815 72,404
6,179 Caterpillar Inc 271,157 300,068
11,582 CBS Corp 264,495 340,945
12,771 Cendant Corp+ 336,400 439,003
523 Centex Corp 23,561 32,916
3,498 Central & South West Corp 84,430 94,665
1,247 Ceridian Corp+ 52,772 57,128
1,620 Champion International Corp 79,888 73,406
1,717 Charming Shoppes Inc+ 9,039 8,048
6,973 Chase Manhattan Bank 625,215 763,544
10,649 Chevron Corp 726,564 819,973
10,844 Chrysler Corp 347,050 381,573
2,886 Chubb Corp 169,610 218,254
1,202 CIGNA Corp 170,118 208,021
895 Cincinnati Financial Corp 125,479 125,971
707 Cincinnati Milacron Inc 17,788 18,338
2,589 Cinergy Corp 82,419 99,191
</TABLE>
- ------------------------
54
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,641 Circuit City Stores Inc $ 54,643 $ 58,358
16,513 Cisco Systems Inc+ 699,262 920,600
7,479 Citicorp 811,089 945,626
1,646 Clear Channel Communications Inc+ 111,157 130,754
1,699 Clorox Co 93,868 134,327
1,785 Coastal Corp 86,275 110,558
40,453 Coca-Cola Co 2,149,286 2,695,181
2,754 Cognizant Corp 100,315 122,725
4,836 Colgate-Palmolive Co 269,927 355,446
845 Columbia Gas System Inc 53,301 66,385
10,626 Columbia HCA Healthcare Corp 354,915 314,795
5,779 Comcast Corp Class A 119,509 182,400
1,639 Comerica Inc 101,920 147,920
12,323 Compaq Computer Corp 503,093 695,479
8,921 Computer Associates International Inc 332,155 471,698
1,188 Computer Sciences Corp+ 88,251 99,198
7,722 ConAgra Inc 210,974 253,378
3,126 Conseco Inc 123,906 142,038
3,820 Consolidated Edison Co 119,209 156,620
1,569 Consolidated Natural Gas Co 84,254 94,925
1,923 Cooper Industries Inc 90,864 94,227
1,339 Cooper Tire & Rubber Co 31,109 32,638
651 Coors (Adolph) Co Class B 16,963 21,646
3,239 CoreStates Financial Corp 181,113 259,322
3,792 Corning Inc 154,148 140,778
3,375 Costco Companies Inc+ 94,978 150,609
1,740 Countrywide Credit Industries Inc 59,215 74,603
2,380 CPC International Inc 199,154 256,445
719 Crane Co 24,918 31,187
2,149 Crown Cork & Seal Co 107,252 107,719
3,597 CSX Corp 175,984 194,238
683 Cummins Engine Co Inc 39,390 40,340
2,798 CVS Corp 140,337 179,247
1,572 Cyprus Amax Minerals 37,516 24,170
1,770 Dana Corp 64,696 84,075
2,509 Darden Restaurants Inc 25,772 31,363
784 Data General Corp+ 18,139 13,671
</TABLE>
---------------------
55
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,593 Dayton-Hudson Corp $ 165,492 $ 242,528
4,157 Deere & Co 188,113 242,405
5,355 Dell Computer Corp+ 269,833 449,820
1,126 Delta Air Lines Inc 100,031 133,994
1,320 Deluxe Corp 42,515 45,540
2,415 Digital Equipment Corp+ 99,981 89,355
1,868 Dillards Inc Class A 60,160 65,847
10,982 Disney (Walt) Co 831,012 1,087,904
3,059 Dominion Resources Inc 114,454 130,199
2,430 Donnelley (R R) & Sons Co 86,159 90,518
3,642 Dover Corp 102,488 131,567
3,713 Dow Chemical Co 309,283 376,870
1,482 Dow Jones & Co Inc 61,012 79,565
2,937 Dresser Industries Inc 100,040 123,170
1,986 DSC Communications Corp+ 55,169 47,664
2,455 DTE Energy Co 74,396 85,158
5,869 Duke Power Co 253,683 324,996
2,684 Dun & Bradstreet Corp 65,904 83,036
18,501 DuPont (E I) de Nemours 941,428 1,111,216
305 Eastern Enterprises 10,490 13,725
1,264 Eastman Chemical Co 74,580 75,287
5,254 Eastman Kodak Co 365,915 319,509
1,245 Eaton Corp 94,249 111,116
1,076 Echlin Inc 36,714 38,938
2,128 Echo Bay Mines Ltd 14,565 5,187
1,104 Ecolab Inc 44,270 61,203
6,322 Edison International 135,575 171,879
795 EG & G Inc 14,927 16,546
8,093 EMC Corp+ 154,479 222,052
7,298 Emerson Electric Co 359,217 411,881
2,372 Engelhard Corp 52,113 41,214
4,984 Enron Corp 200,853 207,148
3,983 Entergy Corp 103,912 119,241
2,374 Equifax Inc 75,140 84,129
40,340 Exxon Corp 2,107,277 2,468,304
1,808 Federal Express Corp+ 95,914 110,401
11,377 Federal Home Loan Mortgage Corp 335,386 477,123
</TABLE>
- ------------------------
56
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
17,303 Federal National Mortgage Association $ 689,900 $ 987,352
3,452 Federated Department Stores Inc+ 124,977 148,652
2,449 Fifth Third Bancorp 128,501 200,206
4,826 First Chicago NBD Corp 272,730 402,971
7,239 First Data Corp 263,856 211,741
10,334 First Union Corp 419,587 529,618
3,731 FirstEnergy Corp+ 88,856 108,199
3,940 Fleet Financial Group Inc 220,443 295,254
642 Fleetwood Enterprises Inc 19,806 27,245
1,296 Fluor Corp 74,030 48,438
594 FMC Corp+ 45,384 39,992
19,514 Ford Motor Co 729,922 950,088
3,002 Fort James Corp 120,486 114,827
2,693 Fortune Brands Inc 90,202 99,809
696 Foster Wheeler Corp 27,495 18,836
3,023 FPL Group Inc 139,689 178,924
3,235 Freeport McMoRan Copper & Gold Inc Class B 89,690 50,951
2,756 Frontier Corp 61,425 66,316
1,170 Fruit of the Loom Inc Class A+ 34,776 29,981
4,613 Gannett Co Inc 199,680 285,141
6,492 Gap Inc 151,517 230,060
1,011 General Dynamics Corp 71,867 87,388
53,384 General Electric Co 2,906,182 3,917,051
2,661 General Mills Inc 165,814 190,594
11,559 General Motors Corp 623,308 700,764
1,309 General Re Corp 221,621 277,508
881 General Signal Corp 36,440 37,167
2,970 Genuine Parts Co 91,881 100,794
1,417 Georgia Pacific Corp+ 84,271 86,083
207 Georgia-Pacific (Timer GRP)+ 5,347 4,696
969 Giant Food Inc Class A 32,133 32,643
9,098 Gillette Co 737,131 913,780
945 Golden West Financial 63,971 92,433
1,173 Goodrich (B F) Co 46,923 48,606
2,445 Goodyear Tire & Rubber Co 132,372 155,563
2,031 GPU Inc 69,242 85,556
1,118 Grace W.R. & Co 64,760 89,929
</TABLE>
---------------------
57
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
803 Grainger (W W) Inc $ 63,673 $ 78,042
664 Great Atlantic & Pacific Tea Co 18,403 19,713
909 Great Lakes Chemical Corp 48,670 40,791
2,283 Green Tree Financial Corp 85,595 59,786
15,535 GTE Corp 668,584 811,704
2,316 Guidant Corp 89,888 144,171
4,119 Halliburton Co 158,976 213,931
1,168 Harcourt General Inc 55,048 63,948
538 Harland (John H) Co 12,629 11,298
861 Harnischfeger Industries Inc 33,995 30,404
1,650 Harrah's Entertainment Inc+ 37,776 31,144
1,316 Harris Corp 48,495 60,372
1,968 Hartford Financial Services Group 138,503 184,131
2,125 Hasbro Inc 56,638 66,938
3,295 HBO & Co 153,070 158,160
6,366 Healthsouth Corp+ 153,015 176,657
6,017 Heinz (H J) Co 242,966 305,739
443 Helmerich & Payne Inc 25,603 30,069
1,555 Hercules Inc 77,226 77,847
2,256 Hershey Foods Corp 107,121 139,731
16,909 Hewlett Packard Co 908,279 1,056,813
4,063 Hilton Hotels Corp 107,962 120,874
11,925 Home Depot Inc 491,928 702,084
2,335 Homestake Mining Co 34,153 20,723
2,122 Honeywell Inc 133,396 145,357
1,798 Household International Inc 177,755 229,357
4,701 Houston Industries Inc 101,702 125,458
2,744 Humana Inc+ 64,858 56,938
3,108 Huntington Bancshares Inc 107,951 111,888
2,189 IKON Office Solutions 71,773 61,566
4,100 Illinois Tool Works Inc 173,579 246,513
2,754 Inco Ltd 78,747 46,818
2,782 Ingersoll-Rand Co 95,689 112,671
840 Inland Steel Industries Inc 18,904 14,385
26,613 Intel Corp 1,674,442 1,869,563
16,080 International Business Machines Corp 1,289,017 1,681,365
1,776 International Flavors & Fragrances 85,872 91,464
</TABLE>
- ------------------------
58
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
4,917 International Paper Co $ 226,510 $ 212,046
2,087 Interpublic Group Cos Inc 77,851 103,959
1,958 ITT Corp+ 114,882 162,269
1,970 ITT Industries Inc 51,155 61,809
1,138 Jefferson-Pilot Corp 68,116 88,622
21,772 Johnson & Johnson 1,150,408 1,434,231
1,300 Johnson Controls Inc 54,101 62,075
673 Jostens Inc 15,560 15,521
8,032 K Mart Corp 100,460 92,870
680 Kaufman & Broad Home Corp 11,785 15,258
6,740 Kellogg Co 263,975 334,473
804 Kerr-McGee Corp 51,262 50,903
3,541 KeyCorp 181,146 250,747
9,089 Kimberly-Clark Corp 403,865 448,201
537 King World Productions+ 22,231 31,012
1,344 KLA Instruments Corp+ 93,589 51,912
1,352 Knight-Ridder Inc 56,369 70,304
4,183 Kroger Co+ 104,772 154,510
5,429 Laidlaw Inc 68,670 73,970
18,147 Lilly (Eli) & Co 803,610 1,263,485
4,459 Limited Inc 93,649 113,705
1,598 Lincoln National Corp 94,926 124,844
1,149 Liz Claiborne Inc 47,270 48,043
3,223 Lockheed Martin Corp 282,156 317,466
1,814 Loews Corp 164,949 192,511
599 Longs Drug Stores Corp 13,632 19,243
1,797 Louisiana-Pacific Corp 42,004 34,143
2,830 Lowe's Co Inc 106,365 134,956
2,345 LSI Logic Corp+ 74,067 46,314
10,401 Lucent Technologies Inc 664,740 830,780
1,222 Mallinckrodt Inc 46,616 46,436
1,038 Manor Care Inc 28,589 36,330
2,149 Marriott International 120,008 148,818
2,824 Marsh & McLennan Companies Inc 172,941 210,565
2,773 Masco Corp 106,629 141,076
4,730 Mattel Inc 144,822 176,193
3,804 May Department Stores Co 177,336 200,423
</TABLE>
---------------------
59
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
1,604 Maytag Corp $ 38,833 $ 59,849
1,411 MBIA Inc 80,230 94,272
8,208 MBNA Corp 166,498 224,181
888 McDermott International Inc 24,039 32,523
11,170 McDonald's Corp 508,636 533,368
1,595 McGraw-Hill Inc 85,560 118,030
11,356 MCI Communications 362,589 486,179
1,702 Mead Corp 51,007 47,656
7,522 Medtronic Inc 272,045 393,495
4,023 Mellon Bank Corp 160,884 243,894
621 Mercantile Stores Co Inc 33,709 37,803
19,701 Merck & Co Inc 1,615,405 2,093,231
932 Meredith Corp 23,317 33,261
5,389 Merrill Lynch & Co Inc 266,128 393,060
1,807 MGIC Investment Corp 77,824 120,166
3,480 Micron Technology Inc+ 133,177 90,480
19,720 Microsoft Corp+ 1,911,834 2,548,810
719 Millipore Corp 29,272 24,401
6,822 Minnesota Mining & Manufacturing Co 561,345 559,830
3,004 Mirage Resorts Inc+ 80,291 68,341
12,835 Mobil Corp 826,231 926,527
9,571 Monsanto Co 326,355 401,982
1,444 Moore Corp Ltd 29,277 21,841
2,995 Morgan (J P) & Co Inc 286,579 338,061
9,529 Morgan Stanley Dean Witter Discover 389,316 563,402
2,097 Mortan International Inc 64,067 72,084
9,660 Motorola Inc 613,236 551,224
129 NACCO Industries Inc Class A 8,392 13,827
1,079 Nalco Chemical Co 40,645 42,688
3,437 National City Corp 170,294 225,983
2,711 National Semiconductor+ 77,341 70,317
790 National Service Industries Inc 30,788 39,154
11,637 NationsBank Corp 619,116 707,675
1,191 Navistar International+ 21,070 29,552
1,490 New York Times Co Class A 65,551 98,526
2,513 Newell Co 84,705 106,803
2,585 Newmont Mining Corp 98,830 75,934
</TABLE>
- ------------------------
60
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
2,377 Nextlevel Systems Inc $ 40,505 $ 42,489
2,340 Niagara Mohawk Power Corp+ 25,638 24,570
812 NICOR Inc 27,963 34,256
4,657 Nike Inc Class B 219,016 182,787
1,191 Nordstrom Inc 58,207 71,907
6,109 Norfolk Southern Corp 182,494 188,234
1,192 Northern States Power Co 58,594 69,434
4,314 Northern Telecom Ltd 314,139 383,946
1,154 Northrop Grumman Corp 108,759 132,710
12,231 Norwest Corp 311,974 472,422
5,746 Novell Inc+ 75,150 43,095
1,495 Nucor Corp 78,033 72,227
5,351 Occidental Petroleum Corp 133,054 156,851
2,536 Omnicom Group 99,523 107,463
480 ONEOK Inc 13,783 19,380
16,079 Oracle Systems Corp+ 465,778 358,763
1,794 Oryx Energy Co+ 38,510 45,747
861 Owens Corning Fiberglass Corp 34,567 29,382
2,190 Owens-Illinois Inc+ 78,485 83,083
1,241 PACCAR Inc 47,467 65,153
1,402 Pacific Enterprises 43,039 52,750
4,950 PacifiCorp 104,699 135,197
2,065 Pall Corp 48,629 42,720
2,151 Parametric Technology Corp+ 93,735 101,904
1,807 Parker Hannifin Corp 60,948 82,896
3,723 PECO Energy Co 91,513 90,283
4,102 Penney (J C) Co Inc 217,902 247,402
773 Pennzoil Co 46,270 51,646
598 Peoples Energy Corp 20,518 23,546
1,078 Pep Boys-Manny Moe & Jack 32,988 25,737
25,014 Pepsico Inc 755,110 911,448
690 Perkin-Elmer Corp 40,958 49,033
21,088 Pfizer Inc 1,037,870 1,572,374
7,191 PG&E Corp 182,777 218,876
8,334 Pharmacia and Upjohn Inc 303,545 305,233
967 Phelps Dodge Corp 66,803 60,196
39,511 Philip Morris Co Inc 1,438,585 1,790,342
</TABLE>
---------------------
61
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
4,275 Phillips Petroleum Co $ 184,112 $ 207,872
1,059 Pioneer Hi Bred International Inc 79,839 113,578
2,287 Pitney Bowes Inc 146,447 205,687
3,969 Placer Dome Inc 81,050 50,357
4,902 PNC Bank Corp 198,733 279,720
759 Polaroid Corp 33,899 36,954
500 Potlatch Corp 22,685 21,500
2,743 PP & L Resources Inc 63,298 65,661
2,963 PPG Industries Inc 157,591 169,261
2,670 Praxair Inc 119,307 120,150
22,030 Procter & Gamble Co 1,313,393 1,758,269
1,234 Progressive Corp Ohio 134,291 147,926
1,536 Providian Financial Corp 38,305 69,408
3,757 Public Services Enterprise Group 102,390 119,050
