<PAGE>
As filed with the Securities and Exchange Commission
on May 18, 1998
Registration No. 33-42927; 811-6419
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Post-Effective Amendment No. 46 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 47 [X]
(Check appropriate box or boxes)
________________________
STAGECOACH FUNDS, INC.
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
__________________________
Registrant's Telephone Number, including Area Code: (800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant [_] on _________ pursuant
to Rule 485(b), or to Rule 485(b)
[_] 60 days after filing pursuant [_] on _________ pursuant
to Rule 485(a)(1), or to Rule 485(a)(1)
[X] 75 days after filing pursuant [_] on ___________pursuant
to Rule 485(a)(2), or to Rule 485(a)(2)
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
EXPLANATORY NOTE
----------------
This Post-Effective Amendment No. 46 (the "Amendment") to the Registration
Statement of Stagecoach Funds, Inc. (the "Company") is being filed to register
the Prospectuses and related Statements of Additional Information ("SAIs") for
the Class A and Service Class shares of the Company's new 100% Treasury Money
Market Fund. The 100% Treasury Money Market Fund will be included in the
Prospectuses and SAIs describing the Class A shares of the California Tax-Free
Money Market, Government Money Market, Money Market, National Tax-Free Money
Market, and Treasury Money Market Funds and the Service Class shares of the
Prime Money Market and Treasury Money Market Funds.
As of August 1, 1998, Stagecoach Funds, Inc. will change its name to Wells
Fargo Funds, Inc. With respect to the Funds, the word "Stagecoach" will be
added at the beginning of each Fund name. The Prospectuses and SAIs included in
this Amendment reflect these name changes.
The Amendment does not affect the Registration Statement for the Company's
other classes, prospectuses or SAIs.
<PAGE>
STAGECOACH FUNDS, INC.
----------------------
Cross Reference Sheet
---------------------
Form N-1A Item Number
- ---------------------
Part A Prospectus Captions
- ------ -------------------
1 Cover Page
2 Summary of Expenses
3 Financial Highlights
How to Read the Financial Highlights
4 General Investment Risks
Key Information
Organization and Management of the Funds
(Name of) Fund
5 Organization and Management of the Funds
Summary of Expenses
6 Additional Services and Other Information
7 Additional Services and Other Information
Exchanges
Your Account
8 Additional Services and Other Information
Exchanges
Your Account
9 Not Applicable
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page
11 Table of Contents
12 Historical Fund Information
13 Additional Permitted Investment Activities
Appendix
Investment Restrictions
Risk Factors
14 Management
15 Management
16 Fund Expenses
Independent Auditors
Management
17 Portfolio Transactions
18 Capital Stoock
Other
19 Additional Purchase and Redemption Information
Determination of Net Asset Value
20 Federal Income Taxes
21 Management
22 Performance Calculations
23 Financial Information
Part C Other Information
- ------ -----------------
24-32 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
<PAGE>
August 1, 1998
================================================================================
WELLS FARGO FUNDS/TM/
Stagecoach/R/
Money Market Funds
Prospectus
Money Market
Fund
California Tax-Free Money Market
Fund
Government Money
Market Fund
National Tax-Free Money Market
Fund
Treasury Money Market Fund
100% Treasury Money Market Fund
Class A
Investment Advisor
and Administrator:
Wells Fargo Bank
Distributor and
Co-Administrator:
Stephens Inc.
Please read this Prospectus and keep it for future reference. It is designed to
provide you with important information and to help you decide if a Fund's goals
match your own.
These securities have not been approved or disapproved by the U.S. Securities
and Exchange Commission, any state securities commission or any other regulatory
authority, nor have any of these authorities passed upon the accuracy or
adequacy of this Prospectus. Any representation to the contrary is a criminal
offense.
Fund shares are NOT deposits or other obligations of, or issued, endorsed or
guaranteed by, Wells Fargo Bank, N.A. ("Wells Fargo Bank"), or any of its
affiliates. Fund shares are NOT insured or guaranteed by the U.S. Government,
the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or
any other governmental agency. AN INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. WE CANNOT ASSURE YOU THAT A FUND WILL
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
================================================================================
<PAGE>
================================================================================
About This Prospectus
- --------------------------------------------------------------------------------
What is a prospectus?
A prospectus provides you with the information you need in order to make an
informed investment decision. It describes how a Fund operates and invests its
assets and also contains fee and expense information.
What is different about this Prospectus?
We have rewritten our Prospectus in "Plain English" and grouped some of the most
important Fund information together to make it easier to read and
understand.
How is the Fund information organized?
After important summary information and the expense fee table, each Fund's
investment objective and financial highlights are presented. The icons below
tell you where various types of information about a Fund can be found.
Important information you should look for:
- --------------------------------------------------------------------------------
[GRAPHIC] Investment Objective and Investment Policies
What is the Fund trying to achieve? How do we intend to
invest your money? What makes a Fund different from the
other Funds offered in this Prospectus? Look for the arrow
icon to find out.
- --------------------------------------------------------------------------------
[GRAPHIC] Permitted Investments
A summary of the Fund's key permitted investments and
practices.
- --------------------------------------------------------------------------------
[GRAPHIC] Important Risk Factors
What are key risk factors for this Fund? This will include
the factors described in "General Investment Risks" together
with any special risk factors for this Fund.
- --------------------------------------------------------------------------------
[GRAPHIC] Additional Fund Facts
Provides additional information about the Fund.
- --------------------------------------------------------------------------------
Why is italicized print used throughout this Prospectus?
Words appearing in italicized print and highlighted in color are defined in the
Glossary.
What else do I need to understand these Funds?
Each Fund has a "Statement of Additional Information" that supplements the
disclosures made in this Prospectus. You may also want to review the most recent
Annual or Semi-Annual Report. You can order copies of these documents without
charge by calling 1-800-222-8222. The Statement of Additional Information and
other information about the Funds is also available on the SEC's web site
(http://www.sec.gov).
================================================================================
<PAGE>
<TABLE>
Table of Contents
<S> <C> <C>
Key Information 4
Summary of Expenses 5
- --------------------------------------------------------------------------------
The Funds Money Market Fund 6
This section contains California Tax-Free Money Market
important information Fund 10
about the individual Funds. Government Money Market
Fund 14
National Tax-Free Money Market
Fund 18
Treasury Money Market Fund 22
100% Treasury Money Market Fund 26
General Investment Risks 27
- --------------------------------------------------------------------------------
Your Account Your Account 31
How to Buy Shares 33
Turn to this section for Selling Shares 34
information on how to Exchanges 36
open and maintain Additional Services and
your account, including Other Information 37
how to buy, sell and
exchange Fund shares.
- --------------------------------------------------------------------------------
Reference Organization and Management
of the Funds 41
Look here for details on the How to Read the Financial Highlights 44
organization of the Funds Glossary 45
and term definitions.
</TABLE>
<PAGE>
Key Information
- --------------------------------------------------------------------------------
Summary of the Stagecoach Money Market Funds
The Funds described in this Prospectus invest in money market instruments, seek
to maintain a $1.00 per share net asset value in order to preserve principal,
and distribute dividends once a month. Each Fund has a different investment
objective intended to meet different investment needs. You should consider each
Fund's objective, investment practices, permitted investments and risks
carefully before investing in a Fund. The investment objective of each Fund is
fundamental and may not be changed without the approval of a majority of
shareholders.
Should you consider investing in these Funds? Yes, if:
o you are looking for a fund in which to invest short-term cash;
o you are looking to preserve principal; and
o you are looking for monthly income.
You should not invest in these Funds if:
o you are looking for FDIC insurance coverage or guaranteed rates of return;
o you are unwilling to accept that you may lose money on your investment;
o you are unwilling to accept the risk that we may be unable to maintain a
$1.00 per share net asset value and that your investment principal may
fluctuate; or
o you are seeking long-term total return.
Who are "We"?
In this Prospectus, "We" generally means the Wells Fargo Funds. "We" sometimes
refers to the Investment Advisor or other companies hired by the Fund to perform
services. The section on "Organization and Management of the Funds" further
explains how the Funds are organized.
Who are "You"?
In this Prospectus, "You" means the potential investor or the shareholder.
What are the "Funds"?
In this Prospectus, the "Funds" refers to the Stagecoach Funds listed on the
cover of this Prospectus. The "Funds" also may refer to other mutual funds
offered by Wells Fargo Funds, Inc.
Key Terms
The term "money market instruments" is used in this Prospectus to refer to a
broad variety of short-term debt securities, commercial paper, certificates of
deposit, repurchase agreements and other investment activities described in the
Glossary and the Investment Practice/Risk table on page 45.
Dividends
We declare dividends, if any, daily and pay them monthly. You earn dividends
from the day your purchase of shares is effected and you continue to earn them
until the day before your shares are redeemed.
4 Stagecoach Money Market Funds Prospectus
<PAGE>
Money Market Funds Summary of Expenses
- --------------------------------------------------------------------------------
================================================================================
SHAREHOLDER TRANSACTION EXPENSES
================================================================================
These tables are intended to help you understand the various costs and expenses
you will pay as a shareholder in a Fund. These tables do not reflect any charges
that may be imposed by Wells Fargo Bank or other institutions in connection with
an account through which you hold Fund shares. See "Organization and Management
of the Funds" for more details.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Money California National 100%
Market Tax-Free Government Tax-Free Treasury Treasury
----------------------------------------------------------------
CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maximum sales charge on a purchase
(as a percentage of offering price) None None None None None None
- ---------------------------------------------------------------------------------------------------------
Maximum sales charge on reinvested
dividends None None None None None None
- ---------------------------------------------------------------------------------------------------------
Maximum sales charge imposed on
redemptions None None None None None None
- ---------------------------------------------------------------------------------------------------------
Exchange fees None None None None None None
</TABLE>
================================================================================
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
================================================================================
Expenses shown "after waivers" reflect amounts paid by each Fund during the
prior fiscal period. In some cases, they have been restated to reflect expenses
and fee waivers expected to be in effect during the current fiscal year.
Expenses shown "before waivers" reflect contract amounts and amounts paid during
the prior fiscal period. Expense waivers and reimbursements are voluntary and
may be discontinued without prior notice.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Money California National 100%
Market Tax-Free Government Tax-Free Treasury Treasury
-----------------------------------------------------------------
CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rule 12b-1 fee 0.02% 0.05% 0.05% 0.05% 0.05% 0.05%
- ----------------------------------------------------------------------------------------------------------
Management fee
(after waivers) 0.36% 0.50% 0.21% 0.30% 0.12% 0.11%
- ----------------------------------------------------------------------------------------------------------
Other expenses
(after waivers or reimbursements) 0.37% 0.10% 0.49% 0.35% 0.48% 0.59%
==========================================================================================================
TOTAL FUND OPERATING EXPENSES
(after waivers or reimbursements) 0.75% 0.65% 0.75% 0.70% 0.65% 0.75%
==========================================================================================================
Management fee
(before waivers) 0.40% 0.50% 0.25% 0.30% 0.25% 0.25%
- ----------------------------------------------------------------------------------------------------------
Other expenses
(before waivers or reimbursements) 0.48% 0.48% 0.70% 1.23% 0.48% 0.64%
- ----------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES
(before waivers or reimbursements) 0.90% 1.03% 1.00% 1.58% 0.78% 0.89%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
EXAMPLE OF EXPENSES -- THIS EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
You would pay the following expenses
on a $1,000 investment assuming a 5%
annual return and that you redeem Money California National 100%
your shares at the end of each Market Tax-Free Government Tax-Free Treasury Treasury
period. -----------------------------------------------------------------
CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR $8 $7 $8 $7 $7 $8
- ----------------------------------------------------------------------------------------------------------
3 YEARS $24 $21 $24 $22 $21 $24
- ----------------------------------------------------------------------------------------------------------
5 YEARS $42 $36 $42 $39 $36 $42
- ----------------------------------------------------------------------------------------------------------
10 YEARS $93 $81 $93 $87 $81 $93
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Stagecoach Money Market Funds Prospectus 5
<PAGE>
Money Market Fund
- --------------------------------------------------------------------------------
Advisor: Wells Fargo Bank
- --------------------------------------------------------------------------------
[GRAPHIC] Investment Objective
The Money Market Fund seeks to provide investors with a high
level of income, while preserving capital and liquidity, by
investing in high-quality, short-term instruments.
Investment Policies
We actively manage a portfolio of U.S. dollar-denominated, high
quality money market instruments, including debt obligations with
remaining maturities of 397 days or less. We maintain an overall
dollar-weighted average maturity of 90 days or less. We may also
make certain other investments including, for example, repurchase
agreements.
- --------------------------------------------------------------------------------
[GRAPHIC] Permitted Investments
Under normal market conditions, we invest in:
o commercial paper rated at the date of purchase as P-1 by
Moody's or A-1+ or A-1 by S&P;
o negotiable certificates of deposits and banker's acceptances;
o repurchase agreements;
o U.S. Government obligations;
o short-term, U.S. dollar-denominated debt obligations of U.S.
branches of foreign banks and foreign branches of U.S. banks;
o municipal obligations; and
o shares of other money market funds.
6 Stagecoach Money Market Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] Important Risk Factors
You should consider both the General Investment Risks listed on
page 26 and the specific risks listed below. They are both
important to your investment choice.
There is no guarantee that we will be able to maintain a $1.00
per share net asset value. Fluctuations in share value may cause
a loss or gain in principal. Generally, short-term funds do not
earn as high a level of income as funds that invest in
longer-term instruments. No government agency either directly or
indirectly insures or guarantees the performance of the Fund.
- --------------------------------------------------------------------------------
[GRAPHIC] Additional Fund Facts
For information on Fund fees and expenses, see "Summary of
Expenses" on page 5.
Stagecoach Money Market Funds Prospectus 7
<PAGE>
<TABLE>
<CAPTION>
Money Market Fund Financial Highlights
- -----------------------------------------------------------
===========================================================
FOR A SHARE OUTSTANDING
===========================================================
For the period ended:
===========================================================
<S> <C>
Net asset value, beginning of period
- -----------------------------------------------------------
Income from investment operations:
Net investment income
Net realized and unrealized gain on investments
- -----------------------------------------------------------
Total from investment operations
- -----------------------------------------------------------
Less distributions:
Dividends from net investment income
Distributions from net realized gain
- -----------------------------------------------------------
Total from distributions:
- -----------------------------------------------------------
Net asset value, end of period
- -----------------------------------------------------------
Total return (not annualized)
- -----------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s)
- -----------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets
Ratio of net investment income to average net assets
- -----------------------------------------------------------
Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses
- -----------------------------------------------------------
Ratio of net investment income to average net
assets prior to waived fees and reimbursed expenses
- -----------------------------------------------------------
<CAPTION>
===========================================================
CLASS A SHARE CALENDAR-YEAR RETURNS
===========================================================
<S>
- -----------------------------------------------------------
These returns reflect fee waivers and reimbursements,
and are not a guarantee of future performance.
- -----------------------------------------------------------
</TABLE>
1 Unaudited financial statements.
2 The Fund changed its fiscal year-end from September 30 to March 31.
3 The Fund changed its fiscal year-end from December 31 to September 30.
8 Stagecoach Money Market Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
See "How to Read the Financial Highlights" on page 43.
- ------------------------------------------------------------------------------------------------------------------------
========================================================================================================================
========================================================================================================================
CLASS A SHARES -- COMMENCED
ON JULY 1, 1992
-------------------------------------------------------------------------------------------------------------------
Sept. 30 March 31 Sept. 30 Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997(1) 1997(2) 1996(3) 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
0.02 0.02 0.03 0.05 0.04 0.03 0.02
0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------
0.02 0.02 0.03 0.05 0.04 0.03 0.02
- ------------------------------------------------------------------------------------------------------------------------
(0.02) (0.02) (0.03) (0.05) (0.04) (0.03) (0.02)
0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------
(0.02) (0.02) (0.03) (0.05) (0.04) (0.03) (0.02)
- ------------------------------------------------------------------------------------------------------------------------
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
2.50% 2.36% 3.55% 5.34% 3.74% 2.70% 1.50%
- ------------------------------------------------------------------------------------------------------------------------
$5,223,158 $4,640,148 $3,799,908 $2,892,621 $2,343,942 $317,474 $236,269
- ------------------------------------------------------------------------------------------------------------------------
0.75% 0.75% 0.75% 0.75% 0.69% 0.58% 0.20%
4.93% 4.71% 4.66% 5.13% 4.12% 2.67% 2.98%
- ------------------------------------------------------------------------------------------------------------------------
0.93% 0.90% 0.88% 0.83% 0.89% 1.00% 0.94%
- ------------------------------------------------------------------------------------------------------------------------
4.75% 4.56% 4.53% 5.05% 3.92% 2.25% 2.24%
- ------------------------------------------------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
<CAPTION>
========================================================================================================================
1996 1995 1994 1993
========================================================================================================================
<S> <C> <C> <C> <C>
4.78% 5.34% 3.74% 2.70%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Stagecoach Money Market Funds Prospectus 9
<PAGE>
California Tax-Free Money Market Fund
- --------------------------------------------------------------------------------
Advisor: Wells Fargo Bank
- --------------------------------------------------------------------------------
[GRAPHIC] Investment Objective
The California Tax-Free Money Market Fund seeks to obtain a high
level of income exempt from federal income tax and California
personal income tax, while preserving capital and liquidity, by
investing in high-quality, short-term, U.S. dollar-denominated
money market instruments, primarily municipal obligations.
Investment Policies
We actively manage a portfolio of bonds, notes and commercial
paper issued by or on behalf of the State of California, its
cities, municipalities, political subdivisions and other public
authorities. Under normal market conditions we invest
substantially all of our assets in debt obligations with
remaining maturities of 397 days or less that are exempt from
federal and California personal income tax. We maintain an
overall dollar-weighted average maturity of 90 days or less.
- --------------------------------------------------------------------------------
[GRAPHIC] Permitted Investments
Under normal market conditions, we invest:
o at least 80% of our assets in municipal obligations that
provide income exempt from federal income tax and not subject to
the federal alternative minimum tax;
o at least 65% of our assets in municipal obligations that pay
interest exempt from California personal income taxes, although
it is our intention to invest substantially all of our assets in
such obligations; and
o in obligations rated within the two highest categories by
nationally recognized ratings organizations.
We may also invest up to 20% of our assets in permitted taxable
investments as a defensive measure due to unusual market
conditions or to maintain liquidity.
10 Stagecoach Money Market Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] Important Risk Factors
You should consider both the General Investment Risks listed on
page 26 and the specific risks listed below. They are both
important to your investment choice.
Since we invest heavily in California municipal obligations,
events in California are likely to affect the Fund's investments.
In addition, we may invest up to 25% or more of our assets in
California municipal obligations that are related in such a way
that political, economic or business developments affecting one
obligation would affect the others. For example, we may own
different obligations that pay interest based on the revenue of
similar projects.
There is no guarantee that we will be able to maintain a $1.00
per share net asset value. Fluctuations in share value may cause
a loss or gain in principal. Generally, short-term funds do not
earn as high a level of income as funds that invest in
longer-term instruments. No government agency either directly or
indirectly insures or guarantees the performance of the Fund.
- --------------------------------------------------------------------------------
[GRAPHIC] Additional Fund Facts
Although it is our intention to minimize such exposure, a portion
of the income earned by the Fund may be subject to the federal
alternative minimum tax. We will send you a letter each year
informing you what percentage, if any, may be subject.
For information on Fund fees and expenses, see "Summary of
Expenses" on page 5.
Stagecoach Money Market Funds Prospectus 11
<PAGE>
California Tax-Free Money Market Fund
- -------------------------------------------------------------
<TABLE>
<CAPTION>
=============================================================
FOR A SHARE OUTSTANDING
=============================================================
For the period ended:
- -------------------------------------------------------------
<S> <C>
Net asset value, beginning of period
- -------------------------------------------------------------
Income from investment operations:
Net investment income
Net realized and unrealized gain on investments
- -------------------------------------------------------------
Total from investment operations:
- -------------------------------------------------------------
Less distributions:
Dividends from net investment income
Distributions from net realized gain
- -------------------------------------------------------------
Total from distributions:
- -------------------------------------------------------------
Net asset value, end of period
- -------------------------------------------------------------
Total return (not annualized)
- -------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s)
- -------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets
Ratio of net investment income to average net assets
- -------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses
- -------------------------------------------------------------
Ratio of net investment income to average net assets prior
to waived fees and reimbursed expenses
- -------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
<CAPTION>
=============================================================
CLASS A SHARE CALENDAR-YEAR RETURNS
=============================================================
<S>
These returns reflect fee waivers and reimbursements,
and are not a guarantee of future performance.
- -------------------------------------------------------------
</TABLE>
1 Unaudited financial statements.
2 The Fund changed its fiscal year-end from September 30 to March 31.
3 The Fund changed its fiscal year-end from December 31 to September 30.
12 Stagecoach Money Market Funds Prospectus
<PAGE>
Financial Highlights See "How to Read the Financial Highlights" on
page 43.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
======================================================================================================================
======================================================================================================================
CLASS A SHARES -- COMMENCED
ON JULY 1, 1992
-------------------------------------------------------------------------------------------------------------------
Sept. 30 March 31 Sept. 30 Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997(1) 1997(2) 1996(3) 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
0.01 0.01 0.02 0.03 0.02 0.02 0.03
0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------
0.01 0.01 0.02 0.03 0.02 0.02 0.03
- ----------------------------------------------------------------------------------------------------------------------
(0.01) (0.01) (0.02) (0.03) (0.02) (0.02) (0.03)
0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------
(0.01) (0.01) (0.02) (0.03) (0.02) (0.02) (0.03)
- ----------------------------------------------------------------------------------------------------------------------
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
1.50% 1.36% 2.04% 3.23% 2.28% 1.89% 2.81%
- ----------------------------------------------------------------------------------------------------------------------
$1,472,066 $1,384,310 $1,161,431 $1,031,004 $869,745 $793,420 $572,906
- ----------------------------------------------------------------------------------------------------------------------
0.65% 0.65% 0.65% 0.65% 0.62% 0.55% 0.28%
2.96% 2.72% 2.69% 3.18% 2.26% 1.88% 2.41%
- ----------------------------------------------------------------------------------------------------------------------
1.04% 1.03% 1.02% 1.01% 1.08% 1.06% 1.03%
- ----------------------------------------------------------------------------------------------------------------------
2.57% 2.34% 2.32% 2.82% 1.80% 1.37% 1.66%
- ----------------------------------------------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
<CAPTION>
======================================================================================================================
1996 1995 1994 1993 1992
======================================================================================================================
<S> <C> <C> <C> <C> <C>
2.76% 3.23% 2.28% 1.89% 2.81%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Stagecoach Money Market Funds Prospectus 13
<PAGE>
Government Money Market Fund
- --------------------------------------------------------------------------------
Advisor: Wells Fargo Bank
- --------------------------------------------------------------------------------
[GRAPHIC] Investment Objective
The Government Money Market Fund seeks to provide
investors with as high a level of current income as is consistent
with preservation of capital and liquidity.
Investment Policies
We actively manage a portfolio exclusively composed of U.S.
Government obligations, or repurchase agreements collateralized
by such obligations. We buy obligations with remaining maturities
of 397 days or less. We maintain an overall dollar-weighted
average maturity of 90 days or less.
- --------------------------------------------------------------------------------
[GRAPHIC] Permitted Investments
Under normal market conditions, we invest:
o in U.S. Government obligations, and
o in repurchase agreements collateralized by U.S. Government
obligations.
14 Stagecoach Money Market Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] Important Risk Factors
You should consider both the General Investment Risks listed on
page 26 and the specific risks listed below. They are both
important to your investment choice.
There is no guarantee that we will be able to maintain a $1.00
per share net asset value. Fluctuations in share value may cause
a loss or gain in principal. Generally, short-term funds do not
earn as high a level of income as funds that invest in
longer-term instruments. The U.S. Government does not directly or
indirectly insure or guarantee the performance of the Fund.
- --------------------------------------------------------------------------------
[GRAPHIC] Additional Fund Facts
Obligations issued or guaranteed by the U.S. Government have
historically involved little risk of loss of principal if held to
maturity. However, fluctuations in market interest rates may
cause the market value of obligations, including U.S. government
obligations, in the Fund's portfolio to fluctuate.
For information on Fund fees and expenses, see "Summary of
Expenses" on page 5.
Stagecoach Money Market Funds Prospectus 15
<PAGE>
Government Money Market Fund
See "Historical Fund Information" on page 37.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
==========================================================================================================
FOR A SHARE OUTSTANDING
==========================================================================================================
For the period ended: CLASS A SHARES -- COMMENCED
ON APRIL 26, 1988
--------------------------------------------
Sept. 30, Mar. 31, Sept. 30,
1997(1) 1997(2) 1996(3)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.02 0.02 0.05
Net realized and unrealized gain (loss) on investments 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 0.02 0.02 0.05
- ----------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.02) (0.02) (0.05)
Distributions from net realized gain 0.00 0.00 0.00
(0.02) (0.02) (0.05)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------
Total return (not annualized) 2.41% 2.32% 4.75%
- ----------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $75,199 $60,224 $65,036
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 0.75% 0.75% 0.77%
Ratio of net investment income to average net assets 4.73% 4.62% 4.74%
- ----------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.10% 1.00% 0.80%
- ----------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 4.38% 4.37% 4.71%
- ----------------------------------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
<CAPTION>
==========================================================================================================
CLASS A SHARE CALENDAR-YEAR RETURNS 1996
==========================================================================================================
<S> <C>
4.73%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
These returns reflect fee waivers and reimbursements,
and are not a guarantee of future performance.
1 Unaudited financial statements.
2 The Fund changed its fiscal year-end from September 30 to March 31.
3 The Fund changed its Investment Advisor during this fiscal year.
16 Stagecoach Money Market Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
"How to Read the Financial Highlights" on page 43.
- ---------------------------------------------------------------------------------------------------------------------------
===========================================================================================================================
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30 Sept. 30, Sept. 30,
1995 1994 1993 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
0.05 0.03 0.03 0.04 0.06 0.08 0.08 0.03
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------
0.05 0.03 0.03 0.04 0.06 0.08 0.08 0.03
- ---------------------------------------------------------------------------------------------------------------------------
(0.05) (0.03) (0.03) (0.04) (0.06) (0.08) (0.08) (0.03)
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(0.05) (0.03) (0.03) (0.04) (0.06) (0.08) (0.08) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
5.22% 3.16% 2.77% 3.99% 6.30% 7.85% 8.71% 3.04%
- ---------------------------------------------------------------------------------------------------------------------------
$109,368 $194,276 $188,934 $184,705 $171,375 $160,436 $162,726 $125,856
- ---------------------------------------------------------------------------------------------------------------------------
0.79% 0.77% 0.83% 0.82% 0.85% 0.73% 0.68% 0.66%
5.08% 3.07% 2.73% 3.85% 6.13% 7.60% 8.42% 6.94%
- ---------------------------------------------------------------------------------------------------------------------------
0.81% 0.79% 0.84% 0.82% 0.88% 0.83% 0.84% 0.92%
- ---------------------------------------------------------------------------------------------------------------------------
5.06% 3.05% 2.72% 3.85% 6.10% 7.50% 8.26% 6.68%
- ---------------------------------------------------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
<CAPTION>
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989
===========================================================================================================================
5.33% 3.65% 2.75% 3.49% 5.68% 7.65% 8.76%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Stagecoach Money Market Funds Prospectus 17
<PAGE>
National Tax-Free Money Market Fund
- --------------------------------------------------------------------------------
Advisor: Wells Fargo Bank
- --------------------------------------------------------------------------------
[GRAPHIC] Investment Objective
The National Tax-Free Money Market Fund seeks to provide
investors with a high level of income exempt from federal income
tax, while preserving capital and liquidity.
Investment Policies
We actively manage a portfolio of U.S. dollar-denominated,
high-quality, short-term instruments, primarily municipal
obligations with remaining maturities of 397 days or less. Among
the municipal obligations we buy are bonds, notes and commercial
paper issued by or on behalf of the states, territories and
possessions of the United States and their political subdivisions
and other public authorities. Under normal market conditions we
invest substantially all of our assets in debt obligations that
are exempt from federal income tax. We maintain an overall
dollar-weighted average maturity of 90 days or less.
- --------------------------------------------------------------------------------
[GRAPHIC] Permitted Investments
Under normal market conditions, we invest:
o at least 80% of our net assets in municipal obligations the
interest on which is exempt from federal income tax and not
subject to the federal alternative minimum tax; and
o in obligations rated within the two highest categories by
nationally recognized ratings organizations.
We may also invest up to 20% of our assets in permitted taxable
investments as a defensive measure due to unusual market
conditions or to maintain liquidity.
18 Stagecoach Money Market Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] Important Risk Factors
You should consider both the General Investment Risks listed on
page 26 and the specific risks listed below. They are both
important to your investment choice.
Up to 25% or more of our assets invested in municipal obligations
may be related in such a way that political, economic or business
developments affecting one obligation would affect the others.
For example, we may own different obligations that pay interest
based on the revenue of similar projects.
There is no guarantee that we will be able to maintain a $1.00
per share net asset value. Fluctuations in share value may cause
a loss or gain in principal. Generally, short-term funds do not
earn as high a level of income as funds that invest in
longer-term instruments. No government agency either directly or
indirectly insures or guarantees the performance of the Fund.
- --------------------------------------------------------------------------------
[GRAPHIC] Additional Fund Facts
Although it is our intention to minimize such exposure, a portion
of the income earned by the Fund may be subject to the federal
alternative minimum tax. We will send you a letter each year
informing you what percentage, if any, may be subject.
For information on Fund fees and expenses, see "Summary of
Expenses" on page 5.
Stagecoach Money Market Funds Prospectus 19
<PAGE>
National Tax-Free
Money Market Fund Financial Highlights
See "Historical Fund Information" on page 37.
See "How to Read the Financial Highlights" on page 43.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=====================================================================================================================
FOR A SHARE OUTSTANDING
=====================================================================================================================
For the period ended: CLASS A SHARES -- COMMENCED
ON APRIL 2, 1996
Sept. 30, March 31, Sept. 30,
1997(1) 1997(2) 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.01 0.01 0.01
Net realized and unrealized gain (loss) on
investments 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations: 0.01 0.01 0.01
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.01) (0.01) (0.01)
Distributions from net realized gain 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------
Total from distributions: (0.01) (0.01) (0.01)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------
Total return (not annualized) 1.50% 1.36% 1.51%
- ---------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $26,637 $35,253 $4,975
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 0.70%(3) 0.64%(3) 0.62%(3)
Ratio of net investment income to
average net assets 2.98% 2.68% 2.71%
- ---------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses(3) 1.22% 1.58% 3.56%
- ---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses(3) 2.46% 1.74% (0.23)%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
=====================================================================================================================
CLASS A SHARE CALENDAR-YEAR RETURNS 1996
=====================================================================================================================
<S> <C>
4.23%
These returns reflect fee waivers and reimbursements,
and are not a guarantee of future performance.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Unaudited financial statements.
2 The Fund changed fiscal year-end from September 30 to March 31.
3 This ratio includes income and expenses allocated from the Master
Portfolio.
20 Stagecoach Money Market Funds Prospectus
<PAGE>
This page intentionally left blank
- --------------------------------------------------------------------------------
<PAGE>
Treasury Money Market Fund
- --------------------------------------------------------------------------------
Advisor: Wells Fargo Bank
- --------------------------------------------------------------------------------
[GRAPHIC] Investment Objective
The Treasury Money Market Fund seeks to provide investors with
current income and stability of principal.
Investment Policies
We actively manage a portfolio composed of obligations issued or
guaranteed by the U.S. Treasury. We also invest in notes,
repurchase agreements and other instruments collateralized or
secured by Treasury obligations. We buy obligations with
remaining maturities of 397 days or less. We maintain an overall
dollar-weighted average maturity of 90 days or less.
- --------------------------------------------------------------------------------
[GRAPHIC] Permitted Investments
Under normal market conditions, we invest:
o in U.S. Treasury obligations; and
o in repurchase agreements collateralized by U.S. Treasury
obligations;
As a temporary defensive measure, or to maintain liquidity, we
may invest in shares of other money market funds that have
similar investment objectives.
22 Stagecoach Money Market Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] Important Risk Factors
You should consider both the General Investment Risks listed on
page 26 and the specific risks listed below. They are both
important to your investment choice.
There is no guarantee that we will be able to maintain a $1.00
per share net asset value. Fluctuations in share value may cause
a loss or gain in principal. Generally, short-term funds do not
earn as high a level of income as funds that invest in
longer-term instruments. The U.S. Treasury does not directly or
indirectly insure or guarantee the performance of the Fund.
- --------------------------------------------------------------------------------
[GRAPHIC] Additional Fund Facts
Treasury obligations have historically involved little risk of
loss of principal if held to maturity. However, fluctuations in
market interest rates may cause the market value of Treasury
obligations in the Fund's portfolio to fluctuate.
Unlike the 100% Treasury Money Market, the Treasury Money Market
Fund may invest in repurchase agreements, the income from which
is not generally exempt from state or local taxes.
For information on Fund fees and expenses, see "Summary of
Expenses" on page 5.
Stagecoach Money Market Funds Prospectus 23
<PAGE>
Treasury Money Market Fund
See "Historical Fund Information" on page 37.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
==============================================================================================================================
FOR A SHARE OUTSTANDING
==============================================================================================================================
For the period ended: CLASS A SHARES -- COMMENCED
ON SEPTEMBER 30, 1995 (PRIOR YEARS SHOW SERVICE CLASS)
------------------------------------------------------------------------------
Sept. 30, March 31, Sept. 30, Sept. 30, Sept. 30,
1997(1) 1997(2) 1996(3) 1995 1994(4)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02 0.02 0.05 0.05 0.02
Net realized and unrealized gain
(loss) on investments 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.02 0.02 0.05 0.05 0.02
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends from net
investment income (0.02) (0.02) (0.05) (0.05) (0.02)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------
Total from distributions: (0.02) (0.02) (0.05) (0.05) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
Total return (not annualized) 2.50% 2.42% 4.95% 5.42% 3.75%(5)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $51,762 $66,486 $53,706 $1,001,707 $690,630
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average
net assets 0.55% 0.55% 0.55% 0.42% 0.43%
Ratio of net investment income
to average net assets 4.95% 4.81% 4.96% 5.32% 3.72%
Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses 0.89% 0.75% 0.67% 0.66% 0.90%
Ratio of net investment income to
average net assets prior to
waived fees and reimbursed
expenses 4.61% 4.61% 4.84% 5.08% 3.25%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
==============================================================================================================================
<S> <C>
CLASS A SHARE CALENDAR-YEAR RETURNS 1996
==============================================================================================================================
4.92%
These returns reflect fee waivers and reimbursements,
and are not a guarantee of future performance.
Performance shown since the inception of Class A
Shares.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Unaudited financial statements.
2 The Fund changed its fiscal year-end from September 30 to March 31.
3 The Fund changed its Investment Advisor during this fiscal year.
24 Stagecoach Money Market Funds Prospectus
<PAGE>
Financial Highlights
See "How to Read the Financial Highlights" on page 43.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
============================================================================================================================
============================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
March 31, March 31, March 31, March 31, March 31, March 31, March 31, March 31,
1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------
0.03 0.03 0.05 0.07 0.08 0.07 0.06 0.06
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------
0.03 0.03 0.05 0.07 0.08 0.07 0.06 0.06
- ----------------------------------------------------------------------------------------------------------------------------
(0.03) (0.03) (0.05) (0.07) (0.08) (0.07) (0.06) (0.06)
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------
(0.03) (0.03) (0.05) (0.07) (0.08) (0.07) (0.06) (0.06)
- ----------------------------------------------------------------------------------------------------------------------------
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------
2.81% 3.13% 5.03% 7.42% 8.58% 7.63% 6.20% 5.64%
- ----------------------------------------------------------------------------------------------------------------------------
$654,950 $614,237 $281,343 $118,623 $98,398 $90,672 $101,066 $134,375
- ----------------------------------------------------------------------------------------------------------------------------
0.43% 0.43% 0.45% 0.48% 0.56% 0.63% 0.69% 0.69%
2.77% 3.04% 4.73% 7.10% 7.73% 7.36% 6.12% 5.50%
0.90% 0.91% 0.93% 0.94% 0.97% 0.98% 1.05% 0.94%
2.30% 2.56% 4.25% 6.64% 7.32% 7.01% 5.76% 5.25%
- ----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
============================================================================================================================
</TABLE>
4 The Fund changed its fiscal year-end from December 31 to September 30.
5 Annualized.
Stagecoach Money Market Funds Prospectus 25
<PAGE>
100% Treasury Money Market Fund
- --------------------------------------------------------------------------------
Advisor: Wells Fargo Bank
- --------------------------------------------------------------------------------
[GRAPHIC] Investment Objective
The 100% Treasury Money Market Fund seeks to provide investors
with stability of principal and current income which is exempt
from state and local income taxes.
Investment Policies
We actively manage a portfolio exclusively composed of
obligations issued or guaranteed by the U.S. Treasury. We buy
obligations with remaining maturities of 397 days or less. We
maintain an overall dollar - weighted average maturity of 90
days or less.
- --------------------------------------------------------------------------------
[GRAPHIC] Permitted Investments
Under normal market conditions, we invest:
* 100% of assets in U.S. Treasury obligations.
As a temporary defensive measure or to maintain liquidity, we
may invest in shares of other money market funds that have
similar investment objectives.
- --------------------------------------------------------------------------------
[GRAPHIC] Important Risk Factors
You should consider both the General Investment Risks listed
on page 27 and the specific risks listed below. They are both
important to your investment choice.
There is no guarantee that we will be able to maintain a $1.00
per share net asset value. Fluctuations in share value may
cause a loss or gain in principal. Generally, short-term funds
do not earn as high a level of income as funds that invest in
longer-term instruments. The U.S. Treasury does not directly
or indirectly insure or guarantee the performance of the Fund.
Any capital gains realized by the Fund generally will not be
exempt from state and local taxes. For more information, see
"Taxes" on page 38, and the Statement of Additional
Information.
- --------------------------------------------------------------------------------
[GRAPHIC] Additional Fund Facts
Treasury obligations have historically involved little risk of
loss of principal if held to maturity. However, fluctuations
in market interest rates may cause the market value of
Treasury obligations in the Fund's portfolio to fluctuate.
Unlike the Treasury Money Market Fund, the 100% Treasury Money
Market Fund may not invest in repurchase agreements; the
income from which is not generally exempt from state and local
taxes.
For information on Fund fees and expenses, see "Summary of
Expenses" on page 5.
26 Stagecoach Money Market Funds Prospectus
<PAGE>
General Investment Risks
- --------------------------------------------------------------------------------
Understanding the risks involved in mutual fund investing will help you make an
informed decision that takes into account your tolerance and preferences. You
should carefully consider risks common to all mutual funds, including the
Stagecoach Funds. Chief among these risks are the following:
o Unlike bank deposits, such as CDs or savings accounts, mutual funds are not
insured by the FDIC.
o We cannot guarantee we will meet our investment objectives. In particular,
we cannot guarantee that we will be able to maintain a $1.00 per share net
asset value.
o You cannot recover through insurance any loss due to investment practices,
nor can the Fund, the selling agents or investment advisors "make good" any
losses you might have.
o Investing in any mutual fund, including those deemed conservative, involves
risk, including the possible loss of any money you invest.
o An investment in a single Fund, by itself, does not constitute a complete
investment plan.
o The Funds invest in debt instruments, such as notes and bonds, that are
subject to credit risk and interest rate risk. Credit risk is the
possibility that an issuer of a security will be unable to make interest
payments or repay principal. Changes in the financial strength of an issuer
or changes in the credit rating of a security may affect its value.
Interest rate risk is the possibility that interest rates may increase and
reduce the resale value of securities in a Fund's portfolio. Debt
instruments with longer maturities are generally more sensitive to interest
rate changes than those with shorter maturities. Interest rate risk does
not affect the interest paid by a debt instrument unless it is specifically
designed to pay an adjustable rate.
o The Fund's advisor may also use certain derivative instruments such as
options or futures contracts. The term "derivatives" covers a wide number
of investments but in general it refers to any financial instrument whose
value is derived, at least in part, from the price of another security or a
specified index, asset or rate. Some derivatives may be more sensitive to
interest rate changes or market moves, and some may be susceptible to
changes in yields or values due to their structure or contract terms.
The following types of floating-rate derivative securities are NOT permitted
investments in the Funds:
o Capped floaters on which interest is not paid when market rates move above
a certain level;
Stagecoach Money Market Funds Prospectus 27
<PAGE>
- --------------------------------------------------------------------------------
o Leveraged floaters whose interest rates reset based on a formula that
magnifies changes in market interest rates;
o Range floaters on which interest is not paid if market interest rates move
outside a specified range;
o Dual index floaters whose interest rate reset provisions are tied to more
than one index; and
o Inverse floaters which have interest rates that reset in an opposite
direction of their index.
Investment practices and risk levels are carefully monitored. Every attempt is
made to ensure that the risk exposure for each Fund remains within the
parameters of its objective.
What follows is a general list of the types of risks (some of which are
described above) that may apply to a given Fund and a table showing some of the
additional investment practices that each Fund may use. Additional information
about these practices is available in the Statement of Additional Information.
Counter-Party Risk-- The risk that the other party in a repurchase agreement or
other transaction will not fulfill its contract obligation.
Credit Risk-- The risk that the issuer of a debt security will be unable to make
interest payments or repay principal on schedule. If an issuer does default, the
affected security could lose all of its value, or be renegotiated at a lower
interest rate or principal amount. Affected securities might also lose
liquidity. Credit risk also includes the risk that a party in a transaction may
not be able to complete the transaction as agreed.
Diplomatic Risk-- The risk that an adverse change in the diplomatic relations
between the United States and another country might reduce the value or
liquidity of investments in either country.
Information Risk-- The risk that information about a security is either
unavailable, incomplete or is inaccurate.
Interest Rate Risk-- The risk that changes in interest rates can reduce the
value of an existing security. Generally, when interest rates increase, the
value of a debt security decreases. The effect is usually more pronounced for
securities with longer dates to maturity.
Liquidity Risk-- The risk that a security cannot be sold, or cannot be sold
without adversely affecting its fair price.
28 Stagecoach Money Market Funds Prospectus
<PAGE>
General Investment Risks
- --------------------------------------------------------------------------------
Market Risk-- The risk that the value of a stock, bond or other security will be
reduced by market activity. This is a basic risk associated with all
securities.
Political Risk-- The risk that political actions, events or instability may be
unfavorable for investments made in a particular nation's or region's industry,
government or markets.
- --------------------------------------------------------------------------------
Investment Practice/Risk
The following table lists some of the additional investment practices of
the Funds, including some not disclosed in the Investment Objective and
Investment Policies sections of the Prospectus. The risks indicated after
the description of the practice are NOT the only potential risks associated
with that practice, but are among the more prominent. Market risk is
assumed for each. See the Investment Objective and Investment Policies for
each Fund or the Statement of Additional Information for more information
on these practices.
Investment practices and risk levels are carefully monitored. We attempt to
ensure that the risk exposure for each Fund remains within the parameters
of its objective.
Remember, each Fund is designed to meet different investment needs and has
a different investment objective and investment policies. Each Fund engages
in the investment practices described below to varying degrees.
In addition to the general risks discussed above, you should carefully
consider and evaluate any special risks that may apply to investing in a
particular Fund. See the "Important Risk Factors" in the summary for each
Fund. You should also see the Statement of Additional information for
additional information about the investment practices and risks particular
to each Fund.
- --------------------------------------------------------------------------------
Stagecoach Money Market Funds Prospectus 29
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CALIFORNIA NATIONAL
MARKET TAX FREE GOVERNMENT TAX FREE TREASURY
====================================================================================================================================
INVESTMENT PRACTICE: RISK:
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Floating and Variable Rate Debt
Instruments with interest rates that are adjusted Interest Rate and X X X X X
either on a schedule or when an index or benchmark Credit Risk
changes.
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements
A transaction in which the seller of a security Credit and X X X X X
agrees to buy back a security at an agreed upon time Counter-Party Risk
and price, usually with interest.
- ------------------------------------------------------------------------------------------------------------------------------------
Other Mutual Funds
The temporary investment in shares of another money Market Risk X X X X X
market fund. A pro rata portion of the other fund's
expenses, in addition to the expenses paid by the
Fund, will be borne by Fund shareholders.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Obligations
Dollar-denominated debt obligations of foreign Information, Liquidity, X X X X
branches of U.S. banks or U.S. branches of foreign Political, Regulatory,
banks. and Diplomatic Risk
- ------------------------------------------------------------------------------------------------------------------------------------
Loans of Portfolio Securities
The practice of loaning securities to brokers, Credit and X X
dealers, and financial institutions to increase Counter-Party Risk
return on those securities. Loans may be made in
accordance with existing investment policies.
- ------------------------------------------------------------------------------------------------------------------------------------
Borrowing Policies
The ability to borrow an equivalent of 10% (20% for Counter-Party Risk X X X X X
the Treasury Money market) of assets from banks for
temporary purposes to meet shareholder redemptions.
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid Securities
A security that cannot be readily sold, or cannot be Liquidity Risk X X X X X
readily sold without negatively affecting its fair
price. Illiquid securities are limited to 10% of
assets for each Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
100%
TREASURY
====================================================================
INVESTMENT PRACTICE:
====================================================================
<S> <C>
Floating and Variable Rate Debt
Instruments with interest rates that are adjusted
either on a schedule or when an index or benchmark
changes.
- --------------------------------------------------------------------
Repurchase Agreements
A transaction in which the seller of a security
agrees to buy back a security at an agreed upon time
and price, usually with interest.
- --------------------------------------------------------------------
Other Mutual Funds
The temporary investment in shares of another money X
market fund. A pro rata portion of the other fund's
expenses, in addition to the expenses paid by the
Fund, will be borne by Fund shareholders.
- --------------------------------------------------------------------
Foreign Obligations
Dollar-denominated debt obligations of foreign
branches of U.S. banks or U.S. branches of foreign
banks.
- --------------------------------------------------------------------
Loans of Portfolio Securities
The practice of loaning securities to brokers, X
dealers, and financial institutions to increase
return on those securities. Loans may be made in
accordance with existing investment policies.
- --------------------------------------------------------------------
Borrowing Policies
The ability to borrow an equivalent of 10% (20% for X
the Treasury Money market) of assets from banks for
temporary purposes to meet shareholder redemptions.
- --------------------------------------------------------------------
Illiquid Securities
A security that cannot be readily sold, or cannot be X
readily sold without negatively affecting its fair
price. Illiquid securities are limited to 10% of
assets for each Fund.
- --------------------------------------------------------------------
</TABLE>
30 Stagecoach Money Market Funds Prospectus
<PAGE>
Your Account
- --------------------------------------------------------------------------------
This section tells you how to open an account and how to buy, sell or exchange
Fund shares once your account is open.
You can buy Fund shares:
o By opening an account directly with the Fund (simply complete and return a
Stagecoach Funds application with proper payment);
o Through a brokerage account with an approved selling agent; or
o Through certain retirement, benefits and pension plans, or through certain
packaged investment products (please see the providers of the plan for
instructions).
Minimum Investments:
o $1,000 per Fund minimum initial investment; or
o $100 per Fund minimum initial investment if you use the AutoSaver option.
o $100 per Fund for all investments after your first.
o We may waive the minimum for Funds you purchase through certain retirement,
benefit and pension plans, through certain packaged investment products, as
"settlement accounts" for certain brokerage accounts or for certain classes
of shareholders as permitted by the Securities and Exchange Commission.
Check the specific disclosure statements and applications for the program
through which you intend to invest.
Stagecoach Money Market Funds Prospectus 31
<PAGE>
- --------------------------------------------------------------------------------
Important Information:
o Read this prospectus carefully. Discuss any questions you have with your
Selling Agent. You may also ask for copies of the Statement of Additional
Information and Annual Report. Copies are available free of charge from
your selling agent or by calling 1-800-222-8222.
o We process requests to buy shares each business day. Requests we receive in
proper form for the Money Market, Government Money Market and Treasury
Money Market Funds before 12:00 Noon (Pacific Time) generally are
processed at 12:00 Noon on the same day.
o Requests we receive in proper form for the California Tax-Free Money
Market, National Tax-Free Money Market and 100% Treasury Money Market
Funds before 9:00 AM (Pacific Time) generally are processed at 9:00 AM,
on the same day.
o Requests we receive in proper form for each Fund before 1:00 PM (Pacific
Time) in connection with certain automated investment programs are
processed at 1:00 PM on the same day.
o Requests we receive after the above-specified times are processed the next
business day at the applicable Net Asset Value (NAV).
o As with all mutual fund investments, the price you pay to purchase shares
or the price you receive when you redeem shares is not determined until
after a request has been received in proper form.
o We determine the NAV of each Fund's shares by subtracting the Fund
liabilities from its total assets, and then dividing the result by the
total number of outstanding shares of that Fund. See the Statement of
Additional Information for further information.
o You may have to complete additional paperwork for certain types of account
registrations, such as a Trust. Please speak to Wells Fargo Investor
Services (1-800-222-8222) if you are investing directly with Stagecoach
Funds, or speak to your selling agent if you are buying shares through a
brokerage account.
o Once an account has been opened, you can add additional Funds under the
same registration without requiring a new application.
o On any day the trading markets for both U.S. goverment securities and money
market instruments close early, the Funds will close early.
o We reserve the right to cancel any purchase order or delay redemption if
your check does not clear.
