<PAGE>
STAGECOACH FUNDS, INC.
C/O STAGECOACH SHAREHOLDER SERVICES
P.O. BOX 7066
SAN FRANCISCO, CA 94120-7066
NOTICE OF SPECIAL SHAREHOLDERS MEETING
TO BE HELD ON MAY 29, 1998
TO INTERMEDIATE BOND FUND SHAREHOLDERS:
NOTICE IS GIVEN THAT a Special Meeting of the Shareholders of the
INTERMEDIATE BOND FUND (the "Bond Fund") of STAGECOACH FUNDS, INC. (the
"Company") will be held at the offices of Stephens Inc. ("Stephens"), 111
Center Street, Little Rock, Arkansas 72201 on May 29, 1998, at 2:00 p.m.
(Central Time) to consider:
ITEM 1. A proposal to approve a Plan of Consolidation (the "Plan") providing
for the transfer of the assets and liabilities of the Bond Fund to the
Company's Short-Intermediate U.S. Government Income Fund (the "Government
Fund") in exchange for shares of designated classes of the Government Fund.
ITEM 2. Such other business as may properly come before the Special Meeting
or any adjournment(s) thereof.
The proposal is described in the attached Combined Proxy Statement/
Prospectus. THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE PROPOSAL.
Shareholders of record as of the close of business on April 9, 1998, are
entitled to notice of, and to vote at, the Special Meeting or any
adjournment(s) thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE
COMPANY'S BOARD OF DIRECTORS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING TO THE COMPANY A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
EXECUTED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
April 24, 1998 /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
Chief Operating Officer,
Secretary and Treasurer
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
("PROXY/PROSPECTUS")
DATED APRIL 13, 1998
STAGECOACH FUNDS, INC.
C/O STAGECOACH SHAREHOLDER SERVICES
WELLS FARGO BANK, N.A.
P.O. BOX 7066
SAN FRANCISCO, CA 94120-7066
1-800-222-8222
This Proxy/Prospectus is furnished in connection with the solicitation of
proxies by the Board of Directors of Stagecoach Funds, Inc. (the "Company") in
connection with a Special Meeting of Shareholders of the Company's
Intermediate Bond Fund (the "Bond Fund") to be held at 2:00 p.m. Central Time
on May 29, 1998 at the offices of Stephens Inc., 111 Center Street, Little
Rock, Arkansas 72201. This Special Meeting and any adjournment(s) are referred
to as the "Meeting." The Meeting has been called to consider the following
proposal, and to conduct such other business as may come before the Meeting.
PROPOSAL: To approve a proposed Plan of Consolidation dated April 13,
1998 (at times, the "Plan") between the Bond Fund and the Company's Short-
Intermediate U.S. Government Income Fund (the "Government Fund" and,
together with the Bond Fund, the "Funds"), another of the Company's funds
advised by Wells Fargo Bank, N.A. ("Wells Fargo Bank"). The Plan provides
for the transfer of the assets and liabilities of the Bond Fund to the
investment portfolio of the Government Fund in exchange for shares of equal
value of designated classes of the Government Fund (the "Consolidation").
As a result of the Consolidation, shareholders of the Bond Fund will
become shareholders of the Government Fund.
This Proxy/Prospectus is the Bond Fund's Proxy Statement for the Special
Meeting of Shareholders and was mailed to shareholders on or about April 24,
1998. The Proxy/Prospectus sets forth concisely the information that a Bond
Fund shareholder should know before voting and should be retained for future
reference. Additional information about the Consolidation is set forth in the
Statement of Additional Information dated April 24, 1998. Each of these
documents is on file with the Securities and Exchange Commission, and is
available without charge by calling 1-800-222-8222 or writing to the Company
at the address above. The information contained in the Statement of Additional
Information is incorporated by reference into this Proxy/Prospectus.
This Proxy/Prospectus and the Statement of Additional Information are
sometimes referred to together as the "Voting Materials."
THE SECURITIES OF THE FUNDS OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, WELLS FARGO BANK OR ANY OTHER BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE DISTRIBUTOR OF EACH FUND
IS STEPHENS INC.
1
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY/PROSPECTUS AND IN THE
MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, ITS ADVISER OR DISTRIBUTOR.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY................................................................. 4
I.About the Proposed Consolidation.................................... 4
A.The Plan of Consolidation......................................... 4
B.Purpose of the Consolidation...................................... 4
C.Overview of the Funds............................................. 4
D.Risk Factors...................................................... 5
E.Federal Income Tax Consequences................................... 5
F.Board Consideration............................................... 5
II.Voting Information................................................. 6
I.ABOUT THE PROPOSED CONSOLIDATION...................................... 7
Description of the Plan of Consolidation............................ 7
Purpose of the Consolidation........................................ 7
Organization of the Company......................................... 8
Capitalization of Each Fund......................................... 8
Comparison of Investment Objectives and Policies.................... 8
Sales Charges....................................................... 9
Comparison of Total Expense Ratios.................................. 9
Investment Adviser and Other Service Providers...................... 10
Shareholder Transactions and Services............................... 11
Federal Income Tax Consequences..................................... 11
Board Consideration................................................. 11
Other Information................................................... 12
II.INFORMATION RELATING TO VOTING MATTERS............................... 13
General Information................................................. 13
Shareholder Approvals............................................... 13
Other Business...................................................... 14
III.OTHER INFORMATION................................................... 15
How to Obtain Additional Information About the Funds................ 15
Financial Statements................................................ 15
Performance Information............................................. 15
Shareholder Inquiries............................................... 15
APPENDICES I-- PLAN OF CONSOLIDATION
II-- INVESTMENT OBJECTIVES AND SIGNIFICANT INVESTMENT POLICIES
III-- EXPENSE SUMMARIES
IV-- SHAREHOLDER TRANSACTIONS AND SERVICES
V-- LIST OF SHAREHOLDERS WITH 5%
OR GREATER OWNERSHIP
VI-- SEPTEMBER 31, 1997 PERFORMANCE INFORMATION
VII-- MARCH 31, 1998 PERFORMANCE INFORMATION
</TABLE>
3
<PAGE>
SUMMARY
The following is a summary of certain information relating to the proposal
to be considered at the Meeting. More complete information about the proposal
is contained throughout the Voting Materials.
I. ABOUT THE PROPOSED CONSOLIDATION
A. THE PLAN OF CONSOLIDATION. At a meeting held on January 29, 1998, the
Company's Board of Directors approved a Plan of Consolidation that, if
approved by shareholders, will result in shareholders of the Bond Fund
becoming shareholders of a designated class of the Government Fund. The Plan
provides for (i) the transfer of all of the assets and stated liabilities of
the Bond Fund to the portfolio of the Government Fund in exchange for shares
of designated classes of the Government Fund; and (ii) the distribution of
these Government Fund shares to shareholders of the Bond Fund in liquidation
of the Bond Fund. Upon completion of the Consolidation, each Bond Fund
shareholder will hold shares of the Government Fund that are equal in value to
the shares of the Bond Fund held by the shareholder immediately before the
Consolidation.
Shareholders of the Bond Fund will receive shares of a corresponding class
of the Government Fund as shown below.
CONSOLIDATION MAP
<TABLE>
<CAPTION>
BOND FUND SHAREHOLDERS WILL RECEIVE THE FOLLOWING
OWNING THE FOLLOWING CLASSES OF GOVERNMENT
CLASSES: FUND SHARES:
------------------------- --------------------------
<S> <C>
Class A shares Class A shares
Class B shares Class B shares
Institutional Class shares Institutional Class shares
</TABLE>
The Plan must be approved by a vote of a majority the shareholders of the
Bond Fund. The Meeting of the Bond Fund's shareholders to vote on the Plan is
scheduled for May 29, 1998. The Consolidation, if approved, is expected to
occur on or about June 12, 1998 (the "Closing Date").
B. PURPOSE OF THE CONSOLIDATION. The proposed Consolidation combines two
Funds with similar investment objectives into a single Fund. The Consolidation
is intended to benefit shareholders by (i) improving efficiency in the
operation of the Funds, including potentially achieving economies of scale and
greater portfolio diversification; (ii) facilitating investment management,
administration and marketing of the combined Fund; and (iii) eliminating
duplicative shareholder costs and market overlap.
C. OVERVIEW OF THE FUNDS. Set forth below is a brief description of certain
key features of the Funds.
Investment Objectives and Policies. The investment objective of the Bond
Fund is similar to the investment objective of the Government Fund. Each Fund
seeks to provide investors with current income while preserving capital. The
Funds' investment policies are also similar. For example, both Funds invest in
a range of U.S. government obligations and corporate bonds. However, the
Government Fund has committed to investing a substantial portion (at least
65%) of its portfolio in U.S. government obligations. The Bond Fund has not
committed to this level of investment in U.S. government obligations, and
tends to invest a higher portion of its assets in corporate bonds than the
Government Fund. Also, the Government Fund is managed to have a shorter
average maturity than the Bond Fund. For additional information about the
similarities and differences between the investment objectives and significant
investment policies of the Funds, see the section herein entitled "Comparison
of Investment Objectives and Policies" and Appendix II.
Operating Expenses and Service Providers. The ongoing level of operating
expenses of each Class of shares of the Government Fund is expected to be less
than the current expense ratio of the corresponding Class
4
<PAGE>
of shares of the Bond Fund. The current and pro forma total operating expense
ratios for each Fund and Class are shown on page 12. A more detailed breakdown
of the expense ratios for each Fund and Class is included in Appendix III.
The Funds have identical investment advisers, administrators, distributors,
transfer agents and independent auditors, as discussed under "Investment
Adviser and Other Service Providers."
Purchase, Redemption and Other Procedures. The purchase, redemption,
dividend, exchange and other policies and procedures of the Funds are
substantially similar. The Class A shares of the Government Fund have a lower
front-end sales charge (3.00%) than the Class A shares of the Bond Fund
(4.50%). If you hold shares of the Bond Fund that are represented by a share
certificate, the certificate must be surrendered to the Company for
cancellation before the Government Fund shares issued to you in the
Consolidation may be exchanged, redeemed, transferred or issued in
certificated form. Information concerning these policies and procedures is
discussed further under "Shareholder Transactions and Services" and in
Appendix IV.
D. RISK FACTORS. Because of the similarities of the investment objectives
and policies of the Funds, management believes that an investment in the
Government Fund will generally involve risks that are similar to those of the
Bond Fund. For example, the debt instruments in which the Funds invest are
subject to interest-rate risk. Interest-rate risk is the risk that increases
in market interest rates may reduce the value of the debt instruments in which
the Funds invest. The value of the debt instruments generally changes
inversely to market interest rates, so that if interest rates go up, the value
of the debt instruments held by the Fund goes down. Debt instruments with
longer maturities are generally more sensitive to interest rate changes than
those with shorter maturities. Some of the debt instruments in which the Funds
invest are subject to credit 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.
Generally speaking, the Government Fund is managed more conservatively than
the Bond Fund. For example, the Government Fund tends to invest a higher
portion of its assets in U.S. Government obligations than the Bond Fund. U.S.
Government obligations are debt obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. U.S. Government obligations may
not offer as high a rate of return as similar obligations or corporate bonds
that are not backed by the U.S. Government. In addition, the Government Fund
maintains a weighted average portfolio maturity of between two and five years
(as compared to between three and ten years for the Bond Fund) and therefore
tends to be subject to less interest-rate risk than the Bond Fund. For these
reasons, the Government Fund can be expected to have less volatility than the
Bond Fund, although, in certain interest-rate environments, its total return
also may be less.
E. FEDERAL INCOME TAX CONSEQUENCES. The Consolidation will not result in a
gain or loss for Federal income tax purposes to the Funds or their respective
shareholders. See "Federal Income Tax Consequences" for additional
information.
F. BOARD CONSIDERATION. In reviewing the proposed Consolidation, the
Company's Board of Directors considered the potential impact of the
Consolidation on the Funds' respective shareholders. The Board considered,
among other things, (i) the terms and conditions of the Plan, including those
provisions intended to avoid the dilution of shareholder interests; (ii) the
potential marketing and shareholder benefits obtained by having a combined
Fund; (iii) the similarity of the investment objectives and significant
investment policies of the Funds; (iv) the historical investment performance
of the Funds; (v) the historical and projected operating expenses of the
Funds; and (vi) the prospects for long-term viability of the Funds. See
"Information Relating to the Proposed Consolidation--Board Consideration."
Based upon its evaluation of these factors, and in light of their fiduciary
duties under federal and state law, the Company's Boards of Directors,
including all of the non-interested members of the Board, have determined that
the proposed Consolidation is in the best interests of the shareholders of
each Fund, and that the interests of the shareholders of the respective Funds
will not be diluted as a result of the Consolidation.
5
<PAGE>
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT BOND FUND
SHAREHOLDERS VOTE FOR THE PLAN OF CONSOLIDATION.
II. VOTING INFORMATION.
This Proxy/Prospectus is being furnished in connection with the solicitation
of proxies by the Company's Board of Directors for the Meeting. Only Bond Fund
shareholders of record at the close of business on April 9, 1998, will be
entitled to vote at the Meeting. Each whole or fractional share is entitled to
a whole or fractional vote. Shares represented by a properly executed proxy
will be voted in accordance with the instructions thereon or, if no
specification is made, the persons named as proxies will vote in favor of each
proposal set forth in the Notice of Meeting. Proxies may be revoked at any
time before they are exercised by attending the meeting and voting in person
or by submitting to the Company (i) a written notice of revocation or (ii) a
subsequently executed proxy. For additional information, including a
description of the shareholder votes required for approval of the proposal to
be considered at the Meeting, see "Information Relating to Voting Matters."
6
<PAGE>
I. ABOUT THE PROPOSED CONSOLIDATION
Important information about the Consolidation and the Plan of Consolidation
is summarized below. This summary is qualified by reference to the Appendixes
at the end of this document.