370 Pulte Corp 11,540 15,471
2,288 Quaker Oats Co 95,925 120,692
1,813 Ralston-Purina Group 139,426 168,496
1,492 Raychem Corp 58,798 64,249
44 Raytheon Co Class A+ 970 2,164
5,535 Raytheon Co Class B 279,264 279,518
929 Reebok International Ltd 37,110 26,767
901 Republic New York Corp 80,766 102,883
1,142 Reynolds Metals Co 73,009 68,520
1,936 Rite Aid Corp 89,632 113,619
3,349 Rockwell International Corp 161,565 174,985
1,051 Rohm & Haas Co 82,701 100,633
1,423 Rowan Co Inc+ 33,467 43,402
34,980 Royal Dutch Petroleum Co 1,580,243 1,895,479
2,445 Rubbermaid Inc 64,509 61,125
534 Russell Corp 15,840 14,184
1,328 Ryder System Inc 40,862 43,492
2,351 SAFECO Corp 99,373 114,611
928 Safety-Kleen Corp 17,099 25,462
7,856 Sara Lee Corp 317,771 442,391
15,000 SBC Communication Inc 826,698 1,098,750
12,032 Schering-Plough Corp 487,538 747,488
7,970 Schlumberger Ltd 478,999 641,585
</TABLE>
- ------------------------
62
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
4,319 Schwab (Charles) Corp $ 128,770 $ 181,128
1,247 Scientific-Atlanta Inc 24,433 20,887
4,019 Seagate Technology Inc+ 137,113 77,366
6,095 Seagram Co Ltd 216,096 196,945
6,425 Sears Roebuck & Co 297,554 290,731
4,139 Service Corp International 120,191 152,884
351 Shared Medical System Corp 18,485 23,166
2,805 Sherwin Williams Co 75,223 77,839
1,617 Sigma-Aldrich Corp 49,133 64,276
2,913 Silicon Graphics Inc+ 71,090 36,230
1,001 Snap-On Inc 35,732 43,669
1,328 Sonat Inc 62,093 60,756
11,185 Southern Co 248,730 289,412
3,552 Southwest Airlines Co 65,630 87,468
286 Springs Industries Inc Class A 13,240 14,872
7,063 Sprint Corp 317,888 414,068
1,476 St Jude Medical Inc+ 52,794 45,018
1,439 St Paul Co Inc 96,852 118,088
1,375 Stanley Works 48,160 64,883
2,549 State Street Corp 133,449 148,320
1,624 Stone Container Corp 25,791 16,951
1,161 Sun Co Inc 37,157 48,835
6,131 Sun Microsystems Inc+ 183,202 244,474
3,101 Sunamerica Inc 117,551 132,568
3,447 SunTrust Banks Inc 174,067 246,030
956 Supervalu Inc 31,988 40,033
1,277 Synovus Financial Corp 41,202 41,822
2,763 Sysco Corp 97,229 125,889
1,646 Tandy Corp 44,447 63,474
851 Tektronix Inc 30,555 33,754
8,167 Tele-Communication Inc Class A+ 142,541 228,155
2,875 Tellabs Inc+ 125,431 152,016
917 Temple-Inland Inc 51,443 47,971
4,899 Tenet Healthcare Corp+ 128,419 162,279
2,701 Tenneco 118,548 106,690
8,956 Texaco Inc 448,269 486,983
6,338 Texas Instruments Inc 253,565 285,210
</TABLE>
---------------------
63
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
3,910 Texas Utilities Co $ 144,009 $ 162,509
2,683 Textron Inc 136,192 167,688
2,443 Thermo Electron Corp+ 97,221 108,714
907 Thomas & Betts Corp 43,202 42,856
9,137 Time Warner Inc 429,188 566,494
1,567 Times Mirror Co Class A 70,367 96,371
1,021 Timken Co 29,280 35,097
2,755 TJX Companies Inc 61,780 94,703
2,250 Torchmark Corp 67,045 94,641
4,633 Toys R Us Inc+ 144,570 145,650
974 Transamerica Corp 83,663 103,731
18,708 Travelers Group Inc 640,539 1,007,894
2,049 Tribune Co 89,769 127,550
2,562 Tricon Global Restaurants+ 65,673 74,444
2,001 TRW Inc 101,724 106,803
1,001 Tupperware Corp 38,126 27,903
8,667 Tyco International Ltd+ 331,444 390,557
3,967 U.S. Bancorp 301,845 444,056
7,799 U.S. West Inc+ 264,999 351,930
9,982 U.S. West Media Group+ 208,160 288,230
3,630 Unicom Corp 92,774 111,623
10,335 Unilever NV 472,627 645,292
1,187 Union Camp Corp 63,067 63,727
2,019 Union Carbide Corp 87,157 86,691
1,655 Union Electric Co 62,843 71,579
4,072 Union Pacific Corp 235,844 254,246
4,189 Union Pacific Resources Group Inc 111,617 101,583
2,853 Unisys Corp+ 28,243 39,585
2,985 United Healthcare Corp 146,129 148,317
1,193 United States Surgical 38,796 34,970
3,874 United Technologies Corp 257,035 282,076
4,059 Unocal Corp 151,083 157,540
15 UNOVA Inc 274 247
2,329 UNUM Corp 87,444 126,639
1,409 USAir Group Inc+ 49,539 88,063
1,841 USF & G Corp 37,128 40,617
3,082 UST Inc 93,708 113,841
</TABLE>
- ------------------------
64
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
4,742 USX - Marathon Group $ 127,333 $ 160,043
1,416 USX - US Steel Group 46,542 44,250
2,085 VF Corp 77,812 95,780
5,850 Viacom Inc Class B+ 220,064 242,409
3,284 Wachovia Corp 209,628 266,415
37,006 Wal Mart Stores Inc 1,128,375 1,459,424
8,097 Walgreen Co 180,065 254,043
4,407 Warner Lambert Co 415,520 546,468
4,127 Washington Mutual Inc 235,093 263,354
7,483 Waste Management Inc 232,458 205,783
1,504 Wells Fargo & Co 368,979 510,514
2,161 Wendy's International Inc 47,017 51,999
936 Western Atlas Inc+ 53,665 69,264
1,658 Westvaco Corp 51,117 52,123
3,326 Weyerhaeuser Co 164,534 163,182
1,195 Whirlpool Corp 63,367 65,725
1,712 Whitman Corp 39,300 44,619
1,744 Willamette Industries Inc 61,566 56,135
5,286 Williams Co Inc 104,293 149,990
2,337 Winn-Dixie Stores Inc 81,603 102,098
2,230 Woolworth Corp+ 47,176 45,436
14,775 WorldCom Inc+ 430,664 446,944
1,610 Worthington Industries Inc 31,261 26,565
1,947 Wrigley (Wm) Jr Co 120,217 154,908
5,427 Xerox Corp 329,130 400,550
------------ --------------
TOTAL COMMON STOCKS $100,973,670 $ 123,404,284
</TABLE>
---------------------
65
<PAGE>
INDEX ALLOCATION FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 3.00%
U.S. TREASURY BILLS - 3.00%
$ 50,000 U.S. Treasury Bills 4.71%(F) 01/15/98 $ 49,896
853,000 U.S. Treasury Bills 5.00(F) 02/05/98 848,737
85,000 U.S. Treasury Bills 5.00(F) 02/26/98 84,323
36,000 U.S. Treasury Bills 5.02(F) 02/19/98 35,731
519,000 U.S. Treasury Bills 5.03(F) 02/12/98 515,714
2,142,000 U.S. Treasury Bills 5.10(F) 03/05/98 2,122,958
158,000 U.S. Treasury Bills 5.13(F) 03/26/98 156,120
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 3,813,479
(Cost $3,813,395)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $104,787,065)* (Notes 1 and 3) 100.21% $ 127,217,763
Other Assets and Liabilities, Net (0.21) (265,062)
------ --------------
TOTAL NET ASSETS 100.00% $ 126,952,701
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</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 $ 25,233,796
Gross Unrealized Depreciation (2,803,098)
------------
NET UNREALIZED APPRECIATION $ 22,430,698
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------------------------
66
<PAGE>
SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 34.29%
BANK & FINANCE - 23.89%
$ 500,000 Associates Corp 8.00 % 10/27/99 $ 516,250
500,000 Chase Manhattan Bank 5.88 08/04/99 499,375
500,000 GMAC 5.63 10/19/98 499,060
500,000 Morgan Stanley Corp 5.75 10/08/99 497,500
500,000 Norwest Corp 6.00 10/13/98 500,585
500,000 Societe Generale 5.92 10/16/98 499,755
500,000 Wachovia Bank NC 4.90 09/19/98 496,495
--------------
$ 3,509,020
MISCELLANEOUS BONDS - 10.40%
$ 500,000 California Infrastructure 6.14 % 03/25/02 $ 501,180
500,000 Donnelley and Sons 7.96 11/08/99 516,250
500,000 Sears Roebuck Co 8.45 11/01/98 509,735
--------------
$ 1,527,165
TOTAL CORPORATE BONDS & NOTES $ 5,036,185
(Cost $5,045,074)
U.S. GOVERNMENT AGENCY SECURITIES - 26.95%
FEDERAL HOME LOAN BANKS - 6.81%
$ 1,000,000 FHLB 5.81 % 11/04/98 $ 1,000,620
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 13.33%
$ 1,000,000 FNMA Discount Note 5.41 %(F) 10/09/98 $ 957,610
1,000,000 FNMA 5.84 01/19/99 1,001,360
--------------
$ 1,958,970
</TABLE>
---------------------
67
<PAGE>
SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES (CONTINUED)
STUDENT LOAN MORTGAGE ASSOCIATION - 6.81%
$ 1,000,000 SLMA 5.79 % 09/16/98 $ 999,680
--------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 3,959,270
(Cost $3,953,664)
U.S. TREASURY SECURITIES - 34.11%
U.S. TREASURY NOTES - 34.11%
$ 2,000,000 U.S. Treasury Notes 5.88 % 10/31/98 $ 2,003,440
1,500,000 U.S. Treasury Notes 5.88 01/31/99 1,503,510
1,500,000 U.S. Treasury Notes 6.00 09/30/98 1,504,215
--------------
TOTAL U.S. TREASURY SECURITIES $ 5,011,165
(Cost $5,009,359)
SHORT-TERM INSTRUMENTS - 3.86%
CERTIFICATES OF DEPOSIT - 3.40%
$ 500,000 Royal Bank of Canada 5.82 % 08/25/98 $ 499,510
REPURCHASE AGREEMENTS - 0.46%
$ 67,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50 % 01/02/98 $ 67,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 566,510
(Cost $566,510)
</TABLE>
- ------------------------
68
<PAGE>
SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $14,574,607)* (Notes 1 and 3) 99.21% $ 14,573,130
Other Assets and Liabilities, Net 0.79 115,803
------ --------------
TOTAL NET ASSETS 100.00% $ 14,688,933
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(F) YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED DEPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 12,630
Gross Unrealized Depreciation (14,107)
------------
NET UNREALIZED DEPRECIATION $ (1,477)
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
69
<PAGE>
SHORT-TERM MUNICIPAL INCOME FUND
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.34%
ARIZONA - 3.78%
$ 700,000 Arizona State Transportation Board Tax Revenue
Maricopa County Regional Area Road Fund MBIA
Insured 7.00 % 07/01/00 $ 742,567
COLORADO - 17.26%
790,000 Arapahoe County CO School District Revenue 4.75 12/15/98 796,928
860,000 Colorado State Student Obligation Bond
Authority Series C 4.35 09/01/99 864,180
1,540,000 Boulder County CO Hospital Revenue Longmont
Hospital Project 8.20 12/01/20 1,726,987
GEORGIA - 5.49%
1,000,000 Marietta GA Development Authority Revenue
College Project 7.25 12/01/19 1,078,430
HAWAII - 2.56%
500,000 Honolulu HI Improvement Board Series B 4.50 10/01/98 502,560
ILLINOIS - 6.28%
200,000 Chicago IL AMBAC Insured 6.00 01/01/98 200,011
1,025,000 Metropolitan Pier & Exposition Authority IL
Dedicated State Revenue 5.80 06/01/98 1,032,954
MINNESOTA - 1.02%
200,000 Minneapolis MN Special School District No. One
COP Prerefunded 7.38 02/01/15 200,498
NEVADA - 7.82%
500,000 Clark County NV USD Series A 7.30 03/01/99 512,630
1,000,000 Clark County NV GO MBIA Insured 5.20 01/01/00 1,022,110
</TABLE>
- ------------------------
70
<PAGE>
SHORT-TERM MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
NEW YORK - 16.70%
$ 250,000 New York State Mortgage Agency Revenue
Homeowner Mortgage Series 44 AMT FHA
Collateralized 6.00 % 04/01/99 $ 254,168
900,000 New York/New Jersey Port Authority Consolidated
Revenue MBIA Insured 5.00 09/01/98 908,073
1,000,000 Metropolitan Transportation Authority NY
Commuter Facility Revenue Series E 4.30 07/01/02 1,006,450
1,000,000 New York State Dorm Authority Revenue City
University System Series F 7.88 07/01/07 1,108,950
NORTH CAROLINA - 2.58%
500,000 North Carolina State Municipal Power Agency
Catawba No 1 Electrical Revenue FGIC Insured 5.10 01/01/99 505,455
PENNSYLVANIA - 10.84%
1,000,000 Pennsylvania State GO 5.00 05/01/00 1,021,660
1,000,000 Washington County PA Authority Lease Revenue
Series C 7.45 12/15/12 1,105,450
PUERTO RICO - 2.57%
500,000 Puerto Rico Commonwealth Aqueduct and Sewer
Authority Revenue 4.50 07/01/99 504,360
SOUTH DAKOTA - 5.14%
1,000,000 South Dakota Student Loan Finance Corp Student
Loan Revenue Series A - GTD STD LN Insured 5.50 08/01/98 1,009,510
</TABLE>
---------------------
71
<PAGE>
SHORT-TERM MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
TEXAS - 6.51%
$ 240,000 Brazos TX Higher Education Authority AMT Series
C-1 6.00 % 11/01/99 $ 246,965
275,000 Port of Houston Authority TX AMT 8.50 10/01/98 284,103
305,000 Texas State Department Housing & Community MBIA
Insured 4.20 03/01/98 305,234
440,000 Texas State Department Housing & Community
Mortgage Series E MBIA Insured 4.20 09/01/98 441,610
WASHINGTON - 6.23%
200,000 Southern Columbia Basin WA Irrigation District 5.50 12/01/98 203,230
1,000,000 Snohomish County WA USD Series A 6.20 12/01/98 1,020,430
WEST VIRGINIA - 2.56%
500,000 West Virginia State HFFA Charleston Area
Medical Center Series A MBIA Insured 4.30 01/01/99 501,874
--------------
TOTAL MUNICIPAL BONDS $ 19,107,377
(Cost $19,030,649)
<CAPTION>
SHARES
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 1.73%
MONEY MARKET FUND - 1.73%
339,000 Dreyfus General CA Municipal Money Market Fund $ 339,000
(Cost $339,000)
</TABLE>
- ------------------------
72
<PAGE>
SHORT-TERM MUNICIPAL INCOME FUND
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $19,369,649)* (Notes 1 and 3) 99.07% $ 19,446,377
Other Assets and Liabilities, Net 0.93 181,738
------ --------------
TOTAL NET ASSETS 100.00% $ 19,628,115
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A