32 Stagecoach Money Market Funds Prospectus
<PAGE>
Your Account
- --------------------------------------------------------------------------------
How to Buy Shares
The following section explains how you can buy shares directly from Stagecoach
Funds. For Funds held through brokerage and other types of accounts, please
consult your Selling Agent.
================================================================================
BY MAIL
================================================================================
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- --------------------------------------------------------------------------------
Complete a Stagecoach Funds application. Be sure to indicate the Fund name and
the share class into which you intend to invest.
- --------------------------------------------------------------------------------
Enclose a check for at least $1,000 made out in the full name and share class of
the Fund. For example, "Stagecoach Money Market Mutual Fund, Class A".
- --------------------------------------------------------------------------------
You may start your account with $100 if you elect the AutoSaver option on the
application.
- --------------------------------------------------------------------------------
Mail to:
Stagecoach Funds
PO Box 7066
San Francisco, CA
94120-9201
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- --------------------------------------------------------------------------------
Make a check payable to the full name and share class of your Fund for at least
$100. Be sure to write your account number on the check as well.
- --------------------------------------------------------------------------------
Enclose the payment stub/card from your statement if available.
- --------------------------------------------------------------------------------
Mail to:
Stagecoach Funds
PO Box 7066
San Francisco, CA
94120-9201
- --------------------------------------------------------------------------------
================================================================================
BY WIRE
================================================================================
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- --------------------------------------------------------------------------------
If you do not currently have an account, complete a Stagecoach Funds
application. You must wire at least $1,000. Be sure to indicate the Fund name
and the share class into which you intend to invest.
- --------------------------------------------------------------------------------
Mail the completed application.
- --------------------------------------------------------------------------------
You may also fax the completed application (with original to follow).
- --------------------------------------------------------------------------------
Mail to:
Stagecoach Funds
PO Box 7066
San Francisco, CA
94120-9201
Fax to: 1-415-546-0280
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- --------------------------------------------------------------------------------
Instruct your wiring bank to transmit at least $100 according to the
instructions given to the right. Be sure to have the wiring bank include your
current account number and the name your account is registered in.
- --------------------------------------------------------------------------------
Wire to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number
121000248
Wire Purchase Account Number:
4068-000587
Attention:
Stagecoach Funds (Name of Fund and Share Class)
Account Name:
(Registration Name Indicated on Application)
- --------------------------------------------------------------------------------
Stagecoach Money Market Funds Prospectus 33
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
BY PHONE
================================================================================
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- --------------------------------------------------------------------------------
You can only make your first purchase of a Fund by phone if you already have an
existing Stagecoach Account.
- --------------------------------------------------------------------------------
Call Investor Services and instruct the representative to either:
o transfer at least $1,000 from a linked settlement account, or
o exchange at least $1,000 worth of shares from an existing Stagecoach Fund.
Please see "Exchanges" for special rules.
- --------------------------------------------------------------------------------
Call:
1-800-222-8222
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- --------------------------------------------------------------------------------
Call Investor Services and instruct the representative to either:
o transfer at least $100 from a linked settlement account, or
o exchange at least $100 worth of shares from another Stagecoach Fund.
- --------------------------------------------------------------------------------
Call:
1-800-222-8222
- --------------------------------------------------------------------------------
Selling Shares:
The following section explains how you can sell shares held directly through an
account with Stagecoach Funds. For Funds held through brokerage and other types
of accounts, please consult your Selling Agent.
================================================================================
BY MAIL
================================================================================
Write a letter stating your account registration, your account number, the Fund
you wish to redeem and the dollar amount ($100 or more) of the redemption you
wish to receive (or write "Full Redemption").
- --------------------------------------------------------------------------------
Make sure all the account owners sign the request.
- --------------------------------------------------------------------------------
You may request that redemption proceeds be sent to you by check, by ACH
transfer into a bank account, or by wire ($5,000 minimum). Please call Investor
Services regarding requirements for linking bank accounts or for wiring funds.
We reserve the right to charge a fee for wiring funds although it is not
currently our practice to do so.
- --------------------------------------------------------------------------------
Signature Guarantees are required for mailed redemption requests over $5,000.
You can get a signature guarantee at financial institutions such as a bank or
brokerage house. We do not accept notarized signatures.
- --------------------------------------------------------------------------------
Mail to:
Stagecoach Funds
PO Box 7066
San Francisco, CA
94120-9201
- --------------------------------------------------------------------------------
34 Stagecoach Money Market Funds Prospectus
<PAGE>
Your Account
- --------------------------------------------------------------------------------
================================================================================
BY PHONE
================================================================================
Call Investor Services to request a redemption of at least $100. Be prepared to
provide your account number and Tax Identification Number.
- --------------------------------------------------------------------------------
Unless you have instructed us otherwise, only one account owner needs to call in
redemption requests.
- --------------------------------------------------------------------------------
You may request that redemption proceeds be sent to you by check, by transfer
into an ACH-linked bank account, or by wire ($5,000 minimum). Please call
Investor Services regarding requirements for linking bank accounts or for wiring
funds. We reserve the right to charge a fee for wiring funds although it is not
currently our practice to do so.
- --------------------------------------------------------------------------------
Telephone privileges are automatically made available to you unless you
specifically decline them on your application or subsequently in writing.
- --------------------------------------------------------------------------------
Phone privileges allow us to accept transaction instructions by anyone
representing themselves as the shareholder and who provides reasonable
confirmation of their identity, such as providing the Taxpayer Identification
Number on the account. We will not be liable for any losses incurred if we
follow telephone instructions we reasonably believe to be genuine.
- --------------------------------------------------------------------------------
Call:
1-800-222-8222
- --------------------------------------------------------------------------------
================================================================================
GENERAL NOTES FOR SELLING SHARES
================================================================================
We process requests to sell shares each business day. Requests we receive in
proper form for the Money Market, Government Money Market and Treasury Money
Market Funds before 12:00 Noon (Pacific Time) generally are processed at 12:00
Noon on the same day.
- --------------------------------------------------------------------------------
Requests we receive in proper form for the California Tax-Free Money Market
National Tax-Free Money Market, and 100% Treasury Money Market Funds before 9:00
AM (Pacific Time) generally are processed at 9:00 AM on the same day.
- --------------------------------------------------------------------------------
Requests we receive in proper form for each Fund before 1:00 PM (Pacific Time)
in connection with certain automated investment programs are processed at 1:00
PM on the same day.
- --------------------------------------------------------------------------------
Requests we receive after the above-specified times are processed the next
business day at the applicable NAV.
- --------------------------------------------------------------------------------
If you purchased shares through a packaged investment product or retirement
plan, read the directions for selling shares provided by the product or plan.
There may be special requirements that supersede the directions in this
Prospectus.
- --------------------------------------------------------------------------------
We reserve the right to delay payment of a redemption for up to ten days so that
we may be reasonably certain that investments made by check have been collected.
Payments of redemptions also may be delayed under extraordinary circumstances or
as permitted by the Securities and Exchange Commission in order to protect
remaining shareholders. Payments of redemptions also may be delayed up to seven
days under normal circumstances, although it is not our policy to delay such
payments.
- --------------------------------------------------------------------------------
Generally, we pay redemption requests in cash, unless the redemption request is
for more than $250,000 or 1% of the net assets of the Fund by a single
shareholder over any ninety-day period. If a request for a redemption is over
these limits, it may be to the detriment of existing shareholders to pay such
redemption in cash. Therefore, we may pay all or part of the redemption in
securities of equal value.
- --------------------------------------------------------------------------------
Stagecoach Money Market Funds Prospectus 35
<PAGE>
Exchanges
- --------------------------------------------------------------------------------
Exchanges between Stagecoach Funds are two transactions: a sale of one Fund and
the purchase of another. In general, the same rules and procedures that apply to
sales and purchases apply to exchanges. There are, however, additional factors
you should keep in mind while making or considering an exchange:
o You should carefully read the Prospectus for the Fund into which you wish
to exchange.
o Every exchange involves selling Fund shares and that sale may produce a
capital gain or loss for federal income tax purposes.
o If you exchange between a money market Fund and a Fund with a sales
load, you will buy shares at the Public Offering Price (POP) of the new
Fund and a sales load may be assessed.
o If you are making an initial investment into a new Fund through an
exchange, you must exchange at least the minimum first purchase amount of
the Fund you are redeeming, unless your balance has fallen below that
amount due to market conditions.
o Any exchange between Funds you already own must meet the minimum redemption
and subsequent purchase amounts for the Funds involved.
o Exchanges from any share class to a money market fund can only be
re-exchanged for the original share class.
o In order to discourage excessive Fund transaction expenses that must be
borne by other shareholders, we reserve the right to limit or reject
exchange orders. Generally, we will notify you 60 days in advance of any
changes in your exchange privileges.
o You may exchange shares of the Funds for class A, B or C shares of a
non-money market fund.
36 Stagecoach Money Market Funds Prospectus
<PAGE>
Additional Services and Other Information
- --------------------------------------------------------------------------------
Automatic Programs:
These programs help you conveniently purchase or redeem shares each month:
o AutoSaver Plan - you need only specify an amount of at least $100 and a day
of the month. We will automatically transfer that amount from your linked
bank account each month to purchase additional shares. We will transfer the
amount on or about the day you specify, or on or about the 20th of each
month if you have not specified a day. Please call Stagecoach Investor
Services at 1-800-222-8222 if you wish to change or add linked accounts.
o Systematic Withdrawal Program - Stagecoach will automatically redeem enough
shares to equal a specified dollar amount of at least $100 on or about the
fifth business day prior to the end of each month and either send you the
proceeds by check or transfer it into your linked bank account. In order to
set up a Systematic Withdrawal Program, you :
o must have a Fund account valued at $10,000 or more;
o must have distributions reinvested; and
o may not simultaneously participate in an AutoSaver Plan.
It generally takes about ten days to set up either plan once we have received
your instructions. It generally takes about five days to change or cancel
participation in either plan. We automatically cancel your program if the linked
account you specified is closed.
Dividend and Capital Gain Distribution Options
You may choose to do any of the following:
o Automatic Reinvestment Option - Lets you buy new shares of the same class
of the Fund that generated the distributions. The new shares are purchased
at NAV generally on the day the income is paid. This option is
automatically assigned to your account unless you specify another plan.
o Automatic Clearing House Option - Deposits your dividends and capital gains
into any bank account you link to your Fund account if it is part of the
ACH system. If your specified bank account is closed, we will reinvest your
distributions.
o Check Payment Option - Allows you to receive checks for distributions
mailed to your address of record or to another name and address which you
have specified in written, signature guaranteed instructions. If checks
remain uncashed for six months or are undeliverable by the Post Office, we
will reinvest the distributions at the earliest date possible.
Stagecoach Money Market Funds Prospectus 37
<PAGE>
- --------------------------------------------------------------------------------
Taxes
The following discussion regarding taxes is based on laws that were in effect as
of the date of this Prospectus. The discussion summarizes only some of the
important tax considerations that affect the Funds and you as a shareholder. It
is not intended as substitute for careful tax planning. You should consult your
tax advisor about your specific tax situation. Federal income tax considerations
are discussed further in the Statement of Additional Information.
We will pass on to you net investment income and net short-term capital gains
earned by a Fund as dividend distributions. These are taxable to you as ordinary
income. However, dividends distributed by the California Tax-Free Money Market
and National Tax-Free Money Market Funds which are attributable to the
Funds' net interest income from tax-exempt securities will not be subject to
federal income tax. A substantial portion of dividends distributed by the
California Tax-Free Money Market Fund to noncorporate shareholders will
also be exempt from California income tax.
We will pass on to you any net capital gains earned by a Fund as a capital gain
distribution. In general, these distributions will be taxable to you as
long-term capital gains and are taxable when paid. However, distributions
declared in October, November and December and distributed by the following
January will be taxable as if they were paid on December 31 of the year in which
they were declared. We will notify you as to the status of your Fund
distributions.
Your redemptions, including exchanges, will ordinarily result in a taxable
capital gain or loss, depending on the amount you receive for your shares and
the amount you paid for them. Foreign shareholders may be subject to different
tax treatment, including withholding. In certain circumstances, U.S. residents
will be subject to back-up withholding.
Historical Fund Information
Effective as of the date of this prospectus, the Company changed its name from
Stagecoach Funds, Inc. to Wells Fargo Funds, Inc. The "Stagecoach" brand name
was incorporated into the name of each individual actively managed Fund,
including the Funds listed in this prospectus.
Government Money Market Fund--The Fund operated as a series of Pacifica
Funds Trust from its commencement of operations until it was reorganized as a
series of Stagecoach Funds on September 6, 1996. Prior to April 1, 1996, First
Interstate Capital Management, Inc. ("FICM") served as the Fund's adviser. In
connection with the merger of First Interstate Bancorp into Wells Fargo &
Company on April 1, 1996, FICM was renamed Wells Fargo Investment Management,
Inc. Performance information for periods prior to September 6, 1996 reflects the
performance of the predecessor Pacifica Fund.
38 Stagecoach Money Market Funds Prospectus
<PAGE>
Additional Services and Other Information
- --------------------------------------------------------------------------------
National Tax-Free Money Market Fund--Prior to December 15, 1997, the Fund
invested all of its assets in a Master Portfolio with an identical investment
objective.
Treasury Money Market Fund--Prior to August 1, 1990, the Treasury Money
Market Fund was known as the Short-Term Government Fund, which commenced
operations on October 1, 1985, and invested in obligations issued or guaranteed
by agencies and instrumentalities of the U.S. Government. The Fund operated as a
portfolio of Pacific American Funds through October 1, 1994, when it was
reorganized as the Pacific American U.S. Treasury Portfolio, a portfolio of
Pacifica Funds Trust. In July 1995, the Fund was renamed the Pacifica Treasury
Money Market Fund, and on September 6, 1996, the Fund was reorganized as a
series of Stagecoach Funds. Prior to April 1, 1996, First Interstate Capital
Management, Inc. ("FICM") served as the Fund's adviser. In connection with the
merger of First Interstate Bancorp into Wells Fargo & Company on April 1, 1996,
FICM was renamed Wells Fargo Investment Management, Inc.
The 100% Treasury Money Market Fund commenced operations on August 3, 1998.
Minimum Account Value - Due to the expense involved in maintaining low-balance
accounts, we reserve the right to close accounts that have fallen below the
$1,000 minimum balance due to redemptions (as opposed to market conditions). You
will be given an opportunity to make additional investments to prevent account
closure before any action is taken.
Statements - We mail statements after any dividends or capital gains, and at
year-end. We do not send statements for Funds held in brokerage, retirement or
other similar accounts. You must check with the administrators of these accounts
for statement policies. The Fund will also send any necessary tax reporting
documents in January, and will send Annual and Semi-Annual Reports each year.
Statement of Additional Information - Additional information about some of the
topics discussed in this Prospectus as well as details about performance
calculations, distribution plans, servicing plans, tax issues and other
important issues are available in the Statement of Additional Information for
each Fund. The Statement of Additional Information should be read along with
this Prospectus and may be obtained free of charge by calling Investor Services
at 1-800-222-8222.
Glass-Steagall Act - Morrison & Foerster LLP, counsel to the Funds and special
counsel to Wells Fargo Bank, has advised us and Wells Fargo Bank that Wells
Fargo Bank and its affiliates may perform the services contemplated by
Stagecoach Money Market Funds Prospectus 39
<PAGE>
- --------------------------------------------------------------------------------
the Advisory Contracts and detailed in this Prospectus and the Statement of
Additional Information without violation of the Glass-Steagall Act. Counsel has
pointed out that future judicial or administrative decisions, or future federal
or state laws may prevent these entities from continuing in their roles.
Voting Rights - All shares of the Funds have equal voting rights and are voted
in the aggregate, rather than by series or class, unless the matter affects only
one series or class. A shareholder of record is entitled to one vote for each
share owned and fractional votes for each fractional share owned. For a detailed
description of voting rights, see the "Capital Stock" section of the Statement
of Additional Information.
40 Stagecoach Money Market Funds Prospectus
<PAGE>
Organization and Management of the Funds
- --------------------------------------------------------------------------------
A number of different entities provide services to the Funds. This section shows
how the Funds are organized, the entities that perform different services, and
how they are compensated. Further information is available in the Statement of
Additional Information for each Fund.
About Stagecoach
Each Fund is one of over 30 Funds of Wells Fargo Funds, Inc., an open-end
management investment company. Wells Fargo Funds was organized under the name
Stagecoach Funds Inc. on September 9, 1991, as a Maryland Corporation.
The Board of Directors of Wells Fargo Funds supervises the Funds' activities and
approves the selection of various companies hired to manage the Funds'
operation. The major service providers are described in the diagram below. If
the Board believes that it is in the best interests of the shareholders it may
make a change in one of these companies.
We do not hold annual shareholder meetings. We may hold special shareholder
meetings to ask shareholders to vote on items such as electing or removing board
members, amending fundamental investment strategies or policies.
================================================================================
SHAREHOLDERS
================================================================================
================================================================================
FINANCIAL SERVICES FIRMS AND SELLING AGENTS
================================================================================
Advise current and prospective shareholders on their Fund investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=======================================================================================================
TRANSFER AND
DISTRIBUTOR & ADMINISTRATOR DIVIDEND DISBURSING SHAREHOLDER
CO-ADMINISTRATOR AGENT SERVICING AGENTS
=======================================================================================================
<S> <C> <C> <C>
Stephens Inc. Wells Fargo Bank Wells Fargo Bank Various Agents
111 Center St. 525 Market St. 525 Market St.
Little Rock, AR San Francisco, CA San Francisco, CA
Markets the Funds, Manages the Funds' Maintains records of Provide services
distributes shares, and business activities shares and supervises to customers
manages the Funds' the paying of dividends
business activities
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
=======================================================================================================
INVESTMENT ADVISOR CUSTODIAN
=======================================================================================================
<S> <C>
Wells Fargo Bank, 525 Market St., San Francisco, Wells Fargo Bank, 525 Market St., San Francisco,
CA CA
Manages the Funds' investment activities Provides safekeeping for the Funds' assets
- -------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
BOARD OF DIRECTORS
================================================================================
Supervises the Funds' activities
- --------------------------------------------------------------------------------
Stagecoach Money Market Funds Prospectus 41
<PAGE>
- --------------------------------------------------------------------------------
In the following sections, the percentages shown are the percentages of the
average daily net assets of each Fund class paid on an annual basis for the
services described. The Statement of Additional Information for each Fund has
more detailed information about the Investment Advisor and the other service
providers and plans described here.
The Investment Advisor
Wells Fargo Bank is the advisor for each of the Funds. Wells Fargo Bank, founded
in 1852, is the oldest bank in the Western United States and is one of the
largest banks in the United States. Wells Fargo Bank is a wholly owned
subsidiary of Wells Fargo & Company, a national bank holding company. As of
August 1, 1997, Wells Fargo Bank and its affiliates managed over $57 billion in
assets. The Funds paid Wells Fargo Bank the following for advisory services
(after fee waivers) for the fiscal period ended March 31, 1997:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Money Market Fund .36%
- --------------------------------------------------------------------------------
California Tax-Free Money Market Fund .24%
- --------------------------------------------------------------------------------
Government Money Market Fund .21%
- --------------------------------------------------------------------------------
National Tax-Free Money Market Fund .30%
- --------------------------------------------------------------------------------
Treasury Money Market Fund .17%
- --------------------------------------------------------------------------------
</TABLE>
The Administrator
Wells Fargo Bank is the administrator of the Funds. Wells Fargo Bank is paid
.03% of each Fund's assets for these services.
The Distributor and Co-Administrator
Stephens Inc. is the Funds' distributor and co-administrator. Stephens Inc.
receives .04% of each Fund's assets for its role as co-administrator. Stephens
Inc. also receives all distribution plan fees.
Distribution Plan
We have adopted distribution plans for each of the Funds. For the Money Market
Fund and California Tax-Free Money Market Fund, these plans are used to defray
all or part of the cost of preparing and distributing prospectuses and
promotional materials. For the Government Money Market Fund, National Tax-Free
Money Market Fund, Treasury Money Market Fund and 100% Treasury Money Market
Fund, the plans are used to pay for distribution-related services including
ongoing compensation to Selling Agents. The
42 Stagecoach Money Market Funds Prospectus
<PAGE>
Organization and Management of the Funds
- --------------------------------------------------------------------------------
Funds may participate in joint distribution activities with other Stagecoach
Funds. The cost of these activities is generally allocated among the Funds.
Funds with higher asset levels pay a higher proportion of these costs. The fees
paid under these plans are as follows:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Money Market Fund .05%
- --------------------------------------------------------------------------------
California Tax-Free Money Market Fund .05%
- --------------------------------------------------------------------------------
Government Money Market Fund .05%
- --------------------------------------------------------------------------------
National Tax-Free Money Market Fund .05%
- --------------------------------------------------------------------------------
Treasury Money Market Fund .05%
- --------------------------------------------------------------------------------
100% Treasury Money Market Fund .05%
- --------------------------------------------------------------------------------
</TABLE>
Shareholder Servicing Plan
We have Shareholder Servicing Plans for each Fund class. We have agreements with
various shareholder servicing agents to process purchase and redemption
requests, to service shareholder accounts, and to provide other related
services.
For these services we pay as follows:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Money Market Fund .30%
- --------------------------------------------------------------------------------
California Tax-Free Money Market Fund .30%
- --------------------------------------------------------------------------------
Government Money Market Fund .25%
- --------------------------------------------------------------------------------
National Tax-Free Money Market Fund .25%
- --------------------------------------------------------------------------------
Treasury Money Market Fund .30%
- --------------------------------------------------------------------------------
100% Treasury Money Market Fund .30%
- --------------------------------------------------------------------------------
</TABLE>
Stagecoach Money Market Funds Prospectus 43
<PAGE>
How to Read the Financial Highlights
- --------------------------------------------------------------------------------
After the description of each Fund, there are charts showing important financial
information about the Fund. The charts are called "Financial Highlights" and are
designed to help you understand the past performance of the Fund. The financial
statements from which these Financial Highlights were derived were audited by
KPMG Peat Marwick LLP, except as indicated. The financial statements are
included in each Fund's most recent Annual or Semi-Annual Report and are
available free of charge by calling 1-800-222-8222. Other auditors audited
statements for the Government Money Market Mutual and the Treasury Money Market
Mutual Funds for periods prior to October 1, 1995.
Here is an explanation of some terms that will help you read these charts.
Net Asset Value (NAV)-- The net value of one share of a class of a Fund. See the
Glossary for a fuller definition.
Net Investment Income-- Net investment income is calculated by subtracting the
aggregate Fund expenses from the Fund's investment income. The number in the
financial highlights is the net investment income of a class divided by the
number of outstanding shares of that class. The amount distributed to
shareholders is listed under the heading "Less Distributions--Dividends from Net
Investment Income."
Net Realized and Unrealized Gain (Loss) on Investments-- We continually buy and
sell investments. The profit on an investment sold for more than its purchase
price is a realized capital gain while a loss on an investment sold for less
than its purchase price is a realized capital loss. An unrealized gain or loss
occurs when an investment gains or loses value but is not sold. The number in
this category is the total gains or losses of a class divided by the number of
outstanding shares for that class. The amount of capital gain or loss per share
that was paid to shareholders is listed under the heading "Less
Distributions--Distributions From Net Realized Gains."
Net Assets-- The value of the investments in a Fund's portfolio (after
accounting for expenses) that are attributable to a particular class of the
Fund.
Ratio of Expenses to Average Net Assets-- This ratio reflects the amount paid by
a Fund to cover the costs of its daily operations, and includes advisory,
administration and other operating expenses. It is expressed as a percentage of
the average daily net assets of a class.
Ratio of Net Investment Income (Loss) to Average Net Assets-- This ratio is the
result of dividing net investment income (or loss) by average net assets.
44 Stagecoach Money Market Funds Prospectus
<PAGE>
Glossary
- --------------------------------------------------------------------------------
ACH
Refers to the "Automated Clearing House" system maintained by the Federal
Reserve System which allows banks to process checks, transfer funds and perform
other tasks.
Annual Report
A document that provides certain financial and other important information for
the most recent reporting period and each Fund's portfolio of investments.
Business Day
Any day the Funds are open. The Funds are generally open Monday through Friday
and are closed weekends and federal bank holidays.
Commercial Paper
Debt instruments issued by banks, corporations and other issuers to finance
short-term credit needs. Commercial Paper typically is of high credit quality
and offers below market interest rates.
Current Income
Earnings in the form of dividends or interest as opposed to capital growth.
Derivatives
Securities whose values are derived in part from the value of another security
or index. An example is a stock option.
Distributions
Dividends and/or capital gains paid by a Fund on its shares.
Dollar-Denominated
Securities issued by foreign banks, companies or governments in U.S. dollars.
Duration
A measure of a security's or portfolio's sensitivity to changes in interest
rates. Duration is usually expressed in years, with longer durations typically
more sensitive to interest rate changes than shorter durations.
FDIC
The Federal Deposit Insurance Corporation. This is the company that provides
federally sponsored insurance covering bank deposits such as savings accounts
and CDs. Mutual funds are not FDIC insured.
Illiquid Security
A security which cannot be readily sold, or cannot be readily sold without
negatively affecting its fair price.
Stagecoach Money Market Funds Prospectus 45
<PAGE>
- --------------------------------------------------------------------------------
Investment-Grade Debt
A type of bond rated in the top four investment categories by a nationally
recognized ratings organization. Generally these are bonds whose issuers are
considered to have a strong ability to pay interest and repay principal,
although some investment-grade bonds may have some speculative characteristics.
Liquidity
The ability to readily sell a security at its fair price.
Moody's
One of the largest nationally recognized ratings organizations.
Nationally Recognized Ratings Organization (NRRO)
A company that examines the ability of a bond issuer to meet its obligations and
which rates the bonds accordingly.
Net Asset Value (NAV)
The value of a single fund share. It is determined by adding together all of a
Fund's assets, subtracting expenses and other liabilities, then dividing by the
total number of shares. The NAV per share of the Money Market, Government Money
Market and Treasury Money Market Funds is determined each business day at 12:00
noon and 1:00 PM (Pacific Time). The NAV per share of the California Tax-Free
National Tax-Free Money Market, and 100% Treasury Money Market Funds is
determined each business day at 9:00 AM and 1:00 PM (Pacific Time).
Options
An option is the right to buy or sell a security based on an agreed upon price
at a specified time. For example, an option may give the holder of a stock the
right to sell the stock to another party, allowing the seller to profit if the
price has fallen below the agreed price. Options can also be based on the
movement of an index such as the S&P 500.
Public Offering Price (POP)
The NAV with the sales load added.
Repurchase Agreement
An agreement between a buyer and seller of a security in which the seller agrees
to repurchase the security at an agreed upon price and time.
46 Stagecoach Money Market Funds Prospectus
<PAGE>
Glossary
- --------------------------------------------------------------------------------
Selling Agent
A person who has an agreement with the Funds' distributor that allows them to
sell Fund shares.
Shareholder Servicing Agent
An entity appointed by a Fund to maintain shareholder accounts and record,
assist and provide information to shareholders or perform similar functions.
Signature Guarantee
A guarantee given by a financial institution that has verified the identity of
the maker of the signature.
S&P
One of the largest nationally recognized ratings organizations. Standard and
Poor's also publishes various indexes or lists of companies representative of
sectors of the U.S. economy.
Statement of Additional Information
A document that supplements the disclosures made in the Prospectus.
Taxpayer Identification Number
Usually the social security number for an individual or the Employer
Identification Number for a corporation.
U.S. Government Obligations
Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Weighted-Average Maturity
The average maturity for the debt securities in a portfolio on a dollar-for-
dollar basis.
Stagecoach Money Market Funds Prospectus 47
<PAGE>
This page intentionally left blank
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
WELLS FARGO FUNDS(R)
You may wish to review the following
documents:
Statement of Additional Information
supplements the disclosures made by this
Prospectus. The Statement of Additional
Information has been filed with the SEC
and is incorporated by reference into this
Prospectus and is legally part of this
Prospectus.
Annual/Semi-Annual Report
provides certain financial and other
important information for the most recent
reporting period and each Fund's portfolio
of investments.
These are available free of
charge by calling
1-800-222-8222, or from
Wells Fargo Funds
PO Box 7066
San Francisco, CA
94120-7066
- --------------------------------------------------------------------------------
WELLS FARGO MONEY MARKET FUNDS:
- --------------------------------------------------------------------------------
o are not insured by the FDIC.
o are not obligations or deposits of Wells Fargo Bank, nor guaranteed by
Wells Fargo Bank.
o involve investment risk, including possible loss of principal.
o seek to maintain a stable net asset value of $1.00 per share, however,
there can be no assurance that a fund will meet this goal. Yields will vary
with market conditions.
- --------------------------------------------------------------------------------
[RECYCLE LOGO]
Printed on Recycled Paper
SC MM P (8/98)
================================================================================
<PAGE>
August 1, 1998
STAGECOACH FUNDS
STAGECOACH
MONEY MARKET FUNDS
PROSPECTUS
Prime Money Market Please read this Prospectus and keep it for
Fund future reference. It is designed to provide you
with important information and to help you decide
Treasury Money Market if a Fund's goals match your own.
Fund
These securities have not been approved or
100% Treasury Money disapproved by the U.S. Securities and Exchange
Market Fund Commission, any state securities commission or
any other regulatory authority, nor have any of
Service Class these authorities passed upon the accuracy or
adequacy of this Prospectus. Any representation
Investment Advisor to the contrary is a criminal offense.
and Administrator:
Fund shares are NOT deposits or other obligations
Wells Fargo Bank of, or issued, endorsed or guaranteed by, Wells
Fargo Bank, N.A. ("Wells Fargo Bank"), or any of
Distributor and its affiliates. Fund shares are NOT insured or
Co-Administrator: guaranteed by the U.S. Government, the Federal
Deposit Insurance Corporation ("FDIC"), the Federal
Stephens Inc. Reserve Board or any other governmental agency. AN
INVESTMENT IN A FUND INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. WE CANNOT
ASSURE YOU THAT A FUND WILL MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
About This Prospectus
- -------------------------------------------------------------------------------
What is a prospectus?
A prospectus provides you with the information you need in order to make an
informed investment decision. It describes how a Fund operates and invests its
assets and also contains fee and expense information.
What is different about this Prospectus?
We have rewritten our Prospectus in "Plain English" and grouped some of the most
important Fund information together to make it easier to read and understand.
How is the Fund information organized?
After important summary information and the expense fee table, each Fund's
investment objective and financial highlights are presented. The icons below
tell you where various types of information about a Fund can be found.
Important information you should look for:
- --------------------------------------------------------------------------------
[LOGO OF Investment Objective and Investment Policies
ARROW]
What is the Fund trying to achieve? How do we intend to invest
your money? What makes a Fund different from the other Fund
offered in this Prospectus? Look for the arrow icon to find
out.
- --------------------------------------------------------------------------------
[LOGO OF Permitted Investments
PERCENTAGE
SIGN] A summary of the Fund's key permitted investments and
practices.
- --------------------------------------------------------------------------------
[LOGO OF Important Risk Factors
EXCLAMATION
POINT] What are key risk factors for this Fund? This will include the
factors described in "General Investment Risks" together with
any special risk factors for this Fund.
- --------------------------------------------------------------------------------
[LOGO OF Additional Fund Facts
ADDITION SIGN]
Provides additional information about the Fund.
- --------------------------------------------------------------------------------
Why is italicized print used throughout this Prospectus?
Words appearing in italicized print and highlighted in color are defined in the
Glossary.
What else do I need to understand these Funds?
The Funds have a "Statement of Additional Information" that supplements the
disclosures made in this Prospectus. You may also want to review the most recent
Annual or Semi-Annual Report. You can order copies of these documents without
charge by calling 1-800-260-5969. The Statement of Additional Information and
other information about the Funds is also available on the SEC's web site
(http://www.sec.gov).
<PAGE>
TABLE OF CONTENTS
Key Information 4
Summary of Expenses 6
- --------------------------------------------------------------------------------
The Funds Prime Money Market Fund 8
This section contains Treasury Money Market Fund 12
important information
about the individual 100% Treasury Money Market Fund 16
Funds.
General Investment Risks 17
- --------------------------------------------------------------------------------
The Fund Your Fund Account 21
Your Account How to Buy Shares 22
Turn to this section
for information on How to Sell Shares 23
maintain how to open
and your account, Exchanges 24
including how to buy,
sell and exchange Other Information 25
Fund shares.
- --------------------------------------------------------------------------------
Reference Organization and Management
of the Funds 28
Look here for details
on the organization How to Read the Financial Highlights 30
of the Funds and term
definitions. Glossary 31
<PAGE>
KEY INFORMATION
- --------------------------------------------------------------------------------
Summary of the Stagecoach Money Market Funds
The Funds described in this Prospectus invest in money market instruments, seek
to maintain a $1.00 per share net asset value in order to preserve principal,
and distribute dividends once a month. Each Fund has a different investment
objective intended to meet different investment needs. You should consider each
Fund's objective, investment practices, permitted investments and risks
carefully before investing in a Fund. The investment objective of each Fund is
fundamental and may not be changed without the approval of a majority of
shareholders.
Should you consider investing in these Funds? Yes, if:
* you are looking for a fund in which to invest short-term cash;
* you are looking to preserve principal; and
* you are looking for monthly income.
You should not invest in these Funds if:
* you are looking for FDIC insurance coverage or guaranteed rates of
return;
* you are unwilling to accept that you may lose money on your investment;
* you are unwilling to accept the risk that we may be unable to maintain a
$1.00 per share net asset value and that your investment principal may
fluctuate; or
* you are seeking long-term total return.
What are Service shares?
Service shares are typically held for your benefit by affiliate, franchise or
correspondent banks of Wells Fargo & Company and other select institutions. The
Funds offered here are available in other share classes. A prospectus for
additional share classes can be obtained by calling 1-800-260-5969.
Who are "We"?
In this Prospectus, "We" generally means the Wells Fargo Funds. "We" sometimes
refers to the Investment Advisor or other companies hired by the Fund to perform
services. The section on "Organization and Management of the Funds" further
explains how the Funds are organized.
Who are "You"?
In this Prospectus, "You" means the potential investor or the shareholder.
What are the "Funds"?
In this Prospectus, the "Funds" refers to the Stagecoach Funds listed on the
cover of this Prospectus. The "Funds" also may refer to other mutual funds
offered by Wells Fargo Funds, Inc.
4 Stagecoach Money Market Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Key Terms
The term "money market instruments" is used in this Prospectus to refer to a
broad variety of short-term debt securities, commercial paper, certificates of
deposit, repurchase agreements and other investment activities described in the
Glossary and the Investment Practice/Risk table on page 19.
Dividends
We declare dividends, if any, daily and pay them monthly. You earn dividends
from the day your purchase of shares is effected and you continue to earn them
until the day before your shares are redeemed.
Stagecoach Money Market Funds Prospectus 5
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUNDS Summary of Expenses
- -----------------------------------------------------------------------------------------------------------
===========================================================================================================
Shareholder Transaction Expenses
===========================================================================================================
These tables are intended to help you understand the various costs and
expenses you will pay as a shareholder in a Fund. These tables do not reflect
any charges that may be imposed by Wells Fargo Bank or other institutions in
connection with an account through which you hold Fund shares. See
"Organization and Management of the Funds" for more details.
- -----------------------------------------------------------------------------------------------------------
Prime Treasury 100% Treasury
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge on a purchase None None None
- -----------------------------------------------------------------------------------------------------------
Maximum sales charge on reinvested
dividends None None None
- -----------------------------------------------------------------------------------------------------------
Maximum sales charge imposed on
redemptions None None None
- -----------------------------------------------------------------------------------------------------------
Exchange fees None None None
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
===========================================================================================================
Annual Fund Operating Expenses (as a percentage of average net assets)
===========================================================================================================
Annual Fund operating expenses reflect amounts paid by each Fund during the
prior fiscal period. In some cases, they have been restated to reflect
expenses and fee waivers expected to be in effect during the current fiscal
year. Fee waivers and expense reimbursements are voluntary and may be
discontinued without prior notice.
- -----------------------------------------------------------------------------------------------------------
Prime Treasury 100% Treasury
- -----------------------------------------------------------------------------------------------------------
Management fee
(after waivers) 0.12% 0.12% 0.11%
- -----------------------------------------------------------------------------------------------------------
Other expenses
(after waivers or reimbursements) 0.33% 0.33% 0.34%
- -----------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses
(after waivers or reimbursements) 0.45% 0.45% 0.45%
- -----------------------------------------------------------------------------------------------------------
Management fee
(before waivers) 0.25% 0.25% 0.25%
- -----------------------------------------------------------------------------------------------------------
Other expenses
(before waivers or reimbursements) 0.35% 0.36% 0.43%
- -----------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses
(before waivers or reimbursements) 0.60% 0.61% 0.68%
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
===========================================================================================================
Example of Expenses - This example is not a representation of past or future
expenses, and actual expenses may be higher or lower than those shown.
===========================================================================================================
You would pay the following expenses
on a $1,000 investment assuming a 5%
annual return and that you redeem your
shares at the end of each period. Prime Treasury 100% Treasury
- -----------------------------------------------------------------------------------------------------------
1 Year $5 $5 $5
- -----------------------------------------------------------------------------------------------------------
3 Years $14 $14 $14
- -----------------------------------------------------------------------------------------------------------
5 Years $25 $25 $25
- -----------------------------------------------------------------------------------------------------------
10 Years $57 $57 $57
- -----------------------------------------------------------------------------------------------------------
</TABLE>
6 Stagecoach Money Market Funds Prospectus
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
- --------------------------------------------------------------------------------
<PAGE>
PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
Advisor: Wells Fargo Bank
- --------------------------------------------------------------------------------
[LOGO OF Investment Objective
ARROW]
The Prime Money Market Fund seeks to provide investors
with maximized current income to the extent consistent with
preservation of capital and maintenance of liquidity.
Investment Policies
We pursue this objective by actively managing a portfolio
consisting of a broad range of U.S. dollar-denominated, high
quality money market instruments, including debt obligations
with remaining maturities of 397 days or less. We maintain an
overall dollar-weighted average maturity of 90 days or less.
We may also make certain other investment including, for
example, repurchase agreements.
- --------------------------------------------------------------------------------
[LOGO OF Permitted Investments
PERCENTAGE
SIGN] Under normal market conditions, we invest in:
* commercial paper rated at the date of purchase as P-1
by Moody's or A-1+ or A-1 by S&P;
* negotiable certificates of deposit and banker's
acceptances;
* repurchase agreements;
* U.S. Government obligations;
* short-term, U.S. dollar-denominated debt obligations
of U.S. branches of foreign banks and foreign branches
of U.S. banks; and
* shares of other money market funds.
8 Stagecoach Money Market Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
[LOGO OF Important Risk Factors
EXCLAMATION
POINT] You should consider both the General Investment Risks
beginning on page 16 and the specific risks listed below. They
are both important to your investment choice.
There is no guarantee that we will be able to maintain a $1.00
per share net asset value. Fluctuations in share value may
cause a loss or gain in principal. Generally, short-term funds
do not earn as high a level of income as funds that invest in
longer-term instruments. No government agency either directly
or indirectly insures or guarantees the performance of the
Fund.
- --------------------------------------------------------------------------------
[LOGO OF Additional Fund Facts
ADDITION
SIGN] For information on Fund fees and expenses, see "Summary of
Expenses" on page 6.
Stagecoach Money Market Funds Prospectus 9
<PAGE>
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND Financial Highlights
See "Historical Fund Information" on page 24.
- -------------------------------------------------------------------------------
========================================================================================================
For a Share Outstanding
========================================================================================================
For the period ended: Service Class Shares - Investor Shares
commenced on April 30, 1981
----------------------------------------------------------------
Sept. 30, Mar. 31, Sept. 30, Sept. 30, Sept. 30,
1997/1/ 1997/2/ 1996/3/ 1995/4/ 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03 0.03 0.05 0.05 0.02
Net realized and unrealized gain
on investments 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------------
Total from investment operations 0.03 0.03 0.05 0.05 0.02
- --------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.03) (0.13) (0.05) (0.05) (0.02)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------------
Total from distributions (0.03) (0.03) (0.05) (0.05) (0.02)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------
Total return (not annualized) 2.64% 2.54% 5.19% 5.60% 3.71%/5/
- --------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $599,177 $626,105 $740,760 $614,101 $565,305
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average
net assets 0.45% 0.45% 0.45% 0.41% 0.41%
Ratio of net investment income to
average net assets 5.18% 5.04% 5.14% 5.47% 3.67%
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses 0.63% 0.60% 0.62% 0.68% 0.89%
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses 5.00% 4.89% 4.97% 5.20% 3.19%
- --------------------------------------------------------------------------------------------------------
<CAPTION>
========================================================================================================
Service Share Calendar-Year Returns 1996 1995 1994
========================================================================================================
Returns for other share classes may vary 5.16% 5.76% 3.88%
due to different fees and expenses. These
returns reflect fee waivers and reimbursements,
do not reflect sales loads, are not a guarantee
of future performance, and have not been audited.
- --------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Unaudited financial statements.
/2/ The Fund changed its fiscal year-end from September 30 to March 31.
/3/ The Fund changed its Investment Advisor during this fiscal year.
10 Stagecoach Money Market Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND Financial Highlights
See "Historical Fund Information" on page 24.
- -------------------------------------------------------------------------------
========================================================================================================
For a Share Outstanding
========================================================================================================
For the period ended: Investor Shares
----------------------------------------------------------------
March 31, March 31, March 31, March 31, March 31, March 31, March 31,
1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03 0.03 0.05 0.07 0.08 0.08 0.06
Net realized and unrealized gain
on investments 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.03 0.03 0.05 0.07 0.08 0.08 0.06
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.03) (0.03) (0.05) (0.07) (0.08) (0.08) (0.06)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total from distributions (0.03) (0.03) (0.05) (0.07) (0.08) (0.08) (0.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total return (not annualized) 3.00% 3.32% 5.22% 7.72% 8.82% 7.88% 6.50%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $527,599 $468,479 $528,397 $543,834 $493,641 $496,675 $628,987
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average
net assets 0.41% 0.41% 0.43% 0.47% 0.54% 0.56% 0.58%
Ratio of net investment income to
average net assets 2.96% 3.27% 5.09% 7.38% 7.95% 7.58% 6.38%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses 0.89% 0.89% 0.91% 0.94% 0.90% 0.90% 0.93%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses 2.48% 2.79% 4.61% 6.91% 7.59% 7.24% 6.03%
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
==================================================================================================================================
Institutional Shares Calendar Returns 1993 1992 1991 1990 1989 1988
==================================================================================================================================
Returns for other share classes may vary 3.00% 3.61% 5.85% 8.03% 9.04% 7.31%
due to different fees and expenses. These
returns reflect fee waivers and reimbursements,
do not reflect sales loads, are not a guarantee
of future performance, and have not been audited.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/4/ The Fund changed its fiscal year-end from March 31 to September 30.
/5/ Annualized.
Stagecoach Money Market Funds Prospectus 11
<PAGE>
TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
Advisor: Wells Fargo Bank
- --------------------------------------------------------------------------------
[LOGO OF Investment Objective
ARROW]
The Treasury Money Market Fund seeks to provide
investors with current income and stability of principal.
Investment Policies
We actively manage a portfolio composed of obligations issued
or guaranteed by the U.S. Treasury. We also invest in notes,
repurchase agreements and other instruments collateralized or
secured by Treasury obligations. We buy obligations with
remaining maturities of 397 days or less. We maintain an
overall dollar-weighted average maturity of 90 days or
less.
- --------------------------------------------------------------------------------
[LOGO OF Permitted Investments
PERCENTAGE
SIGN] Under normal market conditions, we invest:
* in U.S. Treasury obligations; and
* in repurchase agreements collateralized by U.S. Treasury
obligations.
As a temporary defensive measure, or to maintain liquidity, we
may invest in shares of other money market funds that have
similar investment objectives.
12 Stagecoach Money Market Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
[LOGO OF Important Risk Factors
EXCLAMATION
POINT] You should consider both the General Investment Risks
beginning on page 16 and the specific risks listed below. They
are both important to your investment choice.
There is no guarantee that we will be able to maintain a $1.00
per share net asset value. Fluctuations in share value may
cause a loss or gain in principal. Generally, short-term funds
do not earn as high a level of income as funds that invest in
longer-term instruments. The U.S. Treasury does not directly
or indirectly insure or guarantee the performance of the
Fund.
- --------------------------------------------------------------------------------
[LOGO OF Additional Fund Facts
ADDITION
SIGN] Treasury obligations have historically involved little risk of
loss of principal if held to maturity. However, fluctuations
in market interest rates may cause the market value of
Treasury obligations in the Fund's portfolio to fluctuate.
Unlike the 100% Treasury Money Market, the Treasury Money Market
Fund may invest in repurchase agreements; the income from which
is not generally exempt from state or local taxes.
For information on Fund fees and expenses, see "Summary of
Expenses" on page 6.
Stagecoach Money Market Funds Prospectus 13
<PAGE>
<TABLE>
<CAPTION>
TREASURY MONEY MARKET FUND Financial Highlights
See "Historical Fund Information" on page 24.
- --------------------------------------------------------------------------------
========================================================================================================
For a Share Outstanding
========================================================================================================
For the period ended: Service Class Shares - Commenced
on October 11, 1995
--------------------------------------------------------------------------------------
Sept. 30, Mar. 31, Sept. 30, Sept. 30, Sept. 30, March 31,
1997/1/ 1997/2/ 1996/3/ 1995 1994/4/ 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03 0.02 0.05 0.05 0.02 0.03
Net realized and unrealized gain
on investments 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations 0.03 0.02 0.05 0.05 0.02 0.03
- -----------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.03) (0.02) (0.05) (0.05) (0.02) (0.03)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------
Total from distributions (0.03) (0.02) (0.05) (0.05) (0.02) (0.03)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------
Total return (not annualized) 2.55% 2.47% 5.03% 5.42% 3.75% 2.81%
- -----------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $324,408 $483,401 $1,340,325 $1,001,707 $690,630 $654,950
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average
net assets 0.45% 0.45% 0.45% 0.42% 0.43% 0.43%
Ratio of net investment income to
average net assets 5.03% 4.91% 4.98% 5.32% 3.72% 2.77%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Average commission rate paid 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 0.64% 0.61% 0.60% 0.66% 0.90% 0.90%
- -----------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses 4.84% 4.75% 4.83% 5.08% 3.25% 2.30%
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
===============================================================================================================================
Institutional Share Calendar-Year Returns 1996 1995 1994
===============================================================================================================================
Returns for other share classes may vary 5.00% 5.56% 3.84%
due to different fees and expenses. These
returns reflect fee waivers and reimbursements,
do not reflect sales loads, are not a guarantee
of future performance, and have not been audited.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Unaudited financial statements.
/2/ The Fund changed its fiscal year-end from September 30 to March 31.
/3/ The Fund changed Investment Advisor during this fiscal year.
14 Stagecoach Money Market Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
See "How to Read the Financial Highlights" on page 29.
- -------------------------------------------------------------------------------
========================================================================================================
For a Share Outstanding
========================================================================================================
For the period ended:
--------------------------------------------------------------------------------
March 31, March 31, March 31, March 31, March 31, March 31,
1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03 0.05 0.07 0.08 0.07 0.06
Net realized and unrealized gain
on investments 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.03 0.05 0.07 0.08 0.07 0.064
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.03) (0.05) (0.07) (0.08) (0.07) (0.06)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------
Total from distributions (0.03) (0.05) (0.07) (0.08) (0.07) (0.06)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------
Total return (not annualized) 3.13% 5.03% 7.42% 8.58% 7.63% 6.20%
- ------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $614,237 $281,343 $118,623 $98,398 $90,672 $101,066
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average
net assets 0.43% 0.45% 0.48% 0.56% 0.63% 0.69%
Ratio of net investment income to
average net assets 3.04% 4.73% 7.10% 7.73% 7.36% 6.12%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------
Average commission rate paid 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 0.91% 0.93% 0.94% 0.97% 0.98% 1.05%
- -----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses 2.56% 4.25% 6.64% 7.32% 7.01% 5.76%
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
=======================================================================================================================
Institutional Share Calendar Year Returns 1993 1992 1991 1990 1989 1988
=======================================================================================================================
Returns for other share classes may vary 2.80% 3.32% 5.65% 7.75% 8.78% 7.06%
due to different fees and expenses. These
returns reflect fee waivers and reimbursements,
do not reflect sales loads, are not a guarantee
of future performance, and have not been audited.