DESCRIPTION OF THE PLAN OF CONSOLIDATION. The Plan of Consolidation provides
that at the closing of the Consolidation (the "Closing") the assets and stated
liabilities of the Bond Fund will be transferred to the portfolio of the
Government Fund in exchange for full and fractional shares of designated
classes of the Government Fund as shown below. Class A and Institutional Class
shares of the Bond Fund will be reorganized with and into existing Class A and
Institutional Class shares, respectively, of the Government Fund. The Class B
shares of the Bond Fund will be reorganized into newly created Class B shares
of the Government Fund.
CONSOLIDATION MAP
<TABLE>
<CAPTION>
BOND FUND SHAREHOLDERS WILL RECEIVE THE FOLLOWING CLASSES
OWNING THE FOLLOWING CLASSES: OF GOVERNMENT FUND SHARES:
----------------------------- ----------------------------------
<S> <C>
Class A shares Class A shares
Class B shares Class B shares
Institutional Class shares Institutional Class shares
</TABLE>
The shares issued by the Government Fund in the Consolidation will have an
aggregate value equal to the aggregate value of the shares of the Bond Fund
that are outstanding immediately before the Closing.
Immediately after the transfer of its assets and liabilities in exchange for
Government Fund shares, the Bond Fund will distribute the shares of the
Government Fund received in the Consolidation to its shareholders in
liquidation of the Bond Fund and in exchange for the outstanding shares of the
Bond Fund. Each Bond Fund shareholder at the Closing will receive shares of
the corresponding class of the Government Fund (as specified in the foregoing
table) of equal value, and will receive any unpaid dividends or distributions
that were declared before the Closing on Bond Fund shares. The Government Fund
will establish an account for each former shareholder of the Bond Fund
reflecting the appropriate number of Government Fund shares distributed to the
shareholder. These accounts will be identical in all material respects to the
accounts currently maintained by the Bond Fund for each shareholder. Share
certificates will not be issued unless requested by the shareholder.
Upon completion of the Consolidation, all outstanding shares of the Bond
Fund will be canceled, and the Bond Fund will wind up its affairs and be
dissolved under Maryland law. The stock transfer books of the Bond Fund will
be closed permanently as of the close of business on the business day
immediately preceding the Closing. Exchange or redemption requests received
thereafter will be deemed to be exchange or redemption requests for shares of
the Government Fund distributed to the former shareholders of the Bond Fund.
If any shares of the Bond Fund are represented by an unsurrendered share
certificate, the certificate must be surrendered to the Company before the
Government Fund shares issued to a shareholder in the Consolidation may be
redeemed, exchanged, transferred or issued in certificated form.
Each Fund will bear a pro rata portion of any Consolidation expenses
incurred by the Funds, including the costs associated with the Meeting and the
Voting Materials. These costs are estimated to be $75,000.
PURPOSE OF THE CONSOLIDATION. The Consolidation will combine two Funds with
similar investment objectives and policies into a single Fund. Management
believes this will help the combined Fund achieve economies of scale and
eventually lower its transaction costs and ongoing expenses. The Consolidation
should also help eliminate duplicative shareholder costs and market overlap
and facilitate the administration and marketing of the combined Fund. Although
some of these benefits will accrue to the investment adviser, administrator
and distributor of the Fund, some will be passed through to shareholders. The
benefits passed through to shareholders are expected to include reductions in
operating expense levels and greater portfolio diversification.
7
<PAGE>
ORGANIZATION OF THE COMPANY. The Company is registered as an open-end
management investment company under the 1940 Act and currently offers over 30
separate funds.
The Company is organized as a Maryland Corporation and is subject to the
provisions of its Amended and Restated Articles of Incorporation and By-Laws.
Shares of the Funds each have a par value of $.001 per share. Shares of the
Funds are entitled to one vote for each full share held and fractional votes
for fractional shares held, and will vote in the aggregate and not by
portfolio or class except as otherwise required by law or when class voting is
permitted by the Company's Board of Directors. Shares of the Funds have no
preemptive rights and have only such conversion and exchange rights as the
Company's Board of Directors may grant in its discretion. When issued for
payment as described in their respective prospectuses, each Fund's shares are
fully paid and non-assessable.
Each share of a class of a Fund represents an equal proportionate interest
in the Fund with other shares of the same class. Each share is entitled to
cash dividends and distributions earned on such shares as may be declared in
the discretion of the Board of Directors. Shares of each class bear a pro rata
portion of all operating expenses paid by the Fund, except that certain
expenses relating to class-specific services (such as distribution and
shareholder servicing fees) may be allocated to a particular class.
CAPITALIZATION OF EACH FUND. The following table shows the total net assets,
number of shares outstanding and net asset value per share of each Fund. This
information is generally referred to as the "capitalization" of each Fund. The
term "pro forma capitalization" simply means the capitalization of the
Government Fund after it has combined with the Bond Fund, i.e., as if the
Consolidation had already occurred.
The following table sets forth as of February 28, 1998, the capitalization
of each Fund and the pro forma capitalization of the Government Fund adjusted
to give effect to the Consolidation. The ongoing investment performance and
daily share purchase and redemption activity of each Fund affects
capitalization. Therefore, the capitalization of each Fund on the Closing Date
is likely to vary from the capitalization shown in the following table.
TABLE I
PRO FORMA CAPITALIZATION TABLE AS OF FEBRUARY 28, 1998
<TABLE>
<CAPTION>
NET ASSET
SHARES VALUE
FUND/CLASS TOTAL NET ASSETS OUTSTANDING PER SHARE
---------- ---------------- ----------- ---------
<S> <C> <C> <C>
Intermediate Bond Fund Class A $ 7,679,154 518,416 $14.81
Short-Intermediate U.S. Government
Income Fund Class A $29,604,337 2,970,659 $ 9.97
PRO FORMA:
SHORT-INTERMEDIATE U.S. GOVERNMENT $37,283,491 3,740,743 $ 9.97
INCOME FUND CLASS A
Intermediate Bond Fund Class B $ 6,738,100 655,202 $10.28
Short-Intermediate U.S. Government 0 0 $ 0
Income Fund Class B
PRO FORMA:
SHORT-INTERMEDIATE U.S. GOVERNMENT $ 6,738,100 675,574 $ 9.97
INCOME FUND CLASS B
Intermediate Bond Fund Institutional $41,558,538 2,802,183 $14.83
Class
Short-Intermediate U.S. Government $53,806,095 5,504,079 $ 9.78
Income Fund Institutional Class
PRO FORMA:
SHORT-INTERMEDIATE U.S. GOVERNMENT
INCOME FUND INSTITUTIONAL CLASS $95,364,633 9,753,197 $ 9.78
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES. The investment objectives
and policies of the Funds, except as described below, are substantially
similar. The chart below highlights the investment objective of each Fund and
some of each Fund's key investment policies. Additional information about each
Fund's investment objective and policies is contained in Appendix II hereto
and in its prospectus and statement of additional information. To obtain a
prospectus or statement of additional information call 1-800-222-8222 or see
"How To Obtain Additional Information About The Funds" below.
8
<PAGE>
<TABLE>
<CAPTION>
FUND BOND FUND GOVERNMENT FUND
---- --------- ---------------
<S> <C> <C>
Investment Objective: The Bond Fund seeks to The Government Fund seeks to
provide investors with a provide investors with current
high level of current income income while preserving capital,
consistent with the by investing primarily in a
preservation of capital and portfolio consisting of short- to
the maintenance of intermediate-term securities
liquidity. issued or guaranteed by the U.S.
Government, its agencies and
instrumentalities.
Investment Policies: Invests in corporate debt Invests primarily in U.S.
securities, U.S. Government Government obligations and
obligations, and other debt invests in investment grade
securities. corporate debt securities.
Maintains a dollar-weighted Maintains a dollar-weighted
average portfolio maturity average portfolio maturity of
of between 3 and 10 years. between 2 and 5 years.
</TABLE>
Generally speaking, the Government Fund is managed more conservatively than
the Bond Fund. For example, the Government Fund tends to invest a higher
portion of its assets in U.S. Government obligations than the Bond Fund. U.S.
Government obligations are debt obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. U.S. Government obligations may
not offer as high a rate of return as similar obligations or corporate bonds
that are not backed by the U.S. Government. In addition, the Government Fund
maintains a weighted average portfolio maturity of between two and five years
(as compared to between three and ten years for the Bond Fund) and therefore
tends to be subject to less interest-rate risk than the Bond Fund. For these
reasons, the Government Fund can be expected to have less volatility than the
Bond Fund, although, in certain interest-rate environments, its total return
also may be less.
SALES CHARGES. The Class A shares of each Fund are subject to front-end
sales charges at the time of purchase. The maximum front-end sales charge for
Class A shares is 4.50% for the Bond Fund and 3.00% for the Government Fund.
Therefore, upon completion of the Consolidation, shareholders would pay a
lower sales charge (3.00%) on new purchases of Class A shares of the
Government Fund than shareholders currently pay on new purchases of Class A
shares of the Bond Fund.
The Class B shares of the Bond Fund are subject to a contingent-deferred
sales charge of 5.00% for redemptions made within the first year of purchase,
and declining amounts each year thereafter. Class B shares automatically
convert to Class A shares six years after purchase. The newly created Class B
shares of the Government Fund will be identical in all respects to the
existing Class B shares of the Bond Fund.
Institutional Class shares of the Funds do not have front-end or contingent-
deferred sales charges.
Sales charges are described in detail, along with a description of exchange
privileges and other information in Appendix III.
COMPARISON OF TOTAL EXPENSE RATIOS. As with all mutual funds, each class of
the Funds incurs various costs and expenses in connection with its daily
activities. The total of these costs and expenses is the "total expense ratio"
and is expressed as a percentage of the average daily net assets of each
class.
The total expense ratio of each class of the Government Fund after giving
effect to the Consolidation (sometimes called the "pro forma total expense
ratio") will be less than the current total expense ratio of the Bond Fund.
The total expense ratio for each class of the Government Fund is, and
immediately after the Consolidation will be, lower than that of the Bond Fund
immediately prior to the Consolidation.
The following table shows the current total expense ratio for each Class of
each Fund, after fee waivers and reimbursements, and the pro forma total
expense ratio of the Government Fund, based upon the fee arrangements,
9
<PAGE>
after waivers and reimbursements, that will be in place upon consummation of
the Consolidation. All fee rates are annualized and are expressed as a
percentage of average daily net assets. Detailed expense information for each
Fund is included in Appendix III.
TOTAL EXPENSE RATIOS
<TABLE>
<CAPTION>
GOVERNMENT FUND COMBINED FUND PRO
BOND FUND CURRENT CURRENT FORMA
----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Class A 0.98% Class A 0.96% Class A 0.96%
Class B 1.71% Class B N/A Class B 1.66%
Inst. Class 0.93% Inst. Class 0.91% Inst. Class 0.91%
</TABLE>
INVESTMENT ADVISER AND OTHER SERVICE PROVIDERS. The Funds have the same
service providers. Upon completion of the Consolidation, these service
providers will continue to serve the Funds in the capacities indicated below.
SERVICE PROVIDERS FOR THE FUNDS
<TABLE>
<S> <C>
Investment Adviser Wells Fargo Bank
Distributor Stephens Inc.
Administrator Wells Fargo Bank
Co-Administrator Stephens Inc.
Custodian Wells Fargo Bank
Fund Accountant Wells Fargo Bank
Transfer Agent Wells Fargo Bank
Independent Auditors KPMG Peat Marwick LLP
</TABLE>
INVESTMENT ADVISER AND ADVISORY FEES. As investment adviser to the Funds,
Wells Fargo Bank, subject to the supervision of the Company's Boards of
Directors, provides investment guidance and policy direction in connection
with the daily portfolio management of each Fund.
Wells Fargo Bank is currently entitled to receive an advisory fee of 0.50%
of the average daily net assets of each Fund. The advisory fee rates for the
Funds, as well as the fee rates for certain other services described below,
are listed in the detailed summary of expense information in Appendix III.
Wells Fargo Bank, a national bank, is one of the largest banks in the United
States. Wells Fargo Bank was founded in 1852 and is the oldest bank in the
western United States. As of December 31, 1997, various divisions and
affiliates of Wells Fargo Bank provided investment advisory services for
approximately $62 billion of assets of individuals, trusts, estates and
institutions. Wells Fargo Bank also serves as investment adviser or sub-
adviser to separately managed funds of several other open-end management
investment companies. Wells Fargo Bank is a wholly-owned subsidiary of Wells
Fargo & Company, a publicly-held bank holding company.
DISTRIBUTION, ADMINISTRATION AND SHAREHOLDER SERVICING ARRANGEMENTS. Each
Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act
for its Class A shares and its Class B shares. The Distribution Plans, and the
related Distribution Agreements, permit each Fund to pay Stephens for
distribution-related services or expenses, such as the printing and
preparation of prospectuses and other materials and the compensation of
selling agents.
The maximum distribution fee payable by the Class A shares of each Fund is
0.05% of the Fund's average daily net assets attributable to Class A shares.
The maximum amount payable by the Class B shares of each Fund is 0.75% of the
Fund's average daily net assets attributable to Class B shares.
10
<PAGE>
The Funds receive administration services from Wells Fargo Bank, as
Administrator, and Stephens, as Co-administrator. The administration services
provided to the Funds include, among other things, general supervision of each
Fund's operation, coordination of other services, compilation of information
for reports to the SEC and the state securities commissions, preparation of
proxy statements and shareholder reports, and general supervision of data
compilation in connection with preparing periodic reports to Directors and
officers. For these administration services, Wells Fargo Bank and Stephens are
entitled to receive monthly fees at the annual rates of 0.03% and 0.04%,
respectively, of each Fund's average daily net assets.