DEMAND FEATURE WHICH MAY REDUCE THE REMAINING 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 $ 76,728
Gross Unrealized Depreciation 0
------------
NET UNREALIZED APPRECIATION $ 76,728
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
73
<PAGE>
STRATEGIC GROWTH FUND
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 92.92%
ADVERTISING - 2.07%
170,000 HA-LO Industries inc+ $ 2,870,884 $ 4,420,000
BIOTECHNOLOGY - 1.34%
110,000 Serologicals Corp+ $ 2,312,938 $ 2,860,000
COMMERCIAL SERVICES - 4.70%
140,000 AccuStaff Inc+ $ 2,969,509 $ 3,220,000
150,000 Boron Lepore & Associates Inc+ 3,454,257 4,125,000
60,000 Caribiner International Inc+ 2,444,070 2,670,000
------------ --------------
$ 8,867,836 $ 10,015,000
COMPUTER SOFTWARE - 13.12%
45,000 America Online Inc+ $ 2,802,627 $ 4,013,438
120,000 Aris Corp+ 2,727,115 2,520,000
150,000 Checkfree Corp+ 2,878,125 4,050,000
60,000 Lycos Inc+ 1,652,229 2,482,500
24,500 Microsoft Corp+ 2,730,450 3,166,625
60,000 Networks Associates Inc+ 2,972,500 3,172,500
80,000 Security Dynamics Technologies Inc+ 2,824,936 2,860,000
75,000 Veritas Software Corp+ 2,347,246 3,825,000
50,000 Visio Corp+ 1,683,375 1,918,750
------------ --------------
$ 22,618,603 $ 28,008,813
COMPUTER SYSTEMS - 4.16%
40,000 Cisco Systems Inc+ $ 2,030,625 $ 2,230,000
70,000 HNC Software Inc+ 2,416,253 3,010,000
114,500 Hypercom Corp+ 1,832,000 1,617,313
80,000 MMC Networks Inc+ 1,391,250 1,360,000
70,000 Power Integrations Inc+ 562,500 647,500
------------ --------------
$ 8,232,628 $ 8,864,813
</TABLE>
- ------------------------
74
<PAGE>
STRATEGIC GROWTH FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
CONSUMER-DISCRETIONARY - 0.97%
160,000 Enamelon Inc+ $ 2,643,013 $ 2,060,000
ENERGY & RELATED - 8.79%
176,000 Dawson Production Services+ $ 4,305,060 $ 3,058,000
130,000 Falcon Drilling Co Inc+ 4,860,574 4,558,125
110,000 Global Industries Ltd+ 1,230,788 1,870,000
125,000 Key Energy Group Inc+ 3,623,683 2,710,938
60,000 Nabors Industries Inc+ 1,549,929 1,886,250
75,000 Noble Drilling Corp+ 2,115,913 2,296,875
60,000 Veritas Digicon Inc+ 1,690,513 2,370,000
------------ --------------
$ 19,376,460 $ 18,750,188
ENTERTAINMENT & LEISURE - 3.51%
150,000 Family Golf Centers Inc+ $ 2,920,016 $ 4,706,250
100,000 Regal Cinemas Inc+ 2,596,017 2,787,500
------------ --------------
$ 5,516,033 $ 7,493,750
FINANCE & RELATED - 7.24%
215,000 Envoy Corp (New)+ $ 7,098,523 $ 6,261,875
100,000 Firstplus Financial Group+ 3,875,625 3,837,500
105,000 Laser Mortgage Management Inc 1,554,625 1,522,500
185,000 Long Beach Financial Corp+ 1,948,438 2,150,625
80,000 Money Store Inc 1,928,379 1,680,000
------------ --------------
$ 16,405,590 $ 15,452,500
FOOD & RELATED - 2.57%
150,000 Northland Cranberries Inc $ 3,329,013 $ 2,325,000
44,000 NuCo2 Inc+ 707,194 484,000
45,000 Suiza Foods Corp+ 2,654,263 2,680,313
------------ --------------
$ 6,690,470 $ 5,489,313
</TABLE>
---------------------
75
<PAGE>
STRATEGIC GROWTH FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
GENERAL BUSINESS & RELATED - 9.30%
30,000 American Disposal Services+ $ 973,227 $ 1,095,000
55,000 Applied Graphics Technologies+ 2,638,542 2,928,750
60,000 Cinar Films Inc Class B+ 2,105,000 2,332,500
65,000 Corrections Corp of America+ 2,076,568 2,409,063
20,000 Gartner Group Inc Class A 657,500 745,000
85,000 HBO & Co 2,417,022 4,080,000
130,000 Industrial Distribution Group Inc+ 2,481,206 2,039,375
60,000 Preview Travel Inc+ 650,906 453,750
75,000 Staffmark Inc+ 2,093,625 2,371,875
25,000 Teleport Communications Group Inc Class A+ 1,446,875 1,371,875
------------ --------------
$ 17,540,471 $ 19,827,188
HEALTHCARE - 7.02%
40,000 Access Health Inc+ $ 1,241,250 $ 1,175,000
60,000 Alternative Living Services Inc+ 1,516,984 1,773,750
165,000 Genesis Health Ventures Inc+ 4,564,051 4,351,875
120,000 Healthsouth Corp+ 2,382,155 3,330,000
170,000 Somnus Medical Technologies+ 1,965,813 2,167,500
205,000 Vivus Inc+ 5,458,609 2,178,123
------------ --------------
$ 17,128,862 $ 14,976,248
MANUFACTURING PROCESSING - 4.45%
130,000 Aehr Test Systems+ $ 2,236,864 $ 1,040,000
165,000 General Scanning Inc+ 3,363,644 2,846,250
100,000 Sandisk Corp+ 2,700,470 2,031,250
50,000 Sipex Corp+ 1,285,408 1,512,500
90,000 Tefron Ltd ADR+ 1,836,711 2,070,000
------------ --------------
$ 11,423,097 $ 9,500,000
</TABLE>
- ------------------------
76
<PAGE>
STRATEGIC GROWTH FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT & SUPPLIES - 2.35%
110,000 Focal Inc+ $ 1,103,594 $ 1,168,750
150,000 Ultrafem Inc+ 1,570,263 140,625
180,000 Urologix Inc+ 3,559,493 3,262,500
165,000 Uroquest Medical Corp+ 952,955 433,125
------------ --------------
$ 7,186,305 $ 5,005,000
PHARMACEUTICALS - 3.77%
150,000 Anesta Corp+ $ 2,262,104 $ 2,456,250
150,000 Biochem Pharma Inc+ 3,614,843 3,131,250
45,000 Coulter Pharmaceutical+ 697,500 911,250
100,000 KOS Pharmaceuticals Inc+ 3,124,623 1,543,750
------------ --------------
$ 9,699,070 $ 8,042,500
RETAIL & RELATED - 3.11%
80,000 Barbeques Galore Ltd - Sponsored ADR+ $ 762,344 $ 590,000
310,000 Corporate Express Inc+ 5,764,712 3,991,250
200,000 Let's Talk Cellular & Wireless+ 2,216,591 2,050,000
------------ --------------
$ 8,743,647 $ 6,631,250
SEMICONDUCTORS - 1.41%
85,000 Cirrus Logic Inc+ $ 1,231,275 $ 903,125
30,000 Intel Corp 2,345,625 2,107,500
------------ --------------
$ 3,576,900 $ 3,010,625
SHELTER & RELATED - 2.83%
130,000 Brookdale Living Communities Inc+ $ 2,009,688 $ 2,242,500
170,000 Hospitality Worldwide Services+ 1,854,842 2,231,250
80,000 Modtech Inc+ 1,656,499 1,560,000
------------ --------------
$ 5,521,029 $ 6,033,750
</TABLE>
---------------------
77
<PAGE>
STRATEGIC GROWTH FUND
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS - 7.46%
110,000 Corsair Communications Inc+ $ 2,056,076 $ 1,787,500
160,000 LCI International Inc+ 3,429,796 4,920,000
140,000 NEXTEL Communications Class A+ 2,770,088 3,640,000
150,000 Pairgain Technologies Inc+ 3,652,500 2,906,250
30,000 P-Com Inc+ 472,251 517,500
40,000 Tellabs Inc+ 2,068,438 2,115,000
------------ --------------
$ 14,449,149 $ 15,886,250
TRANSPORTATION - 2.75%
58,000 Midway Airlines Corp+ $ 944,938 $ 877,250
170,000 Trico Marine Services Inc+ 4,449,646 4,993,750
------------ --------------
$ 5,394,584 $ 5,871,000
TOTAL COMMON STOCKS $196,197,569 $ 198,198,188
</TABLE>
- ------------------------
78
<PAGE>
STRATEGIC GROWTH FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 6.98%
REPURCHASE AGREEMENTS - 6.98%
$ 7,103,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50 % 01/02/98 $ 7,103,000
7,780,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.30 01/02/98 7,780,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 14,883,000
(Cost $14,883,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $211,080,569)* (Notes 1 and 3) 99.90% $ 213,081,188
Other Assets and Liabilities, Net 0.10 210,538
------ --------------
TOTAL NET ASSETS 100.00% $ 213,291,726
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 24,541,008
Gross Unrealized Depreciation (22,540,389)
------------
NET UNREALIZED APPRECIATION $ 2,000,619
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
79
<PAGE>
U.S. GOVERNMENT INCOME FUND
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 86.44%
FEDERAL AGENCY - OTHER - 3.86%
$ 5,000,000 Tennessee Valley Authority 6.75 % 11/01/25 $ 5,288,800
4,000,000 Tennessee Valley Authority 6.38 06/15/05 4,079,360
--------------
$ 9,368,160
FEDERAL FARM CREDIT - 3.83%
$ 9,350,000 Federal Farm Credit Bank 6.38 % 02/25/02 $ 9,296,986
FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.65%
$ 5,000,000 FHLMC 7.10 % 04/10/07 $ 5,366,400
3,343,049 FHLMC #00683 8.50 12/01/25 3,493,152
--------------
$ 8,859,552
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 30.49%
$10,000,000 FNMA TBA+ 6.00 % 06/01/12 $ 9,843,750
18,000,000 FNMA TBA+ 6.50 12/01/12 18,028,980
10,000,000 FNMA TBA+ 6.50 06/01/27 9,876,400
10,000,000 FNMA TBA+ 7.50 06/01/27 10,242,800
37,394 FNMA #251288 6.50 10/01/12 37,454
7,000,000 FNMA #401994 6.50 11/01/27 6,913,480
4,598,642 FNMA#376272 7.00 02/01/12 4,685,189
3,727,177 FNMA #250799 7.50 12/01/26 3,817,672
8,319,344 FNMA #70765 9.00 03/01/21 8,965,091
1,700,000 FNMA Principal Strip 9.13 (F) 03/09/22 1,680,280
--------------
$ 74,091,096
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 44.61%
$15,000,000 GNMA TBA+ 6.50 % 06/01/27 $ 14,853,600
11,000,000 GNMA TBA+ 6.50 12/01/27 10,892,640
308,738 GNMA #0864 6.50 02/20/08 311,726
1,245,810 GNMA #352961 6.50 05/15/24 1,235,993
6,000,000 GNMA #398655 6.50 05/15/26 5,941,440
</TABLE>
- ------------------------
80
<PAGE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES (CONTINUED)
$ 1,584,116 GNMA #362584 6.88 % 01/15/29 $ 1,582,136
1,875,074 GNMA #430800 7.00 05/15/26 1,891,087
4,914,824 GNMA #2376 7.00 02/20/27 4,941,462
8,910,000 GNMA #780651 7.00 10/15/27 8,988,854
11,880,000 GNMA #461052 7.00 12/15/27 11,981,455
2,016,637 GNMA #319413 7.25 12/15/18 2,039,324
1,907,461 GNMA #358863 7.25 01/15/29 1,928,920
1,062,597 GNMA #336930 7.50 03/15/23 1,092,063
1,363,743 GNMA #291124 7.50 06/15/25 1,390,582
4,287,119 GNMA #414636 7.50 10/15/25 4,395,326
4,800,646 GNMA #450871 8.00 05/15/27 4,978,126
2,630,377 GNMA #355529 8.50 03/15/27 2,646,816
2,178,639 GNMA #355528 8.50 04/15/27 2,192,255
175,567 GNMA #158583 9.00 09/20/16 190,178
567,159 GNMA #170928 9.00 09/20/16 602,250
314,421 GNMA #227132 9.00 07/20/17 333,875
178,322 GNMA #1168 9.00 04/20/19 192,158
4,134,320 GNMA #306052 9.00 06/15/21 4,480,942
20,192 GNMA #223618 10.00 01/15/19 22,441
970 GNMA #0070 12.00 01/20/99 1,028
3,554 GNMA #0116 12.00 04/20/99 3,766
17,317 GNMA II#2443 7.00 06/20/27 17,411
4,028,919 GNMA II #002496 7.00 10/20/27 4,050,756
2,801,599 GNMA II #2268 7.50 08/20/26 2,858,499
2,349,888 GNMA II #2303 7.50 10/20/26 2,397,614
96,878 GNMA II #811 8.00 02/20/23 100,762
434,606 GNMA II #340045 8.00 03/20/23 452,034
782,891 GNMA II #418627 8.50 11/20/25 820,407
122,621 GNMA II #1596 9.00 04/20/21 132,136
420,374 GNMA II #1740 9.00 12/20/21 452,990
546,452 GNMA II #0058 9.00 07/20/22 588,851
227,522 GNMA II #57247 9.50 05/20/16 244,918
32,766 GNMA II #766 9.50 05/20/17 35,274
237,431 GNMA II #1236 9.50 08/20/19 255,328
983,381 GNMA II #1273 9.50 10/20/19 1,057,508
120,135 GNMA II #1579 9.50 03/20/21 129,144
3,650 GNMA II #60 10.00 12/20/13 4,027
</TABLE>
---------------------
81
<PAGE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES (CONTINUED)
$ 152,470 GNMA II #173 10.00 % 07/20/14 $ 168,254
32,864 GNMA II #495 10.00 02/20/16 36,284
30,441 GNMA II #1436 10.00 07/20/20 33,551
215,125 GNMA II #1454 10.00 08/20/20 237,107
325,590 GNMA II #1472 10.00 09/20/20 358,858
235,650 GNMA II #1526 10.00 12/20/20 259,728
242,077 GNMA II #1544 10.00 01/20/21 266,812
1,414,482 GNMA II #1580 10.00 03/20/21 1,559,014
1,055,087 GNMA II #1616 10.00 05/20/21 1,162,896
82,289 GNMA II #1848 10.00 06/20/22 90,698
945,769 GNMA II #1239 11.00 08/20/19 1,082,272
222,637 GNMA II #1420 11.00 06/20/20 254,100
187,875 GNMA II #1456 11.00 08/20/20 214,991
--------------
$ 108,432,667
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 210,048,461
(Cost $207,993,657)
U.S. TREASURY SECURITIES - 25.29%
U.S. TREASURY BILLS - 12.58%
$32,000,000 U.S. Treasury Bills 5.20 %(F) 11/12/98 30,540,160
U.S. TREASURY NOTES - 4.23%
$10,000,000 U.S. Treasury Notes 6.13 % 11/15/27 10,276,600
U.S. TREASURY BONDS - 8.48%
$ 9,000,000 U.S. Treasury Bonds 5.63 % 12/31/02 $ 8,966,252
11,000,000 U.S. Treasury Bonds 6.63 05/15/07 11,642,840
--------------
$ 20,609,092
TOTAL U.S. TREASURY SECURITIES $ 61,425,852
(Cost $61,333,097)
</TABLE>
- ------------------------
82
<PAGE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 2.03%
REPURCHASE AGREEMENTS - 2.03%
$ 1,045,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50 01/02/98 $ 1,045,000
3,889,000 Morgan Stanley & Co Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.50 01/02/98 3,889,000
--------------
TOTAL SHORT-TERM INSTRUMENTS $ 4,934,000
(Cost $4,934,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $274,260,754)* (Notes 1 and 3) 113.76% $ 276,408,313
Other Assets and Liabilities, Net (13.76) (33,423,056)
------ --------------
TOTAL NET ASSETS 100.00% $ 242,985,257
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ PURCHASED ON A WHEN ISSUED BASIS. SEE NOTE 1.