- --------------------------------------------------------------------------------------------------------
</TABLE>
/4/ The Fund changed its fiscal year-end from March 31 to September 30.
/5/ Annualized.
Stagecoach Money Market Funds Prospectus 15
<PAGE>
100% Treasury Money Market Fund
- --------------------------------------------------------------------------------
Advisor: Wells Fargo Bank
- --------------------------------------------------------------------------------
[GRAPHIC] Investment Objective
The 100% Treasury Money Market Fund seeks to provide investors
with stability of principal and current income which is exempt
from state and local income taxes.
Investment Policies
We actively manage a portfolio exclusively composed of
obligations issued or guaranteed by the U.S. Treasury. We buy
obligations with remaining maturities of 397 days or less. We
maintain an overall dollar - weighted average maturity of 90
days or less.
- --------------------------------------------------------------------------------
[GRAPHIC] Permitted Investments
Under normal market conditions, we invest:
* 100% of assets in U.S. Treasury obligations.
As a temporary defensive measure or to maintain liquidity, we
may invest in shares of other money market funds that have
similar investment objectives.
- --------------------------------------------------------------------------------
[GRAPHIC] Important Risk Factors
You should consider both the General Investment Risks listed
on page 17 and the specific risks listed below. They are both
important to your investment choice.
There is no guarantee that we will be able to maintain a $1.00
per share net asset value. Fluctuations in share value may
cause a loss or gain in principal. Generally, short-term funds
do not earn as high a level of income as funds that invest in
longer-term instruments. The U.S. Treasury does not directly
or indirectly insure or guarantee the performance of the Fund.
Any capital gains realized by the Fund generally will not be
exempt from state and local taxes. For more information, see
"Taxes" on page 25, and the Statement of Additional
Information.
- --------------------------------------------------------------------------------
[GRAPHIC] Additional Fund Facts
Treasury obligations have historically involved little risk of
loss of principal if held to maturity. However, fluctuations
in market interest rates may cause the market value of
Treasury obligations in the Fund's portfolio to fluctuate.
Unlike the Treasury Money Market Fund, the 100% Treasury Money
Market Fund may not invest in repurchase agreements; the
income from which is not generally exempt from state and local
taxes.
For information on Fund fees and expenses, see "Summary of
Expenses" on page 6.
16 Stagecoach Money Market Funds Prospectus
<PAGE>
GENERAL INVESTMENT RISKS
- --------------------------------------------------------------------------------
Understanding the risks involved in mutual fund investing will help you make
an informed decision that takes into account your tolerance and preferences.
You should carefully consider risks common to all mutual funds, including the
Stagecoach Funds. Chief among these risks are the following:
* Unlike bank deposits, such as CDs or savings accounts, mutual funds
are not insured by the FDIC.
* We cannot guarantee we will meet our investment objectives. In
particular, we cannot guarantee that we will be able to maintain a
$1.00 per share net asset value.
* You cannot recover through insurance any loss due to investment
practices, nor can the Fund, the Institutions or investment advisors
"make good" any losses you might have.
* Investing in any mutual fund, including those deemed conservative,
involves risk, including the possible loss of any money you
invest.
* An investment in a single Fund, by itself, does not constitute a
complete investment plan.
* The Funds invest in debt securities, such as notes and bonds, that are
subject to credit risk and interest rate risk. Credit risk is the
possibility that an issuer of a security will be unable to make
interest payments or repay principal. Changes in the financial strength
of an issuer or changes in the credit rating of a security may affect
its value. Interest rate risk is the possibility that interest rates
may increase and reduce the resale value of securities in a Fund's
portfolio. Debt securities with longer maturities are generally more
sensitive to interest rate changes than those with shorter maturities.
Interest rate risk does not affect the interest paid by a debt security
unless it is specifically designed to pay an adjustable rate.
* The Funds' advisor may also use certain derivative instruments such as
options or futures contracts. The term "derivatives" covers a wide
range of investments but in general it refers to any financial
instrument whose value is derived, at least in part, from the price of
another security or a specified index, asset or rate. Some derivatives
may be more sensitive to interest rate changes or market moves, and
some may be susceptible to changes in yields or values due to their
structure or contract terms.
Stagecoach Money Market Funds Prospectus 17
<PAGE>
- --------------------------------------------------------------------------------
The following types of floating-rate derivative securities are NOT permitted
investments in the Funds:
* Capped floaters on which interest is not paid when market rates move
above a certain level;
* Leveraged floaters whose interest rates reset based on a formula that
magnifies changes in market interest rates;
* Range floaters on which interest is not paid if market interest rates
move outside a specified range;
* Dual index floaters whose interest rate reset provisions are tied to
more than one index; and
* Inverse floaters which have interest rates that reset in an opposite
direction of their index.
Investment practices and risk levels are carefully monitored. Every attempt is
made to ensure that the risk exposure for each Fund remains within the
parameters of its objective.
What follows is a general list of the types of risks (some of which are
described above) that may apply to a given Fund and a table showing some of the
additional investment practices that each Fund may use. Additional information
about these practices is available in the Statement of Additional
Information.
Counter-Party Risk-- The risk that the other party in a repurchase agreement or
other transaction will not fulfill its contract obligation.
Credit Risk-- The risk that the issuer of a debt security will be unable to make
interest payments or repay principal on schedule. If an issuer does default, the
affected security could lose all of its value, or be renegotiated at a lower
interest rate or principal amount. Affected securities might also lose
liquidity. Credit risk also includes the risk that a party in a transaction may
not be able to complete the transaction as agreed.
Diplomatic Risk-- The risk that an adverse change in the diplomatic relations
between the United States and another country might reduce the value or
liquidity of investments in either country.
Information Risk-- The risk that information about a security is either
unavailable, incomplete or is inaccurate.
18 Stagecoach Money Market Funds Prospectus
<PAGE>
GENERAL INVESTMENT RISKS
- --------------------------------------------------------------------------------
Interest Rate Risk-- The risk that changes in interest rates can reduce the
value of an existing security. Generally, when interest rates increase, the
value of a debt security decreases. The effect is usually more pronounced for
securities with longer dates to maturity.
Leverage Risk-- The risk that a practice may increase a Fund's exposure to
Market Risk, Interest Rate Risk or other risks by, in effect, increasing assets
available for investment.
Liquidity Risk-- The risk that a security cannot be sold, or cannot be sold
without adversely affecting its fair price.
Market Risk-- The risk that the value of a stock, bond or other security will be
reduced by market activity. This is a basic risk associated with all securities.
Political Risk-- The risk that political actions, events or instability may be
unfavorable for investments made in a particular nation's or region's industry,
government or markets.
------------------------------------------------------------------------
Investment Practice/Risk
The following table lists some of the additional investment practices of
the Funds, including some not disclosed in the Investment Objective and
Investment Policies sections of the Prospectus. The risks indicated
after the description of the practice are NOT the only potential risks
associated with that practice, but are among the more prominent. Market
risk is assumed for each. See the Investment Objective and Investment
Policies for each Fund or the Statement of Additional Information for
more information on these practices.
Investment practices and risk levels are carefully monitored. We attempt
to ensure that the risk exposure for each Fund remains within the
parameters of its objective.
Remember, each Fund is designed to meet different investment needs and
has a different investment objective and investment policies. Each Fund
engages in the investment practices described below to varying degrees.
In addition to the general risks discussed above, you should carefully
consider and evaluate any special risks that may apply to investing in a
particular Fund. See the "Important Risk Factors" in the summary for
each Fund. You should also see the Statement of Additional information
for additional information about the investment practices and risks
particular to each Fund.
------------------------------------------------------------------------
Stagecoach Money Market Funds Prospectus 19
<PAGE>
<TABLE>
<CAPTION>
Prime Treasury 100% Treasury
==============================================================================================================
<S> <C> <C> <C> <C>
INVESTMENT PRACTICE: RISK:
==============================================================================================================
FLOATING AND VARIABLE RATE DEBT
Instruments with interest rates Interest Rate and * *
that are adjusted either Credit Risk
on a schedule or when an index
or benchmark changes.
- --------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A transaction in which the Credit and * *
seller of a security agrees Counter-Party Risk
to buy back a security at an
agreed upon time and
price, usually with interest.
- --------------------------------------------------------------------------------------------------------------
OTHER MUTUAL FUNDS
The temporary investment in Market Risk * * *
shares of another mutual fund.
A pro rata portion of the other
fund's expenses, in addition to
the expenses paid by the Fund,
will be borne by Fund shareholders.
- --------------------------------------------------------------------------------------------------------------
FOREIGN OBLIGATIONS
Dollar-denominated debt obligations Information, Liquidity, * *
of foreign branches of U.S. branches Political, Regulatory,
of foreign banks. and Diplomatic Risk
- --------------------------------------------------------------------------------------------------------------
LOANS OF PORTFOLIO SECURITIES
The practice of loaning securities Credit, Leverage, * * *
in brokers, dealers and Counter-Party Risk
and financial institutions to
increase return on those securities.
Loans may be made in accordance with
existing investment policies. Oregon,
Arizona and National Tax-Free Funds,
Limited to 30% of total assets for
the 33 1/3% for the other Funds.
- --------------------------------------------------------------------------------------------------------------
BORROWING POLICIES
The ability to borrow an equivalent Leverage Risk * * *
of 10% of assets from banks for
temporary purposes to meet
shareholder redemptions.
- --------------------------------------------------------------------------------------------------------------
ILLIQUID SECURITIES
A security which cannot be Liquidity Risk * * *
readily sold or cannot be
readily sold without negatively
affecting its fair value.
The limit is 15% of assets for all
but the California
Tax-Free Bond Fund, which has a
limit of 10%.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
20 Stagecoach Money Market Funds Prospectus
<PAGE>
YOUR FUND ACCOUNT
- --------------------------------------------------------------------------------
This section tells you how to open a Fund account and how to buy, sell or
exchange Fund shares once your Fund account is open.
Typically, Service Class shares are bought and held on your behalf by the
Institution through which you are investing. Check with your customer account
representative or your Customer Account agreement for the rules governing your
investment.
Important Information:
* Read this Prospectus carefully. Discuss any questions you have with
your Institution. You may also ask for copies of the Statement of
Additional Information and Annual Report. Copies are available free of
charge from your Institution or by calling 1-800-260-5969.
* We process requests to buy or sell shares each business day.
* Requests we receive from an Institution in proper form before 12:00
Noon (Pacific time) for the Prime Money Market Fund and the Treasury
Money Market Fund generally are processed at 12:00 Noon on the same
day.
* Requests we receive from an institution in proper from before 9:00 AM
(Pacific Time) for the 100% Treasury Money Market Fund generally are
processed at 9:00 AM on the same day.
* Requests we receive after the above-specified times are processed the
next business day at the applicable Net Asset Value (NAV).
* Payment for shares may be made by Institutions in funds immediately
available to us no later than 1:00 p.m. (Pacific time) on the same
business day as the purchase order is processed. If payment is not
received on the same business day, the order will be cancelled and the
Institution will be responsible for any loss.
* As with all mutual fund investments, the price you pay to purchase
shares or the price you receive when you redeem shares is the NAV next
determined after a request has been received in proper form.
* We determine the NAV of each Fund's shares by subtracting the Fund
liabilities from its total assets, and then dividing the result by the
total number of outstanding shares of that Fund. See the Statement of
Additional Information for further information.
* On any day the trading markets for both U.S. government securities and
money market instruments close early, the Funds will close early.
Stagecoach Money Market Funds Prospectus 21
<PAGE>
- --------------------------------------------------------------------------------
How to Buy Shares
You can open a Fund account and buy Fund shares through an Institution through
which you have established a Customer Account. Investors interested in
purchasing Service Class shares of the Funds should contact an account
representative at their Institution and should understand the following:
* Share purchases are made through a Customer Account at an Institution
in accordance with the terms of the Customer Account involved;
* Institutions are usually the holders of record of Institutional shares
held through Customer Accounts and maintain records reflecting their
customers' beneficial ownership of the shares;
* Institutions are responsible for transmitting their customers' purchase
and redemption orders to the Funds and for delivering required payment
on a timely basis;
* The exercise of voting rights and the delivery of shareholder
communications from the Funds is governed by the terms of the Customer
Account involved; and
* Institutions may charge their customers account fees and may receive
fees from us with respect to investments their customers have made with
the Funds. See "Organization and Management of the Funds" for further
details about these fees.
22 Stagecoach Money Market Funds Prospectus
<PAGE>
YOUR FUND ACCOUNT
- --------------------------------------------------------------------------------
How to Sell Shares
Service Class shares must be redeemed in accordance with the account agreement
governing the Customer's Account at the Institution. Please read the Customer
Account agreement with your Institution for rules governing selling shares.
General Notes for Selling Shares
* We process requests for the Prime Money Market and Treasury Money
Market Funds that we receive in proper form before 12:00 Noon
(Pacific Time) on any business day at the NAV determined
as of 12:00 Noon on the same business day.
* We process requests for the 100% Treasury Money Market Fund that we
receive in proper form before 9:00 AM (Pacific Time) on any business
day at the NAV determined as of 9:00 AM on the same business day.
* Redemption proceeds are usually wired to the redeeming Institution the
following business day.
* Requests we receive after 12:00 Noon (Pacific Time) are processed the
next business day as of 12:00 Noon.
* We reserve the right to delay payment of a redemption for up to ten
days so that we may be reasonably certain that investments made by
check have been collected. Payments of redemptions also may be delayed
under extraordinary circumstances or as permitted by the SEC in order
to protect remaining shareholders. Payments of redemptions also may be
delayed up to seven days under normal circumstances, although it is not
our policy to delay such payments.
* Generally, we pay redemption requests in cash, unless the redemption
request is for more than $250,000 or 1% of the net assets of the Fund
by a single shareholder over any ninety-day period. If a request for
a redemption is over these limits it may be to the detriment of
existing shareholders. Therefore, we may pay the redemption in part
or in whole in securities of equal value.
Stagecoach Money Market Funds Prospectus 23
<PAGE>
EXCHANGES
- --------------------------------------------------------------------------------
Exchanges between Stagecoach Funds are two transactions: a sale of one Fund and
the purchase of another. In general, the same rules and procedures that apply to
sales and purchases apply to exchanges. There are, however, additional factors
you should keep in mind while making or considering an exchange:
* You should carefully read the Prospectus for the Fund into which you
wish to exchange.
* Every exchange involves selling Fund shares and that sale may produce a
capital gain or loss for federal income tax purposes.
* If you are making an initial investment into a new Fund through an
exchange, you must exchange at least the minimum first purchase amount
of the Fund you are redeeming, unless your balance has fallen below
that amount due to market conditions.
* Any exchange between Funds you already own must meet the minimum
redemption and subsequent purchase amounts for the Funds involved.
* In order to discourage excessive Fund transaction expenses that must be
borne by other shareholders, we reserve the right to limit or reject
exchange orders. Generally, we will notify you 60 days in advance of
any changes in your exchange privileges.
* You may make exchanges only between like share classes.
24 Stagecoach Money Market Funds Prospectus
<PAGE>
OTHER INFORMATION
- --------------------------------------------------------------------------------
Dividend and Capital Gain Distributions
Distributions paid by a Fund are automatically reinvested to purchase new shares
of the Fund. The new shares are purchased at NAV, generally on the day the
distributions are paid.
Taxes
The following discussion regarding taxes is based on laws that were in effect as
of the date of this Prospectus. The discussion summarizes only some of the
important tax considerations that affect the Funds and you as a shareholder. It
is not intended as substitute for careful tax planning. You should consult your
tax advisor about your specific tax situation. Federal income tax considerations
are discussed further in the Statement of Additional Information.
We will pass on to you net investment income and net short-term capital gains
earned by a Fund as dividend distributions. These are taxable to you as ordinary
income.
We will pass on to you any net capital gains earned by a Fund as a capital gain
distribution. In general, these distributions will be taxable to you as long-
term capital gains and are taxable when paid. However, distributions declared in
October, November and December and distributed by the following January will be
taxable as if they were paid on December 31 of the year in which they were
declared. We will notify you as to the status of your Fund distributions.
Your redemptions, including exchanges, will ordinarily result in a taxable
capital gain or loss, depending on the amount you receive for your shares and
the amount you paid for them. Foreign shareholders may be subject to different
tax treatment, including withholding. In certain circumstances, U.S. residents
will be subject to back-up withholding.
Historical Fund Information
Effective as of the date of this Prospectus, the Company changed its name from
Stagecoach Funds Inc. to Wells Fargo Funds, Inc. The "Stagecoach" brand name was
incorporated into the name of each individual actively managed Fund, including
the Funds listed in this Prospectus.
Prime Money Market Fund-The Fund operated as Pacific American Liquid
Assets, Inc. from commencement of operations on April 30, 1981 until it was
reorganized as a portfolio of Pacific American Fund on October 1, 1985. On
October 1, 1994, the Fund was reorganized as the Pacific American Money Market
Portfolio, a portfolio of Pacifica Funds Trust. In July 1995, the Fund was
renamed the Pacifica Prime Money Market Fund, and on September 6, 1996, the Fund
was reorganized as the Prime Money Market Fund of the Company. Prior to
April 1, 1996, First Interstate Capital Management, Inc. ("FICM") served as the
Fund's adviser. In connection with the merger of First Interstate Bancorp into
Wells Fargo & Company on April 1, 1996, FICM was renamed Wells Fargo Investment
Management, Inc.
Stagecoach Money Market Funds Prospectus 25
<PAGE>
- --------------------------------------------------------------------------------
Treasury Money Market Fund-Prior to August 1, 1990, the Treasury Money Market
Fund was known as the Short-Term Government Fund, which commenced operations on
October 1, 1985, and invested in obligations issued or guaranteed by agencies
and instrumentalities of the U.S. Government. The Fund operated as a portfolio
of Pacific American Funds through October 1, 1994, when it was reorganized as
the Pacific American U.S. Treasury Portfolio, a portfolio of Pacifica Funds
Trust. In July 1995, the Fund was renamed the Pacifica Treasury Money Market
Fund, and on September 6, 1996, the Fund was reorganized as a series of
Stagecoach Funds. Prior to April 1, 1996, FICM served as the Fund's adviser. In
connection with the merger of First Interstate Bancorp into Wells Fargo &
Company on April 1, 1996, FICM was renamed Wells Fargo Investment Management,
Inc.
The 100% Treasury Money Market Fund commenced operations on August 3, 1998.
Share Class - This Prospectus contains information about Service Class shares.
The Funds offer additional share classes with different expenses and returns
than those described here. Call Stephens Inc. at 1-800-643-9691 for information
on these or other investment options in Stagecoach Funds.
Statements - The Institutions mail statements after any account activity,
including dividends or capital gains, and at year-end. The Institutions will
also send any necessary tax reporting documents in January, and will send Annual
and Semi-Annual Reports each year.
Statement of Additional Information - Additional information about some of the
topics discussed in this Prospectus as well as details about performance
calculations, servicing plans, tax issues and other important issues are
available in the Statement of Additional Information for the Funds. The
Statement of Additional Information should be read along with this Prospectus
and may be obtained free of charge by calling Investor Services at 1-800-260-
5969.
Glass-Steagall Act - Morrison & Foerster LLP, counsel to the Funds and special
counsel to Wells Fargo Bank, has advised us and Wells Fargo Bank that Wells
Fargo Bank and its affiliates may perform the services contemplated by the
Advisory Contracts and detailed in this Prospectus and the Statement of
Additional Information without violation of the Glass-Steagall Act. Counsel has
pointed out that future judicial or administrative decisions, or future federal
or state laws may prevent these entities from continuing in their roles.
26 Stagecoach Money Market Funds Prospectus
<PAGE>
OTHER INFORMATION
- --------------------------------------------------------------------------------
Voting Rights - All shares of the Funds have equal voting rights and are voted
in the aggregate, rather than by series or class, unless the matter affects only
one series or class. A shareholder of record is entitled to one vote for each
share owned and fractional votes for each fractional share owned. For a detailed
description of voting rights, see the "Capital Stock" section of the Statement
of Additional Information.
Stagecoach Money Market Funds Prospectus 27
<PAGE>
ORGANIZATION AND MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
A number of different companies provide services to the Funds. This section
shows how the Funds are organized, the companies that perform different
services, and how they are compensated. Further information is available in the
Statement of Additional Information for the Funds.
About Stagecoach
Each Fund is one of over 30 Funds of Wells Fargo Funds, Inc. under the name
Stagecoach Funds, Inc., an open-end management investment company. Wells Fargo
Funds, Inc. was organized under the name Stagecoach Funds, Inc. on September
9, 1991, as a Maryland Corporation.
The Board of Directors of Wells Fargo Funds, Inc. supervises the Funds'
activities and approves the selection of various companies hired to manage the
Funds' operation. The major service providers are described in the diagram
below. If the Board believes that it is in the best interests of the
shareholders it may make a change in one of these companies.
We do not hold annual shareholder meetings. We may hold special shareholder
meetings to ask shareholders to vote on items such as electing or removing board
members, or amending fundamental investment strategies or policies.
================================================================================
Shareholders
================================================================================
Institutions and Their Representatives
================================================================================
Advise current and prospective shareholders on their Fund investments
- --------------------------------------------------------------------------------
|
================================================================================
Transfer and
Distributor & Dividend Disbursing Shareholder
Co-Administrator Administrator Agent Servicing Agents
================================================================================
Stephens Inc. Wells Fargo Bank Wells Fargo Bank Various
111 Center St. 525 Market St. 525 Market St. Institutions
Little Rock, AR San Francisco, CA San Francisco, CA
Markets the Manages the Funds' Maintains records Provide services
Funds, distributes business activities of shares and to customers
shares, and manages supervises the
the Funds' paying of dividends
business activities
- --------------------------------------------------------------------------------
|
================================================================================
Investment Advisor Custodian
================================================================================
Wells Fargo Bank, 525 Market St., Wells Fargo Bank, 525 Market St.,
San Francisco, CA San Francisco, CA
Manages the Funds' Provides safekeeping for the
investment activities Funds' assets
- --------------------------------------------------------------------------------
|
================================================================================
Board of Directors
================================================================================
Supervises the Funds' activities
- --------------------------------------------------------------------------------
28 Stagecoach Money Market Funds Prospectus
<PAGE>
ORGANIZATION AND MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
In the following sections, the percentages shown are the percentages of the
average daily net assets of the Service Class shares paid on an annual basis for
the services described. The Statement of Additional Information has more
detailed information about the Investment Advisor and the other service
providers and plans described here.
The Investment Advisor
Wells Fargo Bank is the advisor for each of the Funds. Wells Fargo Bank, founded
in 1852, is the oldest bank in the western United States and is one of the
largest banks in the United States. Wells Fargo Bank is a wholly owned
subsidiary of Wells Fargo & Company, a national bank holding company. As of
December 31, 1997, Wells Fargo Bank and its affiliates managed over $62 billion
in assets. The Funds paid Wells Fargo Bank the following for advisory services
(after fee waivers) for the fiscal period ended March 31, 1997:
------------------------------------------------
Prime Money Market Fund .18%
------------------------------------------------
Treasury Money Market Fund .17%
------------------------------------------------
The Administrator
Wells Fargo Bank is the administrator of the Funds. Wells Fargo Bank is paid
.03% of each Fund's assets for these services.
The Distributor and Co-Administrator
Stephens Inc. is the Funds' distributor and co-administrator. Stephens Inc.
receives .04% of each Fund's assets for its role as co-administrator.
Shareholder Servicing Plan
We have Shareholder Servicing Plans for the Service Class shares. We have
agreements with various Institutions as shareholder servicing agents to process
purchase and redemption requests, to service shareholder accounts, and to
provide other related services.
For these services, the Service Class of each Fund pays as follows:
-------------------------------------------------
Prime Money Market Fund .20%
-------------------------------------------------
Treasury Money Market Fund .20%
-------------------------------------------------
100% Treasury Money Market Fund .20%
-------------------------------------------------
Stagecoach Money Market Funds Prospectus 29
<PAGE>
HOW TO READ THE FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
After the description of each Fund, there are charts showing important financial
information about the Fund. The charts are called "Financial Highlights" and are
designed to help you understand the past performance of the Fund. The financial
statements from which these Financial Highlights were derived were audited by
KPMG Peat Marwick LLP, except as indicated. The financial statements are
included in each Fund's most recent Annual or Semi-Annual Report and are
available free of charge by calling 1-800-260-5969. Other auditors audited the
financial statements for the Prime Money Market and Treasury Money Market Funds
for periods prior to October 1, 1995.
Here is an explanation of some terms that will help you read these charts.
Net Asset Value (NAV)- The net value of one share of a class of a Fund. See the
Glossary for a fuller definition.
Net Investment Income- Net investment income is calculated by subtracting the
aggregate Fund expenses from the Fund's investment income. The number in the
financial highlights is the net investment income of a class divided by the
number of outstanding shares of that class. The amount distributed to
shareholders is listed under the heading "Less Distributions-Dividends from Net
Investment Income."
Net Realized and Unrealized Gain (Loss) on Investments- We continually buy and
sell investments. The profit on an investment sold for more than its purchase
price is a realized capital gain while a loss on an investment sold for less
than its purchase price is a realized capital loss. An unrealized gain or loss
occurs when an investment gains or loses value but is not sold. The amount of
capital gain or loss per share that was paid to shareholders is listed under the
heading "Less Distributions-Distributions From Net Realized Gains."
Net Assets- The value of the investments in a Fund's portfolio (after accounting
for expenses) that are attributable to a particular class of the Fund.
Ratio of Expenses to Average Net Assets- This ratio reflects the amount paid by
a Fund to cover the costs of its daily operations, and includes advisory,
administration and other operating expenses. It is expressed as a percentage of
the average daily net assets of a class.
Ratio of Net Investment Income (Loss) to Average Net Assets- This ratio is the
result of dividing net investment income (or loss) by average net assets.
30 Stagecoach Money Market Funds Prospectus
<PAGE>
GLOSSARY
- --------------------------------------------------------------------------------
Annual and Semi-Annual Reports
Documents that provide certain financial and other important information for the
most recent reporting period, including each Fund's portfolio of
investments.
Business Day
Any day the Funds are open. The Funds are generally open Monday through Friday
and are closed weekends and federal bank holidays.
Commercial Paper
Debt instruments issued by banks, corporations and other issuers to finance
short-term credit needs. Commercial Paper typically is of high credit quality
and offers below market interest rates.
Current Income
Earnings in the form of dividends or interest as opposed to capital growth.
Debt Securities
Generally, a promise to pay interest and repay principal by an individual or
group of individuals sold as a security. The owner of the security is entitled
to receive any such payments. Examples include bonds and mortgage-backed
securities and can include securities in which the right to receive interest and
principal repayment have been sold separately.
Derivatives
Securities whose values are derived in part from the value of another security
or index. An example is a stock option.
Distributions
Dividends and/or capital gains paid by a Fund on its shares.
Dollar-Denominated
Securities issued by foreign banks, companies or governments in U.S. dollars.
Duration
A measure of a security's or portfolio's sensitivity to changes in interest
rates. Duration is usually expressed in years, with longer durations typically
more sensitive to interest rate changes than shorter durations.
FDIC
The Federal Deposit Insurance Corporation. This is the company that provides
federally sponsored insurance covering bank deposits such as savings accounts
and CDs. Mutual funds are not FDIC insured.
Stagecoach Money Market Funds Prospectus 31
<PAGE>
- --------------------------------------------------------------------------------
Illiquid Security
A security which cannot be readily sold, or cannot be readily sold without
negatively affecting its fair price.
Institution
An affiliate, franchise or correspondent bank of Wells Fargo & Company and other
institutions.
Liquidity
The ability to readily sell a security at its fair price.
Moody's
One of the largest nationally recognized ratings organizations.
Nationally Recognized Ratings Organization (NRRO)
A company that examines the ability of a bond issuer to meet its obligations and
which rates the bonds accordingly.
Net Asset Value (NAV)
The value of a single fund share. It is determined by adding together all of a
Fund's assets, subtracting expenses and other liabilities, then dividing by the
total number of shares. The NAV per share of the Prime Money Market and Treasury
Money Market Funds is determined each business day at 12:00 noon and 1:00 PM
(Pacific Time). The NAV per share of the 100% Treasury Money Market Fund is
determined each business day at 9:00 AM and 1:00 PM (Pacific Time).
Public Offering Price (POP)
The NAV with the sales load added.
Repurchase Agreement
An agreement between a buyer and seller of a security in which the seller agrees
to repurchase the security at an agreed upon price and time.
Shareholder Servicing Agent
An entity appointed by a Fund to maintain shareholder accounts and record,
assist and provide information to shareholders or perform similar
functions.
S&P
One of the largest nationally recognized ratings organizations. Standard and
Poor's also publishes various indexes or lists of companies representative of
sectors of the U.S. economy.
Statement of Additional Information
A document that supplements the disclosures made in the Prospectus.
32 Stagecoach Money Market Funds Prospectus
<PAGE>
GLOSSARY
- --------------------------------------------------------------------------------
U.S. Government Obligations
Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Weighted Average Maturity
The average maturity for the debt securities in a portfolio on a dollar-for-
dollar basis.
Stagecoach Money Market Funds Prospectus 33
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
- --------------------------------------------------------------------------------
<PAGE>
WELLS FARGO FUNDS/R/
You may wish to review the following documents:
Statement of Additional Information
supplements the disclosures made by this Prospectus.
The Statement of Additional Information has been
filed with the SEC and is incorporated by reference
into this Prospectus and is legally part of this
Prospectus.
Annual/Semi-Annual Report
provides certain financial and other important
information for the most recent reporting period
and each Fund's portfolio of investments.
These are available free of
charge by calling
1-800-260-5969, or from
Wells Fargo Funds
PO Box 7066
San Francisco, CA
94120-7066
------------------------------------------------------------------------
WELLS FARGO MONEY MARKET FUNDS:
------------------------------------------------------------------------
* are not insured by the FDIC
* are not obligations or deposits of Wells Fargo Bank, nor guaranteed
by Wells Fargo Bank
* involve investment risk, including possible loss of principal.
* seek to maintain a stable net asset value of $1.00 per share,
however, there can be no assurance that a fund will meet this goal.
Yields will vary with market conditions.
------------------------------------------------------------------------
[LOGO OF RECYCLED PAPER]
Printed on Recycled Paper SC SRV P (8/98)
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WELLS FARGO FUNDS, INC.
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
Dated August 1, 1998
STAGECOACH CALIFORNIA TAX-FREE MONEY MARKET FUND
STAGECOACH GOVERNMENT MONEY MARKET FUND
STAGECOACH MONEY MARKET FUND
STAGECOACH NATIONAL TAX-FREE MONEY MARKET FUND
STAGECOACH TREASURY MONEY MARKET FUND
STAGECOACH 100% TREASURY MONEY MARKET FUND
Class A Shares
Wells Fargo Funds, Inc. (the "Company") is an open-end, management
investment company. This Statement of Additional Information ("SAI") contains
additional information about six funds in the Stagecoach Family of Funds (each,
a "Fund" and collectively, the "Funds") -- the STAGECOACH CALIFORNIA TAX-FREE
MONEY MARKET, STAGECOACH GOVERNMENT MONEY MARKET, STAGECOACH MONEY MARKET,
STAGECOACH NATIONAL TAX-FREE MONEY MARKET, STAGECOACH TREASURY MONEY MARKET, and
STAGECOACH 100% TREASURY MONEY MARKET FUNDS. The Stagecoach California Tax-Free
Money Market Fund offers a single class of shares that are sometimes referred to
as "Class A shares." Each of the other Funds offers Class A shares. This SAI
relates to all such classes of shares.
This SAI is not a prospectus and should be read in conjunction with the
Funds' Prospectus, dated August 1, 1998. All terms used in this SAI that are
defined in the Prospectus have the meanings assigned in the Prospectus. A copy
of the Prospectus may be obtained without charge by calling 1-800-222-8222 or
writing to Wells Fargo Funds, Inc., P.O. Box 7066, San Francisco, CA 94120-
7066.
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TABLE OF CONTENTS
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Historical Fund Information........................................ 1
Investment Restrictions............................................ 1
Additional Permitted Investment Activities......................... 7
Risk Factors....................................................... 17
Special Considerations Affecting California Municipal Obligations.. 19
Management......................................................... 23
Performance Calculations........................................... 38
Determination of Net Asset Value................................... 44
Additional Purchase and Redemption Information..................... 45
Portfolio Transactions............................................. 46
Fund Expenses...................................................... 48
Federal Income Taxes............................................... 49
Capital Stock...................................................... 55
Other.............................................................. 57
Independent Auditors............................................... 57
Financial Information.............................................. 58
Appendix........................................................... A-1
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HISTORICAL FUND INFORMATION
Effective as of the date of this SAI, the Company and each Fund changed
their names as follows. The name of the Company was changed from "Stagecoach
Funds, Inc." to "Wells Fargo Funds, Inc." With respect to the Funds, the word
"Stagecoach" was added to the front of each Fund name as indicated on the cover
page of this SAI.
The Stagecoach California Tax-Free Money Market Fund was originally
organized as a fund of the Company and commenced operations on July 1, 1992.
The Stagecoach Government Money Market Fund was originally organized as the
Pacifica Government Money Market Fund on April 26, 1988, as an investment
portfolio of Pacifica Funds Trust ("Pacifica"). On September 6, 1996, the
Pacifica Government Money Market Fund was reorganized as the Company's
Government Money Market Fund.
The Stagecoach Money Market Fund was originally organized as a fund of the
Company and commenced operations on July 1, 1992.
The Stagecoach National Tax-Free Money Market Fund was originally organized
as a fund of the Company and commenced operations on April 2, 1996.
The Stagecoach Treasury Money Market Fund commenced operations on October
1, 1985, as the Short-Term Government Fund of the Pacific American Funds. The
Fund operated as a portfolio of Pacific American Fund through October 1, 1994,
when it was reorganized as the Pacific American U.S. Treasury Portfolio, a
portfolio of Pacifica Funds Trust. In July 1995, the Fund was renamed the
Pacifica Treasury Money Market Fund. On September 6, 1996, the Pacifica
Treasury Money Market Fund was reorganized as the Company's Treasury Money
Market Fund.
The Stagecoach 100% Treasury Money Market Fund commenced operations on
August 1, 1998.
INVESTMENT RESTRICTIONS
Fundamental Investment Policies
-------------------------------
Each Fund has adopted the following investment restrictions, all of which
are fundamental policies; that is, they may not be changed without approval by
the vote of the holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")) of the outstanding voting securities of
such Fund.
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The Stagecoach California Tax-Free Money Market Fund and Stagecoach Money Market
Fund may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of such Fund's investments in that industry would be 25% or
more of the current value of such Fund's total assets, provided that there is no
limitation with respect to investments in (i) by the Stagecoach California Tax-
Free Money Market Fund in municipal securities (for the purpose of this
restriction, private activity bonds and notes shall not be deemed municipal
securities if the payments of principal and interest on such bonds or notes is
the ultimate responsibility of non-governmental issuers), (ii) with respect to
both Funds, the obligations of the U.S. Government, its agencies or
instrumentalities, and (iii) the obligations of domestic banks (for the purpose
of this restriction, domestic bank obligations do not include obligations of
U.S. branches of foreign banks or obligations of foreign branches of U.S.
banks);
(2) purchase or sell real estate or real estate limited partnerships
(other than municipal obligations with respect to the Stagecoach California Tax-
Free Money Market Fund, or other than money market securities with respect to
the Stagecoach Money Market Fund, or other securities secured by real estate or
interests therein or securities issued by companies that invest in real estate
or interests therein), commodities or commodity contracts (including futures
contracts);
(3) purchase securities on margin (except for short-term credits necessary
for the clearance of transactions with regard to both Funds and except for
margin payments in connection with options, futures and options on futures with
regard to the Stagecoach California Tax-Free Money Market Fund) or make short
sales of securities;
(4) underwrite securities of other issuers, except to the extent that the
purchase of municipal securities or other permitted investments directly from
the issuer thereof or from an underwriter for an issuer and the later
disposition of such securities in accordance with a Fund's investment program
may be deemed to be an underwriting;
(5) make investments for the purpose of exercising control or management;
(6) issue senior securities, except that each Fund may borrow from banks
up to 10% of the current value of its net assets for temporary purposes only in
order to meet redemptions, and these borrowings may be secured by the pledge of
up to 10% of the current value of its net assets (but investments may not be
purchased while any such outstanding borrowings exceed 5% of its net assets);
(7) write, purchase or sell puts, calls, options, warrants or any
combination thereof, except that the Funds may purchase securities with put
rights in order to maintain liquidity; nor
In addition, neither the Stagecoach California Tax-Free Money Market Fund
nor the Stagecoach Money Market Fund may make loans of portfolio securities or
other
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assets, except that loans for purposes of this restriction will not include the
purchase of fixed time deposits, repurchase agreements, commercial paper and
other short-term obligations, and other types of debt instruments commonly sold
in public or private offerings.
The Stagecoach Government Money Market Fund may not:
(1) invest more than 10% of the aggregate value of its total assets in
investments that are illiquid, or not readily marketable (including repurchase
agreements having maturities of more than seven calendar days, variable- and
floating-rate demand notes requiring receipt of principal note amount on more
than seven days notice and securities of foreign issuers that are not listed on
a recognized domestic or foreign securities exchange);
(2) borrow money or pledge or mortgage its assets, except that the Fund
may borrow from banks up to 10% of the current value of its total net assets for
temporary or emergency purposes and those borrowings may be secured by the
pledge of not more than 15% of the current value of its total net assets (but
investments may not be purchased by the Fund while any such borrowings exist);
(3) make loans, except loans of portfolio securities and except that the
Fund may enter into repurchase agreements with respect to its portfolio
securities and may purchase the types of debt instruments described in the
Prospectuses or this SAI. The Fund may invest in repurchase agreements maturing
in more than seven days (unless subject to a demand feature) if any such
investment, together with any illiquid securities (including securities which
are subject to legal or contractual restrictions on resale) held by the Fund,
does not exceed 10% of the value of its total assets;
(4) invest in companies for the purpose of exercising control or
management;
(5) knowingly purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization, or
where otherwise permitted by the 1940 Act;
(6) invest in real property (including limited partnership interests),
commodities, commodity contracts, or oil, gas and other mineral resource,
exploration, development, lease or arbitrage transactions;
(7) acquire securities subject to restrictions on disposition imposed by
the Securities Act of 1933 (the "1933 Act"), if, immediately after and as a
result of such acquisition, the value of such restricted securities and all
other illiquid securities held by the Fund would exceed 10% of the value of the
Fund's total assets;
(8) engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may technically
cause it to be considered an underwriter as that term is defined under the 1933
Act;
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(9) sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(10) mortgage, pledge, or hypothecate any of its assets, except as
described in fundamental investment policy (2);
(11) purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, its Advisor, the sponsor, or the
distributor, each owning beneficially more than 1/2 of 1% of the securities of
such issuer, together own more than 5% of the securities of such issuer;
(12) invest more than 5% of its net assets in warrants which are
unattached to securities, included within that amount, no more than 2% of the
value of the Fund's net assets, may be warrants that are not listed on the New
York or American Stock Exchanges; nor
(13) invest more than 5% of the current value of its total assets in the
securities of companies that, including predecessors, have a record of less than
three years' continuous operation.
The Stagecoach National Tax-Free Money Market Fund may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the Fund's investments in that industry would be 25% or
more of the current value of the Fund's total assets, provided that there is no
limitation with respect to investments in (i) municipal securities (for the
purpose of this restriction, private activity bonds and notes shall not be
deemed municipal securities if the payment of principal and interest on such
bonds or notes is the ultimate responsibility of non-governmental entities);
(ii) obligations of the U.S. Government, its agencies or instrumentalities
(including government-sponsored enterprises); and (iii) the obligations of
domestic banks (for the purpose of this restriction, domestic bank obligations
do not include obligations of U.S. branches of foreign banks or obligations of
foreign branches of U.S. banks);
(2) purchase or sell real estate or real estate limited partnerships
(other than municipal obligations or other securities secured by real estate or
interests therein or securities issued by companies that invest in real estate
or interests therein), commodities or commodity contracts (including futures
contracts) except that the Fund may purchase securities of an issuer which
invests or deals in commodities and commodity contracts and except that the Fund
may enter into futures and options contracts in accordance with its investment
policies;
(3) purchase securities on margin (except for short-term credits necessary
for the clearance of transactions), or make short sales of securities;
(4) underwrite securities of other issuers, except to the extent that the
purchase of municipal securities or other permitted investments directly from
the issuer thereof or from an
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underwriter for an issuer and the later disposition of such securities in
accordance with the Fund's investment program may be deemed to be an
underwriting;
(5) make investments for the purpose of exercising control or management;
(6) issue senior securities, except that the Fund may borrow from banks up
to 10% of the current value of its net assets for temporary purposes only in
order to meet redemptions, and these borrowings may be secured by the pledge of
up to 10% of the current value of its net assets (but investments may not be
purchased while any such outstanding borrowing in excess of 5% of its net assets
exists);
(7) write, purchase or sell puts, calls, warrants, options or any
combination thereof, except that the Fund may purchase securities with put
rights in order to maintain liquidity;
(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities, including
government-sponsored enterprises) if, as a result, with respect to 75% of its
total assets, more than 5% of the value of the Fund's total assets would be
invested in the securities of any one issuer or, with respect to 100% of its
total assets the Fund's ownership would be more than 10% of the outstanding
voting securities of such issuer; nor
(9) make loans, except that the Fund may purchase or hold debt
instruments, lend its portfolio securities or enter into repurchase agreement
transactions in accordance with its investment policies.
With regard to fundamental investment restriction number (1) above, the
Fund intends to reserve freedom of action to have in excess of 25% of the value
of the respective total assets invested in obligations of the banking industry.
Regarding this fundamental concentration policy, the Fund may hold in excess of
25% of the value of the assets in obligations of the banking industry to the
extent that the Fund holds obligations with such credit enhancements as letters
of credit issued by domestic bank issuers, which will be considered to be
obligations of domestic banks. The staff of the U.S. Securities and Exchange
Commission ("SEC") takes the position that the exclusion with respect to banks
may only be applied to domestic banks. For this purpose, the staff also takes
the position that U.S. branches of foreign banks and foreign branches of
domestic banks may, if certain conditions are met, be treated as "domestic
banks". The Company currently intends to consider only obligations of "domestic
banks" to be within the exclusion with respect to bank obligations.
Fundamental investment restriction number (8), above, is less restrictive
than Rule 2a-7 of the 1940 Act. Nonetheless, it is the operating policy of the
Fund to comply with the diversification requirements under Rule 2a-7.
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The Stagecoach Treasury Money Market Fund and Stagecoach 100% Treasury Money
Market Fund may not:
(1) purchase common stocks and voting securities (including state,
municipal or industrial revenue bonds) except for securities of other investment
companies;
(2) borrow money or issue senior securities, except that the Funds may
borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of its total assets at the time
of such borrowing. The Funds will not purchase securities while their
borrowings (including reverse repurchase agreements) in excess of 5% of their
total assets are outstanding. As a matter of non-fundamental policy, the Funds
intend to limit their investments in reverse repurchase agreements to no more
than 20% of their total assets;
(3) mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of one-third of the value of the
Funds' total assets at the time of its borrowing. Securities held in escrow or
separate accounts in connection with the Funds' investment practices are not
deemed to be pledged for purposes of this investment restriction;
(4) purchase securities on margin, except for delayed delivery or when-
issued transactions or such short-term credits as are necessary for the
clearance of transactions; or make short sales of securities or, maintain a
short position;
(5) write put or call options;
(6) underwrite the securities of other issuers, except as each Fund may be
deemed to be an underwriter in connection with the purchase or sale of portfolio
instruments in accordance with its investment objective and portfolio management
policies;
(7) invest in companies for the purpose of exercising control;
(8) make loans, except that the Funds may purchase or hold debt instruments
in accordance with their investment objective and policies and may enter into
loans of portfolio securities and repurchase agreements;
(9) invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation, acquisition of assets or where
otherwise permitted by the 1940 Act; nor
(10) lend their portfolio securities in excess of one-third of the value of
their total assets.
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Non-Fundamental Investment Policies
-----------------------------------
Each Fund has adopted the following non-fundamental policies which may be
changed by a majority vote of the Board of Directors of the Company at any time
and without approval of such Fund's shareholders.
(1) Each Fund, other than the Stagecoach Government Money Market and
Stagecoach 100% Treasury Money Market Funds, may invest in shares of other open-
end management investment companies, subject to the limitations of Section
12(d)(1) of the 1940 Act. Under the 1940 Act, a Fund's investment in such
securities currently is limited to , subject to certain exceptions, (i) 3% of
the total voting stock of any one investment company, (ii) 5% of such Fund's
net assets with respect to any one investment company, and (iii) 10% of such
Fund's net assets in the aggregate. Other investment companies in which the
Funds invest can be expected to charge fees for operating expenses, such as
investment advisory and administration fees, that would be in addition to those
charged by a Fund.
(2) Each Fund may not invest or hold more than 10% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.
(3) Each Fund, except the Stagecoach 100% Treasury Money Market Fund, may
invest up to 25% of its net assets in securities of foreign branches of U.S.
banks and U.S. branches of foreign banks that are denominated in and pay
interest in U.S. dollars.
(4) Each Fund, except the Stagecoach California Tax-Free Money Market and
Stagecoach Money Market Funds, may lend securities from its portfolio to
brokers, dealers and financial institutions, in amounts not to exceed (in the
aggregate) one-third of such Fund's total assets. Any such loans of portfolio
securities will be fully collateralized based on values that are marked to
market daily. The Funds will not enter into any portfolio security lending
arrangement having a duration of longer than one year.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Set forth below are descriptions of certain investments and additional
investment policies for the Funds.
Asset-Backed Securities
-----------------------
The Stagecoach Government Money Market may purchase asset-backed
securities, which are securities backed by installment contracts, credit-card
receivables or other assets. Asset-backed securities represent interests in
"pools" of assets in which payments of both interest and principal on the
securities are made monthly, thus in effect "passing through"
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monthly payments made by the individual borrowers on the assets that underlie
the securities, net of any fees paid to the issuer or guarantor of the
securities. The average life of asset-backed securities varies with the
maturities of the underlying instruments and is likely to be substantially less
than the original maturity of the assets underlying the securities as a result
of prepayments. For this and other reasons, an asset-backed security's stated
maturity may be shortened, and the security's total return may be difficult to
predict precisely.
Bank Obligations
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The Funds, except the Stagecoach Treasury Money Market and Stagecoach 100%
Treasury Money Market Funds, may invest in bank obligations, including
certificates of deposit, time deposits, bankers' acceptances and other short-
term obligations of domestic banks, foreign subsidiaries of domestic banks,
foreign branches of domestic banks, and domestic and foreign branches of foreign
banks, domestic savings and loan associations and other banking institutions.
With respect to such securities issued by foreign branches of domestic banks,
foreign subsidiaries of domestic banks, and domestic and foreign branches of
foreign banks, a Fund may be subject to additional investment risks that are
different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers. Such risks include possible future
political and economic developments, the possible imposition of foreign
withholding taxes on interest income payable on the securities, the possible
establishment of exchange controls or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on these securities and the possible seizure or nationalization of foreign
deposits. In addition, foreign branches of U.S. banks and foreign banks may be
subject to less stringent reserve requirements and to different accounting,
auditing, reporting and recordkeeping standards than those applicable to
domestic branches of U.S. banks.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by a Fund will not benefit from insurance from the
Bank Insurance Fund or the Savings Association Insurance Fund administered by
the Federal Deposit Insurance Corporation ("FDIC"). Bankers' acceptances are
credit instruments evidencing the obligation of a bank to pay a draft drawn on
it by a customer. These instruments reflect the obligation both of the bank and
of the drawer to pay the face amount of the instrument upon maturity. The other
short-term obligations may include uninsured, direct obligations, bearing fixed,
floating- or variable-interest rates.
Commercial Paper
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The Funds, except the Stagecoach Treasury Money Market Fund and Stagecoach
100% Treasury Money Market Fund, may invest in commercial paper. Commercial
paper includes short-term unsecured promissory notes, variable rate demand notes
and variable rate master demand notes issued by domestic and foreign bank
holding companies, corporations and financial institutions as well as similar
taxable instruments issued by government agencies and instrumentalities.