Each class of the Funds have entered into shareholder servicing agreements
with Wells Fargo Bank and may enter into similar agreements with other
institutions ("Shareholder Servicing Agents"). Under such agreements,
Shareholder Servicing Agents (including Wells Fargo Bank) agree, as agents for
their customers, to provide shareholder administrative and liaison services
with respect to Fund shares, which include, without limitation, 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 these
services, a Shareholder Servicing Agent is entitled to receive a fee at an
annual percentage of the average daily net assets attributable to a class of
shares owned of record or beneficially by investors with whom the Shareholder
Servicing Agent maintains a servicing relationship.
The Shareholder Servicing Plan for the Class A shares of the Bond Fund and
the Government Fund provides for a fee at the annual rate of up to 0.25% and
0.30%, respectively, of the average daily net assets attributable to Class A
shares. The Shareholder Servicing Plan for the Class B shares of each Fund
provides for a fee at the annual rate of up to 0.25% of the average daily net
assets attributable to Class B shares. The Shareholder Servicing Plan for the
Institutional Class shares of each Fund provides for a fee at the annual rate
of up to 0.25% of the average daily net assets attributable to Institutional
Class shares. For additional information, see Appendix III.
SHAREHOLDER TRANSACTIONS AND SERVICES. The respective purchase, redemption,
exchange, dividend and other policies and procedures of the Funds are
substantially identical. More detailed information about these policies and
procedures is set forth in Appendix IV. However, there are certain
differences. For example, the front-end sales charges applicable to new
purchases of Class A shares of the Government Fund are lower than the front-
end sales charges applicable to new purchases of Class A shares of the Bond
Fund.
FEDERAL INCOME TAX CONSEQUENCES. The Government Fund intends to qualify as
of the closing of the Consolidation, as a separate "regulated investment
company" under the Internal Revenue Code of 1986 ("IRC"), as amended. The
Consolidation is expected to be a tax-free reorganization under Section
368(a)(1), subsection (C) or (D), of the IRC and is not expected to have tax
consequences for either the Funds or their shareholders. A tax opinion to this
effect is a condition of the Consolidation, such opinion to be received by the
Company on or about the Effective Date of the Consolidation.
The Funds have not sought, and will not seek, a private tax ruling from the
Internal Revenue Service ("IRS") regarding the tax consequences of the
Consolidation. The IRS is not precluded from determining that the
Consolidation has tax consequences for the Funds or their shareholders.
Shareholders may wish to consult their own tax advisers concerning the
potential tax consequences to them, including state and local income tax
consequences, of the Consolidation.
BOARD CONSIDERATION. The Company's Board of Directors unanimously voted to
approve the Plan of Consolidation at a meeting held on January 29, 1998. In
reviewing the proposed Consolidation, the Board considered the potential
impact of the Consolidation on each Fund's shareholders. The Board considered,
among other things, (i) the terms and conditions of the Plan, including those
intended to avoid the dilution of shareholder interests; (ii) the potential
marketing and shareholder benefits obtained by having a combined fund; (iii)
the similarity of the investment objectives and significant policies and
restrictions of the Funds; (iv) the historical investment performance of the
Funds; (v) the historical and projected investment advisory fee rates and
operating expenses of the Funds; (vi) the identity of the organizations that
provide investment advisory and certain other services to the Funds, and the
terms on which these services are provided; and (vii) the prospects for long-
term viability of the Funds.
11
<PAGE>
Based upon its evaluation of these factors, and in light of their fiduciary
duties under federal and state law, the Company's Boards of Directors,
including all of the non-interested members of the Board, have determined that
the proposed Consolidation is in the best interests of the shareholders of
each Fund and that the interests of the shareholders of the respective Funds
will not be diluted as a result of the Consolidation. THE COMPANY'S BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PLAN OF
CONSOLIDATION.
OTHER INFORMATION. The Consolidation may be abandoned at any time before the
Closing upon the mutual consent of both Funds. At any time before or (to the
extent permitted by law) after approval of the agreement by the shareholders
of the Bond Fund (i) the parties may, by written agreement authorized by the
Company's Board of Directors and with or without the approval of their
shareholders, amend any of the provisions of the Plan and (ii) either party
may waive any default by the other party or the failure to satisfy any of the
conditions to its obligations (the waiver to be in writing and authorized by
the Company's Board of Directors with or without the approval of such party's
shareholders).
12
<PAGE>
II. INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. The Proxy/Prospectus is being furnished in connection
with the solicitation of proxies for the Meeting by the Company's Board of
Directors. It is expected that the solicitation of proxies will be primarily
by mail. Officers and agents of the Company also may solicit proxies by
telephone, telegraph or personal interview. Shareholders may vote by (1) mail,
by marking, signing, dating and returning the enclosed Proxy Ballot in the
enclosed postage-paid envelope; (2) telephone, by calling Automatic Data
Processing Investor Communications Services ("ADP") toll-free at 1-800-690-
6903 at anytime or (3) telefacsimile, by marking, signing, dating and faxing
the enclosed Proxy Ballot to ADP at 1-(516) 254-7564. ADP has been retained by
the Company to assist in the tabulation of proxy votes for the Consolidation.
In addition, the Company may retain an agent to assist in the solicitation of
proxies for the Consolidation. The cost of the solicitation will be paid by
the Funds and is estimated to be $10,000. Any shareholder giving a proxy may
revoke it at any time before it is exercised (i) by submitting to Stagecoach a
written notice of revocation, (ii) by submitting to Stagecoach a subsequently
executed proxy or by attending the Meeting and voting in person.
Only shareholders of record at the close of business on April 9, 1998, will
be entitled to vote at the Meeting. On that date, the following number of Bond
Fund shares were outstanding and entitled to be voted.
<TABLE>
<CAPTION>
BOND FUND SHARES ENTITLED TO BE VOTED
--------- ---------------------------
<S> <C>
Class A shares 562,466.278
Class B shares 714,511.408
Institutional Class shares 2,783,757.135
</TABLE>
Each whole or fractional share is entitled to a whole or fractional vote.
If the accompanying proxy is executed and returned in time for the Meeting,
the shares covered thereby will be voted in accordance with the proxy on all
matters that may properly come before the Meeting.
Significant Shareholders. Appendix V shows the name, address and share
ownership of each person known to the Company to have beneficial or record
ownership of 5% or more of the outstanding shares of a class of each Fund as
of March 31, 1998. Any person who owns directly or indirectly more than 25% of
the outstanding voting securities of a Fund or class thereof is presumed by
the 1940 Act to "control" such Fund or class and may be able to significantly
influence the outcome of any shareholder vote. As of March 31, 1998, the
officers and Directors of the Company as a group owned less than 1% of the
outstanding shares of each Fund.
The Company has been advised by Wells Fargo Bank that the shares of the Bond
Fund over which Wells Fargo Bank and its affiliates have voting power will
either be voted by one or more independent fiduciaries or else be voted by the
affiliates for and against the proposal presented at the meeting in the same
proportions as the total votes that are cast for and against the proposal by
other shareholders of the Bond Fund.
SHAREHOLDER APPROVALS. The Plan of Consolidation is being submitted for
approval at the Meeting by the shareholders of the Bond Fund. The vote of the
shareholders of the Government Fund is not being solicited, since their
approval or consent is not necessary to approve the Consolidation.
The Plan must be approved by a majority of the outstanding shares of the
Bond Fund. The term "majority of the outstanding shares" of the Bond Fund
means more than 50% of the outstanding shares of the Fund, in accordance with
Maryland Law and the Company's Amended and Restated Articles of Incorporation
and By-Laws.
Quorum. In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve
a proposal are not received, the persons named as proxies may propose one or
more adjournment(s) of the Meeting to permit further solicitation of proxies.
Any such
13
<PAGE>
adjournment(s) will require the affirmative vote of a majority of those shares
affected by the adjournment(s) that are represented at the Meeting in person
or by proxy. If a quorum is present, the persons named as proxies will vote
those proxies which they are entitled to vote FOR the proposals in favor of
such adjournment(s), and will vote those proxies required to be voted AGAINST
the proposals against any adjournment(s).
A quorum is constituted with respect to the Bond Fund or a share class
thereof by the presence in person or by proxy of the holders of more than 33%
of the outstanding shares of the Fund or class entitled to vote at the
Meeting. For purposes of determining the presence of a quorum for transacting
business at the Meeting, abstentions will be treated as shares that are
present at the Meeting but which have not been voted. Abstentions, therefore,
will have the effect of a "no" vote for purposes of obtaining the requisite
approvals. Broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the
beneficial owners or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have discretionary
power) will not be treated as shares that are present at the Meeting and,
accordingly, could make it more difficult to obtain the requisite approvals.
Annual Meetings. The Company does not presently intend to hold an annual
meeting of shareholders for the election of Directors or other business,
unless and until such time as less than a majority of the Directors holding
office have been elected by the shareholders, at which time the Directors then
in office will call a shareholders' meeting for the election of Directors.
Under certain circumstances, however, shareholders have the right to call a
meeting of shareholders to consider the removal of one or more Directors and
such meetings will be called when requested by the holders of record of 10% or
more of the outstanding shares of common stock of the Company. To the extent
required by law, the Company will assist in shareholder communications in such
matters.
OTHER BUSINESS. The Company's Board of Directors knows of no other business
to be brought before the Meeting. However, if any other matters come before
the Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
14
<PAGE>
III. OTHER INFORMATION
HOW TO OBTAIN ADDITIONAL INFORMATION ABOUT THE FUNDS. Additional information
about each Fund is included in its most recent prospectus and statement of
additional information. You may obtain a prospectus or statement of additional
information without charge by calling 1-800-222-8222 or by writing the Company
at Stagecoach Funds, Inc., c/o Stagecoach Shareholder Services, Wells Fargo
Bank, N.A., P.O. Box 7066, San Francisco, CA 94120-7066.
This Proxy/Prospectus is accompanied by the current prospectuses for the
Government Fund.
Reports and other information filed by the Company can be inspected and
copied at the Public Reference Facilities maintained by the Securities and
Exchange Commission ("SEC") at 450 Fifth Street, N.W., Washington, D.C. 20549.
In addition, these materials can be inspected and copied at the SEC's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also can be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed
rates.
The information contained in each Fund's prospectus is incorporated by
reference into this Proxy/Prospectus.
FINANCIAL STATEMENTS. The unaudited financial statements and financial
highlights for the Funds for the six-month period ended September 30, 1997,
and the audited financial statements, financial highlights and the independent
auditors' report thereon for the six-month period ended March 31, 1997, are
incorporated by reference into the Statement of Additional Information related
to this Proxy/Prospectus. The Financial Highlights included therein are
incorporated by reference into this Proxy/Prospectus.
PERFORMANCE INFORMATION. Certain performance information for the Government
Fund, and a discussion of some of the factors affecting the Fund, are
contained in Appendices VI and VII. Comparable information for the Bond Fund
is contained in the Bond Fund's Annual and Semi-Annual Reports which were sent
to shareholders in June and November of 1997. If you need additional copies of
these documents please call 1-800-222-8222.
SHAREHOLDER INQUIRIES. For additional information call 1-800-222-8222 or
write to Stagecoach Funds, Inc. at the address on the cover page of this
Proxy/Prospectus.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
15
<PAGE>
APPENDIX I
PLAN OF
CONSOLIDATION
FOR THE
INTERMEDIATE BOND FUND
AND THE
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
OF
STAGECOACH FUNDS, INC.
APRIL 15, 1998
<PAGE>
This PLAN OF CONSOLIDATION (the "Plan") is made as of this 15th day of
April, 1998 by Stagecoach Funds, Inc. ("Stagecoach"), a Maryland corporation,
for itself and on behalf of the Intermediate Bond Fund (the "Bond Fund"), a
portfolio of Stagecoach, and on behalf of the Short-Intermediate
U.S. Government Income Fund (the "Government Fund" and sometimes together with
the Bond Fund, the "Funds"), also a portfolio of Stagecoach.
WHEREAS, Stagecoach is an open-end management investment company registered
with the Securities and Exchange Commission (the "SEC") under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, Stagecoach desires that the assets and liabilities of the Bond Fund
as stated herein, be conveyed to and be acquired and assumed by, the
investment portfolio of the Government Fund, in exchange for shares of equal
value of designated classes of the Government Fund which shall thereafter
promptly be distributed to the shareholders of the corresponding classes of
the Bond Fund in connection with its liquidation as described in this Plan
(the "Consolidation").
NOW, THEREFORE, in accordance with the terms and conditions described
herein, the Funds shall be consolidated as follows:
1. Conveyance of Assets of Bond Fund.
(a) At the Effective Time of the Consolidation, as defined in Section 7, all
assets of every kind, and all interests, rights, privileges and powers of the
Bond Fund, subject to all liabilities of such Fund, whether accrued, absolute,
contingent or otherwise existing as of the Effective Time of the
Consolidation, shall be transferred and conveyed by the Bond Fund to the
Government Fund (as set forth below) and shall be accepted and assumed by the
Government Fund as more particularly set forth in this Plan, such that at and
after the Effective Time of the Consolidation: (i) all assets of the Bond Fund
shall become and be the assets of the Government Fund; and (ii) all
liabilities of the Bond Fund shall attach to the Government Fund as aforesaid
and may thenceforth be enforced against the Government Fund to the same extent
as if incurred by it.