(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 $ 2,480,017
Gross Unrealized Depreciation (332,458)
------------
NET UNREALIZED APPRECIATION $ 2,147,559
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
83
<PAGE>
VARIABLE RATE GOVERNMENT FUND
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 92.59%
ADJUSTABLE RATE MORTGAGES - 84.15%
$ 4,943,386 FHLMC #755102 (CMT) 7.41 % 06/01/18 $ 5,110,225
8,909,146 FHLMC #610237 (CMT) 7.84 10/01/25 9,117,976
27,318 FHLMC #845410 (CMT) 7.85 07/01/23 28,108
12,879,490 FHLMC #846150 (CMT) 7.92 04/01/21 13,587,862
11,125 FHLMC #845613 (CMT) 8.09 01/01/24 11,572
13,076,356 FHLMC #846415 7.82 09/01/23 13,529,975
9,817,689 FHLMC #610303 7.83 04/01/18 10,136,764
14,438,816 FHLMC #846111 7.92 06/01/24 15,009,582
10,197,374 FHLMC #846299 7.94 06/01/25 10,436,400
3,670,826 FHLMC #840118 7.98 09/01/18 3,872,721
7,512,516 FNMA #136014 (COFI) 5.85 05/01/18 7,843,969
3,140,747 FNMA #57775 6.18 05/01/18 3,127,995
7,304,337 FNMA #57733 6.20 02/01/17 7,274,681
9,892,246 FNMA #66397 6.28 03/01/18 9,852,084
12,895,947 FNMA #400555 7.63 08/01/27 13,470,203
9,294,694 FNMA #334439 7.83 04/01/24 9,744,929
8,755,853 GNMA II #8303 (CMT) 6.87 10/20/23 9,010,298
12,293,067 GNMA II #8121 (CMT) 7.00 01/20/23 12,648,459
6,670,697 GNMA II #8358 (CMT) 7.00 01/20/24 6,840,599
8,803,836 GNMA II #8705 (CMT) 7.00 09/20/25 9,028,070
7,199,868 GNMA II #8443 (CMT) 7.37 06/20/24 7,413,633
9,219,937 GNMA II #8076 6.87 11/20/22 9,496,536
8,251,372 GNMA II #8006 7.00 07/20/22 8,476,964
--------------
$ 195,069,605
REAL ESTATE MORTGAGE INVESTMENT CONDUITS - 8.44%
$ 3,295,848 FHLMC #1534 7.36 % 06/15/23 $ 3,455,465
15,958,376 FHLMC #1991 6.78 09/15/27 16,119,556
--------------
$ 19,575,021
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 214,644,626
(Cost $213,333,792)
</TABLE>
- ------------------------
84
<PAGE>
VARIABLE RATE GOVERNMENT FUND
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 4.34%
U.S. TREASURY NOTES - 4.34%
$10,000,000 U.S. Treasury Notes 6.00 % 06/30/99 $ 10,050,000
(Cost $10,005,746)
SHORT-TERM INSTRUMENTS - 1.13%
REPURCHASE AGREEMENTS - 1.13%
$ 2,023,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.50 % 01/02/98 $ 2,023,000
354,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.50 01/02/98 354,000
234,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.30 01/02/98 234,000
--------------
$ 2,611,000
TOTAL SHORT-TERM INSTRUMENTS
(Cost $2,611,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $225,950,538)* (Notes 1 and 3) 98.06% $ 227,305,626
Other Assets and Liabilities, Net 1.94 4,505,130
------ --------------
TOTAL NET ASSETS 100.00% $ 231,810,756
------ --------------
------ --------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* 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 $ 1,693,389
Gross Unrealized Depreciation (338,301)
------------
NET UNREALIZED APPRECIATION $ 1,355,088
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
---------------------
85
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
- ------------------------
86
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1997
<TABLE>
<CAPTION>
CALIFORNIA INDEX
TAX-FREE ALLOCATION
BOND FUND FUND
<S> <C> <C>
- --------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $674,474,729 $127,217,763
Cash 1,340 338
Receivables:
Dividends and Interest 10,351,438 163,931
Fund shares sold 260,150 220,833
Investment securities sold 1,266,156 33,390
Due from co-administrator (Note 2) 0 0
Organization expenses, net of
amortization 0 0
Prepaid expenses 0 0
TOTAL ASSETS 686,353,813 127,636,255
LIABILITIES
Payables:
Investment securities purchased 5,483,245 33,543
Distribution to shareholders 2,286,258 198,394
Fund shares redeemed 44,567 39,097
Due to sponsor and distributor (Note
2) 360,979 122,346
Due to adviser (Note 2) 365,822 131,332
Other 205,299 158,842
TOTAL LIABILITIES 8,746,170 683,554
TOTAL NET ASSETS $677,607,643 $126,952,701
NET ASSETS CONSIST OF:
Paid-in capital $634,784,803 $102,888,301
Undistributed net realized gain (loss)
on investments 789,290 1,633,702
Net unrealized appreciation
(depreciation) of investments 42,033,550 22,430,698
TOTAL NET ASSETS $677,607,643 $126,952,701
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A(1) $509,843,709 $ 80,512,337
Shares outstanding - Class A(1) 45,022,879 5,189,607
Net asset value per share - Class A(1) $ 11.32 $ 15.51
Maximum offering price per share - Class
A(1) $ 11.85(2) $ 16.24(2)
Net assets - Class B $ 77,791,575 $ 356,464
Shares outstanding - Class B 6,739,744 18,462
Net asset value and offering price per
share - Class B $ 11.54 $ 19.31
Net assets - Class C $ 5,859,598 $ 46,083,900
Shares outstanding - Class C 507,605 2,385,844
Net asset value and offering price per
share - Class C $ 11.54 $ 19.32
Net assets - Institutional Class $ 84,112,761 N/A
Shares outstanding - Institutional Class 7,409,949 N/A
Net asset value and offering price per
share - Institutional Class $ 11.35 N/A
INVESTMENT AT COST (NOTE 3) $632,441,179 $104,787,065
- --------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) 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.
---------------------
87
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT- SHORT-TERM
CORPORATE MUNICIPAL
INCOME FUND INCOME FUND
<S> <C> <C>
- ------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $14,573,130 $19,446,377
Cash 1,857 1,472
Receivables:
Dividends and Interest 206,922 278,204
Fund shares sold 0 0
Investment securities sold 0 0
Due from co-administrator (Note 2) 7,767 8,032
Organization expenses, net of
amortization 40,020 34,207
Prepaid expenses 0 0
TOTAL ASSETS 14,829,696 19,768,292
LIABILITIES
Payables:
Investment securities purchased 0 0
Distribution to shareholders 39,099 35,708
Fund shares redeemed 0 0
Due to sponsor and distributor (Note
2) 9,088 16,920
Due to adviser (Note 2) 0 0
Other 92,576 87,549
TOTAL LIABILITIES 140,763 140,177
TOTAL NET ASSETS $14,688,933 $19,628,115
NET ASSETS CONSIST OF:
Paid-in capital $14,751,985 $19,546,622
Undistributed net realized gain (loss)
on investments (61,575) 4,765
Net unrealized appreciation
(depreciation) of investments (1,477) 76,728
TOTAL NET ASSETS $14,688,933 $19,628,115
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A(1) $14,688,933 $19,628,115
Shares outstanding - Class A(1) 2,949,270 3,939,434
Net asset value per share - Class A(1) $ 4.98 $ 4.98
Maximum offering price per share - Class
A(1) $ 5.13(3) $ 5.13(3)
Net assets - Class B N/A N/A
Shares outstanding - Class B N/A N/A
Net asset value and offering price per
share - Class B N/A N/A
Net assets - Class C N/A N/A
Shares outstanding - Class C N/A N/A
Net asset value and offering price per
share - Class C N/A N/A
Net assets - Institutional Class N/A N/A
Shares outstanding - Institutional Class N/A N/A
Net asset value and offering price per
share - Institutional Class N/A N/A
INVESTMENT AT COST (NOTE 3) $14,574,607 $19,369,649
- ------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) 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.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(4) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/94.75 OF NET ASSET VALUE. ON
INVESTMENTS OF $50,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
- ------------------------
88
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1997
<TABLE>
<CAPTION>
VARIABLE
STRATEGIC U.S. RATE
GROWTH GOVERNMENT GOVERNMENT
FUND INCOME FUND FUND
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $213,081,188 $276,408,313 $227,305,626
Cash 532 175,501 1,462
Receivables:
Dividends and Interest 18,969 1,548,992 1,718,098
Fund shares sold 115,160 120,929 1,250,000
Investment securities sold 1,864,843 39,961,412 2,529,392
Due from co-administrator (Note 2) 0 0 0
Organization expenses, net of
amortization 3,777 0 0
Prepaid expenses 34,684 34,754 2,757
TOTAL ASSETS 215,119,153 318,249,901 232,807,335
LIABILITIES
Payables:
Investment securities purchased 1,109,178 73,426,094 0
Distribution to shareholders 0 1,399,280 599,087
Fund shares redeemed 331,756 30,546 36,738
Due to sponsor and distributor (Note
2) 140,959 130,552 186,088
Due to adviser (Note 2) 181,716 153,339 77,032
Other 63,818 124,833 97,634
TOTAL LIABILITIES 1,827,427 75,264,644 996,579
TOTAL NET ASSETS $213,291,726 $242,985,257 $231,810,756
NET ASSETS CONSIST OF:
Paid-in capital $217,314,062 $259,304,234 $374,961,873
Undistributed net realized gain (loss)
on investments (6,022,955) (18,466,536) (144,506,205)
Net unrealized appreciation
(depreciation) of investments 2,000,619 2,147,559 1,355,088
TOTAL NET ASSETS $213,291,726 $242,985,257 $231,810,756
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A(1) $148,121,994 $207,557,781 $227,352,811
Shares outstanding - Class A(1) 7,421,786 19,083,581 24,630,030
Net asset value per share - Class A(1) $ 19.96 $ 10.88 $ 9.23
Maximum offering price per share - Class
A(1) $ 21.07(4) $ 11.39(2) $ 9.52(3)
Net assets - Class B $ 23,561,955 $ 26,400,546 N/A
Shares outstanding - Class B 968,504 2,466,432 N/A
Net asset value and offering price per
share - Class B $ 24.33 $ 10.70 N/A
Net assets - Class C $ 41,607,777 $ 1,772,414 $ 4,457,945
Shares outstanding - Class C 1,710,809 165,489 321,510
Net asset value and offering price per
share - Class C $ 24.32 $ 10.71 $ 13.87
Net assets - Institutional Class N/A $ 7,254,516 N/A
Shares outstanding - Institutional Class N/A 461,875 N/A
Net asset value and offering price per
share - Institutional Class N/A $ 15.71 N/A
INVESTMENT AT COST (NOTE 3) $211,080,569 $274,260,754 $225,950,538
- -------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) 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.
---------------------
89
<PAGE>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
CALIFORNIA
TAX-FREE INDEX
BOND ALLOCATION
FUND (2) FUND
<S> <C> <C>
- ------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 0 $ 1,379,317
Interest 14,339,791 1,887,595
TOTAL INVESTMENT INCOME 14,339,791 3,266,912
EXPENSES (NOTE 2)
Advisory fees 1,259,094 747,203
Administration fees 217,623 76,575
Custody fees 45,020 0
Shareholder servicing fees 107,591 86,290
Portfolio accounting fees 112,355 4,018
Transfer agency fees 344,373 144,971
Distribution fees 175,834 439,440
Organization costs 1,567 5,305
Legal and audit fees 25,890 38,051
Registration fees 5,121 34,822
Directors' fees 4,145 4,033
Shareholder reports 29,255 52,082
Other 29,201 10,775
TOTAL EXPENSES 2,357,069 1,643,565
Less:
Waived fees and reimbursed expenses (396,060) (33,242)
Net Expenses 1,961,009 1,610,323
NET INVESTMENT INCOME 12,378,782 1,656,589
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 1,877,019 12,775,977
Net change in unrealized appreciation
(depreciation) of investments 34,032,101 8,758,372
NET GAIN (LOSS) ON INVESTMENTS 35,909,120 21,534,349
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $48,287,902 $23,190,938
- ------------------------------------------------------------------------
</TABLE>
(1) INCLUDES AMOUNTS ALLOCATED FROM THE MASTER PORTFOLIO. SEE NOTE 1.
(2) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS
CALIFORNIA TAX-FREE BOND FUND. SEE NOTE 1.
(3) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS
STRATEGIC GROWTH FUND. SEE NOTE 1.
(4) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS U.S.
GOVERNMENT INCOME FUND. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
- ------------------------
90
<PAGE>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT- SHORT-TERM U.S. VARIABLE
CORPORATE MUNICIPAL STRATEGIC GOVERNMENT RATE
INCOME INCOME GROWTH INCOME GOVERNMENT
FUND FUND FUND (3) FUND (4) FUND
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 0 $ 0 $ 173,507(1) $ 0 $ 0
Interest 730,233(1) 977,367(1) 200,416(1) 6,482,519 21,098,626
TOTAL INVESTMENT INCOME 730,233 977,367 373,923 6,482,519 21,098,626
EXPENSES (NOTE 2)
Advisory fees 58,935(1) 115,283(1) 853,705(1) 469,051 1,650,124
Administration fees 11,020 21,791 162,175 66,992 282,517
Custody fees 1,974(1) 3,857(1) 49,596(1) 28,822 67,018
Shareholder servicing fees 0 0 133,881 39,949 17,359
Portfolio accounting fees 20,995(1) 25,044(1) 80,941(1) 76,869 127,952
Transfer agency fees 15,164 28,433 229,667 127,322 443,980
Distribution fees 29,820 57,493 652,975 23,268 848,029
Organization costs 17,129(1) 16,274(1) 15,455 4,176 5,872
Legal and audit fees 37,628(1) 39,811(1) 40,980(1) 24,753 105,519
Registration fees 12,599 13,028 52,848 27,720 34,123
Directors' fees 4,973 4,975 4,198 4,976 4,976
Shareholder reports 11,184 13,047 71,126 40,752 22,546
Other 6,965(1) 10,958(1) 9,854(1) 22,768 50,880
TOTAL EXPENSES 228,386 349,994 2,357,401 957,418 3,660,895
Less:
Waived fees and reimbursed expenses (182,485) (258,681) (6,776) (106,522) (933,131)
Net Expenses 45,901(1) 91,313(1) 2,350,625 850,896 2,727,764
NET INVESTMENT INCOME 684,332 886,054 (1,976,702) 5,631,623 18,370,862
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments (1,736) 4,765 27,263,706 (16,017,813) 1,330,949
Net change in unrealized appreciation
(depreciation) of investments (4,114) 27,556 (4,721,950) 2,148,328 (325,594)
NET GAIN (LOSS) ON INVESTMENTS (5,850) 32,321 22,541,756 (13,869,485) 1,005,355
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 678,482 $ 918,375 $20,565,054 $ (8,237,862) $19,376,217
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES AMOUNTS ALLOCATED FROM THE MASTER PORTFOLIO. SEE NOTE 1.
(2) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS
CALIFORNIA TAX-FREE BOND FUND. SEE NOTE 1.
(3) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS
STRATEGIC GROWTH FUND. SEE NOTE 1.
(4) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS U.S.
GOVERNMENT INCOME FUND. SEE NOTE 1.
The accompanying notes are an integral part of these financial statements.
---------------------
91
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
-----------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 (2) 1996
<S> <C> <C>
- --------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 12,378,782 $ 13,008,723
Net realized gain (loss) on sale of
investments 1,877,019 3,630,526
Net change in unrealized appreciation
(depreciation) of investments 34,032,101 (6,951,220)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 48,287,902 9,688,029
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (11,799,980) (12,719,724)
CLASS B (141,890) N/A
CLASS C (247,997) (288,999)
INSTITUTIONAL CLASS (188,915) N/A
From net realized gain on sale of
investments
CLASS A (1,345,647) (3,536,604)
CLASS B 0 N/A
CLASS C (36,342) (93,922)
INSTITUTIONAL CLASS 0 N/A
In excess of net realized gain
CLASS A 0 (1,650,016)
CLASS B 0 N/A
CLASS C 0 (50,270)
INSTITUTIONAL CLASS 0 N/A
From tax return of capital
CLASS A 0 0
CLASS B 0 N/A
CLASS C 0 0
INSTITUTIONAL CLASS 0 N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 286,472,490 11,398,703
Reinvestment of dividends - Class A(1) 6,671,789 9,865,419
Cost of shares redeemed - Class A(1) (49,748,321) (41,495,204)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) 243,395,958 (20,231,082)
Proceeds from shares sold - Class B 75,031,948(3) N/A
Reinvestment of dividends - Class B 1,436(3) N/A
Cost of shares redeemed - Class B (468,649)(3) N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 74,564,735(3) N/A
Proceeds from shares sold - Class C 1,299,532 1,595,401
Reinvestment of dividends - Class C 133,685 209,559
Cost of shares redeemed - Class C (2,250,658) (2,127,643)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C (817,441) (322,683)
Proceeds from shares sold -
Institutional Class 80,818,091(3) N/A
Reinvestment of dividends -
Institutional Class 611(3) N/A
Cost of shares redeemed -
Institutional Class (1,090,971)(3) N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS 79,727,731(3) N/A
INCREASE (DECREASE) IN NET ASSETS 431,398,114 (29,205,271)
NET ASSETS:
Beginning net assets 246,209,529 275,414,800
ENDING NET ASSETS $677,607,643 $246,209,529
- --------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS
CALIFORNIA TAX-FREE BOND FUND. SEE NOTE 1.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
- ---------------------
92
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT-
INDEX ALLOCATION FUND CORPORATE INCOME FUND
---------------------------- -----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 1,656,589 $ 1,402,424 $ 684,332 $ 613,660
Net realized gain (loss) on sale of
investments 12,775,977 10,067,335 (1,736) (63,690)
Net change in unrealized appreciation
(depreciation) of investments 8,758,372 460,902 (4,114) (11,931)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 23,190,938 11,930,661 678,482 538,039
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (1,312,200) (1,128,185) (684,332) (613,660)
CLASS B 0 N/A N/A N/A
CLASS C (344,406) (274,239) N/A N/A
INSTITUTIONAL CLASS N/A N/A N/A N/A
From net realized gain on sale of
investments
CLASS A (8,070,952) (6,814,078) 0 0
CLASS B 0 N/A N/A N/A
CLASS C (4,429,345) (2,767,279) N/A N/A
INSTITUTIONAL CLASS N/A N/A N/A N/A
In excess of net realized gain
CLASS A 0 0 0 0
CLASS B 0 N/A N/A N/A
CLASS C 0 0 N/A N/A
INSTITUTIONAL CLASS N/A N/A N/A N/A
From tax return of capital
CLASS A 0 0 0 0
CLASS B 0 N/A N/A N/A
CLASS C 0 0 N/A N/A
INSTITUTIONAL CLASS N/A N/A N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 13,097,927 9,154,800 11,968,872 23,550,292
Reinvestment of dividends - Class A(1) 7,755,142 6,367,210 571,468 368,319
Cost of shares redeemed - Class A(1) (7,305,205) (8,048,045) (11,868,182) (15,774,832)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) 13,547,864 7,473,965 672,158 8,143,779
Proceeds from shares sold - Class B 349,731(3) N/A N/A N/A
Reinvestment of dividends - Class B 0(3) N/A N/A N/A
Cost of shares redeemed - Class B 0(3) N/A N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 349,731(3) N/A N/A N/A
Proceeds from shares sold - Class C 20,805,099 9,098,246 N/A N/A
Reinvestment of dividends - Class C 3,210,184 1,942,667 N/A N/A
Cost of shares redeemed - Class C (5,001,988) (2,535,609) N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C 19,013,295 8,505,304 N/A N/A
Proceeds from shares sold -
Institutional Class N/A N/A N/A N/A
Reinvestment of dividends -
Institutional Class N/A N/A N/A N/A
Cost of shares redeemed -
Institutional Class N/A N/A N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS N/A N/A N/A N/A
INCREASE (DECREASE) IN NET ASSETS 41,944,925 16,926,149 666,308 8,068,158
NET ASSETS:
Beginning net assets 85,007,776 68,081,627 14,022,625 5,954,467
ENDING NET ASSETS $126,952,701 $85,007,776 $ 14,688,933 $ 14,022,625
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS
CALIFORNIA TAX-FREE BOND FUND. SEE NOTE 1.