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Floating- and Variable-Rate Obligations
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The Funds, except the Stagecoach 100% Treasury Money Market Fund, may
purchase floating- and variable-rate obligations. Each Fund may purchase
floating- and variable-rate demand notes and bonds. These obligations may have
stated maturities in excess of thirteen months, but they permit the holder to
demand payment of principal at any time, or at specified intervals not exceeding
thirteen months. Variable-rate demand notes include master demand notes that
are obligations that permit a Fund to invest fluctuating amounts, which may
change daily without penalty, pursuant to direct arrangements between the Fund,
as lender, and the borrower. The interest rates on these notes may fluctuate
from time to time. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of such obligations. The
interest rate on a floating-rate demand obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable-rate demand obligation is
adjusted automatically at specified intervals. Frequently, such obligations are
secured by letters of credit or other credit support arrangements provided by
banks. Because these obligations are direct lending arrangements between the
lender and borrower, it is not contemplated that such instruments generally will
be traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value. Accordingly, where
these obligations are not secured by letters of credit or other credit support
arrangements, a Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies and each Fund may invest in obligations
which are not so rated only if Wells Fargo Bank determines that at the time of
investment the obligations are of comparable quality to the other obligations in
which such Fund may invest. Wells Fargo Bank, on behalf of each Fund, considers
on an ongoing basis the creditworthiness of the issuers of the floating- and
variable-rate demand obligations in such Fund's portfolio. No Fund will invest
more than 10% of the value of its total net assets in floating- or variable-rate
demand obligations whose demand feature is not exercisable within seven days.
Such obligations may be treated as liquid, provided that an active secondary
market exists.
Foreign Obligations
-------------------
Each Fund, except the Stagecoach Treasury Money Market and Stagecoach 100%
Treasury Money Market Funds, may invest up to 25% of its assets in high-quality,
short-term (thirteen months or less) debt obligations of foreign branches of
U.S. banks or U.S. branches of foreign banks that are denominated in and pay
interest in U.S. dollars. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not subject to
the same uniform accounting, auditing and financial reporting standards or
governmental supervision as domestic issuers. In addition, with respect to
certain foreign countries, taxes may be withheld at the source under foreign
income tax laws and there is a possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments that could
affect adversely investments
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in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
---------------------------------------------------------------
Transactions
- ------------
Each Fund may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased or
sold on a when-issued, delayed-delivery or forward commitment basis involve a
risk of loss if the value of the security to be purchased declines, or the value
of the security to be sold increases, before the settlement date. Although each
Fund will generally purchase securities with the intention of acquiring them, a
Fund may dispose of securities purchased on a when-issued, delayed-delivery or a
forward commitment basis before settlement when deemed appropriate by the
Advisor.
Each Fund will segregate cash, U.S. Government obligations or other high-
quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will segregate additional liquid assets on a daily basis so
that the value of the segregated assets is equal to the amount of such
commitments.
Illiquid Securities
-------------------
The Funds, except the Stagecoach 100% Treasury Money Market Fund, may
invest in securities not registered under the 1933 Act and other securities
subject to legal or other restrictions on resale. Because such securities may
be less liquid than other investments, they may be difficult to sell promptly at
an acceptable price. Delay or difficulty in selling securities may result in a
loss or be costly to a Fund. Each Fund may invest up to 10% of its assets in
illiquid securities.
Letters of Credit
-----------------
Certain of the debt obligations (including municipal securities,
certificates of participation, commercial paper and other short-term
obligations) which the Funds, except the Stagecoach Treasury Money Market Fund
and Stagecoach 100% Treasury Money Market Fund, may purchase may be backed by an
unconditional and irrevocable letter of credit of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Wells Fargo Bank, are of comparable quality to issuers of other permitted
investments of each such Fund may be used for letter of credit-backed
investments, in each case, the Company's Board approves or ratifies such
investments.
Loans of Portfolio Securities
-----------------------------
The Funds, except the Stagecoach California Tax-Free Money Market and
Stagecoach Money Market Funds, may lend their portfolio securities to brokers,
dealers
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and financial institutions, provided: (1) the loan is secured continuously by
collateral consisting of U.S. Government securities or cash or letters of credit
(secured continuously by U.S. Treasury obligations only for the Stagecoach
Treasury Money Market Fund) maintained on a daily marked-to-market basis in an
amount at least equal to the current market value of the securities loaned; (2)
the Funds may at any time call the loan and obtain the return of the securities
loaned within five business days; (3) the Funds will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value of
securities loaned will not at any time exceed one third of the total assets of a
particular Fund, and will not exceed 20% of the total assets of the Stagecoach
Treasury Money Market Fund.
A Fund will earn income for lending its securities because cash collateral
pursuant to such loans will be invested in short-term money market instruments.
In connection with lending securities, the Funds may pay reasonable finders,
administrative and custodial fees. A Fund will not enter into any security
lending arrangement having a duration longer than one year. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral. In either case, a Fund could experience delays
in recovering securities or collateral or could lose all or part of the value of
the loaned securities. When a Fund lends its securities, it continues to
receive interest or dividends on the securities loaned and may simultaneously
earn interest on the collateral received from the borrower or from the
investment of cash collateral in readily marketable, high-quality, short-term
obligations. Although voting rights, or rights to consent, attendant to
securities on loan pass to the borrower, such loans may be called at any time
and will be called so that the securities may be voted by a Fund if a material
event affecting the investment is to occur. A Fund may pay a portion of the
interest and fees earned from securities lending to a borrower or a placing
broker. Borrowers and placing brokers may not be affiliated, directly or
indirectly, with Wells Fargo Bank, Stephens Inc. or any of their affiliates.
Mortgage-Backed Securities
--------------------------
The Stagecoach Government Money Market may invest in mortgage-backed
securities, including those representing an undivided ownership interest in a
pool of mortgages, such as certificates of the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"). These certificates are in most
cases pass-through instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate,
net of certain fees. The average life of a mortgage-backed security varies with
the underlying mortgage instruments, which generally have maximum maturities of
40 years. The average life is likely to be substantially less than the original
maturity of the mortgage pools underlying the securities as the result of
prepayments, mortgage refinancings or foreclosure. Mortgage prepayment rates are
affected by factors including the level of interest rates, general economic
conditions, the location and age of the mortgage and other social and
demographic conditions. Such prepayments are passed through to the registered
holder with the regular monthly payments of principal and interest and have the
effect of reducing future payments.
There are risks inherent in the purchase of mortgage-backed securities. For
example, these securities are subject to a risk that default in payment will
occur on the underlying mortgages. In
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addition to default risk, these securities are subject to the risk that
prepayment on the underlying mortgages will occur earlier or later or at a
lesser or greater rate than expected. To the extent that Advisor's assumptions
about prepayments are inaccurate, these securities may expose the Funds, to
significantly greater market risks than expected.
Municipal Bonds
---------------
The Stagecoach California Tax-Free Money Market and Stagecoach National
Tax-Free Money Market Funds may invest in municipal bonds. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
Municipal bonds are debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, housing, hospitals, mass transportation, schools, streets,
and water and sewer works. Other purposes for which municipal bonds may be
issued include the refunding of outstanding obligations and obtaining funds for
general operating expenses or to loan to other public institutions and
facilities. Industrial development bonds are a specific type of revenue bond
backed by the credit and security of a private user. Certain types of
industrial development bonds are issued by or on behalf of public authorities to
obtain funds to provide privately-operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, port or
parking facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity, or sewage or solid waste
disposal. The Funds may not invest 20% or more of their respective assets in
industrial development bonds. Assessment bonds, wherein a specially created
district or project area levies a tax (generally on its taxable property) to pay
for an improvement or project may be considered a variant of either category.
There are, of course, other variations in the types of municipal bonds, both
within a particular classification and between classifications, depending on
numerous factors.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. For example, under federal tax legislation
enacted in 1986, interest on certain private activity bonds must be included in
an investor's alternative minimum taxable income, and corporate investors must
treat all tax-exempt interest as an item of tax preference. Moreover, with
respect to California obligations, the Stagecoach California Tax-Free Money
Market Fund cannot predict what legislation, if any, may be proposed in the
state legislature regarding the state income tax status of interest on such
obligations, or which proposals, if any, might be enacted. Such proposals, while
pending or if enacted, might materially and adversely affect the availability of
municipal obligations generally, or California obligations, specifically, for
investment by a Fund and the liquidity and value of a Fund's portfolio. In such
an event, the Fund involved would re-evaluate its investment objective and
policies and consider possible changes in its structure or possible dissolution.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds nor
the Advisor will review the proceedings relating to the issuance of municipal
obligations or the basis for such opinions.
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Certain of the municipal obligations held by a Fund may be insured as to
the timely payment of principal and interest. The insurance policies usually are
obtained by the issuer of the municipal obligation at the time of its original
issuance. In the event that the issuer defaults on interest or principal
payment, the insurer will be notified and will be required to make payment to
the bondholders. There is, however, no guarantee that the insurer will meet its
obligations. In addition, such insurance does not protect against market
fluctuations caused by changes in interest rates and other factors. The
Stagecoach Tax-Free Funds may, from time to time, invest more than 25% of their
assets in municipal obligations covered by insurance policies.
The values of outstanding municipal securities will vary as a result of
changing market evaluations of the ability of their issuers to meet the interest
and principal payments (i.e., credit risk). Such values also will change in
response to changes in the interest rates payable on new issues of municipal
securities (i.e., market risk). Should such interest rates rise, the values of
outstanding securities, including those held in a Fund's portfolio, will decline
and (if purchased at par value) sell at a discount. If interests rates fall,
the values of outstanding securities will generally increase and (if purchased
at par value) sell at a premium. Changes in the value of municipal securities
held in a Fund's portfolio arising from these or other factors will cause
changes in the net asset value per share.
Municipal Notes
---------------
The Stagecoach California Tax-Free Money Market and Stagecoach National
Tax-Free Money Market Funds may invest in municipal notes. Municipal notes
include, but are not limited to, tax anticipation notes ("TANs"), bond
anticipation notes ("BANs"), revenue anticipation notes ("RANs") and
construction loan notes. Notes sold as interim financing in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise taxes as a
result of such events as a decline in its tax base or a rise in delinquencies
could adversely affect the issuer's ability to meet its obligations on
outstanding TANs. Furthermore, some municipal issuers mix various tax proceeds
into a general fund that is used to meet obligations other than those of the
outstanding TANs. Use of such a general fund to meet various obligations could
affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its obligations on its
BANs is primarily dependent on the issuer's adequate access to the longer term
municipal bond market and the likelihood that the proceeds of such bond sales
will be used to pay the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as anticipated
revenues from another level of government, could adversely affect an issuer's
ability to meet its obligations on outstanding RANs. In addition, the
possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.
13
<PAGE>
The values of outstanding municipal securities will vary as a result of
changing market evaluations of the ability of their issuers to meet the interest
and principal payments (i.e., credit risk). Such values also will change in
response to changes in the interest rates payable on new issues of municipal
securities (i.e., market risk). Should such interest rates rise, the values of
outstanding securities, including those held in a Fund's portfolio, will decline
and (if purchased at par value) sell at a discount. If interests rates fall,
the values of outstanding securities will generally increase and (if purchased
at par value) sell at a premium. Changes in the value of municipal securities
held in a Fund's portfolio arising from these or other factors will cause
changes in the net asset value per share of the Fund.
Other Investment Companies
--------------------------
The Funds, except the Stagecoach Government Money Market Fund and
Stagecoach 100% Treasury Money Market Fund, may invest in shares of other open-
end management investment companies, up to the limits prescribed in Section
12(d) of the 1940 Act. Under the 1940 Act, a Fund's investment in such
securities currently is limited to, subject to certain exceptions, (i) 3% of the
total voting stock of any one investment company, (ii) 5% of such Fund's net
assets with respect to any one investment company and (iii) 10% of such Fund's
net assets in aggregate. Other investment companies in which the Funds invest
can be expected to charge fees for operating expenses such as investment
advisory and administration fees, that would be in addition to those charged by
the Funds.
Repurchase Agreements
---------------------
Each Fund, except the Stagecoach 100% Treasury Fund, may enter into
repurchase agreements wherein the seller of a security to the Fund agrees to
repurchase that security from the Fund at a mutually agreed upon time and price.
A Fund may enter into repurchase agreements only with respect to securities that
could otherwise be purchased by the Fund. All repurchase agreements will be
fully collateralized at 102% based on values that are marked to market daily.
The maturities of the underlying securities in a repurchase agreement
transaction may be greater than twelve months, although the maximum term of a
repurchase agreement will always be less than twelve months. If the seller
defaults and the value of the underlying securities has declined, a Fund may
incur a loss. In addition, if bankruptcy proceedings are commenced with respect
to the seller of the security, the Fund's disposition of the security may be
delayed or limited.
Each Fund may not enter into a repurchase agreement with a maturity of more
than seven days, if, as a result, more than 10% of the market value of such
Fund's total net assets would be invested in repurchase agreements with
maturities of more than seven days, restricted securities and illiquid
securities. A Fund will only enter into repurchase agreements with primary
broker/dealers and commercial banks that meet guidelines established by the
Board of Directors and that are not affiliated with the investment advisor. The
Funds may participate in pooled repurchase agreement transactions with other
funds advised by Wells Fargo Bank.
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Taxable Investments
-------------------
The Stagecoach National Tax-Free Money Market and Stagecoach California
Tax-Free Money Market Funds may make certain taxable investments. Pending the
investment of proceeds from sales of portfolio securities or in anticipation of
redemptions or to maintain a "defensive" posture when, in the opinion of Wells
Fargo Bank, as investment Advisor, it is advisable to do so because of market
conditions, the Stagecoach National Tax-Free Money Market Fund may elect to
invest temporarily up to 20% of the current value of its net assets in cash
reserves including the following taxable high-quality money market instruments:
(I) U.S. Government obligations; (ii) negotiable certificates of deposit,
bankers' acceptances and fixed time deposits and other obligations of domestic
banks (including foreign branches) that have more than $1 billion in total
assets at the time of investment and are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose deposits are insured
by the FDIC; (iii) commercial paper rated at the date of purchase "P-1" by
Moody's Investors Service, Inc. ("Moody's") or "A-1+" or "A-1" by Standard &
Poor's Ratings Group ("S&P"); (iv) certain repurchase agreements; and (v) high-
quality municipal obligations, the income from which may or may not be exempt
from federal income taxes.
Moreover, the Stagecoach National Tax-Free Money Market Fund may invest
temporarily more than 20% of its total assets in such securities and in high-
quality, short-term municipal obligations the interest on which is not exempt
from federal income taxes to maintain a temporary defensive posture or in an
effort to improve after-tax yield to the Fund's interestholders when, in the
opinion of Wells Fargo Bank, as investment Advisor, it is advisable to do so
because of unusual market conditions.
Unrated and Downgraded Investments
----------------------------------
The Funds, except the Stagecoach Treasury Money Market and Stagecoach 100%
Treasury Money Market Funds, may purchase instruments that are not rated if, in
the opinion of Wells Fargo Bank, the investment advisor, such obligations are of
comparable quality to other rated investments that are permitted to be purchased
by the Funds. The Funds may purchase unrated instruments only if they are
purchased in accordance with the Funds' procedures adopted by Company's Board of
Directors in accordance with Rule 2a-7 under the 1940 Act. After purchase by a
Fund, a security may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Fund. In the event that a portfolio
security ceases to be an "Eligible Security" or no longer "presents minimal
credit risks," immediate sale of such security is not required, provided that
the Board of Directors has determined that disposal of the portfolio security
would not be in the best interests of the Fund. To the extent the ratings given
by Moody's or S&P may change as a result of changes in such organizations or
their rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies. The
ratings of Moody's and S&P are more fully described in the Appendix.
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<PAGE>
U.S. Government and U.S. Treasury Obligations
---------------------------------------------
The Funds may invest in obligations of agencies and instrumentalities of
the U.S. Government ("U.S. Government obligations"). The Stagecoach Treasury
Money Market Fund and Stagecoach 100% Treasury Money Market Fund may invest only
in U.S. Government obligations issued or guaranteed by the U.S. Treasury.
Payment of principal and interest on U.S. Government obligations (i) may be
backed by the full faith and credit of the United States (as with U.S. Treasury
bills and GNMA certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with FNMA notes). In the
latter case investors must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. In addition, U.S. Government obligations
are subject to fluctuations in market value due to fluctuations in market
interest rates. As a general matter, the value of debt instruments, including
U.S. Government obligations, declines when market interest rates increase and
rises when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
The Stagecoach Treasury Money Market Fund and Stagecoach 100% Treasury
Money Market Fund may invest only in obligations issued or guaranteed by the
U.S. Treasury such as bills, notes, bonds and certificates of indebtedness
("U.S. Treasury obligations"). The Stagecoach Treasury Money Market Fund may
invest in notes and repurchase agreements collateralized or secured by such U.S.
Treasury obligations[, WHEREAS THE STAGECOACH 100% TREASURY MONEY MARKET FUND
MAY NOT.] U.S. Treasury notes, bills and bonds differ mainly in the length of
their maturity. The U.S. Treasury obligations in which the Funds invest may
also include "U.S. Treasury STRIPS," interests in U.S. Treasury obligations
reflected in the Federal Reserve-Book Entry System that represent ownership in
either the future interest payments or the future principal payments on the U.S.
Treasury obligations. U.S. Treasury Strips are "stripped securities." Stripped
securities are issued at a discount to their face value and may exhibit greater
price volatility than ordinary debt securities because of the manner in which
their principal and interest are paid to investors. The Stagecoach Treasury
Money Market [, STAGECOACH 100% TREASURY MONEY MARKET] and Stagecoach Government
Money Market Funds may invest in U.S. Treasury STRIPS.
The Funds may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover, which should not adversely affect the Funds since they do not
ordinarily pay brokerage commissions on the purchase of short-term debt
obligations.
Nationally Recognized Statistical Ratings Organizations ("NRSROs")
------------------------------------------------------------------
The ratings of Moody's, S&P, Duff & Phelps Credit Rating Co., Fitch
Investors Service, Inc., Thomson Bank Watch and IBCA Inc. represent their
opinions as to the quality of debt securities. It should be emphasized, however,
that ratings are general and not absolute standards of
16
<PAGE>
quality, and debt securities with the same maturity, interest rate and rating
may have different yields while debt securities of the same maturity and
interest rate with different ratings may have the same yield. Subsequent to
purchase by a Fund, an issue of debt securities may cease to be rated or its
rating may be reduced below the minimum rating required for purchase by a Fund.
The Advisor will consider such an event in determining whether the Fund involved
should continue to hold the obligation.
The payment of principal and interest on debt securities purchased by the
Funds depends upon the ability of the issuers to meet their obligations. An
issuer's obligations under its debt securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by federal or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or, in the case of governmental entities, upon the ability
of such entities to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest and principal of its debt securities may
be materially adversely affected by litigation or other conditions. Further, it
should also be noted with respect to all municipal obligations issued after
August 15, 1986 (August 31, 1986 in the case of certain bonds), the issuer must
comply with certain rules formerly applicable only to industrial development
bonds which, if the issuer fails to observe them, could cause interest on the
municipal obligations to become taxable retroactive to the date of issue.
RISK FACTORS
Investments in a Fund are not bank deposits or obligations of Wells Fargo
Bank, are not insured by the FDIC and are not insured or guaranteed against loss
of principal. Therefore, you should be willing to accept some risk with money
you invest in a Fund. Although the Funds seek to maintain a stable net asset
value of $1.00 per share, there is no assurance that they will be able to do so.
The Funds may not achieve as high a level of current income as other mutual
funds that do not limit their investment to the high credit quality instruments
in which the Funds invest. As with all mutual funds, there can be no assurance
that a Fund will achieve its investment objective.
The Funds, under the 1940 Act, must comply with certain investment criteria
designed to provide liquidity, reduce risk, and allow the Funds to maintain a
stable net asset value of $1.00 per share. The Funds' dollar-weighted average
portfolio maturity must not exceed 90 days. Any security that a Fund purchases
must have a remaining maturity of not more than 397 days (13 months). In
addition, any security that a Fund purchases must present minimal credit risks
and be of "high quality," or in the case of the Stagecoach Treasury Money Market
Fund and Stagecoach 100% Treasury Money Market Fund, be of the "highest
quality." "High quality" means to be rated in the top two rating categories and
"highest quality" means to be rated only in the top rating category, by the
requisite NRSROs or, if unrated, determined to be of comparable quality to such
rated securities by Wells Fargo Bank, as the Funds' investment advisor, under
guidelines adopted by the Board of Directors of the Company.
17
<PAGE>
Each Fund seeks to reduce risk by investing its assets in securities of
various issuers. As such, the Stagecoach Money Market Fund and the Stagecoach
National Tax-Free Money Market Fund are considered to be diversified for
purposes of the 1940 Act. In addition, the Funds emphasize safety of principal
and high credit quality. In particular, the internal investment policies of the
investment advisor prohibit the purchase of many types of floating-rate
derivative securities that are considered potentially volatile. The following
types of derivative securities ARE NOT permitted investments for the Funds:
* capped floaters (on which interest is not paid when market rates
move above a certain level);
* leveraged floaters (whose interest rate reset provisions are based
on a formula that magnifies changes in interest rates);
* range floaters (which do not pay any interest if market interest
rates move outside of a specified range);
* dual index floaters (whose interest rate reset provisions are tied
to more than one index so that a change in the relationship between
these indices may result in the value of the instrument falling
below face value); and
* inverse floaters (which reset in the opposite direction of their
index).
Additionally, the Funds may not invest in securities whose interest rate
reset provisions are tied to an index that materially lags short-term interest
rates, such as Cost of Funds Index floaters. The Funds may invest only in
variable or floating-rate securities that bear interest at a rate that resets
quarterly or more frequently and that resets based on changes in standard money
market rate indices such as U.S. Treasury bills, London Interbank Offered Rate
or LIBOR, the prime rate, published commercial paper rates, federal funds rates,
Public Securities Associates floaters or JJ Kenney index floaters.
The Stagecoach Treasury Money Market Fund and Stagecoach 100% Treasury
Money Market Fund restrict their investment to U.S. Treasury obligations that
meet all of the standards described above. Obligations issued or guaranteed by
the U.S. Treasury have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such obligations may vary during the period a shareholder owns shares
of the Fund. It should be noted that neither the United States, nor any agency
or instrumentality thereof, has guaranteed, sponsored or approved the Fund or
its shares.
The portfolio debt instruments of the Funds are subject to credit and
interest-rate risk. Credit risk is the risk that issuers of the debt instruments
in which the Funds invest may default on the payment of principal and/or
interest. Interest-rate risk is the risk that increases in market
18
<PAGE>
interest rates may adversely affect the value of the debt instruments in which
the Funds invest and hence the value of your investment in a Fund.
Generally, securities in which the Funds invest will not earn as high a
yield as securities of longer maturity and/or of lesser quality that are more
subject to market volatility. Each Fund attempts to maintain the value of its
shares at a constant $1.00 per share, although there can be no assurance that a
Fund will always be able to do so.
Since the Stagecoach California Tax-Free Money Market Fund invests
primarily in securities issued by California and its agencies and
municipalities, events in California are more likely to affect the Fund's
investments. While the Stagecoach California Tax-Free Money Market Fund seeks
to reduce risk by investing its assets in securities of various issuers, the
Fund is considered to be nondiversified for purposes of the 1940 Act. However,
the California Tax-Free Money Market Fund will comply with the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), diversification
requirements.
SPECIAL CONSIDERATIONS AFFECTING
CALIFORNIA MUNICIPAL OBLIGATIONS
The concentration of the Stagecoach California Tax-Free Money Market Fund
in securities issued by governmental units of only one state exposes the Fund to
risks greater than those of a more diversified portfolio holding securities
issued by governmental units of different states and different regions of the
country.
Certain California constitutional amendments, legislative measures,
executive orders, civil actions and voter initiatives, as well as the general
financial condition of the state, could adversely affect the ability of issuers
of California municipal obligations to pay interest and principal on such
obligations. These developments, if they occur, could adversely affect the
performance of the Stagecoach California Tax-Free Money Market Fund since it
invests a significant portion of its assets in California municipal obligations.
The following information constitutes only a brief summary, does not purport to
be a complete description, and is based on information drawn from official
statements relating to securities offerings of the State of California and
various local agencies, available as of the date of this SAI. While the Company
has not independently verified such information, it has no reason to believe
that such information is incorrect in any material respect.
The California Economy and General Information. From mid-1990 to late
----------------------------------------------
1993, the State suffered a recession with the worst economic, fiscal and budget
conditions since the 1930s. Construction, manufacturing (particularly that
related to defense), exports and financial services, among others, were all
severely affected. Job losses had been the worst of any post-war recession.
Unemployment reached 10.1% in January 1994, but fell sharply to 7.7% in October
and November 1994, reflecting the State's recovery from the recession.
The recession seriously affected California tax revenues, which basically
mirror economic conditions. It also caused increased expenditures for health
and welfare programs. In
19
<PAGE>
addition, the State has been facing a structural imbalance in its budget with
the largest programs supported by the General Fund (e.g., K-12 schools and
community colleges--also known as "K-14 schools," health and welfare, and
corrections) growing at rates higher than the growth rates for the principal
revenue sources of the General Fund. As a result, the state experienced
recurring budget deficits in the late 1980s and early 1990s. The state's
Controller reported that expenditures exceeded revenues for four of the five
fiscal years ending with 1991-92. Moreover, California accumulated and sustained
a budget deficit in its Special Fund for Economic Uncertainties ("SFEU")
approaching $2.8 billion at its peak on June 30, 1993.
The accumulated budget deficits during the early 1990's, together with
expenditures for school funding which are not reflected in the State's budget,
and reduction of available internal borrowable funds, combined to significantly
deplete the State's cash resources to pay its ongoing expenses. In order to
meet its cash needs, the State has had to rely for several years on a series of
external borrowings, including borrowings past the end of a fiscal year. Such
borrowings are expected to continue in future fiscal years. To meet its cash
flow needs in the 1995-96 fiscal year, California issued $2 billion of revenue
anticipation warrants which matured on June 28, 1996. Because of the State's
deteriorating budget and cash situation, the rating agencies reduced the state's
credit ratings between October 1991 and July 1994. Moody's lowered its rating
from "Aaa" to "A1," S&P lowered its rating from "AAA" to "A" and termed its
outlook as "stable," and Fitch Investors Service lowered its rating from "AAA"
to "A."
However, since the start of 1994, California's economy has been recovering
steadily. Employment has grown in excess of 500,000 during 1994 and 1995, and
400,000 additional jobs were created between the fourth quarter of 1996 and the
fourth quarter of 1997. Some analysts project this trend to continue through
the rest of the decade. Because of the improving economy and California's
fiscal austerity, the State has had operating surpluses for its past five
consecutive fiscal years through 1996-97. In addition, the SFEU is projected to
have a positive balance of approximately $553 million as of June 30, 1998.
Also, S&P upgraded its rating of California municipal obligations back to "A+"
on July 30, 1996.
Local Governments. On December 6, 1994, Orange County, California, became
-----------------
the largest municipality in the United States to file for protection under the
Federal Bankruptcy laws. The bankruptcy filing stemmed from approximately $1.7
billion in losses suffered by the county's investment pool because of
investments in high risk "derivative" securities. In September 1995,
California's legislature approved legislation permitting the county to use for
bankruptcy recovery $820 million over 20 years in sales taxes previously
earmarked for highways, transit, and development. In June 1996, the county
completed an $880 million bond offering secured by real property owned by the
county. In June 1996, the county emerged from bankruptcy. As of October 31,
1997, the county's investment rating by S&P was "B".
On January 17, 1994, an earthquake of the magnitude of an estimated 6.8 on
the Richter Scale struck Los Angeles County, California, causing significant
damage to public and private structures and facilities. While county residents
and businesses suffered losses totaling in the billions of dollars, the overall
effect of the earthquake on the county's and California's economy is not
expected to be serious. However, Los Angeles County is experiencing financial
difficulty
20
<PAGE>
due in part to the severe operating deficits for the county's health care
system. In August 1995, the credit rating of the county's long-term bonds was
downgraded for the third time since 1992. Although the county has received
federal and state assistance, it is still facing a potential budget gap of
approximately $460 million in the 1997-98 fiscal year.
Even though the State has no existing obligations with respect to either
Orange County or Los Angeles County, the State may be required to intervene and
provide funding if the counties cannot maintain certain programs because of
insufficient resources.
State Finances. State tax revenues and other income are segregated into
--------------
the General Fund and approximately 600 Special Funds. The General Fund consists
of the revenues received by the State's Treasury and not required by law to be
credited to any other fund, as well as earnings from State moneys not allocable
to another fund. The General Fund is the principal operating fund for the
majority of governmental activities and is the depository of most major revenue
sources of the State. The General Fund may be expended as the result of
appropriation measures by California's Legislature approved by the Governor, as
well as appropriations pursuant to various constitutional authorizations and
initiative statutes.
The SFEU is funded with General Fund revenues and was established to
protect California from unforeseen revenue reductions and/or unanticipated
expenditure increases. Amounts in the SFEU may be transferred by the State's
Controller to meet cash needs of the General Fund. The Controller is required
to return moneys so transferred without payment of interest as soon as there are
sufficient moneys in the General Fund. Any appropriation made from the SFEU is
deemed, for budgeting and accounting purposes, an appropriation from the General
Fund. For year-end reporting purposes, the Controller is required to add the
balance in the SFEU to the balance in the General Fund to show the total moneys
then available for General Fund purposes.
Inter-fund borrowing has been used for several years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June 30,
1996, the General Fund had outstanding loans from the SFEU and other Special
Funds of approximately $1.5 billion.
Changes in California Constitutional and Other Laws. In 1978, California
---------------------------------------------------
voters approved an amendment to the California Constitution known as
"Proposition 13," which added Article XIIIA to the California Constitution.
Article XIIIA limits ad valorem taxes on real property and restricts the ability
of taxing authorities to increase real property taxes. However, legislation
passed subsequent to Proposition 13 provided for the redistribution of
California's General Fund surplus to local agencies, the reallocation of
revenues to local agencies and the assumption of certain local obligations by
the state to assist California municipal issuers to raise revenue to pay their
bond obligations. It is unknown whether additional revenue redistribution
legislation will be enacted in the future and whether, if enacted, such
legislation will provide sufficient revenue for such California issuers to pay
their obligations. California is also subject to another Constitutional
Amendment, Article XIIIB, which may have an adverse impact on California state
and municipal issuers. Article XIIIB restricts the state from spending certain
appropriations in excess of an appropriation's limit imposed for each state and
local government
21
<PAGE>
entity. If revenues exceed such appropriation's limit, such revenues must be
returned either as revisions in the tax rates or fee schedules.
In 1988, California voters approved "Proposition 98," which amended Article
XIIIB and Article XVI of the State's Constitution. Proposition 98 (as modified
by "Proposition 111," which was enacted in 1990), changed state funding of
public education below the university level and the operation of the State's
appropriations limit, primarily by guaranteeing K-14 schools a minimum share of
General Fund revenues. In 1986, California voters approved "Proposition 62,"
which requires in part that any tax for general governmental purposes imposed by
a local government be approved by a two-thirds vote of the governmental entity's
legislative body and by a majority of its electorate, and that any special tax
imposed by a local government be approved by a two-thirds vote of the
electorate. In September 1995, the California Supreme Court upheld the
constitutionality of Proposition 62, creating uncertainty as to the legality of
certain local taxes enacted by nonchartered cities in California without voter
approval. In 1996, California voters approved "Proposition 218," which added
Articles XIIIC and XIIID to the State's Constitution. Proposition 218 generally
requires voter approval of most tax or fee increases by local governments and
curtails local government use of benefit assessments to fund certain property-
related services to finance infrastructure. Proposition 218 also limits the use
of special assessments or "property-related" fees to services or infrastructure
that confer a "special benefit" to specific property; police, fire and other
services are now deemed to benefit the public at large and, therefore, could not
be funded by special assessments. Finally, the amendments enable the voters to
use their initiative power to repeal previously-authorized taxes, assessments,
fees and charges. It remains to be seen what impact these Articles will have on
the ability of obligors to make payments on existing and future California
security obligations.
Other Information. Certain debt obligations held by the Funds may be
-----------------
obligations payable solely from lease payments on real or personal property
leased to the state, cities, counties or their various public entities.
California law provides that a lessor may not be required to make payments
during any period that it is denied use and occupancy of the property in
proportion to such loss. Moreover, the lessor only agrees to appropriate
funding for lease payments in its annual budget for each fiscal year. In case
of a default under the lease, the only remedy available against the lessor is
that of reletting the property; no acceleration of lease payments is permitted.
Each of these factors presents a risk that the lease financing obligations held
by a Fund would not be paid in a timely manner.
Certain debt obligations held by the Funds may be obligations payable
solely from the revenues of health care institutions. The method of
reimbursement for indigent care, California's selective contracting with health
care providers for such care and selective contracting by health insurers for
care of its beneficiaries now in effect under California and federal law may
adversely affect these revenues and, consequently, payment on those debt
obligations.
There can be no assurance that general economic difficulties or the
financial circumstances of California or its towns and cities or its trading
partners in Asia, where California exports nearly half of $105 billion in total
exports, will not adversely affect the market
22
<PAGE>
value of California municipal securities or the ability of obligors to continue
to make payments on such securities.
The taxable securities market is a broader and more liquid market with a
greater number of investors, issuers and market makers than the market for
municipal securities. The more limited marketability of municipal securities
may make it difficult in certain circumstances to dispose of large investments
advantageously.
MANAGEMENT
The following information supplements, and should be read in conjunction
with, the section in the Prospectus entitled "Organization and Management of the
Funds." The principal occupations during the past five years of the Directors
and principal executive Officer of the Company are listed below. The address of
each, unless otherwise indicated, is 111 Center Street, Little Rock, Arkansas
72201. Directors deemed to be "interested persons" of the Company for purposes
of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupation(s)
Name, Age and Address Position During Past 5 Years
- ------------------------------------- ------------------ -----------------------------------------------
<S> <C> <C>
Jack S. Euphrat, 75 Director Private Investor.
415 Walsh Road
Atherton, CA 94027
*R. Greg Feltus, 46 Director, Executive Vice President of Stephens Inc.;
Chairman and President of Stephens Insurance Services Inc.;
President Senior Vice President of Stephens Sports
Management Inc.; and President of Investor
Brokerage Insurance Inc.
Thomas S. Goho, 55 Director Associate Professor of Finance of the School
321 Beechcliff Court of Business and Accounting at Wake Forest
Winston-Salem, NC 27104 University since 1982.
Peter G. Gordon, 54 Director Chairman and Co-Founder of Crystal Geyser
Crystal Geyser Water Co. Water Company and President of Crystal Geyser
55 Francisco Street Roxane Water Company since 1977.
San Francisco, CA 94133
Joseph N. Hankin, 57 Director President of Westchester Community College
75 Grasslands Road since 1971; Adjunct Professor of Columbia
Valhalla, NY 10595 University Teachers College since 1976.
*W. Rodney Hughes, 71 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation(s)
Name, Age and Address Position During Past 5 Years
- ------------------------------------- ------------------ -----------------------------------------------
<S> <C> <C>
*J. Tucker Morse, 53 Director Private Investor; Chairman of Home Account
4 Beaufain Street Network, Inc. Real Estate Developer; Chairman
Charleston, SC 29401 of Renaissance Properties Ltd.; President of
Morse Investment Corporation; and Co-Managing
Partner of Main Street Ventures.
Richard H. Blank, Jr., 41 Chief Operating Vice President of Stephens Inc.; Director of
Officer, Stephens Sports Management Inc.; and Director
Secretary and of Capo Inc.
Treasurer
</TABLE>
Compensation Table
Year-ended March 31, 1998
-------------------------
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
- ------------------------ ------------------------------------------ ------------------------------------
<S> <C> <C>
Jack S. Euphrat $25,750 $34,500
Director
R. Greg Feltus $ 0 $ 0
Director
Thomas S. Goho $25,750 $34,500
Director
Peter G. Gordon $24,250 $30,500
Director
Joseph N. Hankin $25,750 $34,500
Director
W. Rodney Hughes $25,250 $33,000
Director
Robert M. Joses $ 1,500 $ 4,000
Director
J. Tucker Morse $25,250 $33,000
Director
</TABLE>
24
<PAGE>
As of January 1, 1998, Peter G. Gordon replaced Robert M. Joses on the
Board of Directors of the Wells Fargo Fund Complex.
Directors of the Company are compensated annually by the Company and by all
the registrants in each fund complex they serve as indicated above and also are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. The Company, Wells Fargo Funds Trust (formerly, Stagecoach Trust) and
Life & Annuity Trust are considered to be members of the same fund complex as
such term is defined in Form N-1A under the 1940 Act (the "Wells Fargo Fund
Complex"). Overland Express Funds, Inc. and Master Investment Trust, two
investment companies previously advised by Wells Fargo Bank, were part of the
Wells Fargo Fund Complex prior to December 12, 1997. These companies are no
longer part of the Wells Fargo Fund Complex. MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment Trust together form a
separate fund complex (the "BGFA Fund Complex"). Each of the Directors and
Officers of the Company serves in the identical capacity as directors and
officers or as trustees and/or officers of each registered open-end management
investment company in both the Wells Fargo and BGFA Fund Complexes, except for
Joseph N. Hankin and Peter G. Gordon, who only serve the aforementioned members
of the Wells Fargo Fund Complex. The Directors are compensated by other
companies and trusts within a fund complex for their services as
directors/trustees to such companies and trusts. Currently the Directors do not
receive any retirement benefits or deferred compensation from the Company or any
other member of each fund complex.
As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.
INVESTMENT ADVISOR. Wells Fargo Bank provides investment advisory services
------------------
to the Funds. As investment Advisor, Wells Fargo Bank furnishes investment
guidance and policy direction in connection with the daily portfolio management
of the Funds. Wells Fargo Bank furnishes to the Company's Board of Directors
periodic reports on the investment strategy and performance of each Fund. Wells
Fargo Bank provides the Funds with, among other things, money market security
and fixed-income research, analysis and statistical and economic data and
information concerning interest rate and securities markets trends, portfolio
composition, and credit conditions.
As compensation for its advisory services, Wells Fargo Bank is entitled to
receive a monthly fee at the annual rates indicated below of each Fund's average
daily net assets:
25
<PAGE>
<TABLE>
<CAPTION>
Annual Rate
Fund (as percentage of net assets)
---- ----------------------------
<S> <C>
Stagecoach California Tax-Free Money 0.50%
Market
Stagecoach Government Money Market 0.25%
Stagecoach Money Market 0.40%
Stagecoach National Tax-Free Money 0.30%
Market
Stagecoach Treasury Money Market 0.25%
Stagecoach 100% Treasury Money Market 0.25%
</TABLE>
For the period indicated below, the Funds paid to Wells Fargo Bank the
following advisory fees and Wells Fargo Bank waived the indicated amounts:
<TABLE>
<CAPTION>
Six-Month
Period Ended
3/31/97
----------
Fund Fees Paid Fees Waived
---- --------- -----------
<S> <C> <C>
Stagecoach California Tax-Free Money Market $1,503,717 $1,687,408
Stagecoach Government Money Market $ 63,059 $ 10,775
Stagecoach Money Market $8,856,102 $ 979,244
Stagecoach National Tax-Free Money Market $ 19,989 $ 0
Stagecoach Treasury Money Market $1,518,347 $ 751,971
Stagecoach 100% Treasury Money Market N/A N/A
</TABLE>
Stagecoach California Tax-Free Money Market and Stagecoach Money Market
-----------------------------------------------------------------------
Funds. For the periods indicated below, the Stagecoach Money Market and
- -----
Stagecoach California Tax-Free Money Market Funds paid to Wells Fargo Bank the
following advisory fees and Wells Fargo Bank waived the indicated amounts:
26
<PAGE>
<TABLE>
<CAPTION>
Nine-Month
Period Ended Year-ended Year-ended
9/30/96 12/31/95 12/31/94
--------- -------- ---------
Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived
---- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
Stagecoach California $ 4,867,523 $0 $ 4,099,437 $0 $ 304,857 $3,809,902
Tax-Free Money
Market
Stagecoach Money Market $12,729,506 $0 $11,593,678 $0 $2,073,686 $2,008,946
</TABLE>
Stagecoach Government Money Market and Stagecoach Treasury Money Market
-----------------------------------------------------------------------
Funds. Prior to March 18, 1994, the Advisor for the predecessor portfolio to
- -----
the Stagecoach Government Money Market Fund was San Diego Financial Capital
Management, Inc. ("San Diego Financial"), which was a wholly owned subsidiary of
San Diego Trust & Savings Bank ("San Diego Trust"), which in turn was a wholly
owned subsidiary of San Diego Financial Corporation ("SDFC"). On that date, SDFC
merged into First Interstate Bancorp and San Diego Trust merged into First
Interstate Bank of California ("FICAL"). As a result of these transactions, San
Diego Financial became an indirect wholly-owned subsidiary of FICAL. On January
12, 1995, San Diego Financial merged into First Interstate Investment Services,
Inc., a direct wholly-owned subsidiary of FICAL, which has since changed its
name to First Interstate Capital Management, Inc.
The Pacifica Government Money Market and Treasury Money Market Funds were
reorganized as the Company's Government Money Market and Treasury Money Market
Funds on September 6, 1996. Prior to September 6, 1996, Wells Fargo Investment
Management, Inc. ("WFIM") and its predecessor, First Interstate Capital
Management, Inc. ("FICM") served as Advisor to the Pacifica Government Money
Market and Treasury Money Market Funds. As of September 6, 1996, Wells Fargo
Bank became the Advisor to the Company's Stagecoach Government Money Market and
Stagecoach Treasury Money Market Funds.
For the fiscal year-ended September 30, 1996, the Stagecoach Government
Money Market Fund paid advisory fees of $274,640 and no fees were waived. For
the same period, the Stagecoach Treasury Money Market Fund paid advisory fees of
$2,442,922 of which $2,073,426 were waived. These amounts include advisory fees
paid by the predecessor portfolios to FICM/WFIM for the period begun April 1,
1996 and ended September 5, 1996.
During the fiscal years-ended September 30, 1995 and September 30, 1994,
the prior Advisor was entitled to receive advisory fees from the predecessor
portfolio of the Stagecoach Government Money Market Fund at the same annual
rates as those currently in effect. The prior Advisor was entitled to receive
$383,269 in fees for the fiscal year-ended September 30, 1995 and $442,842 in
fees for the fiscal year-ended September 30, 1994. The investment Advisor did
not waive any fees during these periods.
27
<PAGE>
For the periods indicated below, the advisory fees paid to the former
Advisor by the predecessor portfolio of the Stagecoach Treasury Money Market
Fund were as shown below. These amounts reflect voluntary fee waivers and
expense reimbursements by the Advisor. Prior to October 1, 1994, all of these
fees were, in turn, paid by the Advisor to its affiliates who served as
investment sub-Advisors during the periods indicated.
<TABLE>
<CAPTION>
Six-Month
Year-ended Period Ended Year-ended
9/30/95 9/30/94 3/31/94
- --------------------- -------- --------
<S> <C> <C>
$1,160,424 $454,029 $900,919
</TABLE>
Stagecoach National Tax-Free Money Market Fund. Prior to the
----------------------------------------------
Consolidation, the Stagecoach National Tax-Free Money Market Fund invested all
of its assets into a corresponding Master Portfolio of MIT and did not retain an
investment Advisor. Wells Fargo Bank served as investment Advisor to the Master
Portfolio in which the Fund invested and was entitled to receive a monthly fee
at the annual rate of 0.30% of the Master Portfolio's average daily net assets.
For the period begun April 2, 1996 (commencement of operations) and ended
September 30, 1996, the Stagecoach National Tax-Free Money Market Fund paid to
Wells Fargo Bank $76,987 in advisory fees, and $10,704 in advisory fees were
waived during this period.
General. Each Fund's Advisory Contract will continue in effect for more
-------
than two years from the effective date provided the continuance is approved
annually (i) by the holders of a majority of the respective Fund's outstanding
voting securities or by the Company's Board of Directors and (ii) by a majority
of the Directors of the Company who are not parties to the Advisory Contract or
"interested persons" (as defined in the 1940 Act) of any such party. A Fund's
Advisory Contract may be terminated on 60 days written notice by either party
and will terminate automatically if assigned.
INVESTMENT SUB-ADVISOR. As of May 1, 1998, Wells Capital Management
----------------------
("WCM") serves as sub-advisor to the Funds. As sub-advisor, WCM makes
recommendations regarding the investment and reinvestment of the Funds' assets,
furnishes to Wells Fargo Bank periodic reports on the investment activity and
performance of the Funds, and furnishes such additional reports and information
as Wells Fargo Bank and the Company's Board of Directors and officers may
reasonably request. As compensation for sub-advisory services, WCM is entitled
to receive a monthly fee equal to an annual rate of 0.05% of the first $960
million of each Fund's average daily net assets and 0.04% of net assets over
$960 million.
General. Each Fund's Sub-Advisory Contract will continue in effect for
-------
more than two years from the effective date provided the continuance is approved
annually (i) by the holders of a majority of the respective Fund's outstanding
voting securities or (ii) by the Company's Board of
28
<PAGE>
Directors, including a majority of the Directors of the Company who are not
parties to the Sub-Advisory Contract or "interested persons" (as defined in the
1940 Act) of any such party. A Fund's Sub-Advisory Contract may be terminated on
60 days written notice by either party and will terminate automatically if
assigned.
ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained Wells Fargo
----------------------------------
Bank as Administrator and Stephens Inc. ("Stephens") as Co-Administrator on
behalf of each Fund. Under the respective Administration and Co-Administration
Agreements among Wells Fargo Bank, Stephens and the Company, Wells Fargo Bank
and Stephens shall provide as administration services, among other things: (i)
general supervision of the Funds' operations, including coordination of the
services performed by each Fund's investment Advisor, transfer agent, custodian,
shareholder servicing agent(s), independent auditors and legal counsel,
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions;
and preparation of proxy statements and shareholder reports for each Fund; and
(ii) general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Company's officers and Board
of Directors. Wells Fargo Bank and Stephens also furnish office space and
certain facilities required for conducting the Funds' business together with
ordinary clerical and bookkeeping services. Stephens pays the compensation of
the Company's Directors, officers and employees who are affiliated with
Stephens. The Administrator and Co-Administrator are entitled to receive a
monthly fee of 0.03% and 0.04%, respectively, of the average daily net assets of
each Fund. Prior to February 1, 1998, the Administrator and Co-Administrator
were entitled to receive a monthly fee of 0.04% and 0.02%, respectively, of the
average daily net assets of each Fund. In connection with the change in fees,
the responsibility for performing various administration services was shifted to
the Co-Administrator.
Except as described below, prior to February 1, 1997, Stephens served as
sole Administrator and performed substantially the same services now provided by
Stephens and Wells Fargo Bank.
For the period indicated below, the Funds paid the following dollar amounts
to Wells Fargo Bank and Stephens for administration and co-administration fees:
29
<PAGE>
<TABLE>
<CAPTION>
Six-Month
Period Ended
3/31/97
--------
Fund Total Wells Fargo Stephens
---- ----- ----------- --------
<S> <C> <C> <C>
Stagecoach California Tax-Free Money Market $253,836 $ 50,767 $203,069
Stagecoach Government Money Market $ 15,761 $ 3,152 $ 12,609
Stagecoach Money Market $980,282 $196,056 $784,226
Stagecoach National Tax-Free Money Market $ 3,744 $ 749 $ 2,995
Stagecoach Treasury Money Market $483,198 $ 96,640 $386,558
Stagecoach 100% Treasury Money Market N/A N/A N/A
</TABLE>
Stagecoach California Tax-Free Money Market and Stagecoach Money Market
-----------------------------------------------------------------------
Funds. For the nine-month period ended September 30, 1996 and the fiscal years-
- -----
ended December 31, 1995 and 1994, the Stagecoach California Tax-Free Money
Market and Stagecoach Money Market Funds paid to Stephens the dollar amounts of
administration fees indicated below. Stephens, as sole Administrator during
these periods, was entitled to receive a monthly fee at the annual rate of 0.03%
of each Fund's average daily net assets.
<TABLE>
<CAPTION>
Nine-Month
Period Ended Year-ended Year-ended
Fund 9/30/96 12/31/95 12/31/94
---- -------- --------- ---------
<S> <C> <C> <C>
Stagecoach California Tax-Free Money Market $245,966 $ 292,095 $ 247,666
Stagecoach Money Market $872,577 $ 954,713 $ 306,209
</TABLE>
Stagecoach Government Money Market and Stagecoach Treasury Money Market
-----------------------------------------------------------------------
Funds. The Pacifica Government Money Market and Treasury Money Market Funds
- -----
were reorganized as the Company's Government Money Market and Treasury Money
Market Funds on September 6, 1996. Prior to September 6, 1996, the
Administrator, Furman Selz LLC ("Furman Selz"), of the Pacifica predecessor
portfolios provided management and administration services necessary for the
operation of such Funds, pursuant to an Administrative Services Contract. For
these services, Furman Selz was entitled to receive a fee, payable monthly, at
the annual rate of 0.15% of the average daily net assets of the predecessor
portfolios.