(b) At least fifteen (15) business days prior to the Effective Time of the
Consolidation, the Bond Fund will provide the Government Fund with a schedule
of its securities and other assets and its known liabilities, and the
Government Fund will provide the Bond Fund with a copy of the current
investment objective and policies applicable to the Government Fund. The Bond
Fund reserves the right to sell any of the securities or other assets shown on
the list of the Bond Fund's assets prior to the Effective Time of the
Consolidation but will not, without the prior approval of the Government Fund,
acquire any additional securities other than securities which the Government
Fund is permitted to purchase in accordance with its stated investment
objective and policies. At least ten (10) business days prior to the Effective
Time of the Consolidation, the Government Fund will advise the Bond Fund of
any investments of the Bond Fund shown on such schedule which the Government
Fund would not be permitted to hold, pursuant to its stated investment
objective and policies or otherwise. In the event that the Bond Fund holds any
investments that the Government Fund would not be permitted to hold under its
stated investment objective or policies, the Bond Fund, if requested by the
Government Fund, will dispose of such securities prior to the Effective Time
of the Consolidation to the extent practicable. In addition, if it is
determined that the portfolios of the Bond Fund and the Government Fund, when
aggregated, would contain investments exceeding certain percentage limitations
to which the Government Fund is or will be subject with respect to such
investments, the Bond Fund, if requested by the Government Fund, will dispose
of and/or reinvest a sufficient amount of such investments as may be necessary
to avoid violating such limitations as of the Effective Time of the
Consolidation.
(c) The Bond Fund will endeavor to discharge all of its known liabilities
and obligations prior to the targeted closing date of the Consolidation, on or
about June 12, 1998 (the "Closing Date").
(d) Without limiting the generality of the foregoing, it is understood that
the Bond Fund assets shall include all property and assets of any nature
whatsoever, including, without limitation, all cash, cash equivalents,
A-1
<PAGE>
securities, claims (whether absolute or contingent, known or unknown, accrued
or unaccrued) and receivables (including dividend and interest receivables)
owned by the Bond Fund, and any deferred or prepaid expenses shown as an asset
on the Bond Fund's books, at the Effective Time of the Consolidation, and all
goodwill, all other intangible property and all books and records belonging to
the Bond Fund.
(e) In particular, the Bond Fund assets shall be transferred and conveyed to
the Government Fund, as set forth below:
(1) In exchange for the transfer of the Bond Fund assets, the Government
Fund shall simultaneously issue to the Bond Fund at the Effective Time of
the Consolidation full and fractional shares of Common Stock in the
Government Fund of each of the Class A, Class B, and Institutional Class
shares having an aggregate net asset value equal to the net value of the
Bond Fund assets so conveyed, all determined and adjusted as provided in
this Section 1. In particular, the Government Fund shall deliver to the
Bond Fund the number of shares of each of its share classes described
above, including fractional shares, determined by dividing the value of the
Bond Fund assets of the Bond Fund that are so conveyed and are attributable
to each of the Government Fund's respective share classes, computed in the
manner and as of the time and date set forth in this Section, by the net
asset value of one Government Fund share of the particular share class that
is to be delivered with respect thereto, computed in the manner and as of
the time and date set forth in this Section.
(2) The net asset value of shares to be delivered by the Government Fund,
and the net value of the Bond Fund assets to be conveyed by the Bond Fund,
shall, in each case, be determined as of the Valuation Time specified in
Section 3. The net asset value of shares of the Government Funds shall be
computed in the manner set forth in the Government Fund's then current
prospectuses under the Securities Act of 1933, as amended (the "1933 Act").
In determining the value of the securities transferred by the Bond Fund to
the Government Fund, each security shall be priced in accordance with the
pricing policies and procedures of the Government Fund as described in its
then current prospectus.
2. Liquidation of Bond Fund. At the Effective Time of the Consolidation, the
Bond Fund shall make a liquidating distribution to its shareholders as
follows. Shareholders of record of the Bond Fund shall be credited with full
and fractional shares of the class of common stock that is issued by the
Government Fund in connection with the Consolidation with respect to the
shares that are held of record by the shareholder. In addition, each
shareholder of record of the Bond Fund shall have the right to receive any
unpaid dividends or other distributions which were declared before the
Effective Time of the Consolidation with respect to the shares of the Bond
Fund that are held by the shareholder at the Effective Time of the
Consolidation. Stagecoach shall record on its books the ownership of the
respective Government Fund shares by the shareholders of record of the Bond
Fund (the "Transferor Record Holders"). All of the issued and outstanding
shares of the Bond Fund at the Effective Time of the Consolidation shall be
redeemed and canceled on the books of Stagecoach at such time. After the
Effective Time of the Consolidation, Stagecoach shall wind up the affairs of
the Bond Fund and shall file any final regulatory reports, including but not
limited to any Form N-SAR and Rule 24f-2 filings with respect to the Bond
Fund, and also shall take all other steps as are necessary and proper to
effect the termination or declassification of the Bond Fund in accordance with
the laws of the State of Maryland and other applicable requirements.
3. Valuation Time. The Valuation Time for the Bond Fund and the Government
Fund shall be a mutually agreed upon time on June 12, 1998, or such earlier or
later date as may be determined by Stagecoach's duly authorized officers.
4. Certain Representations, Warranties and Plans of Stagecoach. Stagecoach,
on behalf of the Funds, represents and warrants to the following, such
representations, warranties and agreements being made on behalf of each Fund
on a several (and not joint, or joint and several) basis:
(a) Stagecoach is a Maryland corporation duly created pursuant to its
Articles of Incorporation for the purpose of acting as a management
investment company under the 1940 Act, and is validly existing under
A-2
<PAGE>
the laws of the State of Maryland. Stagecoach is registered as an open-end
management investment company under the 1940 Act and its registration with
the SEC as an investment company is in full force and effect.
(b) Stagecoach has the power to own all of its properties and assets and
to consummate the transactions contemplated herein, and has all necessary
federal, state and local authorizations to carry on its business as now
being conducted and to consummate the transactions contemplated by this
Plan.
(c) This Plan has been duly authorized by the Board of Directors of
Stagecoach, and executed and delivered by the duly authorized officers of
Stagecoach, and represents a valid and binding contract, enforceable in
accordance with its terms, subject as to enforcement to bankruptcy,
insolvency, reorganization, arrangement, moratorium and other similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles. The execution and delivery of this Plan does
not, and the consummation of the transactions contemplated by this Plan
will not, violate Stagecoach's Amended and Restated Articles of
Incorporation or By-Laws or any agreement or arrangement to which it is a
party or by which it is bound.
(d) Stagecoach intends to qualify as a regulated investment company under
Part I of Subchapter M of the Code, and with respect to the Funds as
operating prior to the Effective Time of the Consolidation, has elected to
qualify and has qualified as a regulated investment company under Part I of
Subchapter M of Subtitle A, Chapter 1, of the Code, as of and since its
first taxable year; has been a regulated investment company under such Part
of the Code at all times since the end of its first taxable year when it so
qualified; and qualifies and shall continue to qualify as a regulated
investment company for its current taxable year.
(e) It has valued, and will continue to value, its portfolio securities
and other assets in accordance with applicable legal requirements.
(f) The N-14 Registration Statement and the Consolidation Proxy
Materials, from their effective and clearance dates with the SEC, through
the time of the shareholders meeting referred to in Section 6 and at the
Effective Time of the Consolidation, insofar as they relate to Stagecoach
(i) shall comply in all material respects with the provisions of the 1933
Act, the Exchange Act of 1934 and the 1940 Act, the rules and regulations
thereunder, and state securities laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein not misleading.
(g) The shares of the Government Fund to be issued and delivered to the
Bond Fund for the account of the shareholders of the Bond Fund, pursuant to
the terms hereof, shall have been duly authorized as of the Effective Time
of the Consolidation and, when so issued and delivered, shall be duly and
validly issued, fully paid and non-assessable, and no shareholder of the
Government Fund shall have any preemptive right of subscription or purchase
in respect thereto.
(h) All of the issued and outstanding shares of the Government Fund have
been validly issued and are fully paid and non-assessable, and were offered
for sale and sold in conformity with the registration requirements of all
applicable federal and state securities laws.
(i) Stagecoach shall operate its business in the ordinary course between
the date hereof and the Effective Time of the Consolidation. It is
understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions and any
other dividends and distributions deemed advisable.
(j) At the Effective Time of the Consolidation, the Government Fund will
have good and marketable title to its assets and full right, power and
authority to assign, deliver and otherwise transfer such assets.
5. Shareholder Action. As soon as practicable after the effective date of
the N-14 Registration Statement and SEC clearance of the proxy solicitation
materials referred to in Section 6, but in any event prior to the Effective
Time of the Consolidation and as a condition thereto, the Board of Directors
of Stagecoach shall call
A-3
<PAGE>
and Stagecoach shall hold, meeting(s) of the shareholders of the Bond Fund for
the purpose of considering and voting upon:
(a) approval of this Plan and the transactions contemplated hereby; and
(b) such other matters as may be determined by the Board of Directors of
Stagecoach.
6. Regulatory Filings. Stagecoach shall file a post-effective amendment (the
"N-1A Post-Effective Amendment") to its registration statement on Form N-1A
(File Nos. 33-42927; 811-6419) with the SEC, and the appropriate state
securities commissions, as promptly as practicable so that the Class B shares
of the Government Fund required to complete the Consolidation are registered
under the 1933 Act, 1940 Act and applicable state securities laws. In
addition, Stagecoach shall file an N-14 Registration Statement, which shall
include the Consolidation Proxy Materials, with the SEC, and with the
appropriate state securities commissions, relating to the matters described in
Section 5 as promptly as practicable.
7. Effective Time of the Consolidation. Delivery of the Bond Fund assets and
the shares of the Government Fund to be issued pursuant to Section 1 and the
liquidation of the Bond Fund pursuant to Section 2 shall occur on the day
following the Valuation Time, whether or not such day is a business day, or on
such other date, and at such place and time and date, as may be agreed to by
each of the parties. The date and time at which such actions are taken are
referred to herein as the "Effective Time of the Consolidation." To the extent
any Bond Fund assets are, for any reason, not transferred at the Effective
Time of the Consolidation, Stagecoach shall cause such Bond Fund assets to be
transferred in accordance with this Plan at the earliest practicable date
thereafter.
8. Stagecoach Conditions. The obligations of Stagecoach hereunder shall be
subject to the following conditions precedent:
(a) Stagecoach shall provide a certificate executed in its name by its
President or Vice President and its Treasurer or Assistant Treasurer, dated
as of the Effective Time of the Consolidation, to the effect that its
representations and warranties made in this Plan are true and correct at
and as of the Effective Time of the Consolidation, except as they may be
affected by the transactions contemplated by this Plan.
(b) Stagecoach shall have received an opinion of Morrison & Foerster,
LLP, counsel to Stagecoach, in form reasonably satisfactory to Stagecoach
and dated the Effective Time of the Consolidation, substantially to the
effect that (i) Stagecoach is a Maryland corporation duly established and
validly existing under the laws of the State of Maryland; (ii) this Plan
has been duly authorized, executed and delivered by Stagecoach; (iii) the
execution and delivery of this Plan did not, and the consummation of the
transactions contemplated by this Plan will not, violate the Amended
Articles of Incorporation or By-Laws of Stagecoach or any material contract
known to such counsel to which Stagecoach is a party or by which it is
bound. Such opinion may rely on the opinion of other counsel to the extent
set forth in such opinion, provided such other counsel is reasonably
acceptable to Stagecoach; for federal income tax purposes (vi) the transfer
by the Bond Fund of all of its assets to the Government Fund in exchange
for shares of the Government Fund, and the distribution of such shares to
the shareholders of the Bond Fund, as provided in this Plan, will
constitute a reorganization within the meaning of Section 368(a)(1)(C), (D)
or (F) of the Code; (vii) in accordance with Sections 361(a), 361(c)(1) and
357(a) of the Code, no gain or loss will be recognized by the Bond Fund as
a result of such transactions; (viii) in accordance with Section 1032(a) of
the Code, no gain or loss will be recognized by the Government Fund as a
result of such transactions; (ix) in accordance with Section 354(a)(1) of
the Code, no gain or loss will be recognized by the shareholders of the
Bond Fund on the distribution to them by the Bond Fund of shares of the
Government Fund in exchange for their shares of the Bond Fund; (x) in
accordance with Section 358(a)(1) of the Code, the basis of the Government
Fund shares received by each shareholder of a Bond Fund will be the same as
the basis of the shareholder's Bond Fund shares immediately prior to the
transactions; (xi) in accordance with Section 362(b) of the Code, the basis
of the Bond Fund assets received by the Government Fund will be the same as
the basis of such Bond Fund assets in the hands of the corresponding Bond
Fund immediately prior
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<PAGE>
the transactions; (xii) in accordance with Section 1223(1) of the Code, a
shareholder's holding period for Government Fund shares will be determined
by including the period for which the shareholder held the shares of the
Bond Fund exchanged therefor, provided that the shareholder held such
shares of the Bond Fund as a capital asset; (xiii) in accordance with
Section 1223(2) of the Code, the holding period of the Stagecoach Fund with
respect to the Bond Fund assets will include the period for which such Bond
Fund assets were held by the Bond Fund; and (iv) in accordance with Section
381(a) of the Code, the Government Fund will succeed to the tax attributes
of the Bond Fund described in Section 381(c) of the Code.
(c) The Bond Fund assets to be transferred to the Government Fund under
this Plan shall include no assets which the Government Fund may not
properly acquire pursuant to its investment limitations or objectives or
may not otherwise lawfully acquire.
(d) The N-1A Post-Effective Amendment and the N-14 Registration Statement
shall have become effective under the 1933 Act and no stop order suspending
such effectiveness shall have been instituted or, to the knowledge of
Stagecoach, contemplated by the SEC and the parties shall have received all
permits and other authorizations necessary under state securities laws to
consummate the transactions contemplated by this Plan.
(e) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain
or prohibit or obtain damages or other relief in connection with this Plan
or the transactions contemplated herein.
(f) Prior to the Valuation Time, the Bond Fund shall have declared a
dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Time, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its net investment
company taxable income, if any, for the taxable periods or years ending
March 31, 1998 and for the taxable periods from said date to and including
the Effective Time of the Consolidation (computed without regard to any
deduction for dividends paid), and all of its net capital gain, if any,
realized in taxable periods or years ending March 31, 1998, and in the
taxable periods from said date to and including the Effective Time of the
Consolidation.