(3) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
---------------------
93
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL INCOME
FUND
-----------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 1996
<S> <C> <C>
- --------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 886,054 $ 859,434
Net realized gain (loss) on sale of
investments 4,765 4,708
Net change in unrealized appreciation
(depreciation) of investments 27,556 (81,904)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 918,375 782,238
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (886,054) (859,434)
CLASS B N/A N/A
CLASS C N/A N/A
INSTITUTIONAL CLASS N/A N/A
From net realized gain on sale of
investments
CLASS A (4,513) 0
CLASS B N/A N/A
CLASS C N/A N/A
INSTITUTIONAL CLASS N/A N/A
In excess of net realized gain
CLASS A 0 0
CLASS B N/A N/A
CLASS C N/A N/A
INSTITUTIONAL CLASS N/A N/A
From tax return of capital
CLASS A 0 0
CLASS B N/A N/A
CLASS C N/A N/A
INSTITUTIONAL CLASS N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 15,478,588 20,946,410
Reinvestment of dividends - Class A(1) 901,426 780,444
Cost of shares redeemed - Class A(1) (23,493,210) (11,422,620)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (7,113,196) 10,304,234
Proceeds from shares sold - Class B N/A N/A
Reinvestment of dividends - Class B N/A N/A
Cost of shares redeemed - Class B N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B N/A N/A
Proceeds from shares sold - Class C N/A N/A
Reinvestment of dividends - Class C N/A N/A
Cost of shares redeemed - Class C N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C N/A N/A
Proceeds from shares sold -
Institutional Class N/A N/A
Reinvestment of dividends -
Institutional Class N/A N/A
Cost of shares redeemed -
Institutional Class N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS N/A N/A
INCREASE (DECREASE) IN NET ASSETS (7,085,388) 10,227,038
NET ASSETS:
Beginning net assets 26,713,503 16,486,465
ENDING NET ASSETS $ 19,628,115 $ 26,713,503
- --------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS
STRATEGIC GROWTH FUND. SEE NOTE 1.
(3) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS U.S.
GOVERNMENT INCOME FUND. SEE NOTE 1.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
- ---------------------
94
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
STRATEGIC GROWTH FUND U.S. GOVERNMENT INCOME FUND
------------------------------ -----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 (2) 1996 1997 (3) 1996
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ (1,976,702) $ (1,450,885) $ 5,631,623 $ 2,616,427
Net realized gain (loss) on sale of
investments 27,263,706 12,997,935 (16,017,813) (499,201)
Net change in unrealized appreciation
(depreciation) of investments (4,721,950) (4,523,410) 2,148,328 (979,155)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 20,565,054 7,023,640 (8,237,862) 1,138,071
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A 0 0 (5,440,321) (2,481,512)
CLASS B 0 N/A (22,232) N/A
CLASS C 0 0 (164,423) (134,915)
INSTITUTIONAL CLASS N/A N/A (4,647) N/A
From net realized gain on sale of
investments
CLASS A (32,094,549) (941,378) 0 0
CLASS B 0 N/A 0 N/A
CLASS C (12,310,107) (415,927) 0 0
INSTITUTIONAL CLASS N/A N/A 0 N/A
In excess of net realized gain
CLASS A 0 0 0 0
CLASS B 0 N/A 0 N/A
CLASS C 0 0 0 0
INSTITUTIONAL CLASS N/A N/A 0 N/A
From tax return of capital
CLASS A 0 0 0 0
CLASS B 0 N/A 0 N/A
CLASS C 0 0 0 0
INSTITUTIONAL CLASS N/A N/A 0 N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 227,568,030 154,071,907 180,455,427 60,822,363
Reinvestment of dividends - Class A(1) 24,933,472 728,971 4,095,456 1,102,521
Cost of shares redeemed - Class A(1) (219,015,611) (86,486,498) (39,630,894) (13,841,571)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) 33,485,891 68,314,380 144,919,989 48,083,313
Proceeds from shares sold - Class B 23,193,050(4) N/A 26,085,390(4) N/A
Reinvestment of dividends - Class B 0(4) N/A 289(4) N/A
Cost of shares redeemed - Class B (422,099)(4) N/A (260,384)(4) N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B 22,770,951(4) N/A 25,825,295(4) N/A
Proceeds from shares sold - Class C 221,398,643 110,701,166 313,936 357,679
Reinvestment of dividends - Class C 6,423,494 176,740 40,188 73,898
Cost of shares redeemed - Class C (233,237,347) (83,911,395) (893,744) (771,274)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C (5,415,210) 26,966,511 (539,620) (339,697)
Proceeds from shares sold -
Institutional Class N/A N/A 7,130,458(4) N/A
Reinvestment of dividends -
Institutional Class N/A N/A 0(4) N/A
Cost of shares redeemed -
Institutional Class N/A N/A (10,496)(4) N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS N/A N/A 7,119,962(4) N/A
INCREASE (DECREASE) IN NET ASSETS 27,002,030 100,947,226 163,456,141 46,265,260
NET ASSETS:
Beginning net assets 186,289,696 85,342,470 79,529,116 33,263,856
ENDING NET ASSETS $ 213,291,726 $186,289,696 $242,985,257 $ 79,529,116
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS
STRATEGIC GROWTH FUND. SEE NOTE 1.
(3) INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE OVERLAND EXPRESS U.S.
GOVERNMENT INCOME FUND. SEE NOTE 1.
(4) THIS CLASS OF SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
The accompanying notes are an integral part of these financial statements.
---------------------
95
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND
-------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, 1997 DEC. 31, 1996
<S> <C> <C>
- ----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 18,370,862 $ 28,838,854
Net realized gain (loss) on sale of
investments 1,330,949 (4,577,544)
Net change in unrealized appreciation
(depreciation) of investments (325,594) (1,951,636)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 19,376,217 22,309,674
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
CLASS A (18,017,297) (26,355,616)
CLASS B N/A N/A
CLASS C (353,565) (327,816)
INSTITUTIONAL CLASS N/A N/A
From net realized gain on sale of
investments
CLASS A 0 0
CLASS B N/A N/A
CLASS C 0 0
INSTITUTIONAL CLASS N/A N/A
In excess of net realized gain
CLASS A 0 0
CLASS B N/A N/A
CLASS C 0 0
INSTITUTIONAL CLASS N/A N/A
From tax return of capital
CLASS A 0 (2,128,910)
CLASS B N/A N/A
CLASS C 0 (26,512)
INSTITUTIONAL CLASS N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 68,881,115 13,360,648
Reinvestment of dividends - Class A(1) 3,028,668 6,013,951
Cost of shares redeemed - Class A(1) (239,536,408) (272,864,909)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (167,626,625) (253,490,310)
Proceeds from shares sold - Class B N/A N/A
Reinvestment of dividends - Class B N/A N/A
Cost of shares redeemed - Class B N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS B N/A N/A
Proceeds from shares sold - Class C 213,222,536 82,466,303
Reinvestment of dividends - Class C 220,657 184,258
Cost of shares redeemed - Class C (214,475,037) (84,794,106)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS C (1,031,844) (2,143,545)
Proceeds from shares sold -
Institutional Class N/A N/A
Reinvestment of dividends -
Institutional Class N/A N/A
Cost of shares redeemed -
Institutional Class N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - INSTITUTIONAL CLASS N/A N/A
INCREASE (DECREASE) IN NET ASSETS (167,653,114) (262,163,035)
NET ASSETS:
Beginning net assets 399,463,870 661,626,905
ENDING NET ASSETS $ 231,810,756 $ 399,463,870
- ----------------------------------------------------------------------------
</TABLE>
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
- ---------------------
96
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK --
---------------------
97
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE
BOND FUND (2)
----------------------
CLASS A
----------------------
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.97 $11.34
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.54 0.57
Net realized and unrealized gain (loss) on investments 0.42 (0.13)
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.96 0.44
LESS DISTRIBUTIONS:
Dividends from net investment income (0.54) (0.57)
Distributions from net realized gain (0.07) (0.24)
Tax return of capital 0.00 0.00
---------- ----------
TOTAL FROM DISTRIBUTIONS (0.61) (0.81)
---------- ----------
NET ASSET VALUE, END OF PERIOD $11.32 $10.97
---------- ----------
---------- ----------
TOTAL RETURN* 9.16% 4.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $509,844 $239,703
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.74% 0.71%
Ratio of net investment income to average net assets 4.84% 5.08%
Portfolio turnover 12% 19%
Average commission rate paid(1) N/A N/A
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 0.89% 0.82%
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses 4.69% 4.97%
- ----------------------------------------------------------------------------------------
</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) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
(4) 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.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
- ---------------------
98
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND (2) (CONT.)
----------------------------------------------------------------------------------
CLASS B(3)
CLASS A (CONT.) ---------- CLASS C (4)
---------------------------------- PERIOD ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1997 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.67 $12.00 $11.43 $11.51 $11.19 $11.57 $10.88
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.63 0.67 0.66 0.02 0.47 0.49 0.56
Net realized and
unrealized gain (loss)
on investments 1.08 (1.18) 0.78 0.03 0.42 (0.13) 1.10
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 1.71 (0.51) 1.44 0.05 0.89 0.36 1.66
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.63) (0.67) (0.66) (0.02) (0.47) (0.49) (0.56)
Distributions from net
realized gain (0.41) (0.15) (0.21) 0.00 (0.07) (0.25) (0.41)
Tax return of capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (1.04) (0.82) (0.87) (0.02) (0.54) (0.74) (0.97)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $11.34 $10.67 $12.00 $11.54 $11.54 $11.19 $11.57
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN* 16.38% (4.32)% 12.98% 0.45% 8.11% 3.24% 15.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $268,352 $273,105 $361,779 $77,792 $5,860 $6,506 $7,063
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.58% 0.50% 0.69% 1.44% 1.48% 1.46% 1.30%
Ratio of net investment
income to average net
assets 5.59% 5.87% 5.54% 3.95% 4.19% 4.33% 4.87%
Portfolio turnover 38% 4% 10% 12% 12% 19% 38%
Average commission rate
paid(1) N/A 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 0.78% 0.95% 0.85% 1.76% 1.63% 1.59% 1.57%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 5.39% 5.42% 5.38% 3.63% 4.04% 4.20% 4.60%
- ----------------------------------------------------------------------------------------------------------------
</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) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
(4) 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.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
---------------------
99
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE
BOND FUND (2) (CONT.)
----------------------
CLASS C (3) (CONT.)
----------------------
SIX MONTHS
YEAR ENDED ENDED
DEC. 31, DEC. 31,
1994 1993
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.24 $12.25
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.60 0.28
Net realized and unrealized gain (loss) on investments (1.20) 0.20
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS (0.60) 0.48
LESS DISTRIBUTIONS:
Dividends from net investment income (0.60) (0.28)
Distributions from net realized gain (0.16) (0.21)
Tax return of capital 0.00 0.00
---------- ----------
TOTAL FROM DISTRIBUTIONS (0.76) (0.49)
---------- ----------
NET ASSET VALUE, END OF PERIOD $10.88 $12.24
---------- ----------
---------- ----------
TOTAL RETURN* (5.00)% 3.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $7,346 $7,641
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.20% 1.32%
Ratio of net investment income to average net assets 5.15% 4.50%
Portfolio turnover 4% 10%
Average commission rate paid(1) N/A N/A
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 1.82% 1.61%
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses 4.53% 4.21%
- ----------------------------------------------------------------------------------------
</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) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(3) 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.
(4) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON DECEMBER 15,
1997.
(5) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
- ---------------------
100
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA
TAX-FREE
BOND
FUND (2)
(CONT.)
---------- INDEX ALLOCATION FUND
INSTITUTIONAL ----------------------------------------------------------------------
CLASS (4) CLASS B(5)
---------- CLASS A ----------
PERIOD ---------------------------------------------------------- PERIOD
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1997 1996 1995 1994 1993 1997
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $11.32 $13.99 $13.76 $10.67 $11.90 $11.45 $18.99
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.03 0.28 0.29 0.28 0.31 0.30 0.00
Net realized and
unrealized gain (loss)
on investments 0.03 3.23 2.02 3.42 (0.39) 1.12 0.32
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.06 3.51 2.31 3.70 (0.08) 1.42 0.32
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.03) (0.28) (0.29) (0.28) (0.31) (0.30) 0.00
Distributions from net
realized gain 0.00 (1.71) (1.79) (0.33) (0.84) (0.67) 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.03) (1.99) (2.08) (0.61) (1.15) (0.97) 0.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $11.35 15.51 13.99 $13.76 $10.67 $11.90 $19.31
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN* 0.49% 25.18% 17.04% 34.71% (0.68)% 12.54% 1.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $84,113 $80,512 $60,353 $52,007 $40,308 $53,124 $356
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.63% 1.26% 1.31% 1.30% 1.30% 1.36% 2.05%
Ratio of net investment
income to average net
assets 4.79% 1.82% 2.06% 2.07% 2.41% 2.64% (0.17)%
Portfolio turnover 12% 80% 67% 47% 50% 53% 80%
Average commission rate
paid(1) N/A $0.0295 $0.0227 N/A N/A N/A $0.0295
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 0.92% 1.29% 1.44% 1.35% 1.38% 1.47% 15.17%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 4.50% 1.79% 1.93% 2.02% 2.33% 2.53% (13.29)%
- ----------------------------------------------------------------------------------------------------------------
</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) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(3) 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.
(4) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON DECEMBER 15,
1997.
(5) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
---------------------
101
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND
(CONT.)
----------------------
CLASS C (2)
----------------------
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $17.42 $17.10
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.20 0.22
Net realized and unrealized gain (loss) on investments 4.00 2.54
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 4.20 2.76
LESS DISTRIBUTIONS:
Dividends from net investment income (0.20) (0.22)
Distributions from net realized gain (2.10) (2.22)
Tax return of capital 0.00 0.00
---------- ----------
TOTAL FROM DISTRIBUTIONS (2.30) (2.44)
---------- ----------
NET ASSET VALUE, END OF PERIOD $19.32 $17.42
---------- ----------
---------- ----------
TOTAL RETURN* 24.07% 16.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $46,084 $24,655
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 2.02% 2.05%
Ratio of net investment income to average net assets 1.00% 1.35%
Portfolio turnover 80% 67%
Average commission rate paid(1) $0.0295 $0.0227
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 2.05% 2.20%
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses 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 COMMENCED OPERATIONS ON SEPTEMBER 19, 1994.
(4) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO FOR THE PERIOD
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(5) THE PORTFOLIO TURNOVER RATE INCLUDES ACTIVITY OF THE MASTER PORTFOLIO
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(6) THE RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(7) THE PORTFOLIO TURNOVER SHOWN IN THE TABLE IS FOR THE MASTER PORTFOLIO.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
- ---------------------
102
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND (CONT.)
---------------------------------- SHORT-TERM GOVERNMENT-
CLASS C (2) (CONT.) CORPORATE INCOME FUND (3)
---------------------------------- ----------------------------------------------
SIX MONTHS PERIOD
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $13.26 $14.75 $15.00 $4.98 $5.02 $4.93 $5.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.20 0.25 0.07 0.29 0.28 0.30 0.08
Net realized and
unrealized gain (loss)
on investments 4.24 (0.45) 0.61 0.00 (0.04) 0.09 (0.07)
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 4.44 (0.20) 0.68 0.29 0.24 0.39 0.01
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.20) (0.25) (0.10) (0.29) (0.28) (0.30) (0.08)
Distributions from net
realized gain (0.40) (1.04) (0.83) 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.60) (1.29) (0.93) (0.29) (0.28) (0.30) (0.08)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $17.10 $13.26 $14.75 $4.98 $4.98 $5.02 $4.93
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN* 33.72% (1.38)% 4.56% 5.91% 4.83% 8.05% 0.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $16,075 $9,798 $8,996 $14,689 $14,023 $5,954 $96
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 2.05% 2.01% 0.96% 0.39%(4) 0.36%(6) 0.30%(6) 0.30%(6)
Ratio of net investment
income to average net
assets 1.30% 1.75% 0.53% 5.74%(4) 5.47%(6) 6.01%(6) 5.77%(6)
Portfolio turnover 47% 50% 53% 223%(5) 247%(7) 227%(7) 0%(7)
Average commission rate
paid(1) N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 2.17% 2.20% 1.12% 1.92%(4) 1.85%(6) 6.79%(6) 67.89%(6)
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 1.18% 1.56% 0.37% 4.21%(4) 3.98%(6) (0.48)%(6) (61.82)%(6)
- ----------------------------------------------------------------------------------------------------------------
</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 COMMENCED OPERATIONS ON SEPTEMBER 19, 1994.