The predecessor portfolio of the Stagecoach Treasury Money Market Fund was
administered through April 14, 1996 by the Dreyfus Corporation ("Dreyfus"), at
the annual rate of 0.10% of the Fund's average daily net assets.
The table below reflects the net amounts paid, and the amounts waived, for
administration services by the Funds to Stephens, as sole Administrator to the
Funds, for the period begun
30
<PAGE>
September 6, 1996 and ended September 30, 1996. During this time, Stephens was
entitled to receive a fee, payable monthly, at the annual rate of 0.05% of each
Fund's average daily net assets. The table also reflects the net administration
fees paid to the respective former Administrators of the predecessor portfolios
during the period begun October 1, 1995 and ended September 5, 1996. During the
fiscal years-ended September 30, 1995 and September 30, 1994, Furman Selz was
entitled to receive administration services fees and waived administration fees
in the amounts indicated below. During the fiscal years-ended September 30,
1996, September 30, 1995 and the six-month period ended September 30, 1994 and
the administration fees paid to the Dreyfus Corporation by the Stagecoach
Treasury Money Market Fund are listed below.
<TABLE>
<CAPTION>
Year-ended Year-ended Year-ended
9/30/96 9/30/95 9/30/94
---------- -------- --------
Fees Fees Fees Fees Fees Fees
Fund Paid Waived Paid Waived Paid Waived
------- ---------- ------ -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Stagecoach Government $ 120,179 $0 $255,512 $25,550 $295,228 $29,523
Money Market
Stagecoach Treasury $1,745,759 $0 $921,886 $ 0 $347,499* $ 0
Money Market
</TABLE>
____________________
* The amount indicated reflects fees for the period of March 31, 1994 to
September 30, 1994.
Stagecoach National Tax-Free Money Market Fund. For the period begun April
----------------------------------------------
2, 1996 and ended September 30, 1996, Stephens served as sole Administrator to
the Stagecoach National Tax-Free Money Market Fund, and received $731 in
administration fees. Stephens was entitled to receive a monthly fee at the
annual rate of 0.05% of the Fund's average daily net assets for such services.
DISTRIBUTOR. Stephens (the "Distributor"), located at 111 Center Street,
-----------
Little Rock, Arkansas 72201, serves as Distributor for the Funds. Each Fund has
adopted a distribution plan (a "Plan") under Section 12(b) of the 1940 Act and
Rule 12b-1 thereunder (the "Rule") for its Class A shares. The Plans were
adopted by the Company's Board of Directors, including a majority of the
Directors who were not "interested persons" (as defined in the 1940 Act) of the
Funds and who had no direct or indirect financial interest in the operation of
the Plans or in any agreement related to the Plans (the "Non-Interested
Directors").
Under the Plans and pursuant to the related Distribution Agreement, the
Funds may pay Stephens the amounts listed below as compensation for
distribution-related services or as reimbursement for distribution-related
services. The fees are expressed as a percentage of the average daily net
assets attributable to each Class or Fund.
31
<PAGE>
<TABLE>
<CAPTION>
Fund Fee
---- ---
<S> <C>
Stagecoach Government Money Market 0.05%
Stagecoach National Tax-Free Money Market 0.05%
Stagecoach Treasury Money Market 0.05%
Stagecoach 100% Treasury Money Market 0.05%
</TABLE>
The actual fee payable to the Distributor by the above-indicated Funds is
determined, within such limits, from time to time by mutual agreement between
the Company and the Distributor and will not exceed the maximum sales charges
payable by mutual funds sold by members of the National Association of
Securities Dealers, Inc. ("NASD") under the Conduct Rules of the NASD. The
Distributor may enter into selling agreements with one or more selling agents
(which may include Wells Fargo Bank and its affiliates) under which such agents
may receive compensation for distribution-related services from the Distributor,
including, but not limited to, commissions or other payments to such agents
based on the average daily net assets of Fund shares attributable to their
customers. The Distributor may retain any portion of the total distribution fee
payable thereunder to compensate it for distribution-related services provided
by it or to reimburse it for other distribution-related expenses.
Under the Plans in effect for the Class A shares of the Stagecoach
California Tax-Free Money Market and Stagecoach Money Market Funds, each Fund
may defray all or part of the cost of preparing and printing prospectuses and
other promotional materials and of delivering prospectuses and promotional
materials to prospective Fund shareholders by paying on an annual basis up to
0.05% of the respective Fund's average daily net assets attributable to Class A
shares. The Plans for the Class A shares of these Funds provide only for
reimbursement of actual expenses.
For the six-month period ended March 31, 1997, the Funds' Distributor
received the following fees for the distribution-related services, as set forth
below, under each Fund's Plan:
<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Fund Total Prospectus Brochures Underwriters
---- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
Stagecoach California Tax-Free
Money Market $155,752 $ 70,417 $ 85,335 N/A
Stagecoach Government
Money Market $ 5,810 $ 3,575 $ 2,235 N/A
Stagecoach Money $489,563 $222,858 $266,705 N/A
Market
Stagecoach National Tax-
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Fund Total Prospectus Brochures Underwriters
---- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
Free Money Market $ 3,823 $ 3,659 $ 165 N/A
Stagecoach Treasury Money
Market $ 5,013 $ 3,619 $ 1,395 N/A
Stagecoach 100% Treasury Money N/A N/A N/A N/A
Market
</TABLE>
Stagecoach California Tax-Free Money Market and Stagecoach Money Market
-----------------------------------------------------------------------
Funds: For the period ended September 30, 1996, the Funds' Distributor received
- -----
the following fees for distribution-related services, as set forth below, under
each Fund's Plan:
<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation to
Fund Total Prospectus Brochures Underwriters
---- ----- ---------- --------- ------------
<S> <C> <C> <C> <C>
Stagecoach California
Tax-Free Money Market $188,355 $39,668 $148,687 N/A
Stagecoach Money
Market
Class A $383,963 $24,454 $359,509 N/A
</TABLE>
Stagecoach Government Money Market and Stagecoach Treasury Money Market
-----------------------------------------------------------------------
Funds. The Stagecoach Government Money Market and Stagecoach Treasury Money
- -----
Market Funds, for the year-ended September 30, 1996, paid the Distributor
$29,161 for the Stagecoach Government Money Market Fund and $13,064 for the
Stagecoach Treasury Money Market Fund in distribution-related fees for expense
reimbursement under each Fund's Plan for Class A shares.
Prior to September 6, 1996, PFD, a subsidiary of Furman Selz, served as
principal underwriter for the shares of the predecessor portfolios pursuant to a
Distribution Contract as of October 1, 1995. The figures in the table above
reflect amounts paid to PFD through September 5, 1996, and amounts paid to
Stephens from September 6 to September 30, 1996.
Under a distribution plan adopted for the Stagecoach Government Money
Market and Stagecoach Treasury Money Market predecessor portfolios, Pacifica, on
behalf of the predecessor portfolios, paid directly or reimbursed PFD monthly
for costs and expenses of marketing their shares.
33
<PAGE>
Stagecoach National Tax-Free Money Market Fund. For the period begun April
----------------------------------------------
2, 1996 and ended September 30, 1996, the Stagecoach National Tax-Free Money
Market Fund's Distributor received $144 in distribution-related fees as
reimbursement for promotional materials.
For the periods indicated above, WFSI and its registered representatives
received no compensation under each Fund's Plan.
General. Each Plan will continue in effect from year to year if such
-------
continuance is approved by a majority vote of both the Directors of the Company
and the Non-Interested Directors. Any Distribution Agreement related to the
Plans also must be approved by such vote of the Directors and Non-Interested
Directors. Such Agreement will terminate automatically if assigned and may be
terminated at any time, without payment of any penalty, by a vote of a majority
of the outstanding voting securities of the relevant Fund or by vote of a
majority of the Non-Interested Directors on not more than 60 days' written
notice. The Plans may not be amended to increase materially the amounts payable
thereunder without the approval of a majority of the outstanding voting
securities of the Fund, and no material amendment to the Plans may be made
except by a majority of both the Directors of the Company and the Non-Interested
Directors.
The Plans require that the Treasurer of the Company shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Plans. The Rule also
requires that the selection and nomination of Directors who are not "interested
persons" of the Company be made by such disinterested Directors.
Wells Fargo Bank, an interested person (as that term is defined in Section
2(a)(19) of the 1940 Act) of the Company, acts as a selling agent for the Funds'
shares pursuant to selling agreements with Stephens authorized under the Plans.
As a selling agent, Wells Fargo Bank has an indirect financial interest in the
operation of the Plans. The Board of Directors has concluded that the Plans are
reasonably likely to benefit the Funds and their shareholders because the Plans
authorize the relationships with selling agents, including Wells Fargo Bank,
that have previously developed distribution channels and relationships with the
retail customers that the Funds are designed to serve. These relationships and
distribution channels are believed by the Board to provide potential for
increased Fund assets and ultimately corresponding economic efficiencies (i.e.,
lower per-share transaction costs and fixed expenses) that are generated by
increased assets under management.
SHAREHOLDER SERVICING AGENT. The Funds have approved a Shareholder
---------------------------
Servicing Plan and have entered into related Shareholder Servicing Agreements
with financial institutions, including Wells Fargo Bank, on behalf of the Class
A shares. Under the agreements, Shareholder Servicing Agents (including Wells
Fargo Bank) agree to perform, as agents for their customers, administrative
services, with respect to Fund shares, which include aggregating and
transmitting shareholder orders for purchases, exchanges and redemptions;
maintaining shareholder accounts
34
<PAGE>
and records; and providing such other related services as the Company or a
shareholder may reasonably request. For providing shareholder services, a
Servicing Agent is entitled to a fee from the applicable Fund, on an annualized
basis, of the average daily net assets of the class of shares owned of record or
beneficially by the customers of the Servicing Agent during the period for which
payment is being made. The amounts payable under the Shareholder Servicing Plan
and Agreements are shown below. The Servicing Plan and related Shareholder
Servicing Agreements were approved by the Company's Board of Directors and
provide that a Fund shall not be obligated to make any payments under such Plan
or related Agreements that exceed the maximum amounts payable under the Conduct
Rules of the NASD.
<TABLE>
<CAPTION>
Fund Fee
---- ---
<S> <C>
Stagecoach California Tax-Free Money Market 0.30%
Stagecoach Government Money Market 0.25%
Stagecoach Money Market 0.30%
Stagecoach National Tax-Free Money Market 0.25%
Stagecoach Treasury Money Market 0.30%
Stagecoach 100% Treasury Money Market 0.30%
</TABLE>
For the periods indicated below, the dollar amounts of shareholder
servicing fees paid by the Funds to Wells Fargo Bank or its affiliates were as
follows:
<TABLE>
<CAPTION>
Six-Month Nine-Month
Period Ended Period Ended
Fund 3/31/97 9/30/96
---- ------- -------
<S> <C> <C>
Stagecoach California Tax-Free Money Market $1,914,675 $ 344,032
Stagecoach Money Market $6,287,325 $7,594,481
Stagecoach Government Money Market $ 73,835 $ 155,369
Stagecoach National Tax-Free Money Market $ 0 $ 0
Stagecoach Treasury Money Market $ 68,907 $ 153,899
Stagecoach 100% Treasury Money Market N/A N/A
</TABLE>
Stagecoach Government Money Market and Stagecoach Treasury Money Market
-----------------------------------------------------------------------
Funds. For the period begun October 1, 1995 and ended September 5, 1996, and
- -----
under
35
<PAGE>
similar service agreements, payments were made to First Interstate Bancorp
for the Stagecoach Government Money Market and Stagecoach Treasury Money Market
Funds, except that for the same period, and under similar service agreements
with certain institutions, including affiliates of FICM, payments were made to
various institutions for the Stagecoach Treasury Money Market Fund. For the
period begun September 6, 1996 and ended September 30, 1996, shareholder
servicing fees were paid to Wells Fargo Bank or its affiliates.
General. The Servicing Plan will continue in effect from year to year if
-------
such continuance is approved by a majority vote of the Directors of the Company,
including a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Funds ("Non-Interested Directors"). Any form of
Servicing Agreement related to the Servicing Plan also must be approved by such
vote of the Directors and the Non-Interested Directors. Servicing Agreements
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Board of Directors, including a majority of the Non-Interested
Directors. No material amendment to the Servicing Plan or related Servicing
Agreements may be made except by a majority of both the Directors of the Company
and the Non-Interested Directors.
The Servicing Plan requires that the Administrator shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Servicing Plan.
CUSTODIAN. Wells Fargo Bank acts as Custodian for each Fund. The
---------
Custodian, among other things, maintains a custody account or accounts in the
name of each Fund, receives and delivers all assets for each Fund upon purchase
and upon sale or maturity, collects and receives all income and other payments
and distributions on account of the assets of each Fund, and pays all expenses
of each Fund. For its services as Custodian, Wells Fargo Bank receives a net
asset-based fee charge at the annual rate of 0.0167%, payable monthly, plus
specified transaction charges. Wells Fargo Bank also provides portfolio
accounting services under the Custody Agreement, and receives fees for such
services as follows: a monthly base fee of $2,000 plus a net asset fee at the
annual rate of 0.070% of the first $50,000,000 of a Fund's average daily net
assets, 0.045% of the next $50,000,000, and 0.020% of the average daily net
assets in excess of $100,000,000.
For the six-month period ended March 31, 1997, the Funds did not pay any
compensation for custody services to Wells Fargo Bank.
Stagecoach California Tax-Free Money Market, Stagecoach Money Market and
------------------------------------------------------------------------
Stagecoach National Tax-Free Money Market Funds. For the nine-month period
- -----------------------------------------------
ended September 30, 1996, the Stagecoach California Tax-Free Money Market,
Stagecoach Money Market and Stagecoach National Tax-Free Money Market Funds did
not pay any custody fees to Wells Fargo Bank.
Stagecoach Government Money Market and Stagecoach Treasury Money Market
------------------------------------------------- ---------------------
Funds. FICAL, located at 707 Wilshire Blvd., Los Angeles, California 90017,
- -----
acted as Custodian to the Pacifica Government Money Market and Treasury Money
Market Funds. FICAL
36
<PAGE>
was entitled to receive a fee from Pacifica, computed daily and payable monthly,
at the annual rate of 0.021% of the first $5 billion in aggregate average daily
net assets of the Funds; 0.0175% of the next $5 billion in aggregate average
daily net assets of the Funds; and 0.015% of the aggregate average daily net
assets of the Funds in excess of $10 billion.
For the period begun October 1, 1995 and ended September 5, 1996, the
custody fees paid to FICAL, and for the period begun September 6, 1996 and to
FICAL, and for the period begun September 6, 1996 and ended September 30, 1996,
the custody fees paid to Wells Fargo Bank were as follows:
<TABLE>
<CAPTION>
Year-ended
9/30/96
Fund -------
----
<S> <C>
Stagecoach Government Money Market $ 18,315
Stagecoach Treasury Money Market $252,183
</TABLE>
TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank acts as Transfer
--------------------------------------
and Dividend Disbursing Agent for the Funds. For providing such services, Wells
Fargo Bank is entitled to receive monthly payments at the annual rate of 0.10%
of each Fund's average daily net assets of Class A shares.
For the six-month period ended March 31, 1997, the Funds did not pay any
compensation for transfer and dividend disbursing agency services to Wells Fargo
Bank.
For the nine-month period ended September 30, 1996, the Stagecoach Money
Market, Stagecoach California Tax-Free Money Market and Stagecoach National Tax-
Free Money Market Funds did not pay any compensation for transfer and dividend
disbursing agency services.
Stagecoach Government Money Market and Stagecoach Treasury Money Market
-----------------------------------------------------------------------
Funds. Under the prior transfer agency agreement for the Stagecoach Government
- -----
Money Market Fund and Stagecoach Treasury Money Market Fund, Wells Fargo Bank
was entitled to receive monthly payments at the annual rate of 0.07% of the
average daily net assets of the Class A shares of each such Fund, as well as
reimbursement for all reasonable out-of-pocket expenses. Furman Selz acted as
Transfer Agent for the predecessor portfolios. Pacifica compensated Furman Selz
for providing personnel and facilities to perform transfer agency related
services for Pacifica at a rate intended to represent the cost of providing such
services.
Stagecoach Money Market and Stagecoach California Tax-Free Money Market
-----------------------------------------------------------------------
Funds. For its services as Transfer and Dividend Disbursing Agent for the
- -----
Stagecoach Money Market and Stagecoach California Tax-Free Money Market Funds'
Class A shares, Wells Fargo Bank is entitled to receive monthly payments at the
annual rate of 0.10% of each Fund's average daily net assets for Class A
shares. Under the prior transfer agency agreement, Wells Fargo Bank was
entitled to receive a per account fee plus transaction fees and reimbursement of
out-of-pocket expenses, with a minimum of $3,000 per month per Fund, unless net
assets of the
37
<PAGE>
Fund were under $20 million. For as long as a Fund's assets remained under $20
million, the Fund was not charged any transfer agency fees.
UNDERWRITING COMMISSIONS. The Funds do not assess any front-end sales
------------------------
loads or contingent deferred sales charges in connection with the purchase and
redemption of shares, and therefore pay no underwriting commissions to the
Distributor.
PERFORMANCE CALCULATIONS
The Funds may advertise certain yield and total return information.
Quotations of yield and total return reflect only the performance of a
hypothetical investment in a Fund or class of shares during the particular time
period shown. Yield and total return vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.
In connection with communicating its performance to current or prospective
shareholders, these figures may also be compared to the performance of other
mutual funds tracked by mutual fund rating services or to unmanaged indices
which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Performance information for a Fund or Class of shares in a Fund may be
useful in reviewing the performance of such Fund or Class of shares and for
providing a basis for comparison with investment alternatives. The performance
of a Fund and the performance of a Class of shares in a Fund, however, may not
be comparable to the performance from investment alternatives because of
differences in the foregoing variables and differences in the methods used to
value portfolio securities, compute expenses and calculate performance.
Performance information may be advertised for non-standardized periods,
including year-to-date and other periods less than a year.
Performance shown or advertised for the Class A shares of the Stagecoach
Government Money Market Fund for periods prior to September 6, 1996, reflects
performance of the Pacifica Government Money Market Fund, a predecessor
portfolio with the same investment objective and policies as the Stagecoach
Government Money Market Fund.
Performance shown or advertised for the Class A shares of the Stagecoach
Treasury, Money Market Fund for periods prior to September 6, 1996, reflects
performance of the Service Class shares of the Pacifica Treasury Money Market
Fund, a predecessor portfolio with the same investment objective and policies
and the Stagecoach Treasury Money Market Fund.
AVERAGE ANNUAL TOTAL RETURN: The Funds may advertise certain total return
---------------------------
information. As and to the extent required by the SEC, an average annual
compound rate of return ("T") is computed by using the redeemable value at the
end of a specified period ("ERV")
38
<PAGE>
of a hypothetical initial investment ("P") over a period of years ("n")
according to the following formula: P(1+T)/n/=ERV.
Average Annual Total Return for the Applicable Period Ended September 30,
-------------------------------------------------------------------------
1997
- ----
<TABLE>
<CAPTION>
Five Three One
Fund Inception Year Year Year
---- --------- ---- ---- ----
<S> <C> <C> <C> <C>
Stagecoach California Tax-Free Money Market 2.63% 2.58% 2.97% 2.88%
Stagecoach Government Money Market 5.35% 4.15% 4.94% 4.79%
Stagecoach Money Market 4.14% 4.21% 5.01% 4.92%
Stagecoach National Tax-Free Money Market 2.93% N/A N/A 2.88%
Stagecoach Treasury Money Market 5.49% 4.18% 5.07% 4.98%
Stagecoach 100% Treasury Money Market N/A N/A N/A N/A
</TABLE>
CUMULATIVE TOTAL RETURN: In addition to the above performance information,
-----------------------
each Fund may also advertise the cumulative total return of the Fund.
Cumulative total return is based on the overall percentage change in value of a
hypothetical investment in the Fund, assuming all Fund dividends and capital
gain distributions are reinvested, without reflecting the effect of any sales
charge that would be paid by an investor, and is not annualized.
Cumulative Total Return for the Applicable Period Ended September 30, 1997
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Five Three
Fund Inception Year Year
---- --------- ---- ----
<S> <C> <C> <C>
Stagecoach California Tax-Free Money Market 16.11% 13.61% 9.17%
Stagecoach Government Money Market 63.59% 22.56% 15.57%
Stagecoach Money Market 23.76% 22.89% 15.78%
Stagecoach National Tax-Free Money Market 4.43% N/A N/A
Stagecoach Treasury Money Market 89.86% 22.72% 15.99%
Stagecoach 100% Treasury Money Market N/A N/A N/A
</TABLE>
YIELD CALCULATIONS: The Funds may, from time to time, include their
------------------
yields, tax-equivalent yields (if applicable) and effective yields in
advertisements or reports to shareholders
39
<PAGE>
or prospective investors. Quotations of yield for the Funds are based on the
investment income per share earned during a particular seven-day or thirty-day
period, less expenses accrued during a period ("net investment income") and are
computed by dividing net investment income by the offering price per share on
the last date of the period, according to the following formula:
YIELD = 2[(a - b + 1)/6/ -1]
-----
Cd
where a = dividends and interest earned during the period, b = expenses
accrued for the period (net of any reimbursements), c = the average daily number
of shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period.
TAX-EQUIVALENT YIELD: Quotations of tax-equivalent yield for a Tax-Free
--------------------
Fund are calculated according the following formula:
TAX EQUIVALENT YIELD = ( E ) + t
---
1 - p
E = Tax-exempt yield
p = stated income tax rate
t = taxable yield
EFFECTIVE YIELD: Effective yields for the Funds are based on the change in
---------------
the value of a hypothetical investment (exclusive of capital changes) over a
particular seven-day (or thirty-day) period, less a pro-rata share of each
Fund's expenses accrued over that period (the "base period"), and stated as a
percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized multiplying by 365/7 (or
365/30 for thirty-day yield), with the resulting yield figure carried to at
least the nearest hundredth of one percent. "Effective yield" for the Funds
assumes that all dividends received during the period have been reinvested.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
Effective Seven-Day Yield = [(Base Period Return +1)365/7]-1
40
<PAGE>
Yield for the Applicable Period Ended September 30, 1997
--------------------------------------------------------
<TABLE>
<CAPTION>
Seven-Day Seven-Day Seven-Day Thirty-Day
Seven-Day Effective Tax-Equivalent Tax-Equivalent Thirty-Day Tax-Equivalent
Fund Yield Yield Yield/1/ Effective Yield/1/ Yield Yield/1/
---- ----- ----- -------- ----------------- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
Stagecoach California
Tax-Free Money Market 3.21% 3.26% 5.97% 6.06% 2.94% 5.47%
Stagecoach Government Money
Market 4.87% 4.99% N/A N/A 4.82% 8.97%
Stagecoach Money Market 4.97% 5.09% N/A N/A 4.96% 9.23%
Stagecoach National
Tax-Free Money Market 3.23% 3.28% 4.49% 4.56% 3.00% 4.17%
Stagecoach Treasury Money
Market 4.86% 4.98% N/A N/A 4.96% 9.23%
Stagecoach 100% Treasury N/A N/A N/A N/A N/A N/A
Money Market
</TABLE>
- --------------------
/1/ Based on a combined state and federal income tax rate of 46.24%, except for
the Stagecoach National Tax-Free Money Market Fund which is based on a
federal tax rate of 28.00%.
From time to time and only to the extent the comparison is appropriate for
a Fund or a Class of shares, the Company may quote the performance or price-
earning ratio of a Fund or Class in advertising and other types of literature as
compared to the performance of the S&P Index, the Dow Jones Industrial Average,
the Lehman Brothers 20+ Treasury Index, the Lehman Brothers 5-7 Year Treasury
Index, Donoghue's Money Fund Averages, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by World Gold Council), Bank Averages (which are
calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), average annualized certificate of deposit rates (from the Federal
Reserve G-13 Statistical Releases or the Bank Rate Monitor), the Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), other managed or unmanaged indices or
performance data of bonds, municipal securities, stocks or government securities
(including data provided by Ibbotson Associates), or by other services,
companies, publications or persons who monitor mutual funds on overall
performance or other criteria. The S&P Index and the Dow Jones Industrial
Average are unmanaged indices of selected common stock prices. The performance
of the Funds or a Class also may be compared to that of other mutual funds
having similar objectives. This comparative performance could be expressed as a
ranking prepared by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Bloomberg Financial Markets or Morningstar, Inc.,
independent services which monitor the performance of mutual funds. The Funds'
performance will be calculated by relating net asset value per share at the
beginning of a stated period to the net asset value of the investment, assuming
reinvestment of all gains distributions and dividends paid, at the end of the
period. The Funds' comparative performance
41
<PAGE>
will be based on a comparison of yields, as described above, or total return, as
reported by Lipper, Survey Publications, Donoghue or Morningstar, Inc.
Any such comparisons may be useful to investors who wish to compare past
performance of the Funds or a Class with that of competitors. Of course, past
performance cannot be a guarantee of future results. The Company also may
include, from time to time, a reference to certain marketing approaches of the
Distributor, including, for example, a reference to a potential shareholder
being contacted by a selected broker or dealer. General mutual fund statistics
provided by the Investment Company Institute may also be used.
The Company also may use the following information in advertisements and
other types of literature, only to the extent the information is appropriate for
the Fund: (i) the Consumer Price Index may be used to assess the real rate of
return from an investment in a Fund; (ii) other government statistics,
including, but not limited to, The Survey of Current Business, may be used to
illustrate investment attributes of a Fund or the general economic, business,
investment, or financial environment in which a Fund operates; (iii) the effect
of tax-deferred compounding on the investment returns of a Fund, or on returns
in general, may be illustrated by graphs, charts, etc., where such graphs or
charts would compare, at various points in time, the return from an investment
in a Fund (or returns in general) on a tax-deferred basis (assuming reinvestment
of capital gains and dividends and assuming one or more tax rates) with the
return on a taxable basis; and (iv) the sectors or industries in which a Fund
invests may be compared to relevant indices of stocks or surveys (e.g., S&P
Industry Surveys) to evaluate a Fund's historical performance or current or
potential value with respect to the particular industry or sector.
In addition, the Company also may use, in advertisements and other types of
literature, information and statements: (1) showing that bank savings accounts
offer a guaranteed return of principal and a fixed rate of interest, but no
opportunity for capital growth; and (2) describing Wells Fargo Bank, and its
affiliates and predecessors, as one of the first investment managers to advise
investment accounts using asset allocation and index strategies. The Company
also may include in advertising and other types of literature information and
other data from reports and studies prepared by the Tax Foundation, including
information regarding federal and state tax levels and the related "Tax Freedom
Day."
The Company also may discuss in advertising and other types of literature
that a Fund has been assigned a rating by an NRSRO, such as Standard & Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by the Fund. The assigned rating would not be a recommendation to
purchase, sell or hold the Fund's shares since the rating would not comment on
the market price of the Fund's shares or the suitability of the Fund for a
particular investor. In addition, the assigned rating would be subject to
change, suspension or withdrawal as a result of changes in, or unavailability
of, information relating to the Fund or its investments. The Company may
compare the Fund's performance with other investments which are assigned ratings
by NRSROs. Any such comparisons may be useful to investors who wish to compare
the Fund's past performance with other rated investments.
42
<PAGE>
From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability of
combined Wells Fargo Bank and Stagecoach Funds account statements."
The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Capital Management (formerly,
Wells Fargo Investment Management), a division of Wells Fargo Bank, is listed in
the top 100 by Institutional Investor magazine in its July 1997 survey
"America's Top 300 Money Managers." This survey ranks money managers in several
asset categories. The Company may also disclose in advertising and other types
of sales literature the assets and categories of assets under management by the
Company's investment advisor and the total amount of assets and mutual fund
assets managed by Wells Fargo Bank. As of June 30, 1998, Wells Fargo Bank and
its affiliates provided investment Advisory services for approximately [$62]
billion of assets of individual, trusts, estates and institutions and [$23]
billion of mutual fund assets.
The Company also may discuss in advertising and other types of literature
the features, terms and conditions of Wells Fargo Bank accounts through which
investments in the Funds may be made via a "sweep" arrangement, including,
without limitation, the Managed Sweep Account, Money Market Checking Account,
California Tax-Free Money Market Checking Account, Money Market Access Account
and California Tax-Free Money Market Access Account (collectively, the "Sweep
Accounts"). Such advertisements and other literature may include, without
limitation, discussions of such terms and conditions as the minimum deposit
required to open a Sweep Account, a description of the yield earned on shares of
the Funds through a Sweep Account, a description of any monthly or other service
charge on a Sweep Account and any minimum required balance to waive such service
charges, any overdraft protection plan offered in connection with a Sweep
Account, a description of any ATM or check privileges offered in connection with
a Sweep Account and any other terms, conditions, features or plans offered in
connection with a Sweep Account. Such advertising or other literature may also
include a discussion of the advantages of establishing and maintaining a Sweep
Account, and may include statements from customers as to the reasons why such
customers have established and maintained a Sweep Account.
The Company may disclose in advertising and other types of literature that
investors can open and maintain Sweep Accounts over the Internet or through
other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available to
investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the first
major bank to offer an on-line application for a mutual fund account that can be
filled out completely through Electronic Channels. Advertising and other
literature may disclose that Wells Fargo Bank may maintain Web sites, pages or
other information sites accessible through Electronic Channels (an "Information
Site") and may describe the contents and features of the Information
43
<PAGE>
Site and instruct investors on how to access the Information Site and open a
Sweep Account. Advertising and other literature may also disclose the procedures
employed by Wells Fargo Bank to secure information provided by investors,
including disclosure and discussion of the tools and services for accessing
Electronic Channels. Such advertising or other literature may include
discussions of the advantages of establishing and maintaining a Sweep Account
through Electronic Channels and testimonials from Wells Fargo Bank customers or
employees and may also include descriptions of locations where product
demonstrations may occur. The Company may also disclose the ranking of Wells
Fargo Bank as one of the largest money managers in the United States.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for the Class A shares of the Stagecoach
Government Money Market, Stagecoach Treasury Money Market and Stagecoach Money
Market Funds is determined as of 12:00 noon and 1:00 p.m. (Pacific time) on each
day the New York Stock Exchange ("NYSE") is open for business. Net asset value
per share for the Class A shares of the Stagecoach 100% Treasury, Stagecoach
California Tax-Free Money Market and Stagecoach National Tax-Free Money Market
Funds is determined as of 9:00 a.m. and 1:00 p.m. (Pacific time) on each day the
NYSE is open for business. Expenses and fees, including advisory fees, are
accrued daily and are taken into account for the purpose of determining the net
asset value of the Funds' shares.
Each Fund uses the amortized cost method to determine the value of its
portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The amortized
cost method involves valuing a security at its cost and amortizing any discount
or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
that the Funds would receive if the security were sold. During these periods
the yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund that uses a method of valuation based upon market prices.
Thus, during periods of declining interest rates, if the use of the amortized
cost method resulted in a lower value of the Funds' portfolio on a particular
day, a prospective investor in the Funds would be able to obtain a somewhat
higher yield than would result from investment in a fund using solely market
values, and existing Fund shareholders would receive correspondingly less
income. The converse would apply during periods of rising interest rates.
Rule 2a-7 provides that in order to value its portfolio using the amortized
cost method, a Fund must maintain a dollar-weighted average portfolio maturity
of 90 days or less, purchase securities having remaining maturities (as defined
in Rule 2a-7) of thirteen months or less and invest only in those high-quality
securities that are determined by the Board of Directors to present minimal
credit risks. The maturity of an instrument is generally deemed to be the
period remaining until the date when the principal amount thereof is due or the
date on which the instrument is to be redeemed. However, Rule 2a-7 provides
that the maturity of an instrument
44
<PAGE>
may be deemed shorter in the case of certain instruments, including certain
variable and floating rate instruments subject to demand features. Pursuant to
Rule 2a-7, the Board is required to establish procedures designed to stabilize,
to the extent reasonably possible, a Fund's price per share as computed for the
purpose of sales and redemptions at $1.00. Such procedures include review of the
Fund's portfolio holdings by the Board of Directors, at such intervals as it may
deem appropriate, to determine whether the Fund's net asset value calculated by
using available market quotations deviates from $1.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board of
Directors. If such deviation exceeds 1/2 of 1%, the Board will promptly consider
what action, if any, will be initiated. In the event the Board determines that a
deviation exists that may result in material dilution or other unfair results to
investors or existing shareholders, the Board will take such corrective action
as it regards as necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity, withholding dividends or establishing a net asset
value per share by using available market quotations. It is the intention of the
Funds to maintain a per share net asset value of $1.00, but there can be no
assurance that each Fund will do so.
Instruments having variable or floating interest rates or demand features
may be deemed to have remaining maturities as follows: (a) a government security
with a variable rate of interest readjusted no less frequently than every
thirteen months may be deemed to have a maturity equal to the period remaining
until the next readjustment of the interest rate; (b) an instrument with a
variable rate of interest, the principal amount of which is scheduled on the
face of the instrument to be paid in thirteen months or less, may be deemed to
have a maturity equal to the period remaining until the next readjustment of the
interest rate; (c) an instrument with a variable rate of interest that is
subject to a demand feature may be deemed to have a maturity equal to the longer
of the period remaining until the next readjustment of the interest rate or the
period remaining until the principal amount can be recovered through demand; (d)
an instrument with a floating rate of interest that is subject to a demand
feature may be deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand; and (e) a repurchase agreement
may be deemed to have a maturity equal to the period remaining until the date on
which the repurchase of the underlying securities is scheduled to occur or,
where no date is specified but the agreement is subject to demand, the notice
period applicable to a demand for the repurchase of the securities.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds may be purchased on any day a Fund is open for business
(a "Business Day"). The Funds are open Monday through Friday and are closed on
federal bank holidays. Currently, those holidays are New Year's Day,
President's Day, Martin Luther King Jr. Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.
Purchase orders for Class A shares of the Stagecoach Money Market,
Stagecoach Government Money Market and Stagecoach Treasury Money Market Funds
received before 12:00 Noon (Pacific time) are processed at 12:00 Noon on that
Business Day.
45
<PAGE>
Purchase orders received after 12:00 Noon are processed at 12:00 Noon the next
Business Day. Purchase orders for shares of the Stagecoach California Tax-Free
Money Market, Stagecoach National Tax-Free Money Market and Stagecoach 100%
Treasury Money Market Funds received before 9:00 a.m. (Pacific time) are
processed at 9:00 a.m. on that Business Day. Purchase orders received after 9:00
a.m. are processed at 9:00 a.m. the next Business Day. Transaction orders that
are received prior to 1:00 p.m. through shareholder servicing agents in
connection with automated investment programs are processed at 1:00 p.m. On any
day the trading markets for both U.S. government securities and money market
instruments close early, the Funds will close early. On these days, the net
asset value calculation time and the dividend, purchase and redemption cut-off
times for the Funds may be earlier than 12:00 Noon.
Payment for shares may, in the discretion of the Advisor, be made in the
form of securities that are permissible investments for the Funds. For further
information about this form of payment please contact Stephens. In connection
with an in-kind securities payment, the Funds will require, among other things,
that the securities be valued on the day of purchase in accordance with the
pricing methods used by a Fund and that such Fund receives satisfactory
assurances that (i) it will have good and marketable title to the securities
received by it; (ii) that the securities are in proper form for transfer to the
Fund; and (iii) adequate information will be provided concerning the basis and
other matters relating to the securities.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule or
regulation) an emergency exists as a result of which disposal or valuation of
portfolio securities is not reasonably practicable, or for such periods as the
SEC may permit. The Company may also redeem shares involuntarily or make
payment for redemption in securities or other property if it appears appropriate
to do so in light of the Company's responsibilities under the 1940 Act. In
addition, the Company may redeem shares involuntarily to reimburse the Funds for
any losses sustained by reason of the failure of a shareholders to make full
payment for shares purchased or to collect any charge relating to a transaction
effected for the benefit of a shareholder which is applicable to shares of a
Fund.
PORTFOLIO TRANSACTIONS
The Company has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors, Wells Fargo Bank is responsible
for each Fund's portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Company to obtain the best results
taking into account the dealer's general execution and operational facilities,
the type of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While Wells Fargo Bank generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available.
46
<PAGE>
Purchases and sales of non-equity securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. Each of
the Funds also will purchase portfolio securities in underwritten offerings and
may purchase securities directly from the issuer. Generally, municipal
obligations and taxable money market securities are traded on a net basis and do
not involve brokerage commissions. The cost of executing a Fund's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the
Company are prohibited from dealing with the Company as a principal in the
purchase and sale of securities unless an exemptive order allowing such
transactions is obtained from the SEC or an exemption is otherwise available.
The Funds may purchase securities from underwriting syndicates of which Stephens
or Wells Fargo Bank is a member under certain conditions in accordance with the
provisions of a rule adopted under the 1940 Act and in compliance with
procedures adopted by the Board of Directors.
Wells Fargo Bank, as the Investment Advisor of each of the Funds, may, in
circumstances in which two or more dealers are in a position to offer comparable
results for a Fund portfolio transaction, give preference to a dealer that has
provided statistical or other research services to Wells Fargo Bank. By
allocating transactions in this manner, Wells Fargo Bank is able to supplement
its research and analysis with the views and information of securities firms.
Information so received will be in addition to, and not in lieu of, the services
required to be performed by Wells Fargo Bank under the Advisory Contracts, and
the expenses of Wells Fargo Bank will not necessarily be reduced as a result of
the receipt of this supplemental research information. Furthermore, research
services furnished by dealers through which Wells Fargo Bank places securities
transactions for a Fund may be used by Wells Fargo Bank in servicing its other
accounts, and not all of these services may be used by Wells Fargo Bank in
connection with advising the Funds.
Brokerage Commissions. The Funds did not pay any brokerage commissions on
---------------------
portfolio transactions for the nine-month period ended September 30, 1996 and
the six-month period ended March 31, 1997.
Securities of Regular Broker/Dealers. As of March 31, 1997, the Funds
------------------------------------
owned securities of their "regular brokers or dealers" or their parents, as
defined in the Act as follows:
<TABLE>
<CAPTION>
Fund Broker/Dealers Amount
- ---- -------------- ------
<S> <C> <C>
Stagecoach California Tax-Free None None
Money Market
Stagecoach Money Market Goldman Sachs & Co. $324,580,500
Merrill Lynch $244,186,473
J.P. Morgan Securities $ 56,309,000
Morgan Stanley $ 24,466,000
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Stagecoach Government Goldman Sachs & Co. $ 8,280,000
Money Market J.P. Morgan Securities $ 9,160,000
Stagecoach National Tax-Free Money None None
Market
Stagecoach Treasury Money Goldman Sachs & Co. $172,575,000
Market J.P. Morgan Securities $232,766,000
Morgan Stanley $156,530,000
</TABLE>
Portfolio Turnover. The portfolio turnover rate is not a limiting factor
------------------
when Wells Fargo Bank deems portfolio changes appropriate. Changes may be made
in the portfolios consistent with the investment objectives and policies of the
Funds whenever such changes are believed to be in the best interests of the
Funds and their shareholders. The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities by the average
monthly value of the Fund's portfolio securities. For purposes of this
calculation, portfolio securities exclude all securities having a maturity when
purchased of one year or less. Portfolio turnover generally involves some
expenses to the Funds, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover also can generate short-term capital gain tax
consequences. Portfolio turnover rate is not a limiting factor when Wells Fargo
Bank deems portfolio changes appropriate.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive fees from the
Funds in whole or in part. Any such waiver will reduce expenses and,
accordingly, have a favorable impact on a Fund's performance. Except for the
expenses borne by Wells Fargo Bank and Stephens, the Company bears all costs of
its operations, including the compensation of its Directors who are not
affiliated with Stephens or Wells Fargo Bank or any of their affiliates;
advisory, shareholder servicing and administration fees; payments pursuant to
any Plan; interest charges; taxes; fees and expenses of its independent
accountants, legal counsel, transfer agent and dividend disbursing agent;
expenses of redeeming shares; expenses of preparing and printing prospectuses
(except the expense of printing and mailing prospectuses used for promotional
purposes, unless otherwise payable pursuant to a Plan), shareholders' reports,
notices, proxy statements and reports to regulatory agencies; insurance premiums
and certain expenses relating to insurance coverage; trade association
membership dues; brokerage and other expenses connected with the execution of
portfolio transactions; fees and expenses of its custodian, including those for
keeping books and accounts and calculating the net asset value per share of a
Fund; expenses of shareholders' meetings; expenses relating to the issuance,
registration and qualification of a Fund's shares; pricing services, and any
extraordinary expenses. Expenses attributable to a Fund are charged against a
Fund assets. General expenses of the Company are allocated among all of the
funds of the Company, including a Fund, in a manner proportionate to
48
<PAGE>
the net assets of each Fund, on a transactional basis, or on such other basis as
the Company's Board of Directors deems equitable.
FEDERAL INCOME TAXES
The following information supplements and should be read in conjunction
with the Prospectus section entitled "Taxes." The Prospectus describes
generally the tax treatment of distributions by the Funds. This section of the
SAI includes additional information concerning income taxes.
General. The Company intends to qualify each Fund as a regulated
-------
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), as long as such qualification is in the best interest of
the Fund's shareholders. Each Fund will be treated as a separate entity for tax
purposes and thus the provisions of the Code applicable to regulated investment
companies will generally be applied to each Fund, rather than to the Company as
a whole. In addition, net capital gain, net investment income, and operating
expenses will be determined separately for each Fund. As a regulated investment
company, each Fund will not be taxed on its net investment income and capital
gains distributed to its shareholders.
Qualification as a regulated investment company under the Code requires,
among other things, that (a) each Fund derive at least 90% of its annual gross
income from dividends, interest, certain payments with respect to securities
loans, gains from the sale or other disposition of stock or securities or
foreign currencies (to the extent such currency gains are directly related to
the regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) the Fund diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
obligations and the securities of other regulated investment companies), or in
two or more issuers which the Fund controls and which are determined to be
engaged in the same or similar trades or businesses.
The Funds must also distribute or be deemed to distribute to their
shareholders at least 90% of their net investment income earned in each taxable
year. In general, these distributions must actually or be deemed to be made in
the taxable year. However, in certain circumstances, such distributions may be
made in the 12 months following the taxable year. The Funds intend to pay out
substantially all of their net investment income and net realized capital gains
(if any) for each year.
In addition, a regulated investment company must, in general, derive less
than 30% of its gross income from the sale or other disposition of securities or
options thereon held for less than
49
<PAGE>
three months. However, this restriction has been repealed with respect to a
regulated investment company's taxable years beginning after August 5, 1997.
Excise Tax. A 4% nondeductible excise tax will be imposed on each Fund
----------
(other than to the extent of its tax-exempt interest income) to the extent it
does not meet certain minimum distribution requirements by the end of each
calendar year. Each Fund intends to actually or be deemed to distribute
substantially all of its net investment income and net capital gains by the end
of each calendar year and, thus, expects not to be subject to the excise tax.
Taxation of Fund Investments. Except as provided herein, gains and losses
----------------------------
on the sale of portfolio securities by a Fund will generally be capital gains
and losses. Such gains and losses will ordinarily be long-term capital gains
and losses if the securities have been held by the Funds for more than one year
at the time of disposition of the securities.
Gains recognized on the disposition of a debt obligation (including tax-
exempt obligations purchased after April 30, 1993) purchased by the Funds at a
market discount (generally at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of market discount which
accrued, but was not previously recognized pursuant to an available election,
during the term the Funds held the debt obligation.
Capital Gain Distributions. Distributions which are designated by a Fund
--------------------------
as capital gain distributions will be taxed to shareholders as long-term capital
gain (to the extent such dividends do exceed the Fund's actual net capital gain
for the taxable year), regardless of how long a shareholder has held Fund
shares. Such distributions will be designated as capital gain distributions in
a written notice mailed by the Fund to its shareholders not later than 60 days
after the close of the Fund's taxable year.
The Taxpayer Relief Act of 1997 (the "1997 Act") created several new
categories of capital gains applicable to noncorporate taxpayers. Under prior
law, noncorporate taxpayers were generally taxed at a maximum rate of 28% on net
capital gain (generally, the excess of net long-term capital gain over net
short-term capital loss). Noncorporate taxpayers are now generally taxed at a
maximum rate of 20% on net capital gain attributable to gains realized on the
sale of property held for greater than 18 months, and a maximum rate of 28% on
net capital gain attributable to gain realized on the sale of property held for
greater than one year and not more than 18 months. The 1997 Act retains the
treatment of short term capital gain or loss (generally, gain or loss
attributable to capital assets held for 1 year or less) and did not affect the
taxation of capital gains in the hands of corporate taxpayers.
Under the 1997 Act, the Treasury is authorized to issue regulations for
application of the reduced capital gains tax rates to pass-through entities,
including regulated investment companies, such as the Funds. The Internal
Revenue Service has published a notice describing temporary Regulations to be
issued pursuant to such authority, permitting the application of the reduced
capital gains tax rates to pass-through entities such as the Funds. Under the
Regulations to be issued, if a regulated investment company designates a
dividend as a capital gain dividend for a taxable year ending on or after May 7,
1997, then such regulated investment company may also designate the dividends as
one of two classes: a 20% rate gain distribution, or a 28% rate
50
<PAGE>
gain distribution. Thus, noncorporate shareholders of the Funds may qualify for
the reduced rate of tax on capital gain dividends paid by the Funds, subject
only to the limitation as to the maximum amounts which may be designated in each
class. Such maximum amount for each class is determined by performing the
computation required by Section 1(h) of the Code as if the Fund were an
individual whose ordinary income is subject to a marginal rate of at least 28%.
Other Distributions. Although dividends will be declared daily based on
-------------------
each Fund's daily earnings, for federal income tax purposes, the Fund's earnings
and profits will be determined at the end of each taxable year and will be
allocated pro rata over the entire year. For federal income tax purposes, only
amounts paid out of earnings and profits will qualify as dividends. Thus, if
during a taxable year a Fund's declared dividends (as declared daily throughout
the year) exceed the Fund's net income (as determined at the end of the year),
only that portion of the year's distributions which equals the year's earnings
and profits will be deemed to have constituted a dividend. It is expected that
each Fund's net income, on an annual basis, will equal the dividends declared
during the year.
Disposition of Fund Shares. A disposition of Fund shares pursuant to
--------------------------
redemption (including a redemption in-kind) or exchanges will ordinarily result
in a taxable capital gain or loss, depending on the amount received for the
shares (or are deemed to receive in the case of an exchange) and the cost of the
shares.
If a shareholder exchanges or otherwise disposes of Fund shares within 90
days of having acquired such shares and if, as a result of having acquired those
shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different regulated investment company, the
sales charge previously incurred acquiring the Fund's shares shall not be taken
into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are acquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.
If a shareholder receives a designated capital gain distribution (to be
treated by the shareholder as long-term capital gain) with respect to any Fund
share and such Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as long-term capital loss to the extent of the designated capital gain
distribution. In addition, if a shareholder holds Fund shares for six months or
less, any loss on the sale or exchange of those shares will be disallowed to the
extent of the amount of exempt-interest dividends received with respect to the
shares. The Treasury Department is authorized to issue regulations reducing the
six months holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where a Fund regularly
distributes at least 90% of its net tax-exempt interest, if any. No such
regulations had been issued as of the date of this SAI. The loss disallowance
rules described in this paragraph do not apply to losses realized under a
periodic redemption plan.
51
<PAGE>
Federal Income Tax Rates. As of the printing of this SAI, the maximum
------------------------
individual tax rate applicable to ordinary income is 39.6% (marginal tax rates
may be higher for some individuals to reduce or eliminate the benefit of
exemptions and deductions); the maximum individual marginal tax rate applicable
to net capital gain is 28% (however, see "Capital Gain Distributions" above);
and the maximum corporate tax rate applicable to ordinary income and net capital
gain is 35% (marginal tax rates may be higher for some corporations to reduce or
eliminate the benefit of lower marginal income tax rates). Naturally, the
amount of tax payable by an individual or corporation will be affected by a
combination of tax laws covering, for example, deductions, credits, deferrals,
exemptions, sources of income and other matters.