(g) Stagecoach shall have performed and complied in all material respects
with each of its agreements and covenants required by this Plan to be
performed or complied with by it prior to or at the Valuation Time and the
Effective Time of the Consolidation.
(h) Stagecoach shall have received a letter from KPMG Peat Marwick LLP
addressed to Stagecoach in form reasonably satisfactory to them, and dated
the Effective Time of the Consolidation, to the effect that on the basis of
limited procedures agreed to by Stagecoach and described in such letter
(but not an examination in accordance with generally accepted auditing
standards): (i) the data used in the pro forma adjustment and calculation
of the current and pro forma expense ratios of the Funds appearing in the
N-14 Registration Statement and Consolidation Proxy Materials agree with
underlying accounting records of the Stagecoach Fund or to written
estimates provided by officers of Stagecoach having responsibility for
financial and reporting matters and were found to be mathematically
correct, and (ii) the calculation of the net value of the Bond Fund assets
and the net asset value of the Government Fund shares, in each case as of
the Valuation Time, was determined in accordance with the pricing policies
and procedures of Stagecoach as described in its then current prospectuses.
10. Further Assurances. Subject to the terms and conditions herein provided,
Stagecoach shall use its best efforts to take, or cause to be taken, such
action, to execute and deliver, or cause to be executed and delivered, such
additional documents and instruments and to do, or cause to be done, all
things necessary, proper or advisable under the provisions of this Plan and
under applicable law to consummate and make effective the transactions
contemplated by this Plan, including without limitation, delivering and/or
causing to be delivered each of the items required under this Plan as a
condition to such obligations hereunder.
11. Survival of Representations and Warranties. The representations and
warranties of Stagecoach set forth in this Plan shall survive the delivery of
the Bond Fund assets to the Government Fund and the issuance of the shares of
the Government Fund at the Effective Time of the Consolidation.
A-5
<PAGE>
12. Termination of Plan. This Plan may be terminated by Stagecoach at, or at
any time prior to, the Effective Time of the Consolidation, by a majority vote
of its Board of Directors.
13. Governing Law. This Plan and the transactions contemplated hereby shall
be governed, construed and enforced in accordance with the laws of the State
of Maryland.
14. Brokerage Fees and Expenses.
(a) Stagecoach, for itself and on behalf of the Funds, represents and
warrants that there are no brokers or finders entitled to receive any payments
in connection with the transactions provided for herein.
(b) Except as may be otherwise provided herein, the Bond Fund and the
Government Fund shall be liable for its expenses incurred in connection with
entering into and carrying out the provisions of this Agreement, whether or
not the transactions contemplated hereby are consummated. The expenses payable
by the Bond Fund hereunder are not limited to, but shall include (i) fees and
expenses of its counsel and independent auditors incurred in connection with
the Reorganization; (ii) expenses associated with printing and mailing the
Prospectus/Proxy Statement and soliciting proxies in connection with the
meeting of shareholders of the Bond Fund; (iii) all fees and expenses related
to the liquidation of the Bond Fund; (iv) fees and expenses of the Bond Fund's
custodian and transfer agent(s) incurred in connection with the
Reorganization; and (v) any special pricing fees associated with the valuation
of the Bond Fund's portfolio on the Applicable Valuation Date. The expenses
payable by the Government Fund hereunder are not limited to, but shall include
(i) fees and expenses of its counsel and independent auditors incurred in
connection with the Reorganization; (ii) expenses associated with preparing
this Agreement and preparing and filing the Registration Statement under the
1933 Act covering the Government Fund Shares to be issued in the
Reorganization; (iii) registration or qualification fees and expenses of
preparing and filing such forms, if any, as are necessary under applicable
state securities laws to qualify the Government Fund Shares to be issued in
connection with the Reorganization; (iv) any fees and expenses of the
Government Fund's custodian and transfer agent(s) incurred in connection with
the Consolidation; and (v) any special pricing fees associated with the
valuation of the Government Fund's portfolio on the applicable Valuation Date.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date
first written above.
ATTEST: STAGECOACH FUNDS, INC.,
on behalf of the Intermediate Bond
Fund
__________________________________ By: ________________________________
Michael W. Nolte Richard H. Blank, Jr.
Assistant Secretary Chief Operating Officer,
Secretary and Treasurer
ATTEST: STAGECOACH FUNDS, INC.,
on behalf of the Short-Intermediate
U.S. Government Income Fund
__________________________________ By: ________________________________
Michael W. Nolte Richard H. Blank, Jr.
Assistant Secretary Chief Operating Officer,
Secretary and Treasurer
A-6
<PAGE>
APPENDIX II
INVESTMENT OBJECTIVES AND POLICIES
This Appendix sets forth each Fund's investment objective and significant
investment policies. The information here summarizes only some of the
investment policies and limitations of each Fund. Under certain circumstances,
the investment policies and limitations of the Funds may be changed by the
Company's Board of Directors. Additional information about the investment
policies and limitations of each Fund is included in its most recent
prospectus and statement of additional information, copies of which may be
obtained by calling 1-800-222-8222.
<TABLE>
<CAPTION>
FUND BOND FUND GOVERNMENT FUND
---- --------- ---------------
<S> <C> <C>
Investment Objective: The Bond Fund seeks to provide The Government Fund seeks to
investors with a high level of provide investors with current
current income consistent with income while preserving
the preservation of capital and capital, by investing primarily
the maintenance of liquidity. in a portfolio consisting of
short- to intermediate-term
securities issued or guaranteed
by the U.S. Government, its
agencies and instrumentalities.
Investment Policies: Invests in corporate debt Invests primarily (at least 65%
securities, U.S. Government of its total assets) in U.S.
obligations, and other debt Government obligations.
securities.
Maintains a dollar-weighted Maintains a dollar-weighted
average portfolio maturity of average portfolio maturity of
between 3 and 10 years. between 2 and 5 years.
Additional Investment Invests at least 65% of total Invests at least 65% of total
Policies: assets in a combination of assets in U.S. government
corporate bonds and U.S. obligations.
government obligations. May
invest less than 65% of its
total assets in U.S. government
obligations.
Invests no more than 20% of Invests no more than 25% of
total assets in the dollar- total assets in the dollar-
denominated debt of foreign denominated debt of U.S.
issuers, including foreign branches of foreign banks or
banks. foreign branches of U.S. Banks.
May not invest in debt
securities of non-bank foreign
issues.
</TABLE>
Generally speaking, the Bond Fund assumes slightly more risk and volatility
than the Government Fund. In certain interest-rate environments, the Bond Fund
has a higher expectation of total return, with greater expectation of risk,
than the Government Fund.
The Bond Fund maintains a longer weighted average portfolio maturity than
the Government Fund. This increases the sensitivity of the Bond Fund's
portfolio to interest-rate fluctuations. The Bond Fund may enter into futures
contracts and related options, while the Government Fund may not. The Bond
Fund sometimes invests in unrated securities while the Government Fund invests
almost exclusively in investment grade securities. The stripped Treasury
securities in which the Government Fund invests have greater interest-rate
sensitivity than traditional government securities with identical credit
ratings.
Both Funds may borrow from banks up to 10% of their respective average daily
net assets. The Bond Fund also may enter into reverse repurchase agreements.
1
<PAGE>
APPENDIX III
EXPENSE SUMMARIES OF THE FUNDS
The following tables compare (a) the current fees and expenses for the Bond
Fund and (b) the estimated fees and expenses for the Government Fund on a pro
forma basis after giving effect to the Consolidation. The purpose of the
tables is to help shareholders understand the various costs and expenses that
investors in the Funds will pay directly or indirectly. The tables do not
reflect any charges that may be imposed by institutions directly on their
customer accounts in connection with investments in the Funds.
CLASS A SHARES
<TABLE>
<CAPTION>
GOVERNMENT
BOND FUND
FUND PRO FORMA
---- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge on Purchases (as a percentage of
offering price)............................................ 4.50% 3.00%
Maximum Sales Charge on Reinvested Dividends................ None None
Maximum Sales Charge on Redemptions......................... None None
Maximum Fees................................................ None None
Exchange Fees............................................... None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers or reimbursements)/1/........ 0.23% 0.26%
Rule 12b-1 Fees............................................. 0.05% 0.05%
Other Expenses (after waivers or reimbursements)/2/......... 0.70% 0.65%
---- ----
Total Fund Operating Expenses
(after waivers or reimbursements)/3/........................ 0.98% 0.96%
==== ====
</TABLE>
- --------
/1/ Management Fees (before waivers or reimbursements) would be 0.50% for each
Fund.
/2/ Other Expenses (before waivers or reimbursements) would be 0.85% and 0.65%,
respectively.
/3/ Total Fund Operating Expenses (before waivers or reimbursements) would be
1.40% and 1.15%, respectively.
EXAMPLE:
You would pay the following expenses on a $1,000 investment in Class A
shares, assuming (1) 5% gross annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
GOVERNMENT
BOND FUND
FUND PRO FORMA
---- ----------
<S> <C> <C>
1 year........................................................ $ 55 $ 40
3 years....................................................... 75 60
5 years....................................................... 97 81
10 years...................................................... 160 144
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
1
<PAGE>
CLASS B SHARES
<TABLE>
<CAPTION>
GOVERNMENT
BOND FUND
FUND PRO FORMA
---- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge on Purchases (as a percentage of
offering price)............................................. None None
Maximum Sales Charge on Reinvested Dividends................. None None
Maximum Sales Charge on Redemptions..........................
Redemption during year 1.................................... 5.00% 5.00%
Redemption during year 2.................................... 4.00% 4.00%
Redemption during year 3.................................... 3.00% 3.00%
Redemption during year 4.................................... 3.00% 3.00%
Redemption during year 5.................................... 2.00% 2.00%
Redemption during year 6.................................... 1.00% 1.00%
Redemption after year 6/1/.................................. 0.00% 0.00%
Exchange Fees................................................ None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers or reimbursements)/2/......... 0.23% 0.26%
Rule 12b-1 Fees.............................................. 0.75% 0.75%
Other Expenses (after waivers or reimbursements)/3/.......... 0.73% 0.65%
---- ----
TOTAL FUND OPERATING EXPENSES
(after waivers or reimbursements)/4/......................... 1.71% 1.66%
==== ====
</TABLE>
- --------
/1/ Class B shares automatically convert to Class A shares six years after
purchase.
/2/ Management Fees (before waivers or reimbursements) would be 0.50% for each
Fund.
/3/ Other Expenses (before waivers or reimbursements) would be 1.89% for each
Fund.
/4/ Total Fund Operating Expenses (before waivers or reimbursements) would be
3.14% for each Fund.
EXAMPLE:
You would pay the following expenses on a $1,000 investment in Class B
shares, assuming a 5% gross annual return and, at the end of each time period
indicated:
<TABLE>
<CAPTION>
REDEMPTION NO REDEMPTION
--------------- ---------------
GOVERNMENT GOVERNMENT
BOND FUND BOND FUND
FUND PRO FORMA FUND PRO FORMA
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
1 year....................................... $ 67 $ 67 $ 17 $ 17
3 years...................................... 84 82 54 52
5 years...................................... 113 110 93 90
10 years..................................... 164 160 164 160
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
2
<PAGE>
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
GOVERNMENT
BOND FUND
FUND PRO FORMA
---- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge on Purchases
(as a percentage of offering price)....................... None None
Maximum Sales Charge on Reinvested Dividends............... None None
Maximum Sales Charge on Redemptions........................ None None
Exchange Fees.............................................. None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (after waivers or reimbursements)/1/....... 0.23% 0.26%
Rule 12b-1 Fees............................................ 0.00% 0.00%
Other Expenses (after waivers or reimbursements)........... 0.70%/2/ 0.65%
---- ----
TOTAL FUND OPERATING EXPENSES
(after waivers or reimbursements)/3/....................... 0.93% 0.91%
==== ====
</TABLE>
- --------
/1/ Management Fees (before waivers or reimbursements) would be 0.50% for each
Fund.
/2/ Other Expenses (before waivers or reimbursements) would be 0.73% for the
Bond Fund.
/3/ Total Fund Operating Expenses (before waivers or reimbursements) would be
1.23% and 1.15% for the Bond Fund and the Government Fund, respectively.
EXAMPLE:
You would pay the following expenses on a $1,000 investment in Institutional
Class shares, assuming (1) 5% gross annual return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
GOVERNMENT
BOND FUND
FUND PRO FORMA
---- ----------
<S> <C> <C>
1 year....................................................... $ 9 $ 9
3 years...................................................... 30 29
5 years...................................................... 51 50
10 years..................................................... 114 112
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
3
<PAGE>
APPENDIX IV
SHAREHOLDER TRANSACTIONS AND FUND SERVICES
This Appendix reviews and compares important information about the purchase
and redemption policies (such as front-end sales charges, minimum balances and
contingent-deferred sales charges) applicable to each Fund. This Appendix also
reviews and compares important information about dividend and distribution
options and exchange privileges available to each Fund.
This Appendix is qualified in its entirety by the more detailed information
included in the prospectuses for the Funds which are incorporated by reference
into this Proxy/Prospectus.
I. CLASS A SHARES
A. SALES CHARGES AND EXEMPTIONS. Front-end sales charges for Class A shares
of the Funds are as follows:
. Intermediate Bond Fund--4.50%.
. The Short-Intermediate U.S. Government Income Fund--3.00%.
The Funds offer reductions in front-end sales charges based upon the dollar
amount of shares purchased. Currently, reductions generally are available to
Fund shareholders who purchase or commit to purchase $50,000 or more in Class
A shares.
B. PURCHASE AND REDEMPTION PROCEDURES. Shares of the Funds may be purchased
and redeemed through substantially similar methods. The minimum initial and
subsequent purchase amounts for the Funds are the same, as are the general
procedures for automatic purchase and redemption programs.