(4) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO FOR THE PERIOD
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(5) THE PORTFOLIO TURNOVER RATE INCLUDES ACTIVITY OF THE MASTER PORTFOLIO
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(6) THE RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(7) THE PORTFOLIO TURNOVER SHOWN IN THE TABLE IS FOR THE MASTER PORTFOLIO.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
---------------------
103
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL
INCOME FUND (2)
----------------------
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $4.97 $4.99
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.19 0.20
Net realized and unrealized gain (loss) on investments 0.01 (0.02)
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.20 0.18
LESS DISTRIBUTIONS:
Dividends from net investment income (0.19) (0.20)
Distributions from net realized gain 0.00 0.00
Tax return of capital 0.00 0.00
---------- ----------
TOTAL FROM DISTRIBUTIONS (0.19) (0.20)
---------- ----------
NET ASSET VALUE, END OF PERIOD $4.98 $4.97
---------- ----------
---------- ----------
TOTAL RETURN* 4.14% 3.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $19,628 $26,714
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.40%(4) 0.40%(6)
Ratio of net investment income to average net assets 3.84%(4) 3.95%(6)
Portfolio turnover 67%(5) 47%(7)
Average commission rate paid(1) N/A N/A
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 1.52%(4) 1.43%(6)
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses 2.72%(4) 2.92%(6)
- ----------------------------------------------------------------------------------------
</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 COMMENCED OPERATIONS ON JUNE 3, 1994.
(3) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(4) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO FOR THE PERIOD
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(5) THE PORTFOLIO TURNOVER RATE INCLUDES ACTIVITY OF THE MASTER PORTFOLIO
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(6) THE RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(7) THE PORTFOLIO TURNOVER SHOWN IN THE TABLE IS FOR THE MASTER PORTFOLIO.
(8) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID BY THE
CAPITAL APPRECIATION MASTER PORTFOLIO FROM ITS INCEPTION ON FEBRUARY
20, 1996 TO DECEMBER 31, 1996, WERE 137% AND $0.0781, RESPECTIVELY.
THE INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
(9) THE CLASS A SHARES COMMENCED OPERATIONS ON JANUARY 20, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
- ---------------------
104
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
STRATEGIC GROWTH FUND (3)
SHORT-TERM MUNICIPAL ----------------------------------------------------------
INCOME FUND (2)
(CONT.) CLASS A (9)
---------------------- ----------------------------------------------------------
PERIOD PERIOD
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $4.92 $5.00 $26.42 $24.12 $19.06 $18.93 $14.34
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.22 0.09 (0.07) (0.04) (0.06) (0.16) (0.04)
Net realized and
unrealized gain (loss)
on investments 0.07 (0.08) 2.48 2.54 8.12 0.96 5.27
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.29 0.01 2.41 2.50 8.06 0.80 5.23
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.22) (0.09) 0.00 0.00 0.00 0.00 (0.04)
Distributions from net
realized gain 0.00 0.00 (8.87) (0.20) (3.00) (0.47) (0.59)
Tax return of capital 0.00 0.00 (0.00) 0.00 0.00 (0.20) (0.01)
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.22) (0.09) (8.87) (0.20) (3.00) (0.67) (0.64)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $4.99 $4.92 $19.96 $26.42 $24.12 $19.06 $18.93
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN* 6.10% 0.13% 7.73% 10.32% 42.51% 4.23% 36.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $16,486 $11,778 $148,122 $131,226 $59,016 $26,744 $25,413
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.38%(6) 0.27%(6) 1.18%(4) 1.24%(6) 1.28% 1.20% 0.66%
Ratio of net investment
income to average net
assets 4.39%(6) 3.67%(6) (0.96)%(4) (0.82)%(6) (0.76)% (0.81)% (0.01)%
Portfolio turnover 46%(7) 8%(7) 256%(5) 10%(8) 171% 149% 182%
Average commission rate
paid(1) N/A N/A $0.0622 $0.0760(8) N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 1.97%(6) 1.98%(6) 1.18%(4) 1.27%(6) 1.38% 1.55% 1.64%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 2.80%(6) 1.96%(6) (0.96)%(4) (0.85)%(6) (0.86)% (1.16)% (0.99)%
- ----------------------------------------------------------------------------------------------------------------
</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 COMMENCED OPERATIONS ON JUNE 3, 1994.
(3) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(4) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO FOR THE PERIOD
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(5) THE PORTFOLIO TURNOVER RATE INCLUDES ACTIVITY OF THE MASTER PORTFOLIO
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(6) THE RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(7) THE PORTFOLIO TURNOVER SHOWN IN THE TABLE IS FOR THE MASTER PORTFOLIO.
(8) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID BY THE
CAPITAL APPRECIATION MASTER PORTFOLIO FROM ITS INCEPTION ON FEBRUARY
20, 1996 TO DECEMBER 31, 1996, WERE 137% AND $0.0781, RESPECTIVELY.
THE INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
(9) THE CLASS A SHARES COMMENCED OPERATIONS ON JANUARY 20, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
---------------------
105
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
STRATEGIC GROWTH
FUND (2) (CONT.)
----------------------
CLASS B(3)
---------- CLASS C(4)
PERIOD ----------
ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 1997
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $23.68 $32.42
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.02) (0.45)
Net realized and unrealized gain (loss) on investments 0.67 3.17
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.65 2.72
LESS DISTRIBUTIONS:
Dividends from net investment income 0.00 0.00
Distributions from net realized gain 0.00 (10.82)
Tax return of capital 0.00 (0.00)
---------- ----------
TOTAL FROM DISTRIBUTIONS 0.00 (10.82)
---------- ----------
NET ASSET VALUE, END OF PERIOD $24.33 $24.32
---------- ----------
---------- ----------
TOTAL RETURN* 2.74% 6.98%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $23,562 $41,608
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.89% 1.93%(5)
Ratio of net investment income to average net assets (1.63)% (1.70)%(5)
Portfolio turnover 256% 256%(6)
Average commission rate paid(1) $0.0622 $0.0622
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 1.89% 1.94%(5)
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses (1.63)% (1.71)%(5)
- ----------------------------------------------------------------------------------------
</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) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
(4) 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.
(5) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO FOR THE PERIOD
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(6) THE PORTFOLIO TURNOVER RATE INCLUDES ACTIVITY OF THE MASTER PORTFOLIO
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(7) THE RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(8) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID BY THE
CAPITAL APPRECIATION MASTER PORTFOLIO FROM ITS INCEPTION ON FEBRUARY
20, 1996 TO DECEMBER 31, 1996, WERE 137% AND $0.0781, RESPECTIVELY.
THE INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
- ---------------------
106
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
STRATEGIC GROWTH FUND (2) (CONT.)
---------------------------------------------- U.S. GOVERNMENT INCOME FUND (2)
CLASS C (4) (CONT.) ----------------------------------
---------------------------------------------- CLASS A
PERIOD ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1996 1995 1994 1993 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $29.84 $23.74 $23.75 $21.53 $10.65 $11.34 $10.16
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) (0.11) (0.23) (0.34) (0.62) 0.64 0.66 0.73
Net realized and
unrealized gain (loss)
on investments 2.93 10.03 1.16 3.60 0.23 (0.69) 1.18
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 2.82 9.80 0.82 2.98 0.87 (0.03) 1.91
LESS DISTRIBUTIONS:
Dividends from net
investment income 0.00 0.00 0.00 0.00 (0.64) (0.66) (0.73)
Distributions from net
realized gain (0.24) (3.70) (0.57) (0.76) 0.00 0.00 0.00
Tax return of capital 0.00 0.00 (0.26) 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.24) (3.70) (0.83) (0.76) (0.64) (0.66) (0.73)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $32.42 $29.84 $23.74 $23.75 $10.88 $10.65 $11.34
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN* 9.46% 41.54% 3.46% 13.84% 8.73% (0.11)% 19.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $55,063 $26,326 $15,335 $11,932 $207,558 $77,239 $30,471
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 2.00%(7) 2.02% 1.95% 0.61% 0.88% 0.89% 0.88%
Ratio of net investment
income to average net
assets (1.58)%(7) (1.49)% (1.56)% (1.00)% 6.01% 6.07% 6.79%
Portfolio turnover 10%(8) 171% 149% 182% 306% 240% 95%
Average commission rate
paid(1) $0.0760(8) N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 2.02%(7) 2.09% 2.23% 2.14% 0.96% 1.24% 1.24%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses (1.60)%(7) (1.56)% (1.84)% (2.53)% 5.93% 5.72% 6.44%
- ----------------------------------------------------------------------------------------------------------------
</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) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
(4) 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.
(5) THIS RATIO INCLUDES ACTIVITY OF THE MASTER PORTFOLIO FOR THE PERIOD
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(6) THE PORTFOLIO TURNOVER RATE INCLUDES ACTIVITY OF THE MASTER PORTFOLIO
FROM JANUARY 1, 1997 TO DECEMBER 12, 1997.
(7) THE RATIO INCLUDES INCOME AND EXPENSES ALLOCATED FROM THE MASTER
PORTFOLIO.
(8) THE PORTFOLIO TURNOVER FOR AND AVERAGE COMMISSION RATE PAID BY THE
CAPITAL APPRECIATION MASTER PORTFOLIO FROM ITS INCEPTION ON FEBRUARY
20, 1996 TO DECEMBER 31, 1996, WERE 137% AND $0.0781, RESPECTIVELY.
THE INFORMATION SHOWN REFLECTS THE STAND-ALONE PERIOD ONLY.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
---------------------
107
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME
FUND (2) (CONT.)
----------------------
CLASS A (CONT.)
----------------------
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1994 1993
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.44 $11.11
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.74 0.78
Net realized and unrealized gain (loss) on investments (1.28) 0.38
---------- ----------
TOTAL FROM INVESTMENT OPERATIONS (0.54) 1.16
LESS DISTRIBUTIONS:
Dividends from net investment income (0.74) (0.78)
Distributions from net realized gain 0.00 (0.05)
Tax return of capital 0.00 0.00
---------- ----------
TOTAL FROM DISTRIBUTIONS (0.74) (0.83)
---------- ----------
NET ASSET VALUE, END OF PERIOD $10.16 $11.44
---------- ----------
---------- ----------
TOTAL RETURN* (4.81)% 10.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $35,838 $50,301
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.76% 0.53%
Ratio of net investment income to average net assets 6.84% 6.79%
Portfolio turnover 50% 115%
Average commission rate paid(1) N/A N/A
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees and
reimbursed expenses 1.08% 1.01%
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses 6.52% 6.31%
- ----------------------------------------------------------------------------------------
</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) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
(4) 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.
(5) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON DECEMBER 15,
1997.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
- ---------------------
108
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND (2) (CONT.)
----------------------------------------------------------------------------------
INSTITUTIONAL
CLASS B(3) CLASS C (4) CLASS (5)
---------- ---------------------------------------------------------- ----------
PERIOD SIX MONTHS PERIOD
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1997 1996 1995 1994 1993 1997
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $10.72 $10.49 $11.17 $10.01 $11.26 $11.37 $15.73
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.03 0.55 0.58 0.64 0.65 0.32 0.05
Net realized and
unrealized gain (loss)
on investments (0.02) 0.22 (0.68) 1.16 (1.25) (0.06) (0.02)
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.01 0.77 (0.10) 1.80 (0.60) 0.26 0.03
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.03) (0.55) (0.58) (0.64) (0.65) (0.32) (0.05)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00 (0.05) 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.03) (0.55) (0.58) (0.64) (0.65) (0.37) (0.05)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $10.70 $10.71 $10.49 $11.17 $10.01 $11.26 $15.71
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN* 0.08% 7.56% (0.79)% 18.54% (5.45)% 2.25% 0.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $26,401 $1,772 $2,290 $2,793 $3,722 $9,594 $7,255
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.58% 1.62% 1.62% 1.62% 1.37% 0.90% 0.77%
Ratio of net investment
income to average net
assets 5.75% 5.27% 5.50% 6.07% 6.14% 5.90% 6.58%
Portfolio turnover 306% 306% 240% 95% 50% 115% 306%
Average commission rate
paid(1) N/A 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 1.87% 3.06% 3.39% 2.29% 1.87% 2.03% 1.16%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 5.46% 3.83% 3.73% 5.40% 5.64% 4.77% 6.19%
- ----------------------------------------------------------------------------------------------------------------
</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) PERIODS PRIOR TO DECEMBER 31, 1997 HAVE BEEN RESTATED TO GIVE EFFECT
TO THE CONVERSION RATIOS APPLIED IN THE CONSOLIDATION OF OVERLAND
EXPRESS FUNDS, INC. AND STAGECOACH FUNDS, INC. SEE NOTE 1.
(3) THE CLASS B SHARES COMMENCED OPERATIONS ON DECEMBER 15, 1997.
(4) 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.
(5) THE INSTITUTIONAL CLASS SHARES COMMENCED OPERATIONS ON DECEMBER 15,
1997.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
---------------------
109
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND
----------------------------------
CLASS A
----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $9.25 $9.35 $9.19
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.51 0.50 0.53
Net realized and unrealized gain (loss) on
investments (0.02) (0.10) 0.16
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.49 0.40 0.69
LESS DISTRIBUTIONS:
Dividends from net investment income (0.51) (0.46) (0.53)
Distributions from net realized gain 0.00 0.00 0.00
Tax return of capital 0.00 (0.04) 0.00
---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.51) (0.50) (0.53)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $9.23 $9.25 $9.35
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN* 5.43% 4.41% 7.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $227,353 $393,948 $653,897
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.81% 0.88% 0.84%
Ratio of net investment income to average net
assets 5.55% 5.36% 5.71%
Portfolio turnover 92% 277% 317%
Average commission rate paid(1) N/A N/A N/A
- ---------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.09% 0.98% 0.96%
Ratio of net investment income to average net
assets prior to waived fees and reimbursed
expenses 5.27% 5.26% 5.59%
- ---------------------------------------------------------------------------------------
</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.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
- ---------------------
110
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND (CONT.)
----------------------------------------------------------------------------------
CLASS C (2)
CLASS A (CONT.) ----------------------------------------------------------
---------------------- SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1994 1993 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $9.99 $9.95 $13.83 $13.97 $13.74 $14.93 $15.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.43 0.44 0.70 0.68 0.73 0.57 0.27
Net realized and
unrealized gain (loss)
on investments (0.80) 0.04 0.04 (0.14) 0.23 (1.19) (0.07)
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS (0.37) 0.48 0.74 0.54 0.96 (0.62) 0.20
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.43) (0.44) (0.70) (0.63) (0.73) (0.57) (0.27)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 (0.05) 0.00 0.00 0.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS (0.43) (0.44) (0.70) (0.68) (0.73) (0.57) (0.27)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD $9.19 $9.99 $13.87 $13.83 $13.97 $13.74 $14.93
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN* (3.81)% 4.87% 5.44% 3.95% 7.08% (4.25)% 1.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $1,215,546 $1,949,013 $4,458 $5,516 $7,730 $12,220 $11,319
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.79% 0.76% 1.31% 1.38% 1.35% 1.29% 1.26%
Ratio of net investment
income to average net
assets 4.40% 4.37% 5.05% 4.85% 5.23% 3.94% 3.41%
Portfolio turnover 164% 201% 92% 277% 317% 164% 201%
Average commission rate
paid(1) N/A 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 0.94% 0.95% 1.77% 1.67% 1.64% 1.55% 1.75%
Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses 4.25% 4.18% 4.59% 4.56% 4.95% 3.68% 2.92%
- ----------------------------------------------------------------------------------------------------------------
</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.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES. TOTAL RETURNS FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED.
The accompanying notes are an integral part of these financial statements.
---------------------
111
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Stagecoach Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company. The Company commenced operations on January 1,
1992 and currently offers thirty-two separate series. These financial statements
represent the California Tax-Free Bond, Index Allocation, Short-Term
Government-Corporate Income, Short-Term Municipal Income, Strategic Growth, U.S.