Backup Withholding. The Company may be required to withhold, subject to
------------------
certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (including proceeds from
exchanges and redemptions in-kind) paid or credited to an individual Fund
shareholder, unless the shareholder certifies that the Taxpayer Identification
Number ("TIN") provided is correct and that the shareholder is not subject to
backup withholding, or the IRS notifies the Company that the shareholder's TIN
is incorrect or that the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a credit or refund on the shareholder's federal income tax
return. An investor must provide a valid TIN upon opening or reopening an
account. Failure to furnish a valid TIN to the Company could subject the
investor to penalties imposed by the IRS. Foreign shareholders of the Funds
(described below) are generally not subject to backup withholding.
Foreign Shareholders. Under the Code, distributions of net investment
--------------------
income by a Fund to a nonresident alien individual, foreign trust (i.e., trust
which a U.S. court is able to exercise primary supervision over administration
of that trust and one or more U.S. persons have authority to control substantial
decisions of that trust), foreign estate (i.e., the income of which is not
subject to U.S. tax regardless of source), foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. income tax
withholding (at a rate of 30% or a lower treaty rate, if applicable).
Withholding will not apply if a dividend distribution paid by a Fund to a
foreign shareholder is "effectively connected" with a U.S. trade or business
(or, if an income tax treaty applies, is attributable to a U.S. permanent
establishment of the foreign shareholder), in which case the reporting and
withholding requirements applicable to U.S. residents will apply. Distributions
of net capital gain are generally not subject to U.S. income tax withholding.
New Regulations. On October 6, 1997, the Treasury Department issued new
---------------
regulations (the "New Regulations") which make certain modifications to the
backup withholding, U.S. income tax withholding and information reporting rules
applicable to foreign shareholders. The New Regulations will generally be
effective for payments made after December 31, 1998, subject to certain
transition rules. Among other things, the New Regulations will permit the Funds
to estimate the portion of their distributions qualifying as capital gain
distributions for purposes of determining the portion of such distributions paid
to foreign shareholders which will be subject to U.S. income tax withholding.
Prospective investors are urged to consult their own tax advisors regarding the
New Regulations.
52
<PAGE>
Special Tax Considerations for Stagecoach California Tax-Free Money Market
--------------------------------------------------------------------------
Fund and Stagecoach National Tax-Free Money Market Fund.
- -------------------------------------------------------
General
The Stagecoach California Tax-Free Money Market Fund and Stagecoach
National Tax-Free Money Market Fund intend that at least 50% of the value of
their total assets at the close of each quarter of their taxable years will
consist of obligations, the interest on which is exempt from federal income tax,
so that they will qualify under the Code to pay "exempt-interest dividends."
The portion of total dividends paid by the Funds with respect to any taxable
year that constitutes exempt-interest dividends will be the same for all
shareholders receiving dividends during such year. Long-term and/or short-term
capital gain distributions will not constitute exempt-interest dividends and
will be taxed as capital gain or ordinary income dividends, respectively. The
exemption of interest income derived from investments in tax-exempt obligations
for federal income tax purposes may not result in a similar exemption under the
laws of a particular state or local taxing authority.
Not later than 60 days after the close of its taxable year, each Fund will
notify its shareholders of the portion of the dividends paid with respect to
such taxable year which constitutes exempt-interest dividends. The aggregate
amount of dividends so designated cannot exceed the excess of the amount of
interest excludable from gross income under Section 103 of the Code received by
a Fund during the taxable year over any amounts disallowed as deductions under
Sections 265 and 171(a)(2) of the Code. Interest on indebtedness incurred to
purchase or carry shares of a Fund will not be deductible to the extent that the
Fund's distributions are exempt from federal income tax.
In addition, the federal alternative minimum tax ("AMT") rules ensure that
at least a minimum amount of tax is paid by taxpayers who obtain significant
benefit from certain tax deductions and exemptions. Some of these deductions
and exemptions have been designated "tax preference items" which must be added
back to taxable income for purposes of calculating AMT. Among the tax
preference items is tax-exempt interest from "private activity bonds" issued
after August 7, 1986. To the extent that the Stagecoach California Tax-Free
Money Market Fund or Stagecoach National Tax-Free Money Market Fund invests in
private activity bonds, its shareholders who pay AMT will be required to report
that portion of Fund dividends attributable to income from the bonds as a tax
preference item in determining their AMT. Shareholders will be notified of the
tax status of distributions made by the Funds. Persons who may be "substantial
users" (or "related persons" of substantial users) of facilities financed by
private activity bonds should consult their tax advisors before purchasing
Stagecoach California Tax-Free Money Market Fund or Stagecoach National Tax-Free
Money Market Fund shares. Furthermore, shareholders will not be permitted to
deduct any of their share of the Fund's expenses in computing their AMT. With
respect to a corporate shareholder of such Funds, exempt-interest dividends paid
by a Fund is included in the corporate shareholder's "adjusted current earnings"
as part of its AMT calculation, and may also affect its federal "environmental
tax" liability. As of the printing of this SAI, individuals are subject to an
AMT
53
<PAGE>
at a maximum rate of 28% and corporations at a maximum rate of 20%. Shareholders
with questions or concerns about AMT should consult their own tax advisors.
Shares of the Stagecoach California Tax-Free Money Market Fund or
Stagecoach National Tax-Free Money Market Fund would not be suitable for tax-
exempt institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans and IRAs since such plans and accounts
are generally tax-exempt and, therefore, would not benefit from the exempt
status of dividends from such Funds. Such dividends would be ultimately taxable
to the beneficiaries when distributed to them.
Stagecoach California Tax-Free Money Market Fund
Individuals, trusts and estates resident in California will not be subject
to California personal income tax on dividends from the Stagecoach California
Tax-Free Money Market Fund that represent tax-exempt interest paid on municipal
obligations of the State of California, its political subdivisions, direct
obligations of the U.S. government and certain other issuers, including Puerto
Rico, Guam, and the U.S. Virgin Islands. Such individuals, trusts and estates
will be subject to California personal income tax on other distributions
received from the Stagecoach California Tax-Free Money Market Fund, including
distributions of interest on municipal obligations issued by other issuers and
all capital gains.
Except as noted above with respect to California personal income taxation
of individuals, trusts and estates resident in California, dividends and
distributions from the Stagecoach California Tax-Free Money Market Fund may be
taxable to investors under state or local law as dividend income even though all
or a portion of such distributions may be derived from interest on tax-exempt
obligations which, if realized directly, would be exempt from such income taxes.
Shareholders of the Stagecoach California Tax-Free Money Market Fund should
consult their own tax advisors about other state and local tax consequences of
their investments in the Fund, including consequences to California part-year
residents, which may be different than the federal income tax consequences of
such investments. The Company makes no representations as to California state
and local taxes that may be imposed on a corporate investor in the Stagecoach
California Tax-Free Money Market Fund and encourages such investors to consult
with their own tax advisors.
Stagecoach National Tax-Free Money Market Fund
Investors are advised to consult their tax advisors concerning the
application of state and local taxes, which may have different consequences from
those under federal income tax law.
Other Matters. Investors should be aware that the investments to be made
-------------
by a Fund may involve sophisticated tax rules that may result in income or gain
recognition by the Fund without corresponding current cash receipts. Although
the Funds will seek to avoid significant noncash income, such noncash income
could be recognized by a Fund, in which case the Fund may distribute cash
derived from other sources in order to meet the minimum distribution
requirements described above.
54
<PAGE>
The foregoing discussion and the discussions in the Prospectus applicable
to each shareholder address only some of the federal income tax considerations
generally affecting investments in a Fund. Each investor is urged to consult
his or her tax advisor regarding specific questions as to federal, state, local
and foreign taxes.
CAPITAL STOCK
The Funds are six of the funds in the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991, and
currently offers shares of over thirty funds.
Most of the Company's funds are authorized to issue multiple classes of
shares, one class generally subject to a front-end sales charge and, in some
cases, classes subject to a contingent-deferred sales charge, that are offered
to retail investors. Certain of the Company's funds also are authorized to
issue other classes of shares, which are sold primarily to institutional
investors. Each class of shares in a fund represents an equal, proportionate
interest in a fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the fund's operating expenses, except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule 12b-
1) that are allocated to a particular class. Please contact Stagecoach
Shareholder Services at 1-800-222-8222 if you would like additional information
about other funds or classes of shares offered.
With respect to matters that affect one class but not another, shareholders
vote as a class; for example, the approval of a Plan. Subject to the foregoing,
all shares of a Fund have equal voting rights and will be voted in the
aggregate, and not by series, except where voting by a series is required by law
or where the matter involved only affects one series. For example, a change in
a Fund's fundamental investment policy affects only one Series and would be
voted upon only by shareholders of the Fund involved. Additionally, approval of
an advisory contract since it affects only one Fund, is a matter to be
determined separately by each Series. Approval by the shareholders of one
Series is effective as to that Series whether or not sufficient votes are
received from the shareholders of the other Series to approve the proposal as to
those Series.
As used in the Prospectus and in this SAI, the term "majority" when
referring to approvals to be obtained from shareholders of a Class of a Fund,
means the vote of the lesser of (i) 67% of the shares of such class of the Fund
represented at a meeting if the holders of more than 50% of the outstanding
shares of such Class Fund are present in person or by proxy, or (ii) more than
50% of the outstanding shares of such Class of the Fund. The term "majority,"
when referring to the approvals to be obtained from shareholders of the Company
as a whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares.
55
<PAGE>
Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held. Shareholders are not entitled to
any preemptive rights. All shares, when issued, will be fully paid and non-
assessable by the Company.
The Company may dispense with an annual meeting of shareholders in any year
in which it is not required to elect directors under the 1940 Act.
Each share of a class of a Fund represents an equal proportional interest
in the Fund with each other share in the same class and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
the Fund as are declared in the discretion of the Directors. In the event of
the liquidation or dissolution of the Company, shareholders of a Fund or class
are entitled to receive the assets attributable to the Fund or class that are
available for distribution, and a distribution of any general assets not
attributable to a particular investment portfolio that are available for
distribution in such manner and on such basis as the Directors in their sole
discretion may determine.
Set forth below as of [JUNE 30], 1998, is the name, address and share
ownership of each person known by the Company to have beneficial or record
ownership of 5% or more of a class of each Fund or 5% or more of the voting
securities of each Fund as a whole. The term "N/A" is used where a shareholder
holds 5% or more of a class, but less than 5% of a Fund as a whole.
5% OWNERSHIP AS OF JUNE 30, 1998
[TO BE UPDATED]
<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
Fund ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- ----------
<S> <C> <C> <C> <C>
STAGECOACH CALIFORNIA Wells Fargo Bank Class A 89.39% 89.39%
TAX-FREE MONEY MARKET P.O. Box 7066 Beneficially Owned
San Francisco, CA 94120
STAGECOACH MONEY MARKET Wells Fargo Bank Class A 93.38% 80.46%
P.O. Box 7066 Beneficially Owned
San Francisco, CA 94120
STAGECOACH GOVERNMENT Wells Fargo Bank (Trustee) Class A 35.74% 35.74%
MONEY MARKET Choicemaster Record Holder
Attn: Mutual Funds A88-4
P.O. Box 9800
Calabasas, CA 91372
First Interstate Bank of California Class A 27.61% 27.61%
Attn: Fund Accounting ACM Desk Record Holder
26610 W. Agoura Road
Calabasas, CA 91302
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Hare & Co. Class A 23.65% 23.65%
Bank of New York Record Holder
One Wall Street, Second Floor
Attn: STIF/Master Note
New York, NY 10005
Virg & Co. Class A 67.36% 1.65%
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372
Hare & Co. Class A 7.72% 0.19%
Bank of New York Record Holder
One Wall Street, Second Floor
Attn: STIF/Master Note
New York, NY 10005
STAGECOACH NATIONAL Wells Fargo Bank Class A 83.01% 83.01%
TAX-FREE MONEY P.O. Box 7066 Beneficially Owned
MARKET MUTUAL San Francisco, CA 94120
Stephens Inc. Class A 8.07% 8.07%
111 Center Street Record Holder
Little Rock, AR 72201
STAGECOACH 100% Stephens Inc. Class A 100% 50%
Treasury Money 111 Center Street Record Holder
Market Little Rock, AR 72201
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund) or is identified as the holder of
record or more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).
OTHER
The Company's Registration Statement, including the Prospectus and SAI
for the Funds and the exhibits filed therewith, may be examined at the office of
the U.S. Securities and Exchange Commission in Washington, D.C. Statements
contained in the Prospectus or the SAI as to the contents of any contract or
other document referred to herein or in the Prospectus are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been selected as the independent auditors for
the Company. KPMG Peat Marwick LLP provides audit services, tax return
preparation and assistance and consultation in connection with review of certain
SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero Center, San
Francisco, California 94111.
57
<PAGE>
FINANCIAL INFORMATION
The portfolio of investments and unaudited financial statements for the
six-month period ended September 30, 1997, are hereby incorporated by reference
to the Company's Semi-Annual Reports as filed with the SEC on December 5, 1997.
The portfolio of investments, audited financial statements and
independent auditors' report for the Funds for the fiscal period ended March 31,
1997 are hereby incorporated by reference to the Company's Annual Reports as
filed with the SEC on June 4, 1997.
Annual and Semi-Annual Reports may be obtained by calling 1-800-222-8222.
58
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.
Corporate and Municipal Bonds
- -----------------------------
Moody's: The four highest ratings for corporate and municipal bonds are
-------
"Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest amount of investment risk. Bonds rated "Aa" are
of "high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; interest payments and principal security appear adequate for
the present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1, 2
and 3 in each rating category from "Aa" through "Baa" in its rating system. The
modifier 1 indicates that the security ranks in the higher end of its category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds are
---
"AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings assigned
by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded as having an "adequate capacity" to
pay interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of a
plus or minus sign to show relative standing within the category.
Municipal Notes
- ---------------
Moody's: The highest ratings for state and municipal short-term
-------
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality." Notes rated "MIG 2"
or "VMIG 2" are of "high quality," with margins of protections "ample although
not as large as in the preceding group." Notes rated "MIG 3" or "VMIG 3" are of
"favorable quality," with all security elements accounted for, but lacking the
strength of the preceding grades.
A-1
<PAGE>
S&P: The "SP-1" rating reflects a "very strong or strong capacity to pay
---
principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
Corporate and Municipal Commercial Paper
- ----------------------------------------
Moody's: The highest rating for corporate and municipal commercial paper
-------
is "P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for repayment
of short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.
S&P: The "A-1" rating for corporate and municipal commercial paper
---
indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."
Corporate Notes
- ---------------
S&P: The two highest ratings for corporate notes are "SP-1" and "SP-2."
---
The "SP-1" rating reflects a "very strong or strong capacity to pay principal
and interest." Notes issued with "overwhelming safety characteristics" will be
rated "SP-1+." The "SP-2" rating reflects a "satisfactory capacity" to pay
principal and interest.
A-2
<PAGE>
WELLS FARGO FUNDS, INC.
Telephone: 1-800-260-5969
STATEMENT OF ADDITIONAL INFORMATION
Dated August 1, 1998
STAGECOACH PRIME MONEY MARKET FUND
STAGECOACH TREASURY MONEY MARKET FUND
STAGECOACH 100% TREASURY MONEY MARKET FUND
SERVICE CLASS
Wells Fargo Funds, Inc. (the "Company") is an open-end, management
investment company. This Statement of Additional Information ("SAI") contains
additional information about three funds in the Stagecoach Family of Funds (each
a "Fund" and collectively, the "Funds") -- the STAGECOACH PRIME MONEY MARKET,
STAGECOACH TREASURY MONEY MARKET and STAGECOACH 100% TREASURY MONEY MARKET
FUNDS. This SAI relates to the Service Class shares of each Fund.
This SAI is not a prospectus and should be read in conjunction with the
Funds' Prospectus, dated August 1, 1998. All terms used in this SAI that are
defined in the Prospectus have the meanings assigned in the Prospectus. A copy
of the Prospectus may be obtained without charge by calling 1-800-260-5969 or
writing to Wells Fargo Funds, Inc., P.O. Box 7066, San Francisco, CA 94120-
7066.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Historical Fund Information..................... 1
Investment Restrictions......................... 1
Additional Permitted Investment Activities...... 3
Risk Factors.................................... 11
Management...................................... 13
Performance Calculations........................ 22
Determination of Net Asset Value................ 27
Additional Purchase and Redemption Information.. 28
Portfolio Transactions.......................... 29
Fund Expenses................................... 31
Federal Income Taxes............................ 31
Capital Stock................................... 35
Other........................................... 38
Independent Auditors............................ 39
Financial Information........................... 39
Appendix........................................ A-1
</TABLE>
<PAGE>
HISTORICAL FUND INFORMATION
Effective as of the date of this SAI, the Company and each Fund changed
their names as follows. The name of the Company was changed from "Stagecoach
Funds, Inc." to "Wells Fargo Funds, Inc." With respect to the Funds, the word
"Stagecoach" was added to the front of each Fund name as indicated on the cover
page of this SAI.
The Stagecoach Prime Money Market Fund commenced operations on April 30,
1981, as Pacific American Liquid Assets, Inc. It was reorganized as the Pacific
American Money Market Portfolio, a portfolio of the Pacific American Funds, on
October 1, 1985. The Fund operated as a portfolio of Pacific American Funds
through October 1, 1994, when it was reorganized as the Pacific American Money
Market Portfolio, a portfolio of Pacifica Funds Trust ("Pacifica"). In July
1995, the Fund was renamed the Pacifica Prime Money Market Fund. On September
6, 1996, the Pacifica Prime Money Market Fund was reorganized as the Company's
Stagecoach Prime Money Market Fund.
The Stagecoach Treasury Money Market Fund commenced operations on October
1, 1985, as the Short-Term Government Fund of the Pacifica American Funds. The
Fund operated as a portfolio of the Pacific American Funds through October 1,
1994, when it was reorganized as the Pacific American U.S. Treasury Portfolio, a
portfolio of Pacifica Funds Trust. In July 1995, the Fund was renamed the
Pacifica Treasury Money Market Fund. On September 6, 1996, the Pacifica
Treasury Money Market Fund was reorganized as the Company's Stagecoach Treasury
Money Market Fund.
The Stagecoach 100% Treasury Money Market Fund commenced operations on
August 1, 1998.
INVESTMENT RESTRICTIONS
Fundamental Investment Policies
-------------------------------
Each Fund has adopted the following investment restrictions, all of which
are fundamental policies; that is, they may not be changed without approval by
the vote of the holders of a majority (defined in the Investment Company Act of
1940, as amended (the "1940 Act")) of the outstanding voting securities of such
Fund.
The Stagecoach Prime Money Market, Stagecoach Treasury Money Market and
Stagecoach 100% Treasury Money Market Funds may not:
(1) purchase common stocks and voting securities (including state,
municipal or industrial revenue bonds) except for securities of other investment
companies;
1
<PAGE>
(2) borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of its total assets at the time
of such borrowing. The Funds will not purchase securities while their
borrowings (including reverse repurchase agreements) in excess of 5% of their
total assets are outstanding. As a matter of non-fundamental policy, each Fund
intends to limit its investments in reverse repurchase agreements to no more
than 20% of its total assets;
(3) mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of one-third of the value of
each such Fund's total assets at the time of its borrowing. Securities held in
escrow or separate accounts in connection with a Fund's investment practices are
not deemed to be pledged for purposes of this investment restriction;
(4) purchase securities on margin, except for delayed delivery or when-
issued transactions or such short-term credits as are necessary for the
clearance of transactions; or make short sales of securities or, maintain a
short position;
(5) write put or call options;
(6) underwrite the securities of other issuers, except as each such Fund
may be deemed to be an underwriter in connection with the purchase or sale of
portfolio instruments in accordance with its investment objective and portfolio
management policies;
(7) invest in companies for the purpose of exercising control;
(8) make loans, except that each such Fund may purchase or hold debt
instruments in accordance with its investment objective and policies and may
enter into loans of portfolio securities and repurchase agreements;
(9) invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation, acquisition of assets or where
otherwise permitted by the 1940 Act; nor
(10) lend their portfolio securities in excess of one-third of the value of
their total assets.
Non-Fundamental Investment Policies
-----------------------------------
Each Fund has adopted the following non-fundamental policies which may be
changed by a majority vote of the Board of Directors of the Company at any time
and without approval of such Fund's shareholders.
(1) Each Fund may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act.
Under the 1940 Act, a Fund's investment in such securities currently is limited
to , subject to certain exceptions, (i) 3% of the total voting stock of any one
investment company, (ii) 5% of such Fund's net assets with respect to any one
investment company, and (iii) 10% of such Fund's net assets in the aggregate.
2
<PAGE>
Other investment companies in which the Funds invest can be expected to charge
fees for operating expenses, such as investment advisory and administration
fees, that would be in addition to those charged by a Fund.
(2) Each Fund may not invest or hold more than 10% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.
(3) Each Fund may invest up to 25% of its net assets in securities of
foreign governmental and foreign private issuers that are denominated in and pay
interest in U.S. dollars.
(4) Each Fund may lend securities from its portfolios to brokers, dealers
and financial institutions, in amounts not to exceed (in the aggregate) one-
third of such Fund's total assets. Any such loans of portfolio securities will
be fully collateralized based on values that are marked to market daily. The
Funds will not enter into any portfolio security lending arrangement having a
duration of longer than one year.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Set forth below are descriptions of certain investments and additional
investment policies for the Funds.
Asset-Backed Securities
-----------------------
The Stagecoach Prime Money Market Fund may purchase asset-backed
securities, which are securities backed by installment contracts, credit-card
receivables or other assets. Asset-backed securities represent interests in
"pools" of assets in which payments of both interest and principal on the
securities are made monthly, thus in effect "passing through" monthly payments
made by the individual borrowers on the assets that underlie the securities, net
of any fees paid to the issuer or guarantor of the securities. The average life
of asset-backed securities varies with the maturities of the underlying
instruments and is likely to be substantially less than the original maturity of
the assets underlying the securities as a result of prepayments. For this and
other reasons, an asset-backed security's stated maturity may be shortened, and
the security's total return may be difficult to predict precisely.
Bank Obligations
----------------
The Stagecoach Prime Money Market Fund may invest in bank obligations,
including certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations of domestic banks, foreign subsidiaries of domestic
banks, foreign branches of domestic banks, and domestic and foreign branches of
foreign banks, domestic savings and loan associations and other banking
institutions. With respect to such securities issued by foreign
3
<PAGE>
branches of domestic banks, foreign subsidiaries of domestic banks, and domestic
and foreign branches of foreign banks, the Fund may be subject to additional
investment risks that are different in some respects from those incurred by a
fund which invests only in debt obligations of U.S. domestic issuers. Such risks
include possible future political and economic developments, the possible
imposition of foreign withholding taxes on interest income payable on the
securities, the possible establishment of exchange controls or the adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal and interest on these securities and the possible seizure or
nationalization of foreign deposits. In addition, foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting and recordkeeping standards than those
applicable to domestic branches of U.S. banks.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by the Fund will not benefit from insurance from the
Bank Insurance Fund or the Savings Association Insurance Fund administered by
the Federal Deposit Insurance Corporation ("FDIC"). Bankers' acceptances are
credit instruments evidencing the obligation of a bank to pay a draft drawn on
it by a customer. These instruments reflect the obligation both of the bank and
of the drawer to pay the face amount of the instrument upon maturity. The other
short-term obligations may include uninsured, direct obligations, bearing fixed,
floating- or variable-interest rates.
Commercial Paper
----------------
The Stagecoach Prime Money Market Fund may invest in commercial paper.
Commercial paper includes short-term unsecured promissory notes, variable rate
demand notes and variable rate master demand notes issued by domestic and
foreign bank holding companies, corporations and financial institutions as well
as similar taxable instruments issued by government agencies and
instrumentalities.
Floating- and Variable-Rate Obligations
---------------------------------------
The Funds, except the Stagecoach 100% Treasury Money Market Fund, may
purchase floating- and variable-rate obligations. Each Fund may purchase
floating- and variable-rate demand notes and bonds. These obligations may have
stated maturities in excess of thirteen months, but they permit the holder to
demand payment of principal at any time, or at specified intervals not exceeding
thirteen months. Variable-rate demand notes include master demand notes that
are obligations that permit a Fund to invest fluctuating amounts, which may
change daily without penalty, pursuant to direct arrangements between the Fund,
as lender, and the borrower. The interest rates on these notes may fluctuate
from time to time. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of such obligations. The
interest rate on a floating-rate demand obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable-rate demand
4
<PAGE>
obligation is adjusted automatically at specified intervals. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that such
instruments generally will be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at face
value. Accordingly, where these obligations are not secured by letters of credit
or other credit support arrangements, a Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. Such
obligations frequently are not rated by credit rating agencies and each Fund may
invest in obligations which are not so rated only if Wells Fargo Bank determines
that at the time of investment the obligations are of comparable quality to the
other obligations in which such Fund may invest. Wells Fargo Bank, on behalf of
each Fund, considers on an ongoing basis the creditworthiness of the issuers of
the floating- and variable-rate demand obligations in such Fund's portfolio. No
Fund will invest more than 10% of the value of its total net assets in floating-
or variable-rate demand obligations whose demand feature is not exercisable
within seven days. Such obligations may be treated as liquid, provided that an
active secondary market exists.
Foreign Obligations
-------------------
The Stagecoach Prime Money Market Fund may invest up to 25% of its assets
in high-quality, short-term (thirteen months or less) debt obligations of
foreign branches of U.S. banks or U.S. branches of foreign banks that are
denominated in and pay interest in U.S. dollars. Investments in foreign
obligations involve certain considerations that are not typically associated
with investing in domestic obligations. There may be less publicly available
information about a foreign issuer than about a domestic issuer. Foreign
issuers also are not subject to the same uniform accounting, auditing and
financial reporting standards or governmental supervision as domestic issuers.
In addition, with respect to certain foreign countries, taxes may be withheld at
the source under foreign income tax laws and there is a possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments that could affect adversely investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
---------------------------------------------------------------
Transactions
- ------------
Each Fund may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased or
sold on a when-issued, delayed-delivery or forward commitment basis involve a
risk of loss if the value of the security to be purchased declines, or the value
of the security to be sold increases, before the settlement date. Although each
Fund will generally purchase securities with the intention of acquiring them, a
Fund may dispose of securities purchased on a when-issued, delayed-delivery or a
forward commitment basis before settlement when deemed appropriate by the
advisor.
Each Fund will segregate cash, U.S. Government obligations or other high-
quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-
5
<PAGE>
issued securities. If the value of these assets declines, the Fund will
segregate additional liquid assets on a daily basis so that the value of the
segregated assets is equal to the amount of such commitments.
Illiquid Securities
-------------------
The Funds, except the Stagecoach 100% Treasury Money Market Fund, may
invest in securities not registered under the 1933 Act and other securities
subject to legal or other restrictions on resale. Because such securities may
be less liquid than other investments, they may be difficult to sell promptly at
an acceptable price. Delay or difficulty in selling securities may result in a
loss or be costly to a Fund. Each Fund may hold up to 10% of its net assets in
illiquid securities.
Letters of Credit
-----------------
Certain of the debt obligations (including municipal securities,
certificates of participation, commercial paper and other short-term
obligations) which the Stagecoach Prime Money Market Fund may purchase may be
backed by an unconditional and irrevocable letter of credit of a bank, savings
and loan association or insurance company which assumes the obligation for
payment of principal and interest in the event of default by the issuer. Only
banks, savings and loan associations and insurance companies which, in the
opinion of Wells Fargo Bank, are of comparable quality to issuers of other
permitted investments of the Fund may be used for letter of credit-backed
investments.
Loans of Portfolio Securities
-----------------------------
The Funds may lend their portfolio securities to brokers, dealers and
financial institutions, provided: (1) the loan is secured continuously by
collateral consisting of U.S. Government securities or cash or letters of credit
maintained on a daily marked-to-market basis in an amount at least equal to the
current market value of the securities loaned; (2) the Funds may at any time
call the loan and obtain the return of the securities loaned within five
business days; (3) the Funds will receive any interest or dividends paid on the
loaned securities; and (4) the aggregate market value of securities loaned will
not at any time exceed one third of the total assets of a particular Fund.
A Fund will earn income for lending its securities because cash collateral
pursuant to such loans will be invested in short-term money market instruments.
In connection with lending securities, the Funds may pay reasonable finders,
administrative and custodial fees. A Fund will not enter into any security
lending arrangement having a duration longer than one year. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral. In either case, a Fund could experience delays
in recovering securities or collateral or could lose all or part of the value of
the loaned securities. When a Fund lends its securities, it continues to
receive interest or dividends on the securities loaned and may simultaneously
earn interest on the collateral received from the borrower or from the
investment of cash collateral in readily marketable, high-quality, short-term
obligations. Although voting rights, or rights to consent, attendant to
securities on loan pass to the borrower, such loans may be called at any time
and will be called so that the securities may be voted by a Fund if a material
event
6
<PAGE>
affecting the investment is to occur. A Fund may pay a portion of the
interest and fees earned from securities lending to a borrower or a placing
broker. Borrowers and placing brokers may not be affiliated, directly or
indirectly, with Wells Fargo Bank, Stephens Inc. or any of their affiliates.
Mortgage-Backed Securities
--------------------------
The Stagecoach Prime Money Market Fund may invest in mortgage-backed
securities, including those representing an undivided ownership interest in a
pool of mortgages, such as certificates of the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA"), and
the Federal Home Loan Mortgage Corporation ("FHLMC"). These certificates are in
most cases pass-through instruments, through which the holder receives a share
of all interest and principal payments from the mortgages underlying the
certificate, net of certain fees. The average life of a mortgage-backed
security varies with the underlying mortgage instruments, which generally have
maximum maturities of 40 years. The average life is likely to be substantially
less than the original maturity of the mortgage pools underlying the securities
as the result of prepayments, mortgage refinancings or foreclosure. Mortgage
prepayment rates are affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions. Such prepayments are passed through to the
registered holder with the regular monthly payments of principal and interest
and have the effect of reducing future payments.
There are risks inherent in the purchase of mortgage-backed securities. For
example, these securities are subject to a risk that default in payment will
occur on the underlying mortgages. In addition to default risk, these securities
are subject to the risk that prepayment on the underlying mortgages will occur
earlier or later or at a lesser or greater rate than expected. To the extent
that advisor's assumptions about prepayments are inaccurate, these securities
may expose the Funds, to significantly greater market risks than expected.
Municipal Bonds
---------------
The Stagecoach Prime Money Market Fund may invest in municipal bonds. The
two principal classifications of municipal bonds are "general obligation" and
"revenue" bonds. Municipal bonds are debt obligations issued to obtain funds
for various public purposes, including the construction of a wide range of
public facilities such as bridges, highways, housing, hospitals, mass
transportation, schools, streets, and water and sewer works. Other purposes for
which municipal bonds may be issued include the refunding of outstanding
obligations and obtaining funds for general operating expenses or to loan to
other public institutions and facilities. Industrial development bonds are a
specific type of revenue bond backed by the credit and security of a private
user. Certain types of industrial development bonds are issued by or on behalf
of public authorities to obtain funds to provide privately-operated housing
facilities, sports facilities, convention or trade show facilities, airport,
mass transit, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity, or
sewage or solid waste disposal. The Fund may not invest more than 20% of its
assets in industrial development bonds. Assessment bonds, wherein a specially
created district or project area levies a tax (generally on its taxable
property) to pay for an improvement or project may be
7
<PAGE>
considered a variant of either category. There are, of course, other
variations in the types of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. For example, under federal tax legislation
enacted in 1986, interest on certain private activity bonds must be included in
an investor's alternative minimum taxable income, and corporate investors must
treat all tax-exempt interest as an item of tax preference. Opinions relating
to the validity of municipal obligations and to the exemption of interest
thereon from federal income tax are rendered by bond counsel to the respective
issuers at the time of issuance. Neither the Fund nor the advisor will review
the proceedings relating to the issuance of municipal obligations or the basis
for such opinions.
Certain of the municipal obligations held by the Fund may be insured as to
the timely payment of principal and interest. The insurance policies usually are
obtained by the issuer of the municipal obligation at the time of its original
issuance. In the event that the issuer defaults on interest or principal
payment, the insurer will be notified and will be required to make payment to
the bondholders. There is, however, no guarantee that the insurer will meet its
obligations. In addition, such insurance does not protect against market
fluctuations caused by changes in interest rates and other factors.
The values of outstanding municipal securities will vary as a result of
changing market evaluations of the ability of their issuers to meet the interest
and principal payments (i.e., credit risk). Such values also will change in
response to changes in the interest rates payable on new issues of municipal
securities (i.e., market risk). Should such interest rates rise, the values of
outstanding securities, including those held in the Fund's portfolio, will
decline and (if purchased at par value) sell at a discount. If interests rates
fall, the values of outstanding securities will generally increase and (if
purchased at par value) sell at a premium. Changes in the value of municipal
securities held in the Fund's portfolio arising from these or other factors will
cause changes in the net asset value per share.
Other Investment Companies
--------------------------
The Funds, except the Stagecoach 100% Treasury Money Market Fund, may
invest in shares of other open-end management investment companies, up to the
limits prescribed in Section 12(d) of the 1940 Act. Under the 1940 Act, a
Fund's investment in such securities currently is limited to, subject to certain
exceptions, (i) 3% of the total voting stock of any one investment company, (ii)
5% of such Fund's net assets with respect to any one investment company and
(iii) 10% of such Fund's net assets in aggregate. Other investment companies in
which the Funds invest can be expected to charge fees for operating expenses
such as investment advisory and administration fees, that would be in addition
to those charged by the Funds.
8
<PAGE>
Repurchase Agreements
---------------------
Each Fund, except the Stagecoach 100% Treasury Money Market Fund, may enter
into repurchase agreements, wherein the seller of a security to the Fund agrees
to repurchase that security from the Fund at a mutually agreed upon time and
price. A Fund may enter into repurchase agreements only with respect to
securities that could otherwise be purchased by the Fund. All repurchase
agreements will be fully collateralized at 102% based on values that are marked
to market daily. The maturities of the underlying securities in a repurchase
agreement transaction may be greater than twelve months, although the maximum
term of a repurchase agreement will always be less than twelve months. If the
seller defaults and the value of the underlying securities has declined, a Fund
may incur a loss. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the security, the Fund's disposition of the security
may be delayed or limited.
Each Fund may not enter into a repurchase agreement with a maturity of more
than seven days, if, as a result, more than 10% of the market value of such
Fund's total net assets would be invested in repurchase agreements with
maturities of more than seven days, restricted securities and illiquid
securities. A Fund will only enter into repurchase agreements with primary
broker/dealers and commercial banks that meet guidelines established by the
Board of Directors and that are not affiliated with the investment advisor. The
Funds may participate in pooled repurchase agreement transactions with other
funds advised by Wells Fargo Bank.
Borrowing and Reverse Repurchase Agreements. The Funds intend to limit
their borrowings (including reverse repurchase agreements) during the current
fiscal year to not more than 10% of their net assets. At the time a Fund enters
into a reverse repurchase agreement (an agreement under which the Fund sells
portfolio securities and agrees to repurchase them at an agreed-upon date and
price), it will place in a segregated custodial account liquid assets such as
U.S. Government securities or other liquid high-grade debt securities having a
value equal to or greater than the repurchase price (including accrued interest)
and will subsequently monitor the account to ensure that such value is
maintained. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Fund may decline below the price at which the Fund
is obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings under the 1940 Act.
Unrated and Downgraded Investments
----------------------------------
The Stagecoach Prime Money Market Fund may purchase instruments that are
not rated if, in the opinion of Wells Fargo Bank, the investment advisor, such
obligations are of comparable quality to other rated investments that are
permitted to be purchased by the Fund. The Fund may purchase unrated
instruments only if they are purchased in accordance with the Fund's procedures
adopted by Company's Board of Directors in accordance with Rule 2a-7 under the
1940 Act. After purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. In
the event that a portfolio security ceases to be an "Eligible Security" or no
longer "presents minimal credit risks," immediate sale of such security is not
required, provided that the Board of Directors has
9
<PAGE>
determined that disposal of the portfolio security would not be in the best
interests of the Fund. To the extent the ratings given by Moody's Investors
Service, Inc. ("Moody's) or Standard & Poor's Ratings Group ("S&P") may change
as a result of changes in such organizations or their rating systems, the Fund
will attempt to use comparable ratings as standards for investments in
accordance with the investment policies. The ratings of Moody's and S&P are
more fully described in the Appendix.
U.S. Government and U.S. Treasury Obligations
---------------------------------------------
The Funds may invest in obligations of agencies and instrumentalities of
the U.S. Government ("U.S. Government obligations"). The Stagecoach Treasury
Money Market Fund and Stagecoach 100% Treasury Money Market Fund may invest only
in U.S. Government obligations issued or guaranteed by the U.S. Treasury.
Payment of principal and interest on U.S. Government obligations (i) may be
backed by the full faith and credit of the United States (as with U.S. Treasury
bills and GNMA certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with FNMA notes). In the
latter case investors must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not obligated to do so. In addition, U.S. Government obligations
are subject to fluctuations in market value due to fluctuations in market
interest rates. As a general matter, the value of debt instruments, including
U.S. Government obligations, declines when market interest rates increase and
rises when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
The Stagecoach Treasury Money Market Fund and Stagecoach 100% Treasury
Money Market Fund may invest only in obligations issued or guaranteed by the
U.S. Treasury such as bills, notes, bonds and certificates of indebtedness
("U.S. Treasury obligations"). The Stagecoach Treasury Money Market Fund may
invest in notes and repurchase agreements collateralized or secured by such
obligations[, WHEREAS THE STAGECOACH 100% TREASURY MONEY MARKET FUND MAY NOT.]
U.S. Treasury notes, bills and bonds differ mainly in the length of their
maturity. The U.S. Treasury obligations in which the Funds invest may also
include "U.S. Treasury STRIPS," interests in U.S. Treasury obligations reflected
in the Federal Reserve-Book Entry System that represent ownership in either the
future interest payments or the future principal payments on the U.S. Treasury
obligations. U.S. Treasury Strips are "stripped securities." Stripped
securities are issued at a discount to their face value and may exhibit greater
price volatility than ordinary debt securities because of the manner in which
their principal and interest are paid to investors. The Stagecoach Treasury
Money Market and [, STAGECOACH 100% TREASURY MONEY MARKET] Funds may invest in
U.S. Treasury STRIPS.
The Funds may attempt to increase yields by trading to take advantage of
short-term market variations. This policy could result in high portfolio
turnover, which should not adversely affect the Funds since they do not
ordinarily pay brokerage commissions on the purchase of short-term debt
obligations.
10
<PAGE>
Nationally Recognized Statistical Ratings Organizations ("NRSROs")
------------------------------------------------------------------
The ratings of Moody's, S&P, Duff & Phelps Credit Rating Co., Fitch
Investors Service, Inc., Thomson Bank Watch and IBCA Inc. represent their
opinions as to the quality of debt securities. It should be emphasized, however,
that ratings are general and not absolute standards of quality, and debt
securities with the same maturity, interest rate and rating may have different
yields while debt securities of the same maturity and interest rate with
different ratings may have the same yield. Subsequent to purchase by a Fund, an
issue of debt securities may cease to be rated or its rating may be reduced
below the minimum rating required for purchase by a Fund. The advisor will
consider such an event in determining whether the Fund involved should continue
to hold the obligation.
The payment of principal and interest on debt securities purchased by the
Funds depends upon the ability of the issuers to meet their obligations. An
issuer's obligations under its debt securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by federal or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or, in the case of governmental entities, upon the ability
of such entities to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest and principal of its debt securities may
be materially adversely affected by litigation or other conditions. Further, it
should also be noted with respect to all municipal obligations issued after
August 15, 1986 (August 31, 1986 in the case of certain bonds), the issuer must
comply with certain rules formerly applicable only to industrial development
bonds which, if the issuer fails to observe them, could cause interest on the
municipal obligations to become taxable retroactive to the date of issue.
RISK FACTORS
Investments in a Fund are not bank deposits or obligations of Wells Fargo
Bank, are not insured by the FDIC and are not insured or guaranteed against loss
of principal. Therefore, you should be willing to accept some risk with money
you invest in a Fund. Although the Funds seek to maintain a stable net asset
value of $1.00 per share, there is no assurance that they will be able to do so.
The Funds may not achieve as high a level of current income as other mutual
funds that do not limit their investment to the high credit quality instruments
in which the Funds invest. As with all mutual funds, there can be no assurance
that a Fund will achieve its investment objective.
The Funds, under the 1940 Act, must comply with certain investment criteria
designed to provide liquidity, reduce risk, and allow the Funds to maintain a
stable net asset value of $1.00 per share. The Funds' dollar-weighted average
portfolio maturity must not exceed 90 days. Any security that a Fund purchases
must have a remaining maturity of not more than 397 days (13 months). In
addition, any security that a Fund purchases must present minimal credit risks
and be of "high quality," or in the case of the Stagecoach Treasury Money Market
Fund and Stagecoach 100% Treasury Money Market Fund, be of the "highest
quality." "High quality" means to be rated in the top two rating categories and
"highest quality" means to be rated only in
11
<PAGE>
the top rating category, by the requisite NRSROs or, if unrated, determined to
be of comparable quality to such rated securities by Wells Fargo Bank, as the
Funds' investment advisor, under guidelines adopted by the Board of Directors
of the Company.
Each Fund seeks to reduce risk by investing its assets in securities of
various issuers and the Prime Money Market Fund is considered to be diversified
for purposes of the 1940 Act. In addition, the Funds emphasize safety of
principal and high credit quality. In particular, the internal investment
policies of the investment advisor prohibit the purchase of many types of
floating-rate derivative securities that are considered potentially volatile.
The following types of derivative securities ARE NOT permitted investments for
the Funds:
* capped floaters (on which interest is not paid when market rates
move above a certain level);
* leveraged floaters (whose interest rate reset provisions are based
on a formula that magnifies changes in interest rates);
* range floaters (which do not pay any interest if market interest
rates move outside of a specified range);
* dual index floaters (whose interest rate reset provisions are tied
to more than one index so that a change in the relationship
between these indices may result in the value of the instrument
falling below face value); and
* inverse floaters (which reset in the opposite direction of their
index).
Additionally, the Funds may not invest in securities whose interest rate
reset provisions are tied to an index that materially lags short-term interest
rates, such as Cost of Funds Index floaters. The Funds may invest only in
variable or floating-rate securities that bear interest at a rate that resets
quarterly or more frequently and that resets based on changes in standard money
market rate indices such as U.S. Treasury bills, London Interbank Offered Rate
or LIBOR, the prime rate, published commercial paper rates, federal funds rates,
Public Securities Associates floaters or JJ Kenney index floaters.
The Stagecoach Treasury Money Market Fund and Stagecoach 100% Treasury
Money Market Fund restrict their investment to U.S. Treasury obligations that
meet all of the standards described above. Obligations issued or guaranteed by
the U.S. Treasury have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such obligations may vary during the period a shareholder owns shares
of the Fund. It should be noted that neither the United States, nor any agency
or instrumentality thereof, has guaranteed, sponsored or approved the Fund or
its shares.
The portfolio debt instruments of the Funds are subject to credit and
interest-rate risk. Credit risk is the risk that issuers of the debt instruments
in which the Funds invest may default on
12
<PAGE>
the payment of principal and/or interest. Interest-rate risk is the risk that
increases in market interest rates may adversely affect the value of the debt
instruments in which the Funds invest and hence the value of your investment
in a Fund.
Generally, securities in which the Funds invest will not earn as high a
yield as securities of longer maturity and/or of lesser quality that are more
subject to market volatility. Each Fund attempts to maintain the value of its
shares at a constant $1.00 per share, although there can be no assurance that a
Fund will always be able to do so.
MANAGEMENT
The following information supplements, and should be read in conjunction
with, the section in the Prospectus entitled "Organization and Management of the
Funds." The principal occupations during the past five years of the Directors
and principal executive Officer of the Company are listed below. The address of
each, unless otherwise indicated, is 111 Center Street, Little Rock, Arkansas
72201. Directors deemed to be "interested persons" of the Company for purposes
of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position During Past 5 Years
- ------------------------------------- ------------------ -------------------
<S> <C> <C>
Jack S. Euphrat, 75 Director Private Investor.
415 Walsh Road
Atherton, CA 94027
*R. Greg Feltus, 46 Director, Executive Vice President of Stephens Inc.;
Chairman and President of Stephens Insurance Services Inc.;
President Senior Vice President of Stephens Sports
Management Inc.; and President of Investor
Brokerage Insurance Inc.
Thomas S. Goho, 55 Director Associate Professor of Finance of the School
321 Beechcliff Court of Business and Accounting at Wake Forest
Winston-Salem, NC 27104 University since 1982.
Peter G. Gordon, 54 Director Chairman and Co-Founder of Crystal Geyser
Crystal Geyser Water Co. Water Company and President of Crystal Geyser
55 Francisco Street Roxane Water Company since 1977.
San Francisco, CA 94133
Joseph N. Hankin, 57 Director President of Westchester Community College
75 Grasslands Road since 1971; Adjunct Professor of Columbia
Valhalla, NY 10595 University Teachers College since 1976.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position During Past 5 Years
- ------------------------------------- ------------------ -------------------
<S> <C> <C>
*W. Rodney Hughes, 71 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
*J. Tucker Morse, 53 Director Private Investor; Chairman of Home Account
4 Beaufain Street Network, Inc. Real Estate Developer; Chairman
Charleston, SC 29401 of Renaissance Properties Ltd.; President of
Morse Investment Corporation; and Co-Managing
Partner of Main Street Ventures.
Richard H. Blank, Jr., 41 Chief Operating Vice President of Stephens Inc.; Director of
Officer, Stephens Sports Management Inc.; and Director
Secretary and of Capo Inc.
Treasurer
</TABLE>
<TABLE>
<CAPTION>
Compensation Table
Year Ended March 31, 1998
-------------------------
Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
- ------------------------ ------------------------------------------ ------------------------------------
<S> <C> <C>
Jack S. Euphrat $25,750 $34,500
Director
R. Greg Feltus $ 0 $ 0
Director
Thomas S. Goho $25,750 $34,500
Director
Peter G. Gordon $24,250 $30,500
Director
Joseph N. Hankin $25,750 $34,500
Director
W. Rodney Hughes $25,250 $33,000
Director
Robert M. Joses $ 1,500 $ 4,000
Director
J. Tucker Morse $25,250 $33,000
Director
</TABLE>
14
<PAGE>
As of January 1, 1998, Peter G. Gordon replaced Robert M. Joses on the
Board of Directors of the Wells Fargo Fund Complex.
Directors of the Company are compensated annually by the Company and by all
the registrants in each fund complex they serve as indicated above and also are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. The Company, Wells Fargo Funds Trust (formerly, Stagecoach Trust) and
Life & Annuity Trust are considered to be members of the same fund complex as
such term is defined in Form N-1A under the 1940 Act (the "Wells Fargo Fund
Complex"). Overland Express Funds, Inc. and Master Investment Trust, two
investment companies previously advised by Wells Fargo Bank, were part of the
Wells Fargo Fund Complex prior to December 12, 1997. These companies are no
longer part of the Wells Fargo Fund Complex. MasterWorks Funds Inc., Master
Investment Portfolio, and Managed Series Investment Trust together form a
separate fund complex (the "BGFA Fund Complex"). Each of the Directors and
Officers of the Company serves in the identical capacity as directors and
officers or as trustees and/or officers of each registered open-end management
investment company in both the Wells Fargo and BGFA Fund Complexes, except for
Joseph N. Hankin and Peter G. Gordon, who only serve the aforementioned members
of the Wells Fargo Fund Complex. The Directors are compensated by other
companies and trusts within a fund complex for their services as
directors/trustees to such companies and trusts. Currently the Directors do not
receive any retirement benefits or deferred compensation from the Company or any
other member of each fund complex.
As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.
INVESTMENT ADVISOR. Wells Fargo Bank provides investment advisory services
-------------------
to the Funds. As investment advisor, Wells Fargo Bank furnishes investment
guidance and policy direction in connection with the daily portfolio management
of the Funds. Wells Fargo Bank furnishes to the Company's Board of Directors
periodic reports on the investment strategy and performance of each Fund. Wells
Fargo Bank provides the Funds with, among other things, money market and fixed-
income research, analysis and statistical and economic data and information
concerning interest rate and securities markets trends, portfolio composition,
and credit conditions.
As compensation for its advisory services, Well Fargo Bank is entitled to
receive a monthly fee at the annual rate of 0.25% of each Fund's average daily
net assets.
For the period indicated below, the Funds paid to Wells Fargo Bank the
following advisory fees and Wells Fargo Bank waived the indicated amounts:
15
<PAGE>
<TABLE>
<CAPTION>
Six-Month
Period Ended
3/31/97
----------
Fund Fees Paid Fees Waived
- ------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Stagecoach Prime Money Market $1,311,073 $568,969
Stagecoach Treasury Money Market $1,518,347 $751,971
Stagecoach 100% Treasury Money Market N/A N/A
</TABLE>
Stagecoach Prime Money Market and Stagecoach Treasury Money Market Funds.