C. DIVIDEND AND DISTRIBUTION OPTIONS. Both Funds allow shareholders to
receive dividends and capital gain distributions by check or to reinvest
dividends and capital gain distributions in shares of the same Fund or in an
approved bank account. The Company also allows investors to reinvest dividend
and capital gain distributions in shares of another Fund in the Stagecoach
Family of Funds.
D. SHARE EXCHANGES. The share exchange privileges available to Class A
shareholders of the Funds are identical.
II. CLASS B SHARES
The sales charges, purchase and redemption procedures, dividend and
distribution options and exchange privileges applicable to the new Class B
shares of the Short-Intermediate U.S. Government Income Fund are identical in
every respect to the existing Class B shares of the Intermediate Bond Fund.
III. INSTITUTIONAL CLASS SHARES
A. SALES CHARGES AND EXEMPTION. There are no front-end or contingent-
deferred sales charges on Institutional Class shares of either Fund.
B. PURCHASE AND REDEMPTION PROCEDURES. Institutional Class shares of the
Funds may be purchased and redeemed through the methods and the minimum
initial and subsequent purchase amounts are identical.
C. DIVIDEND AND DISTRIBUTION OPTIONS. The dividend and distribution options
applicable to the Institutional Class shares are identical for the Funds.
D. SHARE EXCHANGES. The share exchange privileges available to Institutional
Class shareholders of each Fund are identical.
1
<PAGE>
IV. DIVIDENDS AND DISTRIBUTIONS
Both Funds distribute their net capital gains to shareholders at least
annually and pay dividends from net investment income, if any, monthly.
2
<PAGE>
APPENDIX V
5% OWNERSHIP AS OF MARCH 31, 1998 (PRE-CONSOLIDATION)
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND TYPE OF PERCENTAGE OF
FUND ADDRESS OWNERSHIP OF CLASS PORTFOLIO
---- -------- --------- ---------- ----------
<S> <C> <C> <C> <C>
INTERMEDIATE BOND FUND Virg & Co. Institutional Class Record Holder 47.32% 32.54%
Attn: MF Dept A88-4
P.O. Box 9800
Calabasas, CA 91372
Hep & Co. Institutional Class Record Holder 50.34% 34.62%
Attn: MF Dept A88-4
P.O. Box 9800
MAC 0139-027
Calabasas, CA 91302
Virg & Co. Class A Record Holder 44.20% 6.13%
c/o Wells Fargo Bank
P.O. Box 9800 MAC
9139-027
Calabasas, CA 91372
Wells Fargo Bank Class A Record Holder 8.04% 1.11%
FBO Retirement Plans
Omnibus
P.O. Box 63015
San Francisco, CA
94163
SHORT-INTERMEDIATE U.S. Wells Fargo Bank Class A Beneficially Owned 27.20% 2.31%
GOVERNMENT INCOME FUND FBO Retirement Plans
Ominibus
P.O. Box 63015
San Francisco, CA
94163
Calabasas, CA 91372
Wells Fargo Bank, Institutional Class Record Holder 10.50% 1.58%
TTEE
Choicemaster
Attn:Mutual Funds
A88-4
P.O. Box 9800
Calabasas, CA 91372-
0800
DIM & Co. Institutional Class Record Holder 47.96% 7.20%
Attn: MF Dept A88-4
P.O. Box 9800
Calabasas, CA 91372-
0800
Virg & Co. Institutional Class Record Holder 23.59% 3.54%
Attn: MF Dept A88-4
P.O. Box 9800
Calabasas, CA 91372-
0800
Hep & Co. Institutional Class Record Holder 14.61% 2.19%
Attn: MF Dept A88-4
P.O. Box 9800 MAC
9139-027
Calabasas, CA 91302
</TABLE>
1
<PAGE>
APPENDIX VI
This Appendix reproduces the discussion of Fund performance from the
Government Fund's September 30, 1997, Semi-Annual Report. The discussion
(which has been slightly modified) reviews some of the factors that affected
the Fund's performance during the six-month period ended September 30, 1997,
and shows the performance of the Fund for various periods. The discussion has
not been updated to reflect events occurring after September 30, 1997.
HOW DID THE GOVERNMENT FUND'S ALLOCATION OF INVESTMENTS SHIFT BETWEEN
GOVERNMENT AND CORPORATE BONDS DURING THE PERIOD?
The Government Fund decreased its allocations to Treasury securities and
cash, with allocations to corporate and mortgage-backed securities remaining
stable. The federal agency allocation was increased from 23% to 34%.
DID SPECULATION ABOUT FURTHER INTEREST-RATE INCREASES PLAY A ROLE IN THE
ALLOCATION CHANGES?
Not directly. The difference in yields between government and corporate
bonds remains narrow by historical standards and is expected to remain fairly
stable. This has allowed the Government Fund to upgrade credit quality without
sacrificing too much yield.
WHAT IS THE CURRENT OUTLOOK FOR INTEREST RATES?
We expect the unusual combination of strong economic growth and low
inflation to continue in the fourth quarter. The market appears sensitive to
any suggestion of too much growth and/or higher inflation. We do not believe
the Federal Reserve will increase the federal funds target rate in November,
but we do expect further tightening. Until then, interest rates are expected
to remain in the 6.00% to 6.75% range. Recently, the average maturity of the
Government Fund's investments has been extended compared to its length at the
beginning of the period.
PERFORMANCE AT A GLANCE
PERFORMANCE AS OF 9/30/97
<TABLE>
<CAPTION>
CLASS A SINCE 10/27/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR INCEPTION
---------------------------- ------ ------ --------------
<S> <C> <C> <C>
With Maximum 3.0% Sales Charge.................. 4.57% 5.98% 4.37%
Without Sales Charge............................ 7.79% 7.08% 5.19%
<CAPTION>
INSTITUTIONAL CLASS SINCE 10/27/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR INCEPTION
---------------------------- ------ ------ --------------
<S> <C> <C> <C>
7.89% 7.08% 5.19%
</TABLE>
Past performance is not predictive of future results. The investment return
and net asset value of shares of the Government Fund will fluctuate with
market conditions so that shares of the Government Fund, when redeemed, may
have a greater or lesser net asset value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Government Fund's manager has voluntarily waived portions of its fees or
has reimbursed expenses to the Government Fund, which has reduced operating
expenses for shareholders. Without these reductions, the Government Fund's
returns would have been lower.
The Class A shares of the Government Fund commenced operations on October
27, 1993. Performance figures for the Institutional Class shares reflect the
performance and expenses of the Class A shares for periods prior to September
6, 1996. The Institutional Class shares commenced operations on September 6,
1996.
1
<PAGE>
APPENDIX VII
This appendix reproduces the discussion of Fund performance from the
Government Fund's March 31, 1997, Annual Report. The discussion (which has
been slightly modified) reviews some of the factors that affected the Fund's
performance during the six-month period ended March 31, 1997, and shows the
performance of the Fund for various periods. The discussion has not been
updated to reflect events occurring after March 31, 1997.
WHAT WERE THE GOVERNMENT FUND'S TOTAL RETURNS?
The total return for Class A shares for the six-month period ended March 31,
1997, was 2.57%. The one-year total return for the Class A shares was 4.56%.
These return figures exclude sales charges. The total return for Institutional
Class shares for the six-month period ended March 31, 1997 was 2.58%. The one-
year total return for the Institutional Class shares was 4.49%.
HOW DID THE UNCERTAINTY ABOUT INTEREST RATES AFFECT THE GOVERNMENT FUND'S
PERFORMANCE OVER THE SIX-MONTH PERIOD?
There is always some uncertainty about interest rates. There are numerous
economic indicators which often suggest contradictory conclusions about
inflation, growth, demand, jobs and the many other factors which influence the
Federal Reserve's decisions about monetary policy. The Government Fund
concentrates on shorter, less volatile maturities. Typically, this means that
the Government Fund should avoid some of the steeper price appreciation and
depreciation likely in an uncertain market.
For most of the period, the federal funds target rate did not change.
Speculation shifted back and forth as to when and to what degree the rate
would be increased, but there was a general consensus that an increase was
coming. As a result, the Government Fund favored shorter maturities in an
effort to reduce price depreciation once an increase was announced.
WITH THE FED INCREASING THE FEDERAL FUNDS TARGET RATE IN EARLY 1997, DO YOU
EXPECT TO EXTEND MATURITIES? WHAT IS THE IMMEDIATE OUTLOOK?
We believe it is too soon to extend maturities. When interest rates go up,
bonds generally become more attractive, both for their current income and for
their future value. Extending maturities to "lock in" higher rates for a
longer period of time makes sense under certain conditions. Higher paying
bonds would also be attractive should rates go back down. Generally, if rates
drop, the resale value of higher paying existing bonds increases. This,
however, may only be the beginning of a cycle of Fed rate increases. As of
now, we expect another 0.25 to 0.50% increase in the target rate. We will also
be examining the economy for signs that the Fed's tightening is slowing the
economy as intended. Once we are comfortable that the cycle is complete, we
will reexamine the question of extending maturities.
THE GOVERNMENT FUND'S PORTFOLIO INCLUDES GOVERNMENT AGENCIES, U.S. TREASURIES
AND CORPORATE DEBT OBLIGATIONS. HOW DO YOU DETERMINE THE ALLOCATION AMONG
PERMISSIBLE INVESTMENTS? WHAT ROLES DO THE VARIOUS TYPES OF SECURITIES PLAY IN
THE PORTFOLIO?
Allocations are recommended by the Wells Fargo Fixed Income Policy
Committee. The Committee examines the expected returns and risks from the
available investments within the context of the Government Fund's shorter-
term, low-risk profile, U.S. Treasury securities, for example, have extremely
high credit quality, but they tend to have lower returns than similar
instruments of other issuers. Government agency securities, which might
include mortgage-backed instruments, for example, typically have higher yields
than Treasury securities and are generally considered to be of high quality.
Select corporate bonds and notes can boost yields, although they are more
risky than government-backed instruments. Consistent with the investment
objectives, policies and restrictions of the Government Fund, the Committee
searches for the proper balance between high
1
<PAGE>
quality, low volatility and solid returns. When yields are high, there may be
less reason to invest in corporate bonds. When they are low, corporate bonds
and collateralized repurchase agreements offer an opportunity for higher
returns which are still within the Government Fund's risk tolerance.
DID THE NOVEMBER ELECTIONS ALTER THE OUTLOOK FOR THE GOVERNMENT FUND?
What often affects the market most is fear of the unknown. The markets were
familiar with President Clinton from his first term and he led in the polls
from a very early stage. Therefore, the market was well prepared for his
reelection.
Issues concerning the ability of federal and local governments to raise
revenue tend to have a significant impact on the fixed-income markets, since
they directly impact budget deficits and the credit quality of government
issued or backed bonds. Both issues received a lot of attention during the
1996 electoral campaigns, although revenue issues have tended to be more
important to the municipal bond market-place. Certainly if a credible
compromise is reached on the federal budget deficit, the financial markets
will consider this very good news.
WILL THE NEW INFLATION-INDEXED TREASURY SECURITIES PLAY A ROLE IN THE
PORTFOLIO?
We do not foresee a role for these instruments right now. Inflation-indexed
Treasury securities do offer an intriguing hedge against inflation for
investors, but they do not currently appear to offer sufficient opportunity to
maximize total return. Inflation-indexed Treasury securities will likely have
very narrow fluctuations in price. Of course, these instruments are very new
and they may behave in unexpected ways. We will monitor how the secondary
market for inflation-indexed Treasury securities develops and make any
reassessments in our policies we deem necessary.
PERFORMANCE AT A GLANCE
PERFORMANCE AS OF 3/31/97
<TABLE>
<CAPTION>
CLASS A SINCE 10/27/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR INCEPTION
---------------------------- ------ ------ --------------
<S> <C> <C> <C>
With Maximum 3.0% Sales Charge.................. 1.46% 4.05% 3.51%
Without Sales Charge............................ 4.56% 5.09% 4.44%
<CAPTION>
INSTITUTIONAL CLASS SINCE 10/27/93
AVERAGE ANNUAL TOTAL RETURNS 1 YEAR 3 YEAR INCEPTION
---------------------------- ------ ------ --------------
<S> <C> <C> <C>
4.49% 5.07% 4.42%
</TABLE>
Past performance is not predictive of future results. The investment return
and net asset value of shares of the Government Fund will fluctuate with
market conditions so that shares of the Government Fund, when redeemed, may
have a greater or lesser net asset value than when originally purchased.
Average annual total returns for the indicated periods represent the average
annual increase in the value of an investment over the periods assuming
reinvestment of dividends and capital gain distributions at net asset value.
The Government Fund's manager has voluntarily waived portions of its fees or
has reimbursed expenses to the Government Fund, which has reduced operating
expenses for shareholders. Without these reductions, the Government Fund's
returns would have been lower.