Government Income and Variable Rate Government Funds (the "Funds") each, with
the exception of the California Tax-Free Bond Fund, 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, Stagecoach Short-Term Government-Corporate Income,
Stagecoach Short-Term Municipal Income and Stagecoach Variable Rate Government
Funds were established to acquire all of the assets and assume all of the
liabilities of the Overland Index Allocation, Overland Short-Term
Government-Corporate Income, Overland Short-Term Municipal Income and Overland
Variable Rate Government Funds, respectively (collectively, the "Predecessor
Funds"). Additionally, the Stagecoach Aggressive Growth, Stagecoach California
Tax-Free Bond and Stagecoach Ginnie Mae Funds acquired all of the assets and
assumed all of the liabilities of the Overland Strategic Growth, Overland
California Tax-Free Bond and Overland U.S. Government Income Funds,
respectively. These three Funds retained Overland accounting and performance
history. Historical share data found within this annual report has been restated
to give effect to the conversion ratios listed below. To ensure that each
Overland shareholder would hold shares of the corresponding Stagecoach Fund
equal in value to the total value of the shares of the Overland fund held by the
shareholder immediately before the Consolidation, the following conversion
ratios were applied to the Overland shares:
<TABLE>
<CAPTION>
CONVERSION CONVERSION
RATIO RATIO
FUND CLASS A CLASS D*
- ---------------------------------------------------------------------------
<S> <C> <C>
Overland Strategic Growth Fund 0.69721936 0.69679054
Overland California Tax-Free Bond Fund 0.95571302 1.22415291
Overland U.S. Government Income Fund 0.95041322 1.31902985
</TABLE>
* THESE SHARES WERE RENAMED AS CLASS C SHARES IN CONJUNCTION WITH THE
CONSOLIDATION.
- ---------------------
112
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Subsequent to the application of the above mentioned conversion ratios,
shareholders of these Funds received one share of the corresponding Stagecoach
Fund for every share held of the Overland fund. Shares issued by the Stagecoach
Aggressive Growth Fund, the Stagecoach California Tax-Free Bond Fund and the
Stagecoach Ginnie Mae Fund in exchange for shares of the Overland Strategic
Growth Fund, the Overland California Tax-Free Bond Fund, and the Overland U.S.
Government Income Fund were 6,399,356 (valued at $130,801,032), 20,098,470
(valued at $227,102,430) and 9,548,126 (valued at $103,934,414), respectively.
At the date of the Consolidation, the components of net assets for each Overland
and Stagecoach fund were as follows:
<TABLE>
<CAPTION>
OVERLAND OVERLAND
OVERLAND CALIFORNIA U.S.
STRATEGIC TAX-FREE BOND GOVERNMENT
DECEMBER 12, 1997 GROWTH FUND FUND INCOME FUND
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Paid-in Capital $142,434,794 $212,481,157 $104,335,828
Undistributed Net Realized Gain
(Loss) 0 0 (2,489,111)
Unrealized Appreciation
(Depreciation) (11,633,762) 14,621,273 2,087,697
------------ ------------- -----------
Total Net Assets $130,801,032 $227,102,430 $103,934,414
<CAPTION>
STAGECOACH
STAGECOACH CALIFORNIA STAGECOACH
AGGRESSIVE TAX-FREE BOND GINNIE MAE
DECEMBER 12, 1997 GROWTH FUND FUND FUND
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Paid-in Capital $60,656,387 $428,818,350 $166,349,440
Undistributed Net Realized Gain
(Loss) (6,239,908) (607,139) (15,541,172)
Unrealized Appreciation
(Depreciation) 8,008,769 26,955,504 931,428
------------ ------------- -----------
Total Net Assets $62,425,248 $455,166,715 $151,739,696
</TABLE>
Subsequent to the Consolidation, the Stagecoach Aggressive Growth Fund was
renamed Stagecoach Strategic Growth Fund and the Stagecoach Ginnie Mae Fund was
renamed Stagecoach U.S. Government Income Fund. The combined net assets
immediately after the Consolidation were $193,226,280 for the Stagecoach
Strategic Growth Fund, $682,269,145 for the Stagecoach California Tax-Free Bond
Fund and $255,674,110 for the Stagecoach U.S. Government Income Fund.
All acquisitions were accomplished in separate tax-free exchanges for shares of
the respective Fund. All performance and financial data for the Index
Allocation, Short-Term Government-Corporate Income, Short-Term Municipal Income
and Variable Rate Government Funds prior to December 15, 1997 refer to the
Predecessor Funds.
---------------------
113
<PAGE>
NOTES TO FINANCIAL STATEMENTS
At the time of the Consolidation, the Short-Term Government-Corporate Income,
Short-Term Municipal Income and Strategic Growth Funds, 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 Short-Term
Government-Corporate Income, Short-Term Municipal Income and Capital
Appreciation 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 January 1, 1997 to December 12, 1997:
<TABLE>
<CAPTION>
NET
WAIVED INVESTMENT
FUND INTEREST DIVIDENDS EXPENSES FEES INCOME
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Government-
Corporate Income Fund $ 688,395 $ 0 $ 100,204 $ 100,204 $ 688,395
Short-Term Municipal
Income Fund 938,002 0 161,566 161,566 938,002
Strategic Growth Fund 193,285 157,182 952,217 0 (601,750)
</TABLE>
The California Tax-Free Bond, Index Allocation, Strategic Growth and U.S.
Government Income Funds each offers Class A, Class B and Class C shares. In
addition, the California Tax-Free Bond and U.S. Government Income Funds also
offer Institutional Class shares. The Variable Rate Government Fund offers only
Class A and Class C shares. The Short-Term Government-Corporate Income and
Short-Term Municipal Income Funds each offers a single class of shares. The
separate classes of shares differ principally in the applicable sales charges
(if any), distribution fees, shareholder servicing fees and transfer agency
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 declared
separately for 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 gain allocations and
from differences in separate class expenses, including distribution, shareholder
servicing and transfer agency fees.
The following significant accounting policies are consistently followed by the
Company in the preparation of its financial statements, and such policies
- ---------------------
114
<PAGE>
NOTES TO FINANCIAL STATEMENTS
are in conformity with generally accepted accounting principles ("GAAP") for
investment companies.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. These estimates should not be considered
an indication of actual or expected figures; actual results may differ.
INVESTMENT POLICY AND 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.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are recorded on a trade date basis. Dividend income is
recognized on the ex-dividend date and interest income is accrued daily.
Realized gains or losses are reported on the basis of identified cost of
securities delivered. Bond discounts are accreted and premiums are amortized as
required by the Internal Revenue Code of 1986, as amended (the "Code").
TBA PURCHASE COMMITMENTS
The Funds may enter into "TBA" (to be announced) purchase commitments to
purchase securities for a fixed price at a future date beyond customary
settlement time. A Fund holds, and maintains until the settlement date, cash or
high-quality debt obligations in an amount sufficient to meet the purchase
price. TBA purchase commitments are considered securities in themselves, and
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date. Unsettled TBA purchase commitments are valued at
the current market value of the underlying
---------------------
115
<PAGE>
NOTES TO FINANCIAL STATEMENTS
securities, generally according to the procedures described under "Security
Valuation" above. At December 31, 1997, the U.S. Government Income Fund held TBA
purchase commitments with an aggregate cost basis of $73,426,094.
Although a Fund generally enters into TBA purchase commitments with the
intention of acquiring securities for its portfolio, the Fund may dispose of a
commitment prior to settlement if the Fund's adviser deems it appropriate to do
so.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell such
securities ("repurchase agreements") are treated as collateralized financing
transactions and are recorded at their contracted resale amounts. These
repurchase agreements, if any, are detailed in each Fund's Portfolio of
Investments. The Funds may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank, N.A. ("WFB"). The
repurchase agreements must be fully collateralized based on values that are
marked to market daily. The collateral may be held by an agent bank under a
tri-party agreement. It is the custodian's responsibility to value collateral
daily and to take action to obtain additional collateral as necessary to
maintain market value equal to or greater than the resale price. The repurchase
agreements held by the Funds are collateralized by instruments such as U.S.
Treasury or federal agency obligations.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Index Allocation
Fund, if any, are declared and distributed quarterly. Dividends to shareholders
from net investment income of the Strategic Growth Fund, if any, are declared
and distributed annually. Dividends to shareholders from net investment income
of the California Tax-Free Bond, Short-Term Government-Corporate Income,
Short-Term Municipal Income, U.S. Government Income and Variable Rate Government
Funds, if any, are declared daily and distributed monthly. Any distributions to
shareholders from net realized capital gains are declared and distributed
annually.
- ---------------------
116
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 December 31, 1997. The
following Funds had net capital loss carryforwards at December 31, 1997:
<TABLE>
<CAPTION>
YEAR CAPITAL LOSS
FUND EXPIRES CARRYFORWARDS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Government-Corporate Income Fund 2004 $ 63,690
2005 1,392
Strategic Growth Fund 2004 3,168,815
2005 2,470,830
U.S. Government Income Fund 2001 2,857,859
2002 11,205,131
2003 510,531
2004 3,893,015
Variable Rate Government Fund 2000 14,942,728
2001 2,818,401
2002 119,628,012
2003 4,546,666
2004 2,482,931
</TABLE>
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 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
the 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
reclassi-
---------------------
117
<PAGE>
NOTES TO FINANCIAL STATEMENTS
fied within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification.
ORGANIZATION EXPENSES
The Funds have been charged for expenses incurred in connection with the
organization and initial registration of the various Funds. Certain of these
expenses are being amortized by the Funds 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 WFB. Pursuant to the contracts, WFB has agreed to provide the Funds with
daily portfolio management. 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. Under the contracts with the
California Tax-Free Bond, Short-Term Government-Corporate Income, Short-Term
Municipal Income, Strategic Growth, U.S. Government Income and Variable Rate
Government Funds, WFB is entitled to be paid a monthly advisory fee at the
annual rate of 0.50% of each Fund's average daily net assets.
Prior to December 15, 1997, the Short-Term Government-Corporate Income,
Short-Term Municipal Income and Strategic Growth 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 Portfolio 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 Index Allocation Fund. BGFA is entitled to receive
from WFB, as compensation for its sub-advisory services a monthly fee at the
annual rate of 0.20% of the Index Allocation Fund's average daily net assets up
to $500 million, 0.15% of the next $500 million and 0.10% of the Fund's average
daily net assets in excess of $1 billion. Prior to December 15, 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.
The Company has entered into contracts on behalf of each Fund (other than the
Index Allocation Fund, for which BGI serves as custodian) with WFB, whereby WFB
is responsible for providing custody and portfolio accounting services for the
Funds. Pursuant to the contracts, WFB is entitled to certain transaction charges
plus an annual fee for custody services at the annual rate of 0.0167% of the
average daily net assets of each Fund. For portfolio accounting services, WFB is
entitled to a monthly base fee from each Fund of $2,000 plus an annual fee of
0.07% of the first $50 million of each Fund's average daily net assets, 0.045%
of the next $50 million and 0.02% of each
- ---------------------
118
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Fund's average daily net assets in excess of $100 million. Prior to December 15,
1997, WFB was entitled to compensation for its custodial and portfolio
accounting services to the Short-Term Government-Corporate Income, Short-Term
Municipal Income and Capital Appreciation Master Portfolios at the same rates as
listed above. Additionally, prior to December 15, 1997, the Index Allocation
Fund did not pay portfolio accounting fees.
BGI, a wholly-owned subsidiary of Barclays Global Investors Holdings Inc., acts
as custodian to the Index Allocation Fund. BGI will not be entitled to receive
compensation for its services as custodian to the Fund so long as BGFA is
entitled to receive fees for providing investment sub-advisory services to the
Fund.
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 Class A, Class B and Class C shares
of the Funds and 0.06% of the average daily net assets of the Institutional
Class shares of the California Tax-Free Bond and U.S. Government Income Funds.
Prior to February 1, 1997, under the agency contract with the Funds, WFB was
paid a per account fee plus other related costs with a minimum monthly fee of
$3,000 per Fund, unless net assets of a Fund were less than $20 million. For as
long as the net assets remained under $20 million, a Fund would not be charged
any transfer agency fees by WFB.
Transfer agency fees paid on behalf of the Funds for the year ended December 31,
1997 were as follows:
<TABLE>
<CAPTION>
TRANSFER TRANSFER TRANSFER TRANSFER
AGENCY FEES AGENCY FEES AGENCY FEES AGENCY FEES
FUND CLASS A CLASS B* CLASS C INSTITUTIONAL CLASS*
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California Tax-Free Bond Fund $328,908 $5,022 $ 8,077 $2,366
Index Allocation Fund 97,521 12 47,438 N/A
Strategic Growth Fund 165,790 1,461 62,416 N/A
U.S. Government Income Fund 122,893 1,716 2,511 202
Variable Rate Government Fund 434,525 N/A 9,455 N/A
</TABLE>
* REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
Transfer agency fees paid on behalf of the single class Short-Term Government-
Corporate Income and Short-Term Municipal Income Funds are disclosed in the
Statement of Operations.
---------------------
119
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 California Tax-Free Bond and U.S. Government Income Funds, and 0.25% of
the average daily net assets of each class of the Strategic Growth Fund, the
Class B and Class C shares of the Index Allocation Fund, the Class C shares of
the California Tax-Free Bond, Variable Rate Government and U.S. Government
Income Funds, and the Institutional Class shares of the California Tax-Free Bond
and U.S. Government Income Funds.
Shareholder servicing fees paid on behalf of the Funds for the year ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SHAREHOLDER SHAREHOLDER
SERVICING FEES SERVICING FEES SERVICING FEES
FUND CLASS A CLASS B* CLASS C
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Tax-Free Bond Fund $ 72,181 $ 10,736 $ 14,814
Index Allocation Fund 0 22 86,268
Strategic Growth Fund 15,403 2,610 115,868
U.S. Government Income Fund 30,748 3,677 4,680
Variable Rate Government Fund 0 N/A 17,359
<CAPTION>
SHAREHOLDER
SERVICING FEES
INSTITUTIONAL
FUND CLASS*
- ----------------------------------------------------------------------
<S> <C>
California Tax-Free Bond Fund $ 9,860
Index Allocation Fund N/A
Strategic Growth Fund N/A
U.S. Government Income Fund 844
Variable Rate Government Fund N/A
</TABLE>
* REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
The Company has adopted a Shareholder Administrative Servicing Plan (the
"Administrative Servicing Plan") on behalf of the Class A shares of the Index
Allocation and Variable Rate Government Funds and the single class shares of the
Short-Term Government-Corporate Income and Short-Term Municipal Income Funds.
Pursuant to the Administrative Servicing Plan, the Funds 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 Funds' Class A shares (or single class shares, as
the case may be). 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 Index Allocation and Variable Rate
Government Funds and the single class shares of the Short-Term
Government-Corporate Income and Short-Term Municipal Income Funds. 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 were entitled (prior to February 1, 1998) to receive
- ---------------------
120
<PAGE>
NOTES TO FINANCIAL STATEMENTS
monthly fees at the annual rates of 0.04% and 0.02%, respectively, of each
Fund's average daily net assets (see Note 5). Prior to May 1, 1997, Stephens
provided substantially the same services as sole administrator to the Funds.
Under the previous administration agreements, the California Tax-Free Bond,
Short-Term Government-Corporate Income, Short-Term Municipal Income, Strategic
Growth and Variable Rate Government Funds had each agreed to pay Stephens a
monthly fee at the annual rate of 0.15% of each such Fund's average daily net
assets up to $200 million and 0.10% of the average daily net assets in excess of
$200 million; and the Index Allocation and U.S. Government Income Funds had each
agreed to pay Stephens a monthly fee at the annual rate of 0.10% of each such
Fund's 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 the single class shares
of the Short-Term Government-Corporate Income and Short-Term Municipal Income
Funds and the Class A, Class B and Class C shares of the other Funds pursuant to
Rule 12b-1 under the 1940 Act (each, a "Plan"). The Plan for Class A shares of
the California Tax-Free Bond and U.S. Government Income 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 up to the greater of $100,000 or 0.05% of each such
Fund's average daily net assets attributable to the Class A shares.
The Plan for Class A shares of the Index Allocation and Variable Rate Government
Funds and the Plan for the single class shares of the Short-Term Government-
Corporate and Short-Term Municipal Income Funds provide that each such Fund may
pay to Stephens up to 0.25% of its average daily net assets attributable to the
Class A shares as compensation for distribution-related services or as
reimbursement for distribution-related expenses.
The Plan for Class A shares of the Strategic Growth Fund provides that the Fund
may pay to Stephens up to 0.10% of its average daily net assets attributable to
the Class A shares as compensation for distribution-related services or as
reimbursement for distribution-related expenses. Prior to December 15, 1997, the
Plan provided that the Strategic Growth Fund pay to Stephens up to 0.25% of its
average daily net assets attributable to the Class A shares as compensation for
distribution-related services.