------------------------------------------------------------------------
The Pacifica Prime Money Market and Treasury Money Market Funds were reorganized
as the Company's Prime Money Market and Stagecoach Treasury Money Market Funds
on September 6, 1996. Prior to September 6, 1996, Wells Fargo Investment
Management, Inc. ("WFIM") and its predecessor, First Interstate Capital
Management, Inc. ("FICM") served as advisor to the Pacifica Prime Money Market
and Treasury Money Market Funds. As of September 6, 1996, Wells Fargo Bank
became the advisor to the Company's Prime Money Market and Stagecoach Treasury
Money Market Funds.
For the period begun April 1, 1996, and ended September 5, 1996, the
predecessor portfolios paid to FICM/WFIM, and for the period begun September 6,
1996 and ended September 30, 1996, the Funds paid to Wells Fargo Bank, the
advisory fees indicated below and the indicated amounts were waived:
<TABLE>
<CAPTION>
Period Ended
9/30/96
----------
Fund Fees Paid Fees Waived
- ------------------------------------------------- -------------------- ------------------
<S> <C> <C>
Stagecoach Prime Money Market $1,845,269 $1,553,968
Stagecoach Treasury Money Market $2,442,922 $2,073,426
</TABLE>
For the periods indicated below, the advisory fees paid to the former
advisor by the predecessor portfolios of the Stagecoach Prime Money Market and
the Stagecoach Treasury Money Market Funds were as shown below. These amounts
reflect voluntary fee waivers and expense reimbursements by the advisor. Prior
to October 1, 1994, all of these fees were, in turn, paid by the advisor to its
affiliates which served as investment sub-advisors during the periods indicated.
<TABLE>
<CAPTION>
Six-Month
Year Ended Period Ended Year Ended
Fund 9/30/95 9/30/94 3/31/94
- ---------------------------------- ---------- -------- --------
<S> <C> <C> <C>
Stagecoach Prime Money Market $ 693,315 $330,715 $737,811
Stagecoach Treasury Money Market $1,160,424 $454,029 $900,919
</TABLE>
16
<PAGE>
General. Each Fund's Advisory Contract will continue in effect for more
-------
than two years from the effective date provided the continuance is approved
annually (i) by the holders of a majority of the respective Fund's outstanding
voting securities or by the Company's Board of Directors and (ii) by a majority
of the Directors of the Company who are not parties to the Advisory Contract or
"interested persons" (as defined in the 1940 Act) of any such party. A Fund's
Advisory Contract may be terminated on 60 days' written notice by either party
and will terminate automatically if assigned.
INVESTMENT SUB-ADVISOR. As of May 1, 1998, Wells Capital Management
----------------------
("WCM") serves as sub-advisor to the Funds. As sub-advisor, WCM makes
recommendations regarding the investment and reinvestment of the Funds' assets,
furnishes to Wells Fargo Bank periodic reports on the investment activity and
performance of the Funds, and furnishes such additional reports and information
as Wells Fargo Bank and the Company's Board of Directors and officers may
reasonably request. As compensation for sub-advisory services, WCM is entitled
to receive a monthly fee equal to an annual rate of 0.05% of the first $960
million of each Fund's average daily net assets and 0.04% of net assets over
$960 million.
General. Each Fund's Sub-Advisory Contract will continue in effect for
-------
more than two years from the effective date provided the continuance is approved
annually (i) by the holders of a majority of the respective Fund's outstanding
voting securities or (ii) by the Company's Board of Directors, including a
majority of the Directors of the Company who are not parties to the Sub-Advisory
Contract or "interested persons" (as defined in the 1940 Act) of any such party.
A Fund's Sub-Advisory Contract may be terminated on 60 days written notice by
either party and will terminate automatically if assigned.
ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained Wells Fargo
----------------------------------
Bank as Administrator and Stephens Inc. ("Stephens") as Co-Administrator on
behalf of each Fund. Under the respective Administration and Co-Administration
Agreements among Wells Fargo Bank, Stephens and the Company, Wells Fargo and
Stephens shall provide as administration services, among other things: (i)
general supervision of the Funds' operations, including coordination of the
services performed by each Fund's investment advisor, transfer agent, custodian,
shareholder servicing agent(s), independent auditors and legal counsel,
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the U.S. Securities and Exchange
Commission ("SEC") and state securities commissions; and preparation of proxy
statements and shareholder reports for each Fund; and (ii) general supervision
relative to the compilation of data required for the preparation of periodic
reports distributed to the Company's officers and Board of Directors. Wells
Fargo Bank and Stephens also furnish office space and certain facilities
required for conducting the Funds' business together with ordinary clerical and
bookkeeping services. Stephens pays the compensation of the Company's
Directors, officers and employees who are affiliated with Stephens. The
Administrator and Co-Administrator are entitled to receive a monthly fee at an
annual rate of 0.03% and 0.04%, respectively, of the average daily net assets of
each Fund. Prior to February 1, 1998, the Administrator and Co-Administrator
were entitled to receive a monthly fee of 0.04% and 0.02%, respectively, of the
average daily net assets of each Fund. In
17
<PAGE>
connection with the change in fees, the responsibility for performing various
administration services was shifted to the Co-Administrator.
Except as described below, prior to February 1, 1997, Stephens served as
the sole Administrator and performed substantially the same services now
provided by Stephens and Wells Fargo Bank, for a monthly fee at an annual rate
of 0.05% of each Fund's average daily net assets.
For the period indicated below, the Funds paid the following dollar amounts
to Wells Fargo Bank and Stephens for administration and co-administration fees:
<TABLE>
<CAPTION>
Six-Month
Period Ended
3/31/97
--------
Fund Total Wells Fargo Stephens
- ---------------------------------------------------- ------------- ---------------- ------------
<S> <C> <C> <C>
Stagecoach Prime Money Market $400,123 $80,025 $320,098
Stagecoach Treasury Money Market $483,198 $96,640 $386,558
Stagecoach 100% Treasury Money Market N/A N/A N/A
</TABLE>
Stagecoach Prime Money Market and Stagecoach Treasury Money Market Funds.
------------------------------------------------------------------------
The Pacifica Prime Money Market and Treasury Money Market Funds were reorganized
as the Company's Prime Money Market and Stagecoach Treasury Money Market Funds
on September 6, 1996. Prior to September 6, 1996, the Administrator, Furman
Selz LLC ("Furman Selz"), of the Pacifica predecessor portfolios provided
management and administration services necessary for the operation of such
Funds, pursuant to an Administrative Services Contract. For these services,
Furman Selz was entitled to receive a fee, payable monthly, at the annual rate
of 0.15% of the average daily net assets of the predecessor portfolios.
The predecessor portfolios of the Stagecoach Prime Money Market and
Stagecoach Treasury Money Market Funds were administered through April 21, and
April 14, 1996, respectively, by the Dreyfus Corporation ("Dreyfus"), at the
annual rate of 0.10% of each such Fund's average daily net assets.
For the periods begun September 6, 1996 and ended September 30, 1996 and
October 1, 1996 to January 31, 1997, Stephens served as each Fund's sole
Administrator and was entitled to receive a fee, payable monthly, at the annual
rate of 0.05% of each Fund's average daily net assets.
The following table reflects the administration fees which the respective
Administrators of the Funds and their predecessor portfolios were paid during
the fiscal year ended September 30, 1996. These amounts also reflect the net
administration fees paid to the respective former Administrator of the
predecessor portfolios during the period begun October 1, 1995 and ended
September 5, 1996.
18
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Fund 9/30/96
- ----------------------------------------------------------------------
<S> <C>
Stagecoach Prime Money Market $1,230,872
Stagecoach Treasury Money Market $1,745,759
</TABLE>
During the fiscal year ended September 30, 1995, the six-month period ended
September 30, 1994 and the fiscal year ended March 31, 1994, the administration
fees paid to Dreyfus by the predecessor portfolios of the Stagecoach Prime Money
Market Fund and the Stagecoach Treasury Money Market Fund were as follows:
<TABLE>
<CAPTION>
Six-Month
Year Ended Period Ended Year Ended
Fund 9/30/95 9/30/94 3/31/94
- ---------------------------------- -------- -------- --------
<S> <C> <C> <C>
Stagecoach Prime Money Market $577,763 $275,596 $614,901
Stagecoach Treasury Money Market $921,886 $347,499 $690,137
</TABLE>
DISTRIBUTOR. Stephens (the "Distributor") located at 111 Center Street,
-----------
Little Rock, Arkansas, 72201, serves as the distributor for the Funds.
SHAREHOLDER SERVICING AGENT. The Funds have approved a Servicing Plan and
----------------------------
have entered into related shareholder servicing agreements with financial
institutions, including Wells Fargo Bank, on behalf of the Service Class shares.
Under the agreements, Shareholder Servicing Agents (including Wells Fargo Bank)
agree to perform, as agents for their customers, administrative services, with
respect to Fund shares, which include aggregating and transmitting shareholder
orders for purchases, exchanges and redemptions; maintaining shareholder
accounts and records; and providing such other related services as the Company
or a shareholder may reasonably request. For providing shareholder services, a
Servicing Agent is entitled to a fee from the applicable Fund, not to exceed
0.20%, on an annualized basis, of the average daily net assets of the class of
shares owned of record or beneficially by the customers of the Servicing Agent
during the period for which payment is being made. The Servicing Plan and
related forms of shareholder servicing agreements were approved by the Company's
Board of Directors and provide that a Fund shall not be obligated to make any
payments under such Plan or related Agreements that exceed the maximum amounts
payable under the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD").
For the period indicated below, the dollar amounts of shareholder servicing
fees paid by the Funds, on behalf of the Service Class shares, to Wells Fargo
Bank or its affiliates, were as follows:
19
<PAGE>
<TABLE>
<CAPTION>
Six-Month
Period Ended
Fund 3/31/97
--- -------------
<S> <C>
Stagecoach Prime Money Market $ 692,898
Stagecoach Treasury Money Market $1,230,129
Stagecoach 100% Treasury Money Market N/A
</TABLE>
Stagecoach Prime Money Market and Stagecoach Treasury Money Market Funds.
------------------------------------------------------------------------
For the period begun October 1, 1995 and ended September 5, 1996, under similar
service agreements with certain institutions, including affiliates of FICM,
shareholder servicing fees were paid to various institutions for the Funds. For
the period begun September 6, 1996 and ended September 30, 1996, shareholder
servicing fees were paid to Wells Fargo Bank or its affiliates. The Service
Class shares of the Funds paid shareholder servicing fees, after waivers, for
the fiscal year ended September 30, 1996 as indicated below:
<TABLE>
<CAPTION>
Year Ended
Fund 9/30/96
---- ----------
<S> <C>
Stagecoach Prime Money Market $1,355,940
Stagecoach Treasury Money Market $2,490,845
</TABLE>
General. The Servicing Plan will continue in effect from year to year if
-------
such continuance is approved by a majority vote of both the Directors of the
Company, including a majority of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Funds ("Non-Interested Directors"). Any
form of servicing agreement related to the Servicing Plan also must be approved
by such vote of the Directors and the Non-Interested Directors. Servicing
Agreements may be terminated at any time, without payment of any penalty, by
vote of a majority of the Board of Directors, including a majority of the Non-
Interested Directors. No material amendment to the Servicing Plan or related
Servicing Agreements may be made except by a majority of both the Directors of
the Company and the Non-Interested Directors.
The Servicing Plan requires that the Administrator shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Servicing Plan.
CUSTODIAN. Wells Fargo Bank acts as Custodian for each Fund. The
---------
Custodian, among other things, maintains a custody account or accounts in the
name of each Fund, receives and delivers all assets for each Fund upon purchase
and upon sale or maturity, collects and receives all income and other payments
and distributions on account of the assets of each Fund and pays all expenses of
each Fund. For its services as Custodian, Wells Fargo Bank is entitled to
receive a net asset-based fee at the annual rate of 0.0167%, payable monthly,
plus specified transaction charges. Wells Fargo Bank also provides portfolio
accounting services under the Custody Agreement, and receives fees for such
services as follows: a monthly base fee of $2,000 plus a net asset fee at the
annual rate of 0.070% of the first $50,000,000 of a Fund's average daily net
20
<PAGE>
assets, 0.045% of the next $50,000,000, and 0.020% of the average daily net
assets in excess of $100,000,000.
For the six-month period ended March 31, 1997, the Funds paid the following
dollar amounts in custody fees, after waivers, to Wells Fargo Bank:
<TABLE>
<CAPTION>
Fund Custody Fees
- --------------------------------------------------------- ------------------
<S> <C>
Stagecoach Prime Money Market $ 0
Stagecoach Treasury Money Market $ 0
Stagecoach 100% Treasury Money Market N/A
</TABLE>
Stagecoach Prime Money Market and Stagecoach Treasury Money Market Funds.
------------------------------------------------------------------------
FICAL, located at 707 Wilshire Blvd., Los Angeles, California 90017, acted as
Custodian of the Pacifica Prime Money Market and Treasury Money Market Funds.
FICAL was entitled to receive a fee from Pacifica, computed daily and payable
monthly, at the annual rate of 0.021% of the first $5 billion in aggregate
average daily net assets of the Funds; 0.0175% of the next $5 billion in
aggregate average daily net assets of the Funds; and 0.015% of the aggregate
average daily net assets of the Funds in excess of $10 billion.
For the period begun October 1, 1995 and ended September 5, 1996, the
custody fees paid to FICAL, and for the period begun September 6, 1996 and ended
September 30, 1996, the custody fees paid to Wells Fargo Bank were as follows:
<TABLE>
<CAPTION>
Year Ended
Fund 9/30/96
- ---- -----------
<S> <C>
Stagecoach Prime Money Market $ 73,023*
Stagecoach Treasury Money Market $252,183
</TABLE>
_____________________________________________
* This amount reflects fee waivers.
TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank acts as Transfer
--------------------------------------
and Dividend Disbursing Agent for the Funds. For providing such services, Wells
Fargo Bank is entitled to receive monthly payments at the annual rate of 0.10%
of average daily net assets for the Stagecoach Prime Money Market and Stagecoach
Treasury Money Market Funds, and 0.02% of the average daily net assets of the
Stagecoach 100% Treasury Money Market Fund for the Service Class shares of such
Funds.
For the six-month period ended March 31, 1997, the Funds paid the following
dollar amounts in transfer and dividend disbursing agency fees, without regard
to class and after waivers, to Wells Fargo Bank:
21
<PAGE>
<TABLE>
<CAPTION>
Fund Transfer Agency Fees
---- ---------------------
<S> <C>
Stagecoach Prime Money Market $0
Stagecoach Treasury Money Market $0
Stagecoach 100% Treasury Money Market N/A
</TABLE>
Under the transfer agency agreement for the Service Class shares of the
Stagecoach Prime Money Market and Stagecoach Treasury Money Market Funds in
effect prior to February 1, 1997, Wells Fargo Bank was entitled to receive
monthly payments at the annual rate of 0.02% of the average daily net assets of
the Service Class shares of these Funds, as well as reimbursement for all
reasonable out-of-pocket expenses. Furman Selz acted as Transfer Agent for the
predecessor portfolios. Pacifica compensated Furman Selz for providing personnel
and facilities to perform transfer agency related services for Pacifica at a
rate intended to represent the cost of providing such services.
UNDERWRITING COMMISSIONS. Front-end sales loads and contingent-deferred
------------------------
sales charges are not assessed in connection with the purchase and redemption of
Service Class shares. Therefore no underwriting commissions are paid to
Stephens as the Funds' Distributor.
PERFORMANCE CALCULATIONS
The Funds may advertise certain yield and total return information.
Quotations of yield and total return reflect only the performance of a
hypothetical investment in a Fund or class of shares during the particular time
period shown. Yield and total return vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.
In connection with communicating its performance to current or prospective
shareholders, these figures may also be compared to the performance of other
mutual funds tracked by mutual fund rating services or to unmanaged indices
which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Performance information for a Fund or Class of shares in a Fund may be
useful in reviewing the performance of such Fund or Class of shares and for
providing a basis for comparison with investment alternatives. The performance
of a Fund and the performance of a Class of shares in a Fund, however, may not
be comparable to the performance from investment alternatives because of
differences in the foregoing variables and differences in the methods used to
value portfolio securities, compute expenses and calculate performance.
Performance information may be advertised for non-standardized periods,
including year-to-date and other periods less than a year for the Funds.
Performance shown or advertised for the Service Class shares of the
Stagecoach Prime Money Market and Stagecoach Treasury Money Market Funds for
periods prior
22
<PAGE>
to September 6, 1996, reflects the performance of the Service Class shares of
the corresponding Pacifica predecessor portfolio.
AVERAGE ANNUAL TOTAL RETURN: The Funds may advertise certain total return
---------------------------
information. As and to the extent required by the SEC, an average annual
compound rate of return ("T") is computed by using the redeemable value at the
end of a specified period ("ERV") of a hypothetical initial investment ("P")
over a period of years ("n") according to the following formula: P(1+T)/n/=ERV.
Average Annual Total Return for the Applicable Period Ended September 30,
-------------------------------------------------------------------------
1997
- ----
<TABLE>
<CAPTION>
Service Ten Five Three One
Class Year Year Year Year
- -------------------------------------------------- -------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
Stagecoach Prime Money Market 5.72% 4.50% 5.37% 5.25%
Stagecoach Treasury Money Market 5.51% 4.34% 5.20% 5.09%
Stagecoach 100% Treasury Money Market N/A N/A N/A N/A
</TABLE>
CUMULATIVE TOTAL RETURN: In addition to the above performance information,
-----------------------
each Fund may also advertise the cumulative total return of the Fund.
Cumulative total return is based on the overall percentage change in value of a
hypothetical investment in the Fund, assuming all Fund dividends and capital
gain distributions are reinvested, without reflecting the effect of any sales
charge that would be paid by an investor, and is not annualized.
Cumulative Total Return for the Applicable Period Ended September 30, 1997
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Service Ten Five Three
Class Year Year Year
- -------------------------------------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
Stagecoach Prime Money Market 74.35% 24.60% 17.00%
Stagecoach Treasury Money Market 70.90% 23.68% 16.43%
Stagecoach 100% Treasury Money Market N/A N/A N/A
</TABLE>
YIELD CALCULATIONS: The Funds may, from time to time, include their
------------------
yields, tax-equivalent yields (if applicable) and effective yields in
advertisements or reports to shareholders or prospective investors. Quotations
of yield for the Funds are based on the investment income per share earned
during a particular seven-day or thirty-day period, less expenses accrued during
a period ("net investment income") and are computed by dividing net investment
income by the offering price per share on the last date of the period, according
to the following formula:
YIELD = 2[(a - b + 1)/6/ -1]
-----
Cd
where a = dividends and interest earned during the period, b = expenses
accrued for the period (net of any reimbursements), c = the average daily number
of shares outstanding during
23
<PAGE>
the period that were entitled to receive dividends, and d = the maximum offering
price per share on the last day of the period.
EFFECTIVE YIELD: Effective yields for the Funds are based on the change in
---------------
the value of a hypothetical investment (exclusive of capital changes) over a
particular seven-day (or thirty-day) period, less a pro-rata share of each
Fund's expenses accrued over that period (the "base period"), and stated as a
percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized multiplying by 365/7 (or
365/30 for thirty-day yield), with the resulting yield figure carried to at
least the nearest hundredth of one percent. "Effective yield" for the Funds
assumes that all dividends received during the period have been reinvested.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
Effective Seven-Day Yield = [(Base Period Return +1)365/7]-1
Yield for the Applicable Period Ended September 30, 1997
--------------------------------------------------------
<TABLE>
<CAPTION>
Seven-Day
Seven-Day Effective Thirty-Day
Fund Yield Yield Yield
- ---------------------------------------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C>
Stagecoach Prime Money Market 5.26% 5.40% 5.24%
Stagecoach Treasury Money Market 4.96% 5.09% 5.06%
Stagecoach 100% Treasury Money Market N/A N/A N/A
</TABLE>
From time to time and only to the extent the comparison is appropriate for
a Fund or a Class of shares, the Company may quote the performance or price-
earning ratio of a Fund or Class in advertising and other types of literature as
compared to the performance of the S&P Index, the Dow Jones Industrial Average,
the Lehman Brothers 20+ Treasury Index, the Lehman Brothers 5-7 Year Treasury
Index, Donoghue's Money Fund Averages, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by World Gold Council), Bank Averages (which are
calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), average annualized certificate of deposit rates (from the Federal
Reserve G-13 Statistical Releases or the Bank Rate Monitor), the Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), other managed or unmanaged indices or
performance data of bonds, municipal securities, stocks or government securities
(including data provided by Ibbotson Associates), or by other services,
companies, publications or persons who monitor mutual funds on overall
performance or other criteria. The S&P Index and the Dow Jones Industrial
Average are unmanaged indices of selected common stock prices. The performance
of the Funds or a Class also may be compared to that of other mutual funds
having similar objectives. This comparative performance could be expressed as a
ranking prepared by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Bloomberg Financial Markets or
24
<PAGE>
Morningstar, Inc., independent services which monitor the performance of mutual
funds. The Funds' performance will be calculated by relating net asset value per
share at the beginning of a stated period to the net asset value of the
investment, assuming reinvestment of all gains distributions and dividends paid,
at the end of the period. The Funds' comparative performance will be based on a
comparison of yields, as described above, or total return, as reported by
Lipper, Survey Publications, Donoghue or Morningstar, Inc.
Any such comparisons may be useful to investors who wish to compare past
performance of the Funds or a Class with that of competitors. Of course, past
performance cannot be a guarantee of future results. The Company also may
include, from time to time, a reference to certain marketing approaches of the
Distributor, including, for example, a reference to a potential shareholder
being contacted by a selected broker or dealer. General mutual fund statistics
provided by the Investment Company Institute may also be used.
The Company also may use the following information in advertisements and
other types of literature, only to the extent the information is appropriate for
the Fund: (i) the Consumer Price Index may be used to assess the real rate of
return from an investment in a Fund; (ii) other government statistics,
including, but not limited to, The Survey of Current Business, may be used to
illustrate investment attributes of a Fund or the general economic, business,
investment, or financial environment in which a Fund operates; (iii) the effect
of tax-deferred compounding on the investment returns of a Fund, or on returns
in general, may be illustrated by graphs, charts, etc., where such graphs or
charts would compare, at various points in time, the return from an investment
in a Fund (or returns in general) on a tax-deferred basis (assuming reinvestment
of capital gains and dividends and assuming one or more tax rates) with the
return on a taxable basis; and (iv) the sectors or industries in which a Fund
invests may be compared to relevant indices of stocks or surveys (e.g., S&P
Industry Surveys) to evaluate a Fund's historical performance or current or
potential value with respect to the particular industry or sector.
In addition, the Company also may use, in advertisements and other types of
literature, information and statements: (1) showing that bank savings accounts
offer a guaranteed return of principal and a fixed rate of interest, but no
opportunity for capital growth; and (2) describing Wells Fargo Bank, and its
affiliates and predecessors, as one of the first investment managers to advise
investment accounts using asset allocation and index strategies. The Company
also may include in advertising and other types of literature information and
other data from reports and studies prepared by the Tax Foundation, including
information regarding federal and state tax levels and the related "Tax Freedom
Day."
The Company also may discuss in advertising and other types of literature
that a Fund has been assigned a rating by a nationally recognized statistical
rating organization ("NRSRO"), such as Standard & Poor's Corporation. Such
rating would assess the creditworthiness of the investments held by the Fund.
The assigned rating would not be a recommendation to purchase, sell or hold the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of the Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information relating
to the Fund or its investments. The Company may
25
<PAGE>
compare the Fund's performance with other investments which are assigned ratings
by NRSROs. Any such comparisons may be useful to investors who wish to compare
the Fund's past performance with other rated investments.
From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines (ATMs), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability of
combined Wells Fargo Bank and Stagecoach Funds account statements."
The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Capital Management, Inc.
(formerly, Wells Fargo Investment Management), a division of Wells Fargo Bank,
is listed in the top 100 by Institutional Investor magazine in its July 1997
survey "America's Top 300 Money Managers." This survey ranks money managers in
several asset categories. The Company may also disclose in advertising and
other types of sales literature the assets and categories of assets under
management by the Company's investment advisor. The Company may also disclose
in advertising and other types of sales literature the assets and categories of
assets under management by a fund's investment advisor or sub-advisor and the
total amount of assets and mutual fund assets managed by Wells Fargo Bank. As
of June 30, 1998, Wells Fargo Bank and its affiliates provided investment
Advisory services for approximately [$62] billion of assets of individual,
trusts, estates and institutions and [$23] billion of mutual fund assets.
The Company also may discuss in advertising and other types of literature
the features, terms and conditions of Wells Fargo Bank accounts through which
investments in the Funds may be made via a "sweep" arrangement, including,
without limitation, the Managed Sweep Account, Money Market Checking Account and
Money Market Access Account (collectively, the "Sweep Accounts"). Such
advertisements and other literature may include, without limitation, discussions
of such terms and conditions as the minimum deposit required to open a Sweep
Account, a description of the yield earned on shares of the Funds through a
Sweep Account, a description of any monthly or other service charge on a Sweep
Account and any minimum required balance to waive such service charges, any
overdraft protection plan offered in connection with a Sweep Account, a
description of any ATM or check privileges offered in connection with a Sweep
Account and any other terms, conditions, features or plans offered in connection
with a Sweep Account. Such advertising or other literature may also include a
discussion of the advantages of establishing and maintaining a Sweep Account,
and may include statements from customers as to the reasons why such customers
have established and maintained a Sweep Account.
The Company may disclose in advertising and other types of literature that
investors can open and maintain Sweep Accounts over the Internet or through
other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available to
investors, including the types of accounts and any applicable
26
<PAGE>
fees. Such advertising and other literature may disclose that Wells Fargo Bank
is the first major bank to offer an on-line application for a mutual fund
account that can be filled out completely through Electronic Channels.
Advertising and other literature may disclose that Wells Fargo Bank may maintain
Web sites, pages or other information sites accessible through Electronic
Channels (an "Information Site") and may describe the contents and features of
the Information Site and instruct investors on how to access the Information
Site and open a Sweep Account. Advertising and other literature may also
disclose the procedures employed by Wells Fargo Bank to secure information
provided by investors, including disclosure and discussion of the tools and
services for accessing Electronic Channels. Such advertising or other literature
may include discussions of the advantages of establishing and maintaining a
Sweep Account through Electronic Channels and testimonials from Wells Fargo Bank
customers or employees and may also include descriptions of locations where
product demonstrations may occur. The Company may also disclose the ranking of
Wells Fargo Bank as one of the largest money managers in the United States.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for the Service Class shares of the Stagecoach
Prime Money Market and Stagecoach Treasury Money Market Funds is determined as
of 12:00 noon and 1:00 p.m. (Pacific time) on each day the New York Stock
Exchange ("NYSE") is open for business. Net asset value per share for the
Service Class shares of the Stagecoach 100% Treasury Money Market Fund is
determined as of 9:00 a.m. and 1:00 p.m. (Pacific time) on each day the NYSE is
open for business. Expenses and fees, including advisory fees, are accrued
daily and are taken into account for the purpose of determining the net asset
value of the Funds' shares.
Each Fund uses the amortized cost method to determine the value of its
portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The amortized
cost method involves valuing a security at its cost and amortizing any discount
or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
that the Funds would receive if the security were sold. During these periods
the yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund that uses a method of valuation based upon market prices.
Thus, during periods of declining interest rates, if the use of the amortized
cost method resulted in a lower value of the Funds' portfolio on a particular
day, a prospective investor in the Funds would be able to obtain a somewhat
higher yield than would result from investment in a fund using solely market
values, and existing Fund shareholders would receive correspondingly less
income. The converse would apply during periods of rising interest rates.
Rule 2a-7 provides that in order to value its portfolio using the amortized
cost method, a Fund must maintain a dollar-weighted average portfolio maturity
of 90 days or less, purchase securities having remaining maturities (as defined
in Rule 2a-7) of thirteen months or less and
27
<PAGE>
invest only in those high-quality securities that are determined by the Board of
Directors to present minimal credit risks. The maturity of an instrument is
generally deemed to be the period remaining until the date when the principal
amount thereof is due or the date on which the instrument is to be redeemed.
However, Rule 2a-7 provides that the maturity of an instrument may be deemed
shorter in the case of certain instruments, including certain variable and
floating rate instruments subject to demand features. Pursuant to the Rule, the
Board is required to establish procedures designed to stabilize, to the extent
reasonably possible, a Fund's price per share as computed for the purpose of
sales and redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether the Fund's net asset value calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation will be examined by the Board of Directors. If
such deviation exceeds 1/2 of 1%, the Board will promptly consider what action,
if any, will be initiated. In the event the Board determines that a deviation
exists that may result in material dilution or other unfair results to investors
or existing shareholders, the Board will take such corrective action as it
regards as necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity, withholding dividends or establishing a net asset
value per share by using available market quotations. It is the intention of the
Funds to maintain a per share net asset value of $1.00, but there can be no
assurance that each Fund will do so.
Instruments having variable or floating interest rates or demand features
may be deemed to have remaining maturities as follows: (a) a government security
with a variable rate of interest readjusted no less frequently than every
thirteen months may be deemed to have a maturity equal to the period remaining
until the next readjustment of the interest rate; (b) an instrument with a
variable rate of interest, the principal amount of which is scheduled on the
face of the instrument to be paid in thirteen months or less, may be deemed to
have a maturity equal to the period remaining until the next readjustment of the
interest rate; (c) an instrument with a variable rate of interest that is
subject to a demand feature may be deemed to have a maturity equal to the longer
of the period remaining until the next readjustment of the interest rate or the
period remaining until the principal amount can be recovered through demand; (d)
an instrument with a floating rate of interest that is subject to a demand
feature may be deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand; and (e) a repurchase agreement
may be deemed to have a maturity equal to the period remaining until the date on
which the repurchase of the underlying securities is scheduled to occur or,
where no date is specified but the agreement is subject to demand, the notice
period applicable to a demand for the repurchase of the securities.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds may be purchased on any day a Fund is open for business
(a "Business Day"). The Funds are open Monday through Friday and are closed on
federal bank holidays. Currently, those holidays are New Year's Day,
President's Day, Martin Luther King Jr. Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.
28
<PAGE>
Payment for shares may, in the discretion of the advisor, be made in the
form of securities that are permissible investments for the Funds. For further
information about this form of payment please contact Stephens. In connection
with an in-kind securities payment, the Funds will require, among other things,
that the securities be valued on the day of purchase in accordance with the
pricing methods used by a Fund and that such Fund receives satisfactory
assurances that (i) it will have good and marketable title to the securities
received by it; (ii) that the securities are in proper form for transfer to the
Fund; and (iii) adequate information will be provided concerning the basis and
other matters relating to the securities.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule or
regulation) an emergency exists as a result of which disposal or valuation of
portfolio securities is not reasonably practicable, or for such periods as the
SEC may permit. The Company may also redeem shares involuntarily or make
payment for redemption in securities or other property if it appears appropriate
to do so in light of the Company's responsibilities under the 1940 Act. In
addition, the Company may redeem shares involuntarily to reimburse the Funds for
any losses sustained by reason of the failure of a shareholders to make full
payment for shares purchased or to collect any charge relating to a transaction
effected for the benefit of a shareholder which is applicable to shares of a
Fund.
PORTFOLIO TRANSACTIONS
The Company has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors, Wells Fargo Bank is responsible
for each Fund's portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Company to obtain the best results
taking into account the dealer's general execution and operational facilities,
the type of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While Wells Fargo Bank generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available.
Purchases and sales of non-equity securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. Each of
the Funds also will purchase portfolio securities in underwritten offerings and
may purchase securities directly from the issuer. Generally, municipal
obligations and taxable money market securities are traded on a net basis and do
not involve brokerage commissions. The cost of executing a Fund's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the
Company are prohibited from dealing with the Company as a principal in the
purchase and sale of securities unless an exemptive order allowing such
transactions is obtained from the SEC or an exemption is otherwise available.
The Funds may purchase securities from underwriting syndicates of which Stephens
or Wells Fargo Bank is a member
29
<PAGE>
under certain conditions in accordance with the provisions of a rule adopted
under the 1940 Act and in compliance with procedures adopted by the Board of
Directors.
Wells Fargo Bank, as the Investment Advisor of each of the Funds, may, in
circumstances in which two or more dealers are in a position to offer comparable
results for a Fund portfolio transaction, give preference to a dealer that has
provided statistical or other research services to Wells Fargo Bank. By
allocating transactions in this manner, Wells Fargo Bank is able to supplement
its research and analysis with the views and information of securities firms.
Information so received will be in addition to, and not in lieu of, the services
required to be performed by Wells Fargo Bank under the Advisory Contracts, and
the expenses of Wells Fargo Bank will not necessarily be reduced as a result of
the receipt of this supplemental research information. Furthermore, research
services furnished by dealers through which Wells Fargo Bank places securities
transactions for a Fund may be used by Wells Fargo Bank in servicing its other
accounts, and not all of these services may be used by Wells Fargo Bank in
connection with advising the Funds.
Brokerage Commissions. The Funds did not pay any brokerage commissions on
---------------------
portfolio transactions for the nine-month period ended September 30, 1996 and
the six-month period ended March 31, 1997.
Securities of Regular Broker/Dealers. As of March 31, 1997, the Funds
------------------------------------
owned securities of their "regular brokers or dealers" or their parents, as
defined in the Act as follows:
<TABLE>
<CAPTION>
Fund Broker/Dealers Amount
- --------------------------------------------- --------------------------- ---------------------
<S> <C> <C>
Stagecoach Prime Money Market Goldman Sachs & Co. $ 72,419,000
J.P. Morgan Securities $ 15,000,000
Morgan Stanley $ 15,000,000
Stagecoach Treasury Money Market Goldman Sachs & Co. $172,575,000
J.P. Morgan Securities $232,766,000
Morgan Stanley $156,530,000
</TABLE>
Portfolio Turnover. The portfolio turnover rate is not a limiting factor
------------------
when Wells Fargo Bank deems portfolio changes appropriate. Changes may be made
in the portfolios consistent with the investment objectives and policies of the
Funds whenever such changes are believed to be in the best interests of the
Funds and their shareholders. The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities by the average
monthly value of the Fund's portfolio securities. For purposes of this
calculation, portfolio securities exclude all securities having a maturity when
purchased of one year or less. Portfolio turnover generally involves some
expenses to the Funds, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and the reinvestment in other
securities. Portfolio turnover also can generate short-term capital gain tax
consequences. Portfolio turnover rate is not a limiting factor when Wells Fargo
Bank deems portfolio changes appropriate.
30
<PAGE>
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive fees from the
Funds in whole or in part. Any such waiver will reduce expenses and,
accordingly, have a favorable impact on a Fund's performance. Except for the
expenses borne by Wells Fargo Bank and Stephens, the Company bears all costs of
its operations, including the compensation of its Directors who are not
affiliated with Stephens or Wells Fargo Bank or any of their affiliates;
advisory, shareholder servicing and administration fees; payments pursuant to
any Plan; interest charges; taxes; fees and expenses of its independent
accountants, legal counsel, transfer agent and dividend disbursing agent;
expenses of redeeming shares; expenses of preparing and printing prospectuses
(except the expense of printing and mailing prospectuses used for promotional
purposes, unless otherwise payable pursuant to a Plan), shareholders' reports,
notices, proxy statements and reports to regulatory agencies; insurance premiums
and certain expenses relating to insurance coverage; trade association
membership dues; brokerage and other expenses connected with the execution of
portfolio transactions; fees and expenses of its custodian, including those for
keeping books and accounts and calculating the net asset value per share of a
Fund; expenses of shareholders' meetings; expenses relating to the issuance,
registration and qualification of a Fund's shares; pricing services, and any
extraordinary expenses. Expenses attributable to a Fund are charged against a
Fund assets. General expenses of the Company are allocated among all of the
funds of the Company, including a Fund, in a manner proportionate to the net
assets of each Fund, on a transactional basis, or on such other basis as the
Company's Board of Directors deems equitable.
FEDERAL INCOME TAXES
The following information supplements and should be read in conjunction
with the Prospectus section entitled "Taxes." The Prospectus describes
generally the tax treatment of distributions by the Funds. This section of the
SAI includes additional information concerning income taxes.
General. The Company intends to qualify each Fund as a regulated
-------
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), as long as such qualification is in the best interest of
the Fund's shareholders. Each Fund will be treated as a separate entity for tax
purposes and thus the provisions of the Code applicable to regulated investment
companies will generally be applied to each Fund, rather than to the Company as
a whole. In addition, net capital gain, net investment income, and operating
expenses will be determined separately for each Fund. As a regulated investment
company, each Fund will not be taxed on its net investment income and capital
gains distributed to its shareholders.
Qualification as a regulated investment company under the Code requires,
among other things, that (a) each Fund derive at least 90% of its annual gross
income from dividends, interest, certain payments with respect to securities
loans, gains from the sale or other disposition of stock or securities or
foreign currencies (to the extent such currency gains are directly related to
the regulated investment company's principal business of investing in stock or
securities) and other
31
<PAGE>
income (including but not limited to gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; and (b) the Fund diversify its holdings so that, at
the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, government securities and
other securities limited in respect of any one issuer to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its assets is invested
in the securities of any one issuer (other than U.S. Government obligations and
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are determined to be engaged in the
same or similar trades or businesses.
The Funds must also distribute or be deemed to distribute to their
shareholders at least 90% of their net investment income earned in each taxable
year. In general, these distributions must actually or be deemed to be made in
the taxable year. However, in certain circumstances, such distributions may be
made in the 12 months following the taxable year. The Funds intend to pay out
substantially all of their net investment income and net realized capital gains
(if any) for each year.
In addition, a regulated investment company must, in general, derive less
than 30% of its gross income from the sale or other disposition of securities or
options thereon held for less than three months. However, this restriction has
been repealed with respect to a regulated investment company's taxable years
beginning after August 5, 1997.
Excise Tax. A 4% nondeductible excise tax will be imposed on each Fund
----------
(other than to the extent of its tax-exempt interest income) to the extent it
does not meet certain minimum distribution requirements by the end of each
calendar year. Each Fund intends to actually or be deemed to distribute
substantially all of its net investment income and net capital gains by the end
of each calendar year and, thus, expects not to be subject to the excise tax.
Taxation of Fund Investments. Except as provided herein, gains and losses
----------------------------
on the sale of portfolio securities by a Fund will generally be capital gains
and losses. Such gains and losses will ordinarily be long-term capital gains
and losses if the securities have been held by the Fund for more than one year
at the time of disposition of the securities.
Gains recognized on the disposition of a debt obligation (including tax-
exempt obligations purchased after April 30, 1993) purchased by the Fund at a
market discount (generally at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of market discount which
accrued, but was not previously recognized pursuant to an available election,
during the term the Fund held the debt obligation.
Capital Gain Distributions. Distributions which are designated by a Fund
--------------------------
as capital gain distributions will be taxed to shareholders as long-term capital
gain (to the extent such dividends do exceed the Fund's actual net capital gain
for the taxable year), regardless of how long a shareholder has held Fund
shares. Such distributions will be designated as capital gain distributions in
a written notice mailed by the Fund to its shareholders not later than 60 days
after the close of the Fund's taxable year.
32
<PAGE>
The Taxpayer Relief Act of 1997 (the "1997 Act") created several new
categories of capital gains applicable to noncorporate taxpayers. Under prior
law, noncorporate taxpayers were generally taxed at a maximum rate of 28% on net
capital gain (generally, the excess of net long-term capital gain over net
short-term capital loss). Noncorporate taxpayers are now generally taxed at a
maximum rate of 20% on net capital gain attributable to gains realized on the
sale of property held for greater than 18 months, and a maximum rate of 28% on
net capital gain attributable to gain realized on the sale of property held for
greater than one year and not more than 18 months. The 1997 Act retains the
treatment of short term capital gain or loss (generally, gain or loss
attributable to capital assets held for 1 year or less) and did not affect the
taxation of capital gains in the hands of corporate taxpayers.
Under the 1997 Act, the Treasury is authorized to issue regulations for
application of the reduced capital gains tax rates to pass-through entities,
including regulated investment companies, such as the Funds. The Internal
Revenue Service has published a notice describing temporary Regulations to be
issued pursuant to such authority, permitting the application of the reduced
capital gains tax rates to pass-through entities such as the Funds. Under the
Regulations to be issued, if a regulated investment company designates a
dividend as a capital gain dividend for a taxable year ending on or after May 7,
1997, then such regulated investment company may also designate the dividends as
one of two classes: a 20% rate gain distribution, or a 28% rate gain
distribution. Thus, noncorporate shareholders of the Funds may qualify for the
reduced rate of tax on capital gain dividends paid by the Funds, subject only to
the limitation as to the maximum amounts which may be designated in each class.
Such maximum amount for each class is determined by performing the computation
required by Section 1(h) of the Code as if the Fund were an individual whose
ordinary income is subject to a marginal rate of at least 28%.
Other Distributions. Although dividends will be declared daily based on
-------------------
each Fund's daily earnings, for federal income tax purposes, the Fund's earnings
and profits will be determined at the end of each taxable year and will be
allocated pro rata over the entire year. For federal income tax purposes, only
amounts paid out of earnings and profits will qualify as dividends. Thus, if
during a taxable year a Fund's declared dividends (as declared daily throughout
the year) exceed the Fund's net income (as determined at the end of the year),
only that portion of the year's distributions which equals the year's earnings
and profits will be deemed to have constituted a dividend. It is expected that
each Fund's net income, on an annual basis, will equal the dividends declared
during the year.
Disposition of Fund Shares. A disposition of Fund shares pursuant to
--------------------------
redemption (including a redemption in-kind) or exchanges will ordinarily result
in a taxable capital gain or loss, depending on the amount received for the
shares (or are deemed to receive in the case of an exchange) and the cost of the
shares.
If a shareholder exchanges or otherwise disposes of Fund shares within 90
days of having acquired such shares and if, as a result of having acquired those
shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different regulated investment company, the
sales charge previously incurred acquiring the Fund's shares shall not be taken
into account (to the extent such previous sales charges do not exceed the
33
<PAGE>
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are acquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.
If a shareholder receives a designated capital gain distribution (to be
treated by the shareholder as long-term capital gain) with respect to any Fund
share and such Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as long-term capital loss to the extent of the designated capital gain
distribution. In addition, if a shareholder holds Fund shares for six months or
less, any loss on the sale or exchange of those shares will be disallowed to the
extent of the amount of exempt-interest dividends received with respect to the
shares. The Treasury Department is authorized to issue regulations reducing the
six months holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where a Fund regularly
distributes at least 90% of its net tax-exempt interest, if any. No such
regulations had been issued as of the date of this SAI. The loss disallowance
rules described in this paragraph do not apply to losses realized under a
periodic redemption plan.
Federal Income Tax Rates. As of the printing of this SAI, the maximum
------------------------
individual tax rate applicable to ordinary income is 39.6% (marginal tax rates
may be higher for some individuals to reduce or eliminate the benefit of
exemptions and deductions); the maximum individual marginal tax rate applicable
to net capital gain is 28% (however, see "Capital Gain Distributions" above);
and the maximum corporate tax rate applicable to ordinary income and net capital
gain is 35% (marginal tax rates may be higher for some corporations to reduce or
eliminate the benefit of lower marginal income tax rates). Naturally, the
amount of tax payable by an individual or corporation will be affected by a
combination of tax laws covering, for example, deductions, credits, deferrals,
exemptions, sources of income and other matters.
Backup Withholding. The Company may be required to withhold, subject to
------------------
certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (including proceeds from
exchanges and redemptions in-kind) paid or credited to an individual Fund
shareholder, unless the shareholder certifies that the Taxpayer Identification
Number ("TIN") provided is correct and that the shareholder is not subject to
backup withholding, or the IRS notifies the Company that the shareholder's TIN
is incorrect or that the shareholder is subject to backup withholding. Such tax
withheld does not constitute any additional tax imposed on the shareholder, and
may be claimed as a credit or refund on the shareholder's federal income tax
return. An investor must provide a valid TIN upon opening or reopening an
account. Failure to furnish a valid TIN to the Company could subject the
investor to penalties imposed by the IRS. Foreign shareholders of the Funds
(described below) are generally not subject to backup withholding.
Foreign Shareholders. Under the Code, distributions of net investment
--------------------
income by a Fund to a nonresident alien individual, foreign trust (i.e., trust
which a U.S. court is able to exercise primary supervision over administration
of that trust and one or more U.S. persons have
34
<PAGE>
authority to control substantial decisions of that trust), foreign estate (i.e.,
the income of which is not subject to U.S. tax regardless of source), foreign
corporation, or foreign partnership (a "foreign shareholder") will be subject to
U.S. income tax withholding (at a rate of 30% or a lower treaty rate, if
applicable). Withholding will not apply if a dividend distribution paid by a
Fund to a foreign shareholder is "effectively connected" with a U.S. trade or
business (or, if an income tax treaty applies, is attributable to a U.S.
permanent establishment of the foreign shareholder), in which case the reporting
and withholding requirements applicable to U.S. residents will apply.
Distributions of net capital gain are generally not subject to U.S. income tax
withholding.
New Regulations. On October 6, 1997, the Treasury Department issued new
---------------
regulations (the "New Regulations") which make certain modifications to the
backup withholding, U.S. income tax withholding and information reporting rules
applicable to foreign shareholders. The New Regulations will generally be
effective for payments made after December 31, 1998, subject to certain
transition rules. Among other things, the New Regulations will permit the Funds
to estimate the portion of their distributions qualifying as capital gain
distributions for purposes of determining the portion of such distributions paid
to foreign shareholders which will be subject to U.S. income tax withholding.
Prospective investors are urged to consult their own tax advisors regarding the
New Regulations.
Tax-Deferred Plans. The shares of the Funds are available for a variety of
------------------
tax-deferred retirement and other plans, including Individual Retirement
Accounts ("IRA"), Simplified Employee Pension Plans ("SEP-IRA"), Savings
Incentive Match Plans for Employees ("SIMPLE plans"), Roth IRAs, and Education
IRAs, which permit investors to defer some of their income from taxes.
Investors should contact their selling agents for details concerning retirement
plans.
Other Matters. Investors should be aware that the investments to be made
-------------
by a Fund may involve sophisticated tax rules that may result in income or gain
recognition by the Fund without corresponding current cash receipts. Although
the Funds will seek to avoid significant noncash income, such noncash income
could be recognized by a Fund, in which case the Fund may distribute cash
derived from other sources in order to meet the minimum distribution
requirements described above.
The foregoing discussion and the discussions in the Prospectus applicable
to each shareholder address only some of the federal income tax considerations
generally affecting investments in a Fund. Each investor is urged to consult
his or her tax advisor regarding specific questions as to federal, state, local
and foreign taxes.
CAPITAL STOCK
The Funds are three of the funds in the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991, and
currently offers shares of over thirty funds.
35
<PAGE>
Most of the Company's funds are authorized to issue multiple classes of
shares, one class generally subject to a front-end sales charge and, in some
cases, classes subject to a contingent-deferred sales charge, that are offered
to retail investors. Certain of the Company's funds also are authorized to
issue other classes of shares, which are sold primarily to institutional
investors. Each class of shares in a fund represents an equal, proportionate
interest in a fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the fund's operating expenses, except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule 12b-
1) that are allocated to a particular class. Please contact Stagecoach
Shareholder Services at 1-800-260-5969 if you would like additional information
about other funds or classes of shares offered.
With respect to matters that affect one class but not another, shareholders
vote as a class; for example, the approval of a Plan. Subject to the foregoing,
all shares of a Fund have equal voting rights and will be voted in the
aggregate, and not by series, except where voting by a series is required by law
or where the matter involved only affects one series. For example, a change in
a Fund's fundamental investment policy affects only one Series and would be
voted upon only by shareholders of the Fund involved. Additionally, approval of
an advisory contract since it affects only one Fund, is a matter to be
determined separately by each Series. Approval by the shareholders of one
Series is effective as to that Series whether or not sufficient votes are
received from the shareholders of the other Series to approve the proposal as to
those Series.
As used in the Prospectus and in this SAI, the term "majority" when
referring to approvals to be obtained from shareholders of a Class of a Fund,
means the vote of the lesser of (i) 67% of the shares of such class of the Fund
represented at a meeting if the holders of more than 50% of the outstanding
shares of such Class Fund are present in person or by proxy, or (ii) more than
50% of the outstanding shares of such Class of the Fund. The term "majority,"
when referring to the approvals to be obtained from shareholders of the Company
as a whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the holders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares.
Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held. Shareholders are not entitled to
any preemptive rights. All shares, when issued, will be fully paid and non-
assessable by the Company.