2
<PAGE>
GROWTH OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) SC Short Int'd U.S. Gov't Income - A Lehman Brothers U.S. Treasury Note Index
- --------------------- ------------------------------------ ----------------------------------------
<S> <C> <C>
Measurement Pt- Oct-93 $9,700 $10,000
FYE Nov-93 $9,715 $9,950
FYE Dec-93 $9,745 $9,991
FYE Jan-94 $9,807 $10,090
FYE Feb-94 $9,748 $9,946
FYE Mar-94 $9,695 $9,804
FYE Apr-94 $9,661 $9,741
FYE May-94 $9,689 $9,748
FYE Jun-94 $9,697 $9,750
FYE Jul-94 $9,756 $9,877
FYE Aug-94 $9,753 $9,906
FYE Sep-94 $9,632 $9,824
FYE Oct-94 $9,626 $9,827
FYE Nov-94 $9,570 $9,782
FYE Dec-94 $9,608 $9,813
FYE Jan-95 $9,759 $9,973
FYE Feb-95 $9,937 $10,163
FYE Mar-95 $9,988 $10,219
FYE Apr-95 $10,074 $10,337
FYE May-95 $10,300 $10,629
FYE Jun-95 $10,361 $10,699
FYE Jul-95 $10,364 $10,704
FYE Aug-95 $10,434 $10,790
FYE Sep-95 $10,495 $10,862
FYE Oct-95 $10,597 $10,983
FYE Nov-95 $10,710 $11,117
FYE Dec-95 $10,825 $11,228
FYE Jan-96 $10,919 $11,325
FYE Feb-96 $10,825 $11,204
FYE Mar-96 $10,762 $11,149
FYE Apr-96 $10,720 $11,117
FYE May-96 $10,695 $11,111
FYE Jun-96 $10,796 $11,221
FYE Jul-96 $10,625 $11,255
FYE Aug-96 $10,823 $11,269
FYE Sep-96 $10,971 $11,414
</TABLE>
The above chart compares the performance of the Government Fund since the
inception with the Lehman Brothers U.S. Treasury Note Index. The chart assumes
a hypothetical $10,000 initial investment in the Fund and reflects all
operating expenses and assumes the maximum initial sales charge of 3.0%. The
Lehman Brothers U.S. Treasury Note Index is an unmanaged index of U.S.
Treasury 2-10 year notes, while the Government Fund is a professionally
managed mutual fund. The index presented does not incur expenses and is not
available directly for investment. Had this index incurred operating expenses,
its performance would have been lower.
GROWTH OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Lehman Brothers U.S. Treasury Note Index SC Short Int'd U.S. Gov't Income - 1
- --------------------- ---------------------------------------- ------------------------------------
<S> <C> <C>
Measurement Pt- Oct-93 $10,000 $10,000
FYE Nov-93 $9,950 $10,015
FYE Dec-93 $9,991 $10,047
FYE Jan-94 $10,090 $10,110
FYE Feb-94 $9,946 $10,050
FYE Mar-94 $9,804 $9,995
FYE Apr-94 $9,741 $9,960
FYE May-94 $9,748 $9,989
FYE Jun-94 $9,750 $9,997
FYE Jul-94 $9,877 $10,058
FYE Aug-94 $9,906 $10,055
FYE Sep-94 $9,824 $9,930
FYE Oct-94 $9,827 $9,924
FYE Nov-94 $9,782 $9,866
FYE Dec-94 $9,813 $9,905
FYE Jan-95 $9,973 $10,061
FYE Feb-95 $10,163 $10,244
FYE Mar-95 $10,219 $10,297
FYE Apr-95 $10,337 $10,385
FYE May-95 $10,629 $10,619
FYE Jun-95 $10,699 $10,681
FYE Jul-95 $10,704 $10,664
FYE Aug-95 $10,790 $10,756
FYE Sep-95 $10,862 $10,819
FYE Oct-95 $10,983 $10,924
FYE Nov-95 $11,117 $11,041
FYE Dec-95 $11,228 $11,160
FYE Jan-96 $11,325 $11,257
FYE Feb-96 $11,204 $11,160
FYE Mar-96 $11,149 $11,095
FYE Apr-96 $11,117 $11,052
FYE May-96 $11,111 $11,026
FYE Jun-96 $11,221 $11,130
FYE Jul-96 $11,255 $11,159
FYE Aug-96 $11,269 $11,158
FYE Sep-96 $11,414 $11,301
</TABLE>
The above chart compares the performance of$the Government Fund Institutional
Class shares since its inception with the Lehman Brothers U.S. Treasury Note
Index. The chart assumes a hypothetical $10,000 initial investment in the
Institutional Class shares and, for periods prior to September 6, 1996, reflects
the performance of the Class A Shares. For periods after September 6, 1996, the
chart reflects the operating expenses of the Institutional Class shares. The
Lehman Brothers U.S. Treasury Note Index is an unmanaged index of U.S. Treasury
2-10 year notes. Please note that the Fund is a professionally managed mutual
fund. The index presented here does not incur expenses and is not available
directly for investment. Had this index incurred operating expenses, its
performance would have been lower.
<PAGE>
SC 44 PROXY (4/98)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated April 13, 1998
STAGECOACH FUNDS, INC.
c/o Stagecoach Shareholder Services
Wells Fargo Bank, N.A.
P.O. Box 7066
San Francisco, CA 94120-7066
1-800-222-8222
May 29, 1998 Special Meeting of
Shareholders of THE INTERMEDIATE BOND FUND
This Statement of Additional Information sets forth certain additional
information about Stagecoach Funds, Inc. (the "Company") and the Company's
Intermediate Bond Fund (the "Bond Fund") and the Short-Intermediate U.S.
Government Income Fund (the "Government Fund"). This Statement of Additional
Information is not a prospectus but should be read in conjunction with the
Proxy/Prospectus, also dated April 13, 1998, for the Special Meeting of
Shareholders of the Bond Fund to be held on May 29, 1998. Copies of the
Proxy/Prospectus may be obtained at no charge by calling 1-800-222-8222 or
writing the Company at the address above.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Proxy/Prospectus.
The Proxy/Prospectus and this Statement of Additional Information are sometimes
referred to together as the "Voting Materials."
INCORPORATION OF DOCUMENTS BY REFERENCE
IN THIS STATEMENT OF ADDITIONAL INFORMATION
Further information about the Company's Bond Fund and the Government Fund
(together with the Bond Fund, the "Funds") is contained in other documents
previously filed with the Securities and Exchange Commission (the "SEC"). These
documents are incorporated herein by reference to the statements of additional
information referenced below.
Further information about Class A shares of the Funds is contained in and
incorporated by reference to the statement of additional information for the
Class A shares of the Funds dated December 15, 1997, as supplemented on February
24, 1998. The statement of additional information is contained in Post-
Effective Amendment No. 37, Registration No. 33-42927; 811-6419, as filed with
the SEC on December 15, 1997. The statement of additional information was
1
<PAGE>
supplemented pursuant to Rule 497(e) of the Securities Act of 1933 on
February 24, 1998, and the supplemented statement of additional information is
incorporated herein by reference.
Further information about the Class B shares of the Bond Fund is contained
in and incorporated by reference to the statement of additional information for
the Class B shares of such Fund dated December 15, 1997, as supplemented on
February 24, 1998. The statement of additional information is contained in
Post-Effective Amendment No. 37, Registration No. 33-42927; 811-6419, as filed
with the SEC on December 15, 1997. The statement of additional information was
supplemented pursuant to Rule 497(e) of the Securities Act of 1933 on February
24, 1998, and the supplemented statement of additional information is
incorporated herein by reference.
Further information about Institutional Class shares of the Funds is
contained in and incorporated by reference to the statement of additional
information for the Institutional Class shares of the Funds dated January 30,
1998. The statement of additional information is contained in Post-Effective
Amendment No. 41, Registration No. 33-42927; 811-6419, as filed with the SEC on
January 30, 1998.
The audited financial statements and financial highlights for the Funds
contained in the Annual Report for the fiscal period ended March 31, 1997, are
hereby incorporated by reference to the Funds' Annual Report for such period, as
filed with the SEC on June 4, 1997.
The unaudited financial statements, financial highlights and related
independent auditors' report for the Funds contained in the Semi-Annual Report
for the fiscal period ended September 30, 1997, are hereby incorporated by
reference to the Funds' Semi-Annual Report for such period, as filed with the
SEC on December 5, 1997.
2
<PAGE>
Table of Contents
-----------------
Page
----
General Information.................................................. 4
Exhibit I -- Pro Forma Financial Statements.......................... I-1
3
<PAGE>
GENERAL INFORMATION
About the Proposed Consolidation
--------------------------------
The shareholders of the Company's Bond Fund are being asked to approve an
Agreement and Plan of Consolidation (the "Consolidation Agreement") between the
Bond Fund and the Government Fund. The Consolidation Agreement contemplates
that all of the assets and stated liabilities of the Bond Fund will be
transferred to the investment portfolio of the Government Fund, in exchange for
shares of equal value of designated classes of the Government Fund (the
"Consolidation"). As a result of the Consolidation, shareholders of the Bond
Fund will become shareholders of the Government Fund.
The shares issued by the Government Fund will have an aggregate value equal
to the aggregate value of the shares of the Bond Fund that are outstanding
immediately before the Closing.
After the transfer of its assets and stated liabilities in exchange for
Government Fund shares, the Bond Fund will distribute the shares of the
Government Fund to its shareholders. Each shareholder owning shares of the Bond
Fund at the Closing will receive shares of the designated class of the
Government Fund of equal value, and will receive any unpaid dividends or
distributions that were declared before the Closing on shares of the Bond Fund.
Stagecoach will establish an account for each former shareholder of the
Bond Fund reflecting the appropriate number of Government Fund shares
distributed to the shareholder. These accounts will be substantially identical
to the accounts currently maintained by Stagecoach for each shareholder.
For further information about the Consolidation, see the Proxy/Prospectus.
4
<PAGE>
INTRODUCTORY NOTE TO PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information gives effect to the
proposed transfer of the assets and stated liabilities of the Bond Fund and
Government Fund, accounted for as if each transfer had occurred as of September
30, 1997, and as if the Funds had operated for the periods then ended. In
addition, the pro forma combining statements have been prepared based upon the
proposed fee and expense structure of the surviving Government Fund. The
statements do not reflect the effect of proposed differing investment objectives
and policies of the Funds.
The pro forma financial information should be read in conjunction with the
historical financial statements and notes thereto of the Funds incorporated by
reference in this statement of additional information. The Funds will be
accounted for as a tax-free reorganization. For more information concerning
this aspect of the Consolidation, see "About the Proposed Consolidation-Federal
Income Tax Consequences," in the Proxy/Prospectus.
5
<PAGE>
PRO-FORMA COMBINED SCHEDULE OF INVESTMENTS FOR STATECOACH SHORT-INTERMEDIATE
U.S. GOV'T INCOME FUND AND THE STAGECOACH INTERMEDIATE BOND FUND
(UNAUDITED) SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Stagecoach Stagecoach
Short-Intermediate U.S. Intermediate Pro-Forma
Interest Maturity Gov't Income Bond Fund Combined
PRINCIPAL Security Name Rate Date Fund Value Value Funds Value
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL FOREIGN GOVERNMENTS - 2.09%
FOREIGN GOVERNMENTS - 2.09%
1,300,000 Ontario, Province of 7.63% 06/22/04 0 1,378,000 $ 1,378,000
1,500,000 Ontario, Province of 6.50 01/17/06 0 1,475,625 1,475,625
----------------------------------------------------
TOTAL INTERNATIONAL FOREIGN GOVERNMENTS 0 2,853,625 $ 2,853,625
(Cost $2,736,838)
CORPORATE BONDS & NOTES - 40.16%
BANK & FINANCE - 11.68%
5,000,000 First Bank Corp 6.40% 02/15/03 5,027,150 0 $ 5,027,150
500,000 First Chicago NBD Bancorp 8.10 03/01/02 0 530,000 530,000
1,000,000 General Motors Acceptance Corp 6.88 07/15/01 0 1,015,000 1,015,000
500,000 ITT Hartford Group Inc 8.20 10/15/98 0 512,115 512,115
1,000,000 Midland Bank Plc 7.63 06/15/06 0 1,052,500 1,052,500
1,000,000 NationsBankCorp 6.88 02/15/05 0 1,010,000 1,010,000
1,750,000 Norwest Corp 7.13 04/01/00 0 1,785,000 1,785,000
1,000,000 NYNEX Credit Co 6.25 06/13/02 0 1,002,450 1,002,450