The Plans for the Class B and Class C shares of the California Tax-Free Bond,
Index Allocation, Strategic Growth and U.S. Government Income Funds provide that
the Funds may pay to Stephens, as compensation for distribution-related services
or as reimbursement for distribution-related expenses, up to 0.75% of the
average daily net assets attributable to the Class B and Class C shares of the
Index Allocation and Strategic Growth Funds, 0.70% of the average daily net
assets attributable to the Class B shares of the California Tax-Free Bond and
U.S. Government Income Funds and 0.75% of
---------------------
121
<PAGE>
NOTES TO FINANCIAL STATEMENTS
the average daily net assets attributable to the Class C shares of the
California Tax-Free Bond and U.S. Government Income Funds. Prior to December 15,
1997, the Plans provided that the California Tax-Free Bond and U.S. Government
Income Funds pay to Stephens up to 0.50% of each such Fund's average daily net
assets attributable to the Class D shares as compensation for distribution-
related services. The Class D shares were renamed as Class C shares in
conjunction with the Consolidation.
The Plan for Class C shares of the Variable Rate Government Fund provides that
the Fund may pay to Stephens up to 0.50% of its average daily net assets
attributable to the Class C shares as compensation for distribution-related
services or as reimbursement for distribution-related expenses.
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 December 31,
1997 were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES DISTRIBUTION FEES DISTRIBUTION FEES
FUND CLASS A CLASS B* CLASS C
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Tax-Free Bond Fund $ 120,470 $ 25,051 $ 30,313
Index Allocation Fund 180,571 68 258,801
Strategic Growth Fund 297,542 7,829 347,604
U.S. Government Income Fund 5,125 8,579 9,564
Variable Rate Government Fund 813,312 N/A 34,717
</TABLE>
* REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
Distribution fees paid on behalf of the single class Short-Term Government-
Corporate Income and Short-Term Municipal Income Funds are disclosed in the
Statement of Operations.
Registration fees paid on behalf of the Funds for the year ended December 31,
1997 were as follows:
<TABLE>
<CAPTION>
REGISTRATION REGISTRATION REGISTRATION REGISTRATION FEES
FUND FEES CLASS A FEES CLASS B* FEES CLASS C INSTITUTIONAL CLASS*
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California Tax-Free Bond Fund $ 3,904 $ 140 $ 797 $ 280
Index Allocation Fund 21,905 1,508 11,409 N/A
Strategic Growth Fund 33,505 466 18,877 N/A
U.S. Government Income Fund 16,548 233 10,473 466
Variable Rate Government Fund 24,123 N/A 10,000 N/A
</TABLE>
* REPRESENTS THE PERIOD FROM DECEMBER 15, 1997 TO DECEMBER 31, 1997.
- ---------------------
122
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Registration fees paid on behalf of the single class Short-Term Government-
Corporate Income and Short-Term Municipal Income Funds are disclosed in the
Statement of Operations.
WAIVED FEES AND REIMBURSED EXPENSES
All amounts shown as waived fees and reimbursed expenses on the Statement of
Operations for the year-ended December 31, 1997, were waived by WFB. Waived fees
and reimbursed expenses continue at the discretion of WFB and Stephens.
Certain officers and one of the directors of the Company are also officers of
Stephens. As of December 31, 1997, Stephens owned 8,898 shares of the California
Tax-Free Bond Fund, 228,962 shares of the Index Allocation Fund, 11 shares of
the Short-Term Government-Corporate Income Fund, 2,317 shares of the Short-Term
Municipal Income Fund, 6,046 shares of the Strategic Growth Fund, 3,076 shares
of the U.S. Government Income Fund and 1,515 shares of the Variable Rate
Government Fund.
Stephens has retained $4,867,137 as sales charges from the proceeds of Class A
shares sold, $835,456 as proceeds from Class B shares redeemed by the Company
and $661 as proceeds from Class C shares redeemed by the Company for the year
ended December 31, 1997. Wells Fargo Securities Inc., a subsidiary of WFB,
received $4,253,190 as sales charges from the proceeds of Class A shares sold,
$775,669 as proceeds from Class B shares redeemed by the Company and $0.00 as
proceeds from Class C shares redeemed by the Company for the year ended December
31, 1997.
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 December 31, 1997, were as follows:
<TABLE>
<CAPTION>
AGGREGATE PURCHASES AND
SALES
------------------------
PURCHASES AT SALES
FUND COST PROCEEDS
- ---------------------------------------------------------------------------
<S> <C> <C>
California Tax-Free Bond Fund $ 30,310,601 $56,906,907
Index Allocation Fund 101,448,355 81,829,212
Short-Term Government-Corporate Income Fund** 21,551,757 20,317,989
Short-Term Municipal Income Fund** 13,186,594 14,926,637
Strategic Growth Fund** 555,512,922 587,880,324
U.S. Government Income Fund 291,049,261 316,059,024
Variable Rate Government Fund 224,845,952 422,984,473
</TABLE>
** INCLUDES ACTIVITY OF THE MASTER PORTFOLIO FOR THE PERIOD FROM JANUARY 1, 1997
TO DECEMBER 12, 1997.
---------------------
123
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. CAPITAL SHARE TRANSACTIONS
As of December 31, 1997, there were over 106 billion shares of $0.001 par value
capital stock authorized by the Company. As of December 31, 1997, the California
Tax-Free Bond, Index Allocation and Strategic Growth Funds were authorized to
issue 100 million shares of $0.001 par value capital stock for each class of
shares and the U.S. Government Income Fund was authorized to issue 300 million
shares of $0.001 par value capital stock for each class of shares. As of
December 31, 1997, the Short-Term Government-Corporate Income and Short-Term
Municipal Income Funds were authorized to issue 300 million shares and the
Variable Rate Government Fund was authorized to issue 500 million shares of
$0.001 par value capital stock for each class of shares.
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE
BOND FUND
---------------------
FOR THE
FOR THE YEAR
YEAR ENDED ENDED
DEC. 31, DEC. 31,
1997 (1) 1996*
- ---------------------------------------------------------------------------
<S> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 27,081,868 1,035,266
Shares issued in reinvestment of dividends --
Class A 601,099 894,075
Shares redeemed -- Class A (4,493,270) (3,749,696)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING --
CLASS A 23,189,697 (1,820,355)
Shares sold -- Class B 6,780,297 N/A
Shares issued in reinvestment of dividends --
Class B 125 N/A
Shares redeemed -- Class B (40,678) N/A
NET INCREASE (DECREASE) IN SHARES OUTSTANDING --
CLASS B 6,739,744 N/A
Shares sold -- Class C 114,726 141,462
Shares issued in reinvestment of dividends --
Class C 11,817 18,629
Shares redeemed -- Class C (200,314) (189,483)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING --
CLASS C (73,771) (29,392)
Shares sold -- Institutional Class 7,506,033 N/A
Shares issued in reinvestment of dividends --
Institutional Class 54 N/A
Shares redeemed -- Institutional Class (96,138) N/A
NET INCREASE (DECREASE) IN SHARES OUTSTANDING --
INSTITUTIONAL CLASS 7,409,949 N/A
</TABLE>
* FIGURES HAVE BEEN RESTATED TO GIVE EFFECT TO THE CONVERSION RATIOS APPLIED IN
THE CONSOLIDATION.
SEE NOTE 1.
(1) "SHARES SOLD" INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE
STAGECOACH AND OVERLAND EXPRESS CALIFORNIA TAX-FREE BOND FUNDS. SEE NOTE 1.
- ---------------------
124
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND
---------------------
FOR THE
FOR THE YEAR
YEAR ENDED ENDED
DEC. 31, DEC. 31,
1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 850,777 626,835
Shares issued in reinvestment of dividends -- Class A 496,833 455,598
Shares redeemed -- Class A (470,768) (547,890)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS A 876,842 534,543
Shares sold -- Class B 18,462 N/A
Shares issued in reinvestment of dividends -- Class B 0 N/A
Shares redeemed -- Class B 0 N/A
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS B 18,462 N/A
Shares sold -- Class C 1,061,333 501,829
Shares issued in reinvestment of dividends -- Class C 164,916 112,003
Shares redeemed -- Class C (255,583) (138,443)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS C 970,666 475,389
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT-
CORPORATE INCOME FUND
----------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold 2,403,766 4,726,783
Shares issued in reinvestment of dividends 114,787 73,914
Shares redeemed (2,384,400) (3,170,650)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 134,153 1,630,047
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL
INCOME FUND
----------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold 3,113,993 4,213,144
Shares issued in reinvestment of dividend 181,253 156,919
Shares redeemed (4,728,462) (2,299,217)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (1,433,216) 2,070,846
</TABLE>
---------------------
125
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STRATEGIC GROWTH FUND
---------------------
FOR THE
FOR THE YEAR
YEAR ENDED ENDED
DEC. 31, DEC. 31,
1997 (2) 1996*
- ---------------------------------------------------------------------------
<S> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 9,450,816 5,734,498
Shares issued in reinvestment of dividends --
Class A 1,180,296 26,926
Shares redeemed -- Class A (8,176,548) (3,240,135)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING --
CLASS A 2,454,564 2,521,289
Shares sold -- Class B 986,522 N/A
Shares issued in reinvestment of dividends --
Class B 0 N/A
Shares redeemed -- Class B (18,018) N/A
NET INCREASE (DECREASE) IN SHARES OUTSTANDING --
CLASS B 968,504 N/A
Shares sold -- Class C 7,044,117 3,347,233
Shares issued in reinvestment of dividends --
Class C 249,166 5,316
Shares redeemed -- Class C (7,280,888) (2,536,604)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING --
CLASS C 12,395 815,945
</TABLE>
* FIGURES HAVE BEEN RESTATED TO GIVE EFFECT TO THE CONVERSION RATIOS APPLIED IN
THE CONSOLIDATION.
SEE NOTE 1.
(2) "SHARES SOLD" INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE
STAGECOACH AGGRESSIVE GROWTH FUND AND OVERLAND EXPRESS STRATEGIC GROWTH
FUND. SEE NOTE 1.
- ---------------------
126
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME
FUND
------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 (3) 1996*
- ------------------------------------------------------------------------------------
<S> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 15,150,976 5,755,299
Shares issued in reinvestment of dividends -- Class A 384,053 102,502
Shares redeemed -- Class A (3,703,910) (1,290,959)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS A 11,831,119 4,566,842
Shares sold -- Class B 2,490,749 N/A
Shares issued in reinvestment of dividends -- Class B 27 N/A
Shares redeemed -- Class B (24,344) N/A
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS B 2,466,432 N/A
Shares sold -- Class C 29,243 34,053
Shares issued in reinvestment of dividends -- Class C 3,838 6,982
Shares redeemed -- Class C (85,895) (72,602)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS C (52,814) (31,567)
Shares sold -- Institutional Class 462,544 N/A
Shares issued in reinvestment of dividends --
Institutional Class 0 N/A
Shares redeemed -- Institutional Class (669) N/A
NET INCREASE (DECREASE) IN SHARES OUTSTANDING --
INSTITUTIONAL CLASS 461,875 N/A
</TABLE>
* FIGURES HAVE BEEN RESTATED TO GIVE EFFECT TO THE CONVERSION RATIOS APPLIED IN
THE CONSOLIDATION. SEE NOTE 1.
(3) "SHARES SOLD" INCLUDES AMOUNTS RELATED TO THE CONSOLIDATION OF THE
STAGECOACH GINNIE MAE FUND AND OVERLAND EXPRESS U.S. GOVERNMENT INCOME FUND.
SEE NOTE 1.
<TABLE>
<CAPTION>
VARIABLE RATE
GOVERNMENT FUND
----------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31,
1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C>
SHARES ISSUED AND REDEEMED:
Shares sold -- Class A 7,444,514 1,440,106
Shares issued in reinvestment of dividends -- Class A 327,188 648,270
Shares redeemed -- Class A (25,731,027) (29,451,100)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS A (17,959,325) (27,362,724)
Shares sold -- Class C 15,373,699 5,964,908
Shares issued in reinvestment of dividends -- Class C 15,917 13,296
Shares redeemed -- Class C (15,467,038) (6,132,463)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING -- CLASS C (77,422) (154,259)
</TABLE>
---------------------
127
<PAGE>
NOTES TO FINANCIAL STATEMENTS
5. SUBSEQUENT EVENTS
The Funds have changed their fiscal year-end to March 31 to coincide with the
year-end of other funds offered by the Company.
On January 29, 1998, the Board approved a change to the administration and co-
administration agreements for the Funds. Effective February 1, 1998, WFB and
Stephens will be entitled to receive 0.03% and 0.04%, respectively, of each
Fund's average daily net assets for administration services.
- ---------------------
128
<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 California Tax-Free Bond Fund, Index
Allocation Fund, Short-Term Government-Corporate Income Fund, Short-Term
Municipal Income Fund, Strategic Growth Fund, U.S. Government Income Fund and
Variable Rate Government Fund (seven of the funds comprising Stagecoach Funds,
Inc.) as of December 31, 1997, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the years
in the two-year period then ended, and financial highlights for the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds of Stagecoach Funds, Inc. as of December 31, 1997,
the results of their operations, the changes in their net assets and their
financial highlights for the periods indicated herein in conformity with
generally accepted accounting principles.
SAN FRANCISCO, CALIFORNIA
FEBRUARY 6, 1998
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STAGECOACH FUNDS
- -----------------------------------------
SHAREHOLDERS' MEETING AND PROXY VOTING RESULTS
The following proposals were passed by the required majority of shareholders of
the indicated Predecessor Funds at Special Shareholders' meetings held on
November 20, (as adjourned to) November 26, December 5 and December 11, 1997,
for the purpose of voting on the proposals.
PROPOSAL 1
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.
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
11,708,017 656,057 967,290
</TABLE>
INDEX ALLOCATION FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,427,823 156,356 280,436
</TABLE>
SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
995,384 0 0
</TABLE>
SHORT-TERM MUNICIPAL INCOME FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
2,344,459 0 0
</TABLE>
STRATEGIC GROWTH FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
3,639,051 99,472 280,253
</TABLE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
5,566,973 306,540 588,496
</TABLE>
VARIABLE RATE GOVERNMENT FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
21,798,205 1,959,250 810,199
</TABLE>
PROPOSAL 2
For Class D shareholders of specific Overland portfolios to approve a twenty-
five basis point (0.25%) increase in the maximum level of distribution fees
payable under the rule 12b-1 distribution plan for the Class C shares of
corresponding portfolios of Stagecoach Funds, Inc.
CALIFORNIA TAX-FREE BOND FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
179,588 41,378 3,032
</TABLE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -----------------------------------
69,935 4,123 5,078
</TABLE>
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LIST OF ABBREVIATIONS
The following is a list of common abbreviations for terms and entities which may
have appeared in this report.
<TABLE>
<S> <C> <C>
ABAG -- Association of Bay Area Governments
ADR -- American Depository Receipts
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
ARM -- Adjustable Rate Mortgages
BART -- Bay Area Rapid Transit
CDA -- Community Development Authority
CDSC -- Contingent Deferred Sales Charge
CGIC -- Capital Guaranty Insurance Company
CGY -- Capital Guaranty Corporation
CMT -- Constant Maturity Treasury
COFI -- Cost of Funds Index
CONNIE LEE -- Connie Lee Insurance Company
COP -- Certificate of Participation
CP -- Commercial Paper
DW&P -- Department of Water & Power
DWR -- Department of Water Resources
EDFA -- Education Finance Authority
FGIC -- Financial Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance, Inc
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
HFFA -- Health Facilities Financing Authority
IDA -- Industrial Development Authority
LIBOR -- London Interbank Offered Rate
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
MFHR -- Multi-Family Housing Revenue
MUD -- Municipal Utility District
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Public School Fund Guaranty
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Authority
RDFA -- Redevelopment Finance Authority
R&D -- Research & Development
SFMR -- Single Family Mortgage Revenue
TBA -- To Be Announced
TRAN -- Tax Revenue Anticipation Notes
USD -- Unified School District
V/R -- Variable Rate
</TABLE>
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Wells Fargo Bank provides investment advisory services, shareholder services,
and certain other services for the Stagecoach Funds. The Funds are sponsored and
distributed by STEPHENS INC., Member NYSE/SIPC. Wells Fargo Bank is not
affiliated with Stephens Inc.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Stagecoach Funds. If this report
is used for promotional purposes, distribution of the report must be accompanied
or preceded by a current prospectus. For a prospectus containing more complete
information, including charges and expenses, call 1-800-222-8222. Read the
prospectus carefully before you invest or send money.
SC OEX AR (2/98)
<TABLE>
<S> <C>
STAGECOACH
FUNDS-REGISTERED TRADEMARK-
P.O. Box 7066
San Francisco, CA 94120-7066
DATED MATERIAL
PLEASE EXPEDITE
</TABLE>
[LOGO]
-C- 1998 Stagecoach Funds
<PAGE>
STAGECOACH FUNDS 1997 ANNUAL REPORT