The Company may dispense with an annual meeting of shareholders in any year
in which it is not required to elect directors under the 1940 Act.
Each share of a class of a Fund represents an equal proportional interest
in the Fund with each other share in the same class and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
the Fund as are declared in the discretion of the Directors. In the event of
the liquidation or dissolution of the Company, shareholders of a Fund or class
are entitled to receive the assets attributable to the Fund or class that are
available for distribution, and a distribution of any general assets not
attributable to a particular investment portfolio that are
36
<PAGE>
available for distribution in such manner and on such basis as the Directors in
their sole discretion may determine.
Set forth below as of [JUNE 30], 1998 is the name, address and share
ownership of each person known by the Company to have beneficial or record
ownership of 5% or more of the Service Class shares of a Fund or 5% or more of
the voting securities of the Fund as a whole. The term "N/A" is used where a
shareholder holds 5% or more of a class, but less than 5% of a Fund as a whole.
5% OWNERSHIP AS OF JUNE 30, 1998
--------------------------------
[TO BE UPDATED]
<TABLE>
<CAPTION>
CLASS; TYPE PERCENTAGE PERCENTAGE
Fund Name and Address of Ownership of Class of Portfolio
- ----------------------- ----------------------------- ------------------------- ----------- -------------
<S> <C> <C> <C> <C>
STAGECOACH PRIME MONEY Virg & Co. Service Class 30.28% 5.08%
MARKET FUND Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372-0800
Hare & Co. Service Class 48.58% 8.15%
Bank of New York Record Holder
One Wall Street, 2nd Floor
Attn: STIF/Master Note
New York, NY 10286
Virg. & Co. Class A 27.05% 8.18%
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372-0800
Hare & Co. Class A 34.78% 10.52%
Bank of New York Record Holder
One Wall Street, 2nd Floor
Attn: STIF/Master Note
New York, NY 10005-2501
Omnibus Account 2 Class A 26.93% 8.15%
Attn: Zoe Hines Record Holder
c/o Stephens Inc.
P.O. Box 3507
Little Rock, AR 72203
Virg & Co. Institutional Class 40.44% 8.87%
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372-0800
STAGECOACH TREASURY Wells Fargo Bank, TTEE Service Class 5.78% N/A
MONEY MARKET FUND FBO Choicemaster Beneficially Owned
Attn: Mutual Funds
P.O. Box 9800
Calabasas, CA 91372-0800
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
CLASS; TYPE PERCENTAGE PERCENTAGE
Fund Name and Address of Ownership of Class of Portfolio
- ----------------------- ----------------------------- ------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Virg & Co. Service Class 22.52% N/A
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372-0800
Hare & Co. Service Class 66.94% 13.47%
Bank of New York Record Holder
One Wall Street, 2nd Floor
Attn: STIF/Master Note
New York, NY 10005-2501
Virg. & Co. Class A 36.06% 6.22%
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372
WFB-WHOLESALE SWEEP Class A 30.18% 5.21%
155 Fifth Street Mac 0106-066 Record Holder
San Francisco, CA 94103
Hare & Co. Class E 100.00% 32.54%
Bank of New York Record Holder
One Wall Street, 2nd Fl.
Attn: STIFF/Master Note
New York, NY 10005-2501
Wells Fargo Bank Institutional Class 33.23% 7.28%
Attn: Investment Sweep T-15 Record Holder
1300 S.W. Fifth Ave.
Portland, OR 97201-5688
Virg. & Co. Institutional Class 34.83% 7.63%
Attn: MF Dept. A88-4 Record Holder
P.O. Box 9800
Calabasas, CA 91372-0800
STAGECOACH 100% Stephens Inc. Service Class 100% 50%
TREASURY MONEY MARKET 111 Center Street Record Holder
FUND Little Rock, AR 72201
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).
OTHER
The Company's Registration Statement, including the Prospectus and SAI for
the Funds and the exhibits filed therewith, may be examined at the office of the
U.S. Securities and Exchange Commission ("SEC") in Washington, D.C. Statements
contained in the Prospectus or
38
<PAGE>
the SAI as to the contents of any contract or other document referred to herein
or in the Prospectus are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been selected as the independent auditors for the
Company. KPMG Peat Marwick LLP provides audit services, tax return preparation
and assistance and consultation in connection with review of certain SEC
filings. KPMG Peat Marwick LLP's address is Three Embarcadero Center, San
Francisco, California 94111.
FINANCIAL INFORMATION
The portfolio of investments and unaudited financial statements for the
six-month period ended September 30, 1997, are hereby incorporated by reference
to the Company's Semi-Annual Reports as filed with the SEC on December 5, 1997.
The portfolio of investments, audited financial statements and independent
auditors' report for the Funds for the six-month period ended March 31, 1997,
are hereby incorporated by reference to the Company's Annual Reports as filed
with the SEC on June 4, 1997.
Annual and Semi-Annual Reports may be obtained by calling 1-800-260-5969.
39
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.
Corporate and Municipal Bonds
Moody's: The four highest ratings for corporate and municipal bonds are
"Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest amount of investment risk. Bonds rated "Aa" are
of "high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds
rated "A" possess many favorable investment attributes and are considered to be
upper medium grade obligations. Bonds rated "Baa" are considered to be medium
grade obligations; interest payments and principal security appear adequate for
the present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds have
speculative characteristics as well. Moody's applies numerical modifiers: 1, 2
and 3 in each rating category from "Aa" through "Baa" in its rating system. The
modifier 1 indicates that the security ranks in the higher end of its category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings assigned by S&P
and have an extremely strong capacity to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity to pay interest and repay
principal" and differ "from the highest rated issued only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having an "adequate capacity" to pay interest and
repay principal, but changes in economic conditions or other circumstances are
more likely to lead to a "weakened capacity" to make such repayments. The
ratings from "AA" to "BBB" may be modified by the addition of a plus or minus
sign to show relative standing within the category.
Municipal Notes
Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality." Notes rated "MIG 2"
or "VMIG 2" are of "high quality," with margins of protections "ample although
not as large as in the preceding group." Notes rated "MIG 3" or "VMIG 3" are of
"favorable quality," with all security elements accounted for, but lacking the
strength of the preceding grades.
S&P: The "SP-1" rating reflects a "very strong or strong capacity to pay
principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
A-1
<PAGE>
Corporate and Municipal Commercial Paper
Moody's: The highest rating for corporate and municipal commercial paper
is "P-1" (Prime-1). Issuers rated "P-1" have a "superior capacity for repayment
of short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a
strong capacity for repayment of short-term promissory obligations," but
earnings trends, while sound, will be subject to more variation.
S&P: The "A-1" rating for corporate and municipal commercial paper
indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."
A-2
<PAGE>
STAGECOACH FUNDS, INC.
SEC REGISTRATION NOS. 33-42927; 811-6419
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
--------------------
With respect to the California Tax-Free Bond, Index Allocation,
Overland Express Sweep, Short-Term Government-Corporate Income, Short-
Term Municipal Income, Strategic Growth, U.S. Government Income and
Variable Rate Government Funds, the portfolio of investments, audited
financial statements and independent auditors' report for the year
ended December 31, 1997, are incorporated in the respective
statements of additional information for such Funds by reference to
the Company's Annual Reports, as filed with the SEC on March 3, 1998.
With respect to the International Equity Fund, 4-6 month unaudited
financial statements for the period beginning September 24, 1997
(commencement of operations) and ending March 9, 1998, are
incorporated by reference to Post-Effective Amendment No. 44 to the
Company's Registration Statement, as filed with the SEC on April 17,
1998.
With respect to the Arizona Tax-Free, Asset Allocation, Balanced,
California Tax-Free Bond, California Tax-Free Income, California Tax-
Free Money Market, Diversified Equity Income, Equity Index, Equity
Value, Government Money Market, Growth, Intermediate Bond, Money
Market, Money Market Trust, National Tax-Free, National Tax-Free
Money Market, Oregon Tax-Free, Prime Money Market, Short-Intermediate
U.S. Government Income, Small Cap, Strategic Growth, Treasury Money
Market, U.S. Government Allocation and U.S. Government Income Funds,
the portfolio of investments, unaudited financial statements and
independent auditors' report for the fiscal period ended September
30, 1997 are incorporated in the respective statements of additional
information for such Funds by reference to the Company's Semi-Annual
Reports, as filed with the SEC on December 5, 1997.
With respect to the Asset Allocation, Capital Appreciation, Corporate
Stock, Small Cap, Tax-Free Money Market and U.S. Government
Allocation Master Portfolios of Master Investment Trust ("MIT"), the
portfolio of investments, audited financial statements and
independent auditors' report for the fiscal period ended September
30, 1997 are incorporated in the respective statements of additional
information for such
C-1
<PAGE>
Funds by reference to the Company's Semi-Annual Reports, as filed with
the SEC on December 5, 1997.
With respect to the Arizona Tax-Free, Asset Allocation, Balanced,
California Tax-Free Bond, California Tax-Free Income, California Tax-
Free Money Market, Diversified Equity Income, Equity Index, Equity
Value, Government Money Market, Growth, Intermediate Bond, Money Market,
Money Market Trust, National Tax-Free, National Tax-Free Money Market,
Oregon Tax-Free, Prime Money Market, Short-Intermediate U.S. Government
Income, Small Cap, Strategic Growth, Treasury Money Market, U.S.
Government Allocation and U.S. Government Income Funds, the portfolio of
investments, audited financial statements and independent auditors'
report for the fiscal period ended March 31, 1997 are incorporated in
the respective statements of additional information for such Funds by
reference to the Company's Annual Reports, as filed with the SEC on June
4, 1997.
With respect to the Asset Allocation, Capital Appreciation, Corporate
Stock, Small Cap, Tax-Free Money Market and U.S. Government Allocation
Master Portfolios of Master Investment Trust ("MIT"), the portfolio of
investments, audited financial statements and independent auditors'
report for the fiscal period ended March 31, 1997 are incorporated in
the respective statements of additional information for such Funds by
reference to the Company's Annual Reports as filed with the SEC on June
4, 1997.
With respect to the National Tax Free Money Market Trust, the financial
statements for such Fund will be incorporated by reference in its
respective statements of additional information when available.
With respect to the predecessor portfolios to the California Tax-Free
Bond, Index Allocation, Overland Express Sweep, Short-Term Government-
Corporate Income, Short-Term Municipal Income, Strategic Growth, U.S.
Government Income and Variable Rate Government Funds, the portfolio of
investments and unaudited financial statements for the six month period
ended June 30, 1997 are hereby incorporated by reference to the Semi-
Annual Reports for Overland Express Funds, Inc. ("Overland") (SEC File
Nos. 33-16296; 811-8275) as filed with the SEC on September 3, 1997.
With respect to the Cash Investment Trust, Short-Term Government-
Corporate Income and Short-Term Municipal Income Master Portfolios of
MIT, the portfolio of investments and unaudited financial statements for
the six month period ended June 30, 1997 are hereby incorporated by
reference to the Semi-Annual Reports for Overland as filed with the SEC
on September 3, 1997.
With respect to the predecessor portfolios to the California Tax-Free
Bond, Index Allocation, Overland Express Sweep, Short-Term Government-
Corporate Income,
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<PAGE>
Short-term Municipal Income, Strategic Growth, U.S. Government Income
and Variable Rate Government Funds, the portfolio of investments,
audited financial statements and independent auditors' report for the
year ended December 31, 1996, are hereby incorporated by reference to
the Overland Annual Reports as filed with the SEC on March 11, 1997.
With respect to the Cash Investment Trust, Short-Term Government-
Corporate Income and Short-Term Municipal Income Master Portfolios of
MIT, the portfolio of investments, audited financial statements and
independent auditors' report for the year ended December 31, 1996, are
hereby incorporated by reference to the Overland Annual Reports as filed
with the SEC on March 11, 1997.
(b) Exhibits:
--------
Exhibit
Number Description
------ -----------
1(a) - Amended and Restated Articles of Incorporation
dated November 22, 1995, incorporated by reference to Post-
Effective Amendment No. 17 to the Registration Statement,
filed November 29, 1995.
1(b) - Articles Supplementary, incorporated by reference to Post-
Effective Amendment No. 43 to the Registration Statement,
filed March 30, 1998.
2 - By-Laws, incorporated by reference to Post-Effective
Amendment No. 31 to the Registration Statement, filed May
15, 1997.
3 - Not Applicable
4 - Not Applicable
5(a)(i) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Asset Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
5(a)(ii) - Sub-Advisory Contract with Barclays Global Fund
Advisors on behalf of the Asset Allocation Fund, incorporated
by reference to Post-Effective Amendment No. 21 to the
Registration Statement, filed February 29, 1996.
5(b)(i) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the U.S. Government Allocation Fund, incorporated
by reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
5(b)(ii) - Sub-Advisory Contract with Barclays Global Fund
Advisors on behalf of the U.S. Government Allocation Fund,
incorporated by reference to Post-Effective Amendment No. 21
to the Registration Statement, filed February 29, 1996.
5(c) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Money Market Fund,
incorporated by reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April 17, 1992.
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<PAGE>
5(d) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Bond Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
5(e) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Ginnie Mae Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
5(f) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Growth and Income Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
5(g)(i) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Corporate Stock Fund, incorporated by reference
to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
5(g)(ii) - Sub-Advisory Contract with Barclays Global Fund
Advisors on behalf of the Corporate Stock Fund, incorporated
by reference to Post-Effective Amendment No. 21 to the
Registration Statement, filed February 29, 1996.
5(h) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Money Market Fund, incorporated by reference to
Post-Effective Amendment No. 3 to the Registration Statement,
filed May 1, 1992.
5(i) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Income Fund, incorporated
by reference to Post-Effective Amendment No. 4 to the
Registration Statement, filed September 10, 1992.
5(j) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Diversified Income Fund, incorporated by
reference to Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
5(k) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Arizona Tax-Free Fund, incorporated by
reference to Post-Effective Amendment No. 30 to the
Registration Statement, filed January 31, 1997.
5(l) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Balanced Fund, incorporated by reference to
Post-Effective Amendment No. 30 to the Registration
Statement, filed January 31, 1997.
5(m) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Equity Value Fund, incorporated by reference to
Post-Effective Amendment No. 30 to the Registration
Statement, filed January 31, 1997.
5(n) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Government Money Market Fund, incorporated by
reference to Post-Effective Amendment No. 30 to the
Registration Statement, filed January 31, 1997.
5(o) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Intermediate Bond Fund, incorporated by
reference to Post-Effective Amendment No. 30 to the
Registration Statement, filed January 31, 1997.
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<PAGE>
5(p) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Money Market Trust Fund, incorporated by
reference to Post-Effective Amendment No. 30 to the
Registration Statement, filed January 31, 1997.
5(q) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the National Tax-Free Fund, incorporated by
reference to Post-Effective Amendment No. 30 to the
Registration Statement, filed January 31, 1997.
5(r) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Oregon Tax-Free Fund, incorporated by reference
to Post-Effective Amendment No. 30 to the Registration
Statement, filed January 31, 1997.
5(s) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Prime Money Market Fund, incorporated by
reference to Post-Effective Amendment No. 30 to the
Registration Statement, filed January 31, 1997.
5(t) - Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Treasury Money Market Fund, incorporated by
reference to Post-Effective Amendment No. 30 to the
Registration Statement, filed January 31, 1997.
5(u) - Form of Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the California Tax-Free Money Market Trust,
incorporated by reference to Post-Effective Amendment No. 28
to the Registration Statement, filed December 3, 1996.
5(v) - Form of Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the National Tax-Free Money Market Trust,
incorporated by reference to Post-Effective Amendment No. 32
to the Registration Statement, filed May 30, 1997.
5(v)(i) - Form of Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the Index Allocation, Short-Term
Government-Corporate Income, Short-Term Municipal Income,
Overland Express Sweep and Variable Rate Government Funds,
filed September 25, 1997.
5(v)(ii) - Form of Sub-Advisory Contract with Barclays Global
Fund Advisors on behalf of the Index Allocation Fund, filed
September 25, 1997.
5(w) - Form of Advisory Contract with Wells Fargo Bank,
N.A. on behalf of the International Equity Fund, incorporated
by reference to Post-Effective Amendment No. 32 to the
Registration Statement, filed May 30, 1997.
6(a) - Amended Distribution Agreement with Stephens Inc.,
incorporated by reference to Post-Effective Amendment No. 15
to the Registration Statement, filed May 1, 1995.
6(b) - Selling Agreement with Wells Fargo Bank, N.A. on
behalf of the Funds, incorporated by reference to Post-
Effective Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
7 - Not Applicable
8(a) - Custody Agreement with Wells Fargo Institutional
Trust Company, N.A. on behalf of the Asset Allocation Fund,
incorporated by reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April 17, 1992.
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<PAGE>
8(b) - Custody Agreement with Wells Fargo Institutional
Trust Company, N.A. on behalf of the U.S. Government
Allocation Fund, incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement, filed April
17, 1992.
8(c) - Custody Agreement with Wells Fargo Institutional
Trust Company, N.A. on behalf of the Corporate Stock Fund,
incorporated by reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April 17, 1992.
8(d) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Money Market Fund,
incorporated by reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April 17, 1992.
8(e) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Bond Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
8(f) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Growth and Income Fund, incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement, filed April 17, 1992.
8(g) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Ginnie Mae Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
8(h) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Money Market Fund, incorporated by reference to
Post-Effective Amendment No. 3 to the Registration Statement,
filed May 1, 1992.
8(i) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the California Tax-Free Income Fund, incorporated
by reference to Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
8(j) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Diversified Income Fund, incorporated by
reference to Post-Effective Amendment No. 17 to the
Registration Statement, filed November 29, 1995.
8(k) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Short-Intermediate U.S. Government Income Fund,
incorporated by reference to Post-Effective Amendment No. 8
to the Registration Statement, filed February 10, 1994.
8(l) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the National Tax-Free Money Market Fund,
incorporated by reference to Post-Effective Amendment No. 24
to the Registration Statement, filed April 29, 1996.
8(m) - Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the Aggressive Growth Fund, incorporated by
reference to Post-Effective Amendment No. 20 to the
Registration Statement, filed February 28, 1996.
8(n) - Custody Agreement with Wells Fargo Bank on behalf
of the Arizona Tax-Free, Balanced, Equity Value, Government
Money Market, Index Allocation, Intermediate Bond, Money
Market Trust, National Tax-Free, Oregon Tax-Free,
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<PAGE>
Overland Express Sweep, Prime Money Market, Short-Term
Government-Corporate Income, Short-Term Municipal Income,
Treasury Money Market and Variable Rate Government Funds,
filed September 25, 1997.
9(a)(i) - Administration Agreement with Wells Fargo Bank,
N.A. on behalf of the Funds, incorporated by reference to
Post-Effective Amendment No. 33 to the Registration
Statement, filed August 5, 1997.
9(a)(ii) - Co-Administration Agreement with Wells Fargo Bank,
N.A. and Stephens Inc. on behalf of the Funds, incorporated
by reference to Post-Effective Amendment No. 33 to the
Registration Statement, filed August 5, 1997.
9(b) - Agency Agreement with Wells Fargo Bank, N.A. on
behalf of the Funds, incorporated by reference to Post-
Effective Amendment No. 32 to the Registration Statement,
filed May 30, 1997.
9(c)(i) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the California Tax-Free Money Market
Fund, incorporated by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed April 17, 1992.
9(c)(ii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Corporate Stock Fund,
incorporated by reference to Post-Effective Amendment No. 2
to the Registration Statement, filed April 17, 1992.
9(c)(iii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Money Market Fund, incorporated
by reference to Post-Effective Amendment No. 3 to the
Registration Statement, filed May 1, 1992.
9(c)(iv) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the California Tax-Free Income Fund,
incorporated by reference to Post-Effective Amendment No. 17
to the Registration Statement, filed November 29, 1995.
9(c)(v) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Short-Intermediate U.S.
Government Income Fund, incorporated by reference to Post-
Effective Amendment No. 8 to the Registration Statement,
filed February 10, 1994.
9(c)(vi) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the National Tax-Free Money Market
Fund, incorporated by reference to Post-Effective Amendment
No. 24 to the Registration Statement, filed April 29, 1996.
9(c)(vii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the Asset
Allocation Fund, incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement, filed May 1,
1995.
9(c)(viii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the California
Tax-Free Bond Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
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<PAGE>
9(c)(ix) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the Diversified
Income Fund, incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement, filed May 1,
1995.
9(c)(x) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the Ginnie Mae
Fund, incorporated by reference to Post-Effective Amendment
No. 15 to the Registration Statement, filed May 1, 1995.
9(c)(xi) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the Growth and
Income Fund, incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement, filed May 1,
1995.
9(c)(xii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the U.S.
Government Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
9(c)(xiii) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class B Shares of the Aggressive
Growth Fund, incorporated by reference to Post-Effective
Amendment No. 20 to the Registration Statement, filed
February 28, 1996.
9(c)(xiv) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares of the Asset
Allocation Fund, incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement, filed May 1,
1995.
9(c)(xv) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares of the
California Tax-Free Bond Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
9(c)(xvi) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares of the
Diversified Income Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
9(c)(xvii) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares of the
Ginnie Mae Fund, incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement, filed May 1,
1995.
9(c)(xviii) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares of the
Growth and Income Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
9(c)(xix) - Amended Shareholder Servicing Agreement with Wells
Fargo Bank, N.A. on behalf of the Class A Shares of the U.S.
Government Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
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<PAGE>
9(c)(xx) - Shareholder Servicing Agreement with Wells Fargo
Bank, N.A. on behalf of the Class A Shares of the Aggressive
Growth Fund, incorporated by reference to Post-Effective
Amendment No. 20 to the Registration Statement, filed
February 28, 1996.
9(d)(i) - Servicing Plan on behalf of the National Tax-Free
Money Market Fund, incorporated by reference to Post-
Effective Amendment No. 17 to the Registration Statement,
filed November 29, 1995.
9(d)(ii) - Servicing Plan on behalf of the Class B Shares of
the Asset Allocation Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
9(d)(iii) - Servicing Plan on behalf of the Class B Shares of
the California Tax-Free Bond Fund, incorporated by reference
to Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
9(d)(iv) - Servicing Plan on behalf of the Class B Shares of
the Diversified Income Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
9(d)(v) - Servicing Plan on behalf of the Class B Shares of
the Ginnie Mae Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
9(d)(vi) - Servicing Plan on behalf of the Class B Shares of
the Growth and Income Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
9(d)(vii) - Servicing Plan on behalf of the Class B Shares of
the U.S. Government Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
9(d)(viii) - Servicing Plan on behalf of the Class A Shares of
the Aggressive Growth Fund, incorporated by reference to
Post-Effective Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
9(d)(ix) - Servicing Plan on behalf of the Class B Shares of
the Aggressive Growth Fund, incorporated by reference to
Post-Effective Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
9(d)(x) - Servicing Plan on behalf of the Class B shares of
the Index Allocation Fund, filed September 25, 1997.
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<PAGE>
9(e)(i) - Servicing Plan and Form of Shareholder Servicing
Agreement on behalf of the Class A Shares of the Arizona Tax-
Free, Balanced, Equity Value, Government Money Market,
Intermediate Bond, International Equity, National Tax-Free,
Oregon Tax-Free, Prime Money Market, Small Cap and Treasury
Money Market Funds, incorporated by reference to Post-
Effective Amendment No. 32 to the Registration Statement,
incorporated by reference to Post-Effective Amendment No. 32
to the Registration Statement, filed May 30, 1997.
9(e)(ii) - Servicing Plan and Form of Shareholder Servicing
Agreement on behalf of the Class B Shares of the Arizona Tax-
Free, Balanced, Equity Value, Intermediate Bond,
International Equity, National Tax-Free, Oregon Tax-Free and
Small Cap Funds, incorporated by reference to Post-Effective
Amendment No. 32 to the Registration Statement, filed May 30,
1997.
9(e)(iii) - Servicing Plan and Form of Shareholder Servicing
Agreement on behalf of the Institutional Class Shares of the
Aggressive Growth, Arizona Tax-Free, Balanced, California
Tax-Free Bond, California Tax-Free Income, Equity Value,
Ginnie Mae, Growth and Income, Intermediate Bond,
International Equity, Money Market, National Tax-Free, Oregon
Tax-Free, Prime Money Market, Short-Intermediate Government,
Small Cap and Treasury Money Market Funds, incorporated by
reference to Post-Effective Amendment No. 32 to the
Registration Statement, filed May 30, 1997.
9(e)(iv) - Servicing Plan and Form of Shareholder Servicing
Agreement on behalf of the Service Class Shares of the Prime
Money Market and Treasury Money Market Funds, incorporated by
reference to Post-Effective Amendment No. 25 to the
Registration Statement, filed June 17, 1996.
9(e)(v) - Servicing Plan and Form of Shareholder Servicing
Agreement on behalf of the Money Market Trust and California
Tax-Free Money Market Trust, incorporated by reference to
Post-Effective Amendment No. 28 to the Registration
Statement, filed December 3, 1996.
9(e)(vi) - Servicing Plan and Form of Shareholder Servicing
Agreement on behalf of the Class E Shares of the Treasury
Money Market Fund, incorporated by reference to Post-
Effective Amendment No. 19 to the Registration Statement,
filed January 23, 1997.
9(e)(vii) - Servicing Plan and Form of Shareholder Servicing
Agreement on behalf of the Administrative Class shares of the
Prime Money Market and Treasury Money Market Funds,
incorporated by reference to Post-Effective Amendment No. 33
to the Registration Statement, filed August 5, 1997.
9(e)(viii) - Servicing Plan and Form of Shareholder Servicing
Agreement on behalf of the Class C shares of the Aggressive
Growth, California Tax-Free Bond, Index Allocation, Ginnie
Mae, National Tax-Free Bond, Small Cap and Variable Rate
Government Funds, incorporated by reference to Post-Effective
Amendment No. 33 to the Registration Statement, filed August
5, 1997.
9(e)(ix) - Servicing Plan and Form of Shareholder Servicing
Agreement on behalf of the Institutional Class shares of the
National Tax-Free Money Market Fund, incorporated by
reference to Post-Effective Amendment No. 33 to the
Registration Statement, filed August 5, 1997.
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<PAGE>
9(f) - Shareholder Administrative Servicing Plan and Form
of Administrative Servicing Agreement on behalf of Class A
shares of Index Allocation and Variable Rate Government Funds
and shares of the Short-Term Government-Corporate Income and
Short-Term Municipal Income Funds, filed September 25, 1997.
10 - Opinion and Consent of Counsel, filed herewith.
11 - Not Applicable
12 - Not Applicable
13 - Investment letter, incorporated by reference to Item 24(b)
of Pre-Effective Amendment No. 1 to the Registration
Statement, filed November 29, 1991.
14 - Not Applicable
15(a)(i) - Distribution Plan on behalf of the California Tax-
Free Money Market Fund, incorporated by reference to Post-
Effective Amendment No. 2 to the Registration Statement,
filed April 17, 1992.
15(a)(ii) - Distribution Plan on behalf of the Corporate Stock
Fund, incorporated by reference to Post-Effective Amendment
No. 2 to the Registration Statement, filed April 17, 1992.
15(a)(iii) - Distribution Plan on behalf of the Money Market
Fund, incorporated by reference to Post-Effective Amendment
No. 3 to the Registration Statement, filed May 1, 1992.
15(a)(iv) - Distribution Plan on behalf of the California Tax-
Free Income Fund, incorporated by reference to Post-Effective
Amendment No. 4 to the Registration Statement, filed
September 10, 1992.
15(a)(v) - Distribution Plan on behalf of the Short-
Intermediate U.S. Government Income Fund, incorporated by
reference to Post-Effective Amendment No. 8 to the
Registration Statement, filed February 10, 1994.
15(a)(vi) - Amended Distribution Plan on behalf of the Class A
Shares of the Asset Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
15(a)(vii) - Amended Distribution Plan on behalf of the Class A
Shares of the California Tax-Free Bond Fund, incorporated by
reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
15(a)(viii) - Amended Distribution Plan on behalf of the Class A
Shares of the Diversified Income Fund, incorporated by
reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
15(a)(ix) - Amended Distribution Plan on behalf of the Class A
Shares of the Ginnie Mae Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
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<PAGE>
15(a)(x) - Amended Distribution Plan on behalf of the Class A
Shares of the Growth and Income Fund, incorporated by
reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
15(a)(xi) - Amended Distribution Plan on behalf of the Class A
Shares of the U.S. Government Allocation Fund, incorporated
by reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
15(a)(xii) - Distribution Plan on behalf of the National Tax-
Free Money Market Fund, incorporated by reference to Post-
Effective Amendment No. 17 to the Registration Statement,
filed November 29, 1995.
15(a)(xiii) - Distribution Plan on behalf of the Class A Shares
of the Aggressive Growth Fund, incorporated by reference to
Post-Effective Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
15(a)(xiv) - Distribution Plan on behalf of the California Tax-
Free Money Market Trust, incorporated by reference to Post-
Effective Amendment No. 28 to the Registration Statement,
filed December 3, 1996.
15(a)(xv) - Distribution Plan on behalf of the Class A Shares
of the Arizona Tax-Free, Balanced, Equity Value, Government
Money Market, Intermediate Bond, International Equity,
National Tax-Free, Oregon Tax-Free, Prime Money Market, Small
Cap and Treasury Money Market Funds, incorporated by
reference to Post-Effective Amendment No. 32, filed May 30,
1997.
15(a)(xvi) - Distribution Plan on behalf of the Class A shares
of the Index Allocation and Variable Rate Government Funds
and shares of the Short-Term Government-Corporate Income and
Short-Term Municipal Income Funds, filed September 25, 1997.
15(b)(i) - Distribution Plan on behalf of the Class B Shares
of the Asset Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
15(b)(ii) - Distribution Plan on behalf of the Class B Shares
of the California Tax-Free Bond Fund, incorporated by
reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
15(b)(iii) - Distribution Plan on behalf of the Class B Shares
of the Diversified Income Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
15(b)(iv) - Distribution Plan on behalf of the Class B Shares
of the Ginnie Mae Fund, incorporated by reference to Post-
Effective Amendment No. 15 to the Registration Statement,
filed May 1, 1995.
15(b)(v) - Distribution Plan on behalf of the Class B Shares
of the Growth and Income Fund, incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement, filed May 1, 1995.
15(b)(vi) - Distribution Plan on behalf of the Class B Shares
of the U.S. Government Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 15 to the
Registration Statement, filed May 1, 1995.
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<PAGE>
15(b)(vii) - Distribution Plan on behalf of the Class B Shares
of the Aggressive Growth Fund, incorporated by reference to
Post-Effective Amendment No. 19 to the Registration
Statement, filed December 18, 1995.
15(b)(viii) - Distribution Plan on behalf of the Class B Shares
of the Arizona Tax-Free, Balanced, Equity Value, Index
Allocation, Intermediate Bond, International Equity, National
Tax-Free, Oregon Tax-Free and Small Cap Funds, incorporated
by reference to Post-Effective Amendment No. 32 to the
Registration Statement, filed May 30, 1997.
15(c) - Distribution Plan on behalf of the Class C Shares
of the Aggressive Growth, California Tax-Free Bond, Index
Allocation, Ginnie Mae, National Tax-Free Bond, Small Cap and
Variable Rate Government Funds, incorporated by reference to
Post-Effective Amendment No. 33 to the Registration
Statement, filed August 5, 1997.
15(d) - Distribution Plan on behalf of the Overland Sweep Fund,
filed September 25, 1997.
15(e) - Distribution Plan on behalf of the Class E Shares of the
Treasury Money Market Fund, incorporated by reference to
Post-Effective Amendment No. 29, filed January 23, 1997.
16 - Schedules for Computation of Performance Data, incorporated
by reference to Post-Effective Amendment No. 15, filed May
1, 1995.
17 - See Exhibit 27.
18 - Rule 18f-3 Multi-Class Plan, as amended, incorporated by
reference to Post-Effective Amendment No. 33 to the
Registration Statement, filed August 5,1997.
19 - Powers of Attorney for R. Greg Feltus, Jack S.
Euphrat, Thomas S. Goho, Joseph N. Hankin, W. Rodney Hughes,
Robert M. Joses and J. Tucker Morse, incorporated by
reference to Post-Effective Amendment No. 32, filed May 30,
1997; Power of Attorney for Peter G. Gordon, incorporated by
reference to Post-Effective Amendment No. 41, filed January
30, 1998.
27 - Financial Data Schedules for the Overland
predecessor portfolios for the period ended December 31,
1996, incorporated by reference to the Form N-SAR filed
February 9, 1997; Financial Data Schedules for the fiscal
period ended March 31, 1997, incorporated by reference to the
Form N-SAR, filed May 29, 1997.
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
As of March 1, 1998 the Funds did not directly or indirectly control,
and were not under common control with, any other person or entity.
Item 26. Number of Holders of Securities
-------------------------------
As of February 28, 1998, the number of record holders of each class of
Securities of the Registrant was as follows:
C-13
<PAGE>
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
- ---------------------------------------------------------- ------------------------------------------------------------------
Institutional
Class A/1/ Class B Class C Class
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Arizona Tax-Free Fund 185 33 N/A 6
Asset Allocation Fund 12,266 10,615 N/A N/A
Balanced Fund 1,657 509 N/A 102
California Tax-Free Bond Fund 10,971 1,670 79 51
California Tax-Free Income Fund 3,069 N/A N/A 8
California Tax-Free Money Market Fund 8,120 N/A N/A N/A
California Tax-Free Money Market Trust 3 N/A N/A N/A
Diversified Equity Income Fund 12,587 3,688 N/A N/A
Equity Index Fund 2,078 N/A N/A N/A
Equity Value Fund 2,254 4,499 N/A 104
Government Money Market Fund 133 N/A N/A N/A
Growth Fund 13,384 3,663 N/A 30
Index Allocation Fund 1,427 111 1,065 N/A
International Equity Fund 1,086 2,436 N/A N/A
Intermediate Bond Fund 152 245 N/A 10
Money Market Fund 5,940 2/2/ N/A N/A
Money Market Trust 5 N/A N/A N/A
National Tax-Free Fund 946 28 144 5
National Tax-Free Money Market Fund 51 N/A N/A N/A
National Tax-Free Money Market Trust 2 N/A N/A N/A
Oregon Tax-Free Fund 639 70 N/A 9
Overland Express Sweep Fund 4 N/A N/A N/A
Prime Money Market 361 347/3/ 696/4/ 74
Short-Intermediate U.S. Government Income Fund 729 N/A N/A 49
Short-Term Government-Corporate Income Fund 22 N/A N/A N/A
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Short-Term Municipal Income Fund 19 N/A N/A N/A
Small Cap Fund 731 1,569 130 13
Strategic Growth Fund 14,309 2,849 1,654 N/A
Treasury Money Market Fund 216 99/3/ 2/4/ 187
144/5/
U.S. Government Allocation Fund 1,312 467 N/A N/A
U.S. Government Income Fund 10,948 823 80 67
Variable Rate Government 746 N/A 49 N/A
</TABLE>
/1/ For purposes of this chart, shares of single class Funds are included under
the designation "Class A".
/2/ Designates the number of Class S recordholders.
/3/ Designates the number of Service Class recordholders.
/4/ Designates the number of Class E recordholders.
/5/ Designates the number of Administrative Class recordholders.
Item 27. Indemnification
---------------
The following paragraphs of Article VIII of the Registrant's
Articles of Incorporation provide:
(h) The Corporation shall indemnify (1) its Directors and Officers,
whether serving the Corporation or at its request any other entity, to the
full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under
the procedures and to the full extent permitted by law, and (2) its other
employees and agents to such extent as shall be authorized by the Board of
Directors or the Corporation's By-Laws and be permitted by law. The
foregoing rights of indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such By-Laws, resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be
permitted by law. No amendment of these Articles of Incorporation of the
Corporation shall limit or eliminate the right to indemnification provided
hereunder with respect to acts or omissions occurring prior to such amendment
or repeal. Nothing contained herein shall be construed to authorize the
Corporation to indemnify any Director or officer of the Corporation against
any liability to the Corporation or to any holders of securities of the
Corporation to which he is subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office. Any indemnification by the Corporation shall be
consistent with the requirements of law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director or
officer of the Corporation shall be
C-15
<PAGE>
personally liable to the Corporation or its stockholders for money damages;
provided, however, that nothing herein shall be construed to protect any
Director or officer of the Corporation against any liability to which such
Director or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. No amendment, modification or repeal
of this Article VIII shall adversely affect any right or protection of a
Director or officer that exists at the time of such amendment, modification
or repeal.
Item 28. Business and Other Connections of Investment Advisor.
----------------------------------------------------
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned subsidiary
of Wells Fargo & Company, currently serves as investment advisor to several of
the Registrant's investment portfolios and to certain other registered open-end
management investment companies. Wells Fargo Bank's business is that of a
national banking association with respect to which it conducts a variety of
commercial banking and trust activities.
To the knowledge of Registrant, none of the directors or executive
officers of Wells Fargo Bank, except those set forth below, is or has been at
any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
executive officers also hold various positions with and engage in business for
Wells Fargo & Company. Set forth below are the names and principal businesses of
the directors and executive officers of Wells Fargo Bank who are or during the
past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature for their own account or in the
capacity of director, officer, employee, partner or trustee. All the directors
of Wells Fargo Bank also serve as directors of Wells Fargo & Company.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- -------------------------- -----------------------------------------
<S> <C>
H. Jesse Arnelle Senior Partner of Arnelle, Hastie, McGee, Willis & Greene
Director 455 Market Street
San Francisco, CA 94105
Director of Armstrong World Industries, Inc.
5037 Patata Street
South Gate, CA 90280
Director of Eastman Chemical Corporation
12805 Busch Place
Santa Fe Springs, CA 90670
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Michael R. Bowlin Chairman of the Board of Directors, Chief Executive Officer,
Director Chief Operating Officer and President of
Atlantic Richfield Co. (ARCO)
Highway 150
Santa Paula, CA 93060
Edward Carson Chairman of the Board and Chief Executive Officer of
Director First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Director of Aztar Corporation
2390 East Camelback Road Suite 400
Phoenix, AZ 85016
Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024
Director of Terra Industries, Inc.
1321 Mount Pisgah Road
Walnut Creek, CA 94596
William S. Davilla President (Emeritus) and a Director of
Director The Vons Companies, Inc.
618 Michillinda Ave.
Arcadia, CA 91007
Director of Pacific Gas & Electric Company
788 Taylorville Road
Grass Valley, CA 95949
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Company
P.O. Box 1000
Lebec, CA 93243
Director of The Bakersfield Californian
1707 I Street
P.O. Box 440
Bakersfield, CA 93302
Trustee of Whittier College
13406 East Philadelphia Ave.
P.O. Box 634
Whittier, CA 90608
</TABLE>
C-17
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Paul Hazen Chairman of the Board of Directors of
Chairman of the Board of Wells Fargo & Company
Directors 420 Montgomery Street
San Francisco, CA 94105
Director of Phelps Dodge Corporation
2600 North Central Ave.
Phoenix, AZ 85004
Director of Safeway, Inc.
4th and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Professor (Emeritus) of Accounting
Director Graduate School of Business at Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Bailard Biehl & Kaiser
Real Estate Investment Trust, Inc.
2755 Campus Dr.
San Mateo, CA 94403
Director of Boise Cascade Corporation
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Enron Corporation
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
Director of Homestake Mining Company
650 California Street
San Francisco, CA 94108
Thomas L. Lee Chairman and Chief Executive Officer of
Director The Newhall Land and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622
</TABLE>
C-18
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Director of Calmat Co.
501 El Charro Road
Pleasanton, CA 94588
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Ellen Newman President of Ellen Newman Associates
Director 323 Geary Street
Suite 507
San Francisco, CA 94102
Chair (Emeritus) of the Board of Trustees
University of California at San Francisco Foundation
250 Executive Park Blvd.
Suite 2000
San Francisco, CA 94143
Director of the California Chamber of Commerce
1201 K Street
12th Floor
Sacremento, CA 95814
Philip J. Quigley Chairman, President and Chief Executive Officer of
Director Pacific Telesis Group
130 Kearney Street Rm. 3700
San Francisco, CA 94108
Carl E. Reichardt Director of Columbia/HCA Healthcare Corporation
Director One Park Plaza
Nashville, TN 37203
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Retired Chairman of the Board of Directors
and Chief Executive Officer of Wells Fargo & Company
420 Montgomery Street
</TABLE>
C-19
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
San Francisco, CA 94105
Donald B. Rice President and Chief Executive Officer of Teledyne, Inc.
Director 2049 Century Park East
Los Angeles, CA 90067
Retired Secretary of the Air Force
Director of Vulcan Materials Company
One MetroPlex Drive
Birmingham, AL 35209
Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp
Director 44141 Yucca Avenue
Lancaster, CA 93534
Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201
Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
David M. Tellep Retired Chairman of the Board and Chief Executive Officer of
Director Martin Lockheed Corp
6801 Rockledge Drive
</TABLE>
C-20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Bethesda, MD 20817
Director of Edison International
and Southern California Edison Company
2244 Walnut Grove Ave.
Rosemead, CA 91770
Director of First Interstate
633 West Fifth Street
Los Angeles, CA 90071
Chang-Lin Tien Chancellor of the University of California at Berkeley
Director
Director of Raychem Corporation
300 Constitution Drive
Menlo Park, CA 94025
John A. Young President, Chief Executive Officer and Director
Director of Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 9434
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
Director of Lucent Technologies
25 John Glenn Drive
Amherst, NY 14228
Director of Novell, Inc.
11300 West Olympic Blvd.
Los Angeles, CA 90064
Director of Shaman Pharmaceuticals Inc.
213 East Grand Ave. South
San Francisco, CA 94080
William F. Zuendt President of Wells Fargo & Company
President 420 Montgomery Street
San Francisco, CA 94105
Director of 3Com Corporation
5400 Bayfront Plaza, P.O. Box 58145
Santa Clara, CA 95052
Director of the California Chamber of Commerce
</TABLE>
C-21
<PAGE>
Prior to May 1, 1996, Barclays Global Fund Advisors ("BGFA"), a wholly-
owned subsidiary of Barclays Global Investors, N.A. ("BGI", formerly, Wells
Fargo Institutional Trust Company), served as sub-advisor to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds of the Company
and to certain other open-end management investment companies. From May 1, 1996
to December 15, 1997 BGFA BGFA served as sub-advisor to the corresponding Asset
Allocation, U.S. Government Allocation and Corporate Stock Master Portfolios of
Master Investment Trust, in which such funds invested substantially all of their
assets. These Funds currently invest directly in a portfolio of securities and
no longer invest in the Master Portfolios. BGFA currently serves as sub-advisor
to these Funds.
The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management business
of the former sub-advisor to the Registrant, Wells Fargo Nikko Investment
Advisors ("WFNIA") and, in some cases, the service business of BGI. To the
knowledge of the Registrant, except as set forth below, none of the directors or
executive officers of BGFA is or has been at any time during the past two fiscal
years engaged in any other business, profession, vocation or employment of a
substantial nature.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ---------------------------- -------------------------------
<S> <C>
Frederick L.A. Grauer Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
Patricia Dunn Director of BGFA and C-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
Lawrence G. Tint Chairman of the Board of Directors of BGFA
Chairman and Director and Chief Executive Officer of BGI
45 Fremont Street, San Francisco, CA 94105
Geoffrey Fletcher Chief Financial Officer of BGFA and BGI since May 1997
Chief Financial Officer 45 Fremont Street, San Francisco, CA 94105
Managing Director and Principal Accounting Officer at
Bankers Trust Company from 1988 - 1997
505 Market Street, San Francisco, CA 94105
</TABLE>
Prior to January 1, 1996 WFNIA served as sub-advisor to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds of the Company
and as advisor or sub-advisor to various other open-end management investment
companies.
For additional information, "Organization and Management of the Fund(s)"
in the Prospectuses for the Funds as well as "Management" in the Statements of
Additional Information of such Funds. For information as to the business,
profession, vocation or employment of a substantial nature of each of the
officers and management committees of WFNIA, reference is
C-22
<PAGE>
made to WFNIA's Form ADV and Schedules A and D filed under the Investment
Advisors Act of 1940, File No. 801-36479, incorporated herein by reference.
Item 29. Principal Underwriters.
----------------------
(a) Stephens Inc., distributor for the Registrant, does not presently
act as investment advisor for any other registered investment companies, but
does act as principal underwriter for Life & Annuity Trust, MasterWorks Funds,
Inc. Stagecoach Trust, Nations Fund, Inc., Nations Fund Trust, Nations Fund
Portfolios, Inc., Nations LifeGoal Funds, Inc. and Nations Institutional
Reserves, and is the exclusive placement agent for Managed Series Investment
Trust and Master Investment Portfolio, all of which are registered open-end
management investment companies.
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D filed by Stephens Inc. with the Securities and Exchange Commission
pursuant to the Investment Advisors Act of 1940 (file No. 501-15510).
(c) Not applicable.
Item 30. Location of Accounts and Records.
--------------------------------
(a) The Registrant maintains accounts, books and other documents required
by Section 31(a) of the Investment Company Act of 1940 and the rules thereunder
(collectively, "Records") at the offices of Stephens Inc., 111 Center Street,
Little Rock, Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its services as
investment advisor, administrator and custodian and transfer and dividend
disbursing agent at 525 Market Street, San Francisco, California 94105.
(c) WFNIA and Wells Fargo Institutional Trust Company, N.A. maintain all
Records relating to their services as sub-advisor and custodian, respectively,
for the period prior to January 1, 1996, at 45 Fremont Street, San Francisco,
California 94105.
(d) BGFA and BGI maintain all Records relating to their services as sub-
advisor and custodian, respectively, for the period beginning January 1, 1996 at
45 Fremont Street, San Francisco, California 94105.
(e) Stephens maintains all Records relating to its services as sponsor,
co-administrator and distributor at 111 Center Street, Little Rock, Arkansas
72201.
Item 31. Management Services.
-------------------
Other than as set forth under the captions "Organization and Management
of the Fund(s)" in the Prospectuses for the Funds as well as "Management" in the
Statements of
C-23
<PAGE>
Additional Information of such Funds, the Registrant is not a party to any
management-related service contract.
Item 32. Undertakings.
------------
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of its most current annual report to
shareholders, upon request and without charge.
(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions set
forth above in response to Item 27, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final
adjudication of such issue.
C-24
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to its
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Little Rock, State of
Arkansas on the 15th day of May, 1998.
STAGECOACH FUNDS, INC.
By /s/ Richard H. Blank, Jr.
--------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement on Form N-1A has been signed below by the
following persons in the capacities and on the date indicated:
Signature Title Date
--------- ----- ----
* Director, Chairman and President
----------------------- (Principal Executive Officer)
(R. Greg Feltus)
/s/Richard H. Blank, Jr. Secretary and Treasurer 5/15/98
----------------------- (Principal Financial Officer)
(Richard H. Blank, Jr.)
* Director
-----------------------
(Jack S. Euphrat)
* Director
-----------------------
(Thomas S. Goho)
* Director
-----------------------
(Peter G. Gordon)
* Director
-----------------------
(Joseph N. Hankin)
* Director
-----------------------
(W. Rodney Hughes)
* Director
-----------------------
(Tucker Morse)
*By /s/Richard H. Blank, Jr.
---------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
May 15, 1998
<PAGE>
STAGECOACH FUNDS, INC.
FILE NOS. 33-42927; 811-6419
EXHIBIT INDEX
Exhibit Number Description
EX-99.B10 Opinion and Consent of Counsel
<PAGE>
EXHIBIT 99.B10
[MORRISON & FOERSTER LLP LETTERHEAD]
May 18, 1998
Stagecoach Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Common Stock of
Stagecoach Funds, Inc.
-------------------------
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 46 and Amendment No. 47 to the
Registration Statement on Form N-1A (SEC File Nos. 33-42927 and 811-6419) (the
"Registration Statement") of Stagecoach Funds, Inc. (the "Company") relating to
the registration of an indefinite number of shares of common stock of the 100%
Treasury Money Market Fund (the "Shares").
We have been requested by the Company to furnish this opinion as Exhibit
10 to the Registration Statement.
We have examined documents relating to the organization of the Company
and its series and the authorization and issuance of shares of its series. We
have also verified with the Company's transfer agent the maximum number of
shares issued by the Company through March 1, 1998.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares by the Company, upon completion of
such corporate action as is deemed necessary or appropriate, will be duly and
validly authorized by such corporate action and assuming delivery by sale or in
accord with the Company's dividend reinvestment plan in accordance with the
description set forth in the Fund's current prospectus under the Securities Act
of 1933, as amended, the Shares will be legally issued, fully paid and
nonassessable by the Company.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to the description of advice rendered by our firm under the heading
"Additional Services and Other Information - Glass-Steagall Act" in the
Prospectus, which are included as part of the Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