2,000,000 Sears Roebuck Acceptance Corp 5.82 12/07/98 0 2,002,720 2,002,720
1,000,000 Smith Barney Holdings 6.50 10/15/02 0 1,002,500 1,002,500
1,000,000 Standard Credit Card Master Credit 8.35 01/07/00 0 1,025,600 1,025,600
----------------------------------------------------
5,027,150 10,937,885 $ 15,965,035
INDUSTRIALS - 2.90%
400,000 International Business Machines Corp 7.50% 06/15/13 0 425,500 $ 425,500
1,000,000 Lockheed Martin Co 6.85 05/15/01 0 1,016,250 1,016,250
1,500,000 Mobil Oil Corp 6.25 08/31/01 0 1,498,125 1,498,125
1,000,000 Pepsico Inc 7.63 11/01/98 0 1,016,800 1,016,800
----------------------------------------------------
0 3,956,675 $ 3,956,675
INTERNATIONAL AGENCIES - 1.93%
2,500,000 European Investment Bank 7.13% 09/18/06 2,637,500 0 $ 2,637,500
MISCELLANEOUS BONDS - 18.28%
5,000,000 Anheuser-Busch Co 6.75% 08/01/03 5,087,500 0 $ 5,087,500
1,300,000 CIT Group Holdings 5.88 11/19/98 0 1,299,974 1,299,974
4,000,000 Comdisco Inc 6.50 04/30/99 4,025,000 0 4,025,000
1,000,000 CSX Corp 7.25 05/01/04 0 1,026,250 1,026,250
1,150,000 Disney (Walt) Co 6.75 03/30/06 0 1,161,500 1,161,500
2,000,000 Ford Holdings Inc 9.38 03/01/20 0 2,484,240 2,484,240
4,000,000 Honeywell Inc 6.75 03/15/02 4,050,000 0 4,050,000
3,800,000 Norwest Financial Inc 6.38 09/15/02 3,801,900 0 3,801,900
1,000,000 Phillip Morris Co Inc 7.00 07/15/05 0 1,007,500 1,007,500
1,000,000 RJR Nabisco Inc 8.25 07/01/04 0 1,028,750 1,028,750
----------------------------------------------------
16,964,400 8,008,214 $ 24,972,614
UTILITIES - 5.37%
5,000,000 Pacific Gas & Electric Co 7.88% 3/1/02 5,281,250 0 $ 5,281,250
2,000,000 US West Capital Funding Inc 7.30 1/15/07 0 2,062,499 2,062,499
----------------------------------------------------
5,281,250 2,062,499 $ 7,343,749
TOTAL CORPORATE BONDS & NOTES $ 54,875,573
(Cost $54,151,255)
U.S. GOVERNMENT AGENCY SECURITIES - 35.27%
FEDERAL AGENCY - OTHER - 1.48
2,000,000 Tennessee Valley Authority 6.50% 08/20/01 2,026,240 0 $ 2,026,240
FEDERAL HOME LOAN BANKS - 2.89%
1,030,000 FHLB 8.45% 07/26/99 1,073,816 0 $ 1,073,816
2,760,000 FHLB 8.60 06/25/99 2,879,260 0 2,879,260
----------------------------------------------------
$ 3,953,076
FEDERAL HOME LOAN MORTGAGE CORPORATION - 6.29%
5,000,000 FHLMC 6.79% 08/26/05 5,118,750 0 $ 5,118,750
1,500,000 FHLMC 7.13 07/21/99 1,530,315 0 1,530,315
198,583 FHLMC #544269 8.00 11/01/08 205,099 0 205,099
57,010 FHLMC #22-0009 8.25 08/01/01 58,222 0 58,222
236,981 FHLMC #291786 8.50 01/01/09 246,380 0 246,380
30,824 FHLMC #189194 8.75 08/01/08 32,481 0 32,481
79,545 FHLMC #274688 9.00 07/01/16 0 85,136 85,136
1,090,670 FHLMC #536534 9.00 07/01/17 1,159,852 0 1,159,852
143,553 FHLMC #546103 10.50 08/01/19 156,910 0 156,910
----------------------------------------------------
$ 8,593,145
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 15.55%
354,761 FNMA #264440 6.00% 12/01/08 0 349,461 $ 349,461
3,336,827 FNMA #50761 6.00 07/01/08 3,254,440 0 3,254,440
317,720 FNMA #050965 6.50 01/01/24 0 310,768 310,768
21,503 FNMA #68853 6.50 11/01/98 20,945 0 20,945
172,470 FNMA #83785 8.00 08/01/18 179,250 0 179,250
290,939 FNMA #2783 8.75 03/01/07 306,393 0 306,393
25,539 FNMA #75336 9.50 02/01/09 27,251 0 27,251
2,000,000 FNMA Global 6.85 05/26/00 2,010,620 0 2,010,620
5,000,000 FNMA Global 8.50 02/01/05 5,255,450 0 5,255,450
5,000,000 FNMA MTN 6.18 06/23/00 5,020,615 0 5,020,615
2,000,000 FNMA MTN 6.69 08/07/01 2,035,620 0 2,035,620
2,455,000 FNMA MTN 7.30 04/17/00 2,474,935 0 2,474,935
----------------------------------------------------
20,585,519 660,229 $ 21,245,748
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 8.99%
1,550,170 GNMA #418261 6.50% 04/15/26 1,515,772 0 $ 1,515,772
427,463 GNMA #423225 6.50 04/15/26 418,366 0 418,366
313,652 GNMA #8552 6.87 11/20/24 0 323,159 323,159
1,866,343 GNMA #423779 7.00 05/15/26 1,866,343 0 1,866,343
1,417,057 GNMA #417389 7.00 05/15/26 0 1,418,333 1,418,333
1,226,353 GNMA #336930 7.50 03/15/23 0 1,252,560 1,252,560
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
475,666 GNMA #339486 7.50 04/15/23 0 485,831 485,831
198,090 GNMA #389023 8.50 11/15/22 0 208,607 208,607
1,618,987 GNMA #402844 9.00 12/15/24 1,724,723 0 1,724,723
1,481,931 GNMA #403934 9.00 08/15/24 1,585,148 0 1,585,148
176,544 GNMA #158583 9.00 09/20/16 0 190,107 190,107
146,906 GNMA #1740 9.00 10/20/21 0 157,275 157,275
124,532 GNMA #1740 9.00 12/20/21 0 133,322 133,322
114,453 GNMA #188769 9.00 02/15/17 0 124,106 124,106
33,246 GNMA #197650 9.00 08/15/21 0 35,852 35,852
18,927 GNMA #201783 9.00 02/15/17 0 20,524 20,524
7,558 GNMA #264106 9.00 11/15/18 0 8,186 8,186
96,254 GNMA #302683 9.00 03/15/21 0 103,799 103,799
196,497 GNMA #305078 9.00 04/15/21 0 211,900 211,900
232,674 GNMA #57247 9.50 05/01/16 0 251,441 251,441
73,159 GNMA #258377 10.00 08/15/18 0 81,575 81,575
109,328 GNMA #262027 10.00 08/15/18 0 122,239 122,239
38,452 GNMA #122382 11.50 04/15/15 0 44,430 44,430
-----------------------------------------
7,110,352 5,173,246 $ 12,283,598
REAL ESTATE MORTGAGE INVESTMENT CONDUITS - 0.07%
87,203 FNMA 1993-G19 7.25% 04/25/23 91,263 0 $ 91,263
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 48,193,070
(Cost $48,055,460)
U.S. TREASURY SECURITIES - 19.44%
U.S. TREASURY BONDS - 5.29%
1,000,000 U.S. Treasury Bonds 6.25% 5/31/00 1,009,060 0 $ 1,009,060
2,500,000 U.S. Treasury Bonds 8.13 08/15/19 0 2,973,825 2,973,825
2,500,000 U.S. Treasury Bonds 10.38 11/15/12 0 3,248,050 3,248,050
-----------------------------------------
1,009,060 6,221,875 $ 7,230,935
U.S. TREASURY NOTES - 14.15
2,000,000 U.S. Treasury Notes 5.75% 08/15/03 1,969,060 0 $ 1,969,060
5,000,000 U.S. Treasury Notes 5.88 11/15/05 4,907,800 0 4,907,800
2,250,000 U.S. Treasury Notes 6.75 04/30/00 0 2,296,755 2,296,755
2,500,000 U.S. Treasury Notes 7.13 09/30/99 2,560,925 0 2,560,925
1,000,000 U.S. Treasury Notes 7.25 08/15/04 0 1,063,120 1,063,120
2,000,000 U.S. Treasury Notes 7.88 11/15/04 0 2,199,060 2,199,060
3,200,000 U.S. Treasury Notes 8.00 08/15/09 3,321,983 0 3,321,983
1,000,000 U.S. Treasury Notes 8.25 07/15/98 0 1,020,160 1,020,160
-----------------------------------------
12,759,768 6,579,095 $ 19,338,863
TOTAL U.S. TREASURY SECURITIES $ 26,569,798
(Cost $26,398,858)
SHORT - TERM INSTRUMENTS - 2.36%
REPURCHASE AGREEMENTS - 2.36%
2,864,000 Goldman Sachs Pooled Repurchase Agreement - 6.15% 10/01/97 2,629,000 235,000 $ 2,864,000
102% Collateralized by U.S. Government
Securities
356,000 JP Morgan Securities Inc Repurchase 6.00 10/01/97 20,000 336,000 356,000
Agreement - 102% Collateralized by U.S.
Government Securities
-----------------------------------------
2,649,000 571,000 3,220,000
TOTAL SHORT-TERM INSTRUMENTS
(Cost $3,220,000)
TOTAL INVESTMENTS IN SECURITIES
(Cost $134,562,411)* (Notes 1 and 3) 99.32% $135,712,066
Other Assets and Liabilities, Net 0.68% 933,492
------ ------------
TOTAL NET ASSETS 100.00% $136,645,558
====== ============
* Cost for federal income tax purposes is the
same as for financial statement purposes and
net unrealized appreciation consists of:
Gross Unrealized Appreciation $1,620,328
Gross Unrealized Depreciation (470,673)
----------
Net Unrealized Appreciation $1,149,655
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
OVERLAND EXPRESS MUNICIPAL INCOME FUND - JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity
Principal Security Name Rate Date Value
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 96.49%
ALABAMA - 0.33%
160000 Alabama State SFMR Series B AMT GNMA Collateralized 7.40 04/01/22 164,170
ALASKA - 3.11%
1000000 Alaska Industrial Development Authority Revenue Series A 6.13 04/01/27 1,021,760
490000 Alaska State Housing Finance Corporation Second Series AMT Government Agency Collateralized 7.10 06/01/22 513,358
CALIFORNIA - 29.06%
9750000 Riverside County CA SFMR Series B AMT Escrowed to Maturity 8.35 06/01/13 12,452,213
1000000 San Francisco CA City AMT 6.15 05/01/16 1,036,550
820000 Southern California State SFMR Project B AMT GNMA/FNMA Collateralized 6.90 10/01/24 857,925
DISTRICT OF COLUMBIA - 0.68%
320000 District of Columbia SFMR AMT GNMA Collateralized 7.10 12/01/24 337,443
FLORIDA - 0.46%
215000 Brevard County FL HFA SFMR Refunded Series B FSA Insured 7.00 03/01/13 226,825
HAWAII - 2.69%
725000 Hawaii State Airports Systems Revenue AMT FGIC Insured 7.00 07/01/20 789,344
500000 Hawaii State Harbor Capital Improvement Revenue AMT MBIA Insured 7.00 07/01/17 538,125
IDAHO - 3.12%
1500000 Idaho State HFA SFMR Series C-2 AMT 6.35 07/01/15 1,540,845
ILLINOIS - 5.21%
500000 Chicago IL O'Hare International Airport Special Facilities Revenue AMT LOC - Bayerische 7.13 05/01/18 539,190
Landesbank
1900000 Chicago IL O'Hare International Airport Special Facilities Revenue AMT MBIA Insured 6.75 01/01/18 2,030,245
INDIANA - 5.29%
2500000 Indiana State HFA Series A-2 AMT GNMA/FNMA Collateralized 6.45 07/01/14 2,613,750
IOWA - 3.84%
1435000 Iowa State HFA SFMR Series B AMT GNMA/FNMA Collateralized 6.95 07/01/24 1,512,533
365000 Iowa State HFA SFMR Series B AMT GNMA/FNMA Collateralized 7.45 07/01/23 382,549
KANSAS - 0.36%
165000 Kansas City KS Mortgage Revenue AMT GNMA Collateralized 7.35 12/01/23 175,141
KENTUCKY - 4.49%
1100000 Kenton County KY Cincinnati/Northern Kentucky International Airport Revenue AMT FSA Insured 6.30 03/01/15 1,140,513
1025000 Kentucky State HFA MFHR Series D AMT FHA Collateralized 7.45 01/01/23 1,077,982
LOUISIANA - 1.44%
670000 Louisiana State Public Facilities Authority Student Loan Revenue AMT FSA Insured 6.85 01/01/09 710,562
MASSACHUSETTS - 2.17%
1000000 Massachusetts State HFA Residential Development FNMA Collateralized 6.90 11/15/21 1,071,830
MINNESOTA - 0.91%
425000 Minneapolis-St Paul MN Housing Finance Board Revenue SFMR Phase IX AMT GNMA Collateralized 7.30 08/01/31 449,790
NEVADA - 11.81%
1020000 Nevada State SFMR Series A-2 AMT FHA Collateralized 6.55 10/01/15 1,072,887
1825000 Nevada State SFMR Series C AMT FHA Collateralized 6.35 10/01/13 1,899,661
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
2700000 Washoe County NV Gas Facilities Sierra Pacific Power AMT MBIA Insured 6.55 09/01/20 2,858,678
NEW JERSEY - 2.66%
1250000 New Jersey State MFHR FHA Collateralized 7.00 05/01/30 1,314,425
NEW YORK - 2.09%
1000000 Port Authority New York & New Jersey 5.75 09/15/12 1,031,370
OKLAHOMA - 2.71%
200000 Pryor Creek OK Economic Development Authority Mortgage Revenue Series A FNMA Collateralized 7.13 07/01/21 208,316
570000 Tulsa County OK HFA Mortgage Revenue Series B Remarket AMT GNMA Collateralized 7.10 06/01/22 601,755
500000 Tulsa County OK HFA Mortgage Revenue Series B Remarket AMT GNMA Collateralized 7.55 05/01/23 528,265
PENNSYLVANIA - 1.07%
500000 Pennsylvania State Higher EDFA Student Loan Revenue Series D AMT AMBAC Insured 7.05 10/01/16 525,625
TEXAS - 0.92%
425000 Travis County TX HFC Residential Mortgage Revenue Series A GNMA/FNMA Collateralized 7.00 12/01/11 453,241
UTAH - 9.02%
500000 Utah State Board of Regents Student Loan Revenue Series F AMT AMBAC Insured 7.45 11/01/08 528,485
1100000 Utah State Board of Regents Student Loan Revenue Series H AMT AMBAC Insured 6.70 11/01/15 1,142,295
1920000 Utah State HFA SFMR Series B-2 AMT FHA Collateralized 6.50 07/01/15 2,003,693
750000 Utah State HFA SFMR Series D-2 AMT FHA Collateralized 6.45 01/01/11 779,993
WASHINGTON - 3.05%
1440000 Washington State SFMR Series D AMT GNMA/FNMA Collateralized 7.10 07/01/22 1,505,491
TOTAL MUNICIPAL BONDS
(Cost $44,941,825)
</TABLE>
<TABLE>
<CAPTION>
Interest Maturity
Principal Security Name Rate Date Value
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 2.65%
-2.65%
1307000 Provident National Municipal Fund 3.50 1/01/0 1,307,000
(Cost $1,307,000)
TOTAL INVESTMENTS IN SECURITIES
(Cost $46,248,825)* (Notes 1 and 3) 0.9914 48,943,823
Other Assets and Liabilities, Net 0.86 423,617
TOTAL NET ASSETS 100.00% 49,367,440
Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
Gross Unrealized Appreciation 2694998
Gross Unrealized Depreciation 0
Net Unrealized Appreciation 2694998
</TABLE>
The accompanying notes are an integral part of these financial statements.
