<PAGE>
[KPMG PEAT MARWICK LLP
LETTERHEAD APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Stagecoach Funds, Inc.:
We have examined management's assertion that the Arizona Tax-Free Fund,
California Tax-Free Bond Fund, California Tax-Free Income Fund, Corporate Bond
Fund, National Tax-Free Fund, Oregon Tax-Free Fund, Short-Term Government-
Corporate Income Fund, Short-Term Municipal Income Fund, Short-Intermediate U.S.
Government Income Fund, U.S. Government Income Fund, and Variable Rate
Government Fund (eleven of the funds constituting Stagecoach Funds, Inc.)
(collectively the "Funds") complied with the requirements of subsections (b) and
(c) of Rule 17f-2 under the Investment Company Act of 1940 as of June 30, 1998,
included in the accompanying Management Statement regarding Compliance with
Certain Provisions of the Investment Company Act of 1940. Management is
responsible for the Funds' compliance with those requirements. Our
responsibility is to express an opinion on management's assertion about the
Funds' compliance based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Funds' compliance with those
requirements and performing such other procedures as we considered necessary in
the circumstances. Included among our procedures were the following tests
performed as of June 30, 1998, and for the period from March 31, 1998 (the date
of our last examination) through June 30, 1998, with respect to securities
transactions:
* Confirmation of all securities with the custodians, Wells Fargo Bank, N.A.;
* Confirmation or examination of underlying documentation of all securities
purchased but not received;
* Reconciliation of all securities to the books and records of the Funds and
the custodians; and
* Testing of a selected sample of security transactions to determine if they
were properly recorded.
<PAGE>
We believe that our examination provides a reasonable basis for our
opinion. Our examination does not provide a legal determination on the Fund's
compliance with the specified requirements.
In our opinion, management's assertion that the Funds were in compliance
with the above mentioned provisions of Rule 17f-2 of the Investment Company Act
of 1940 as of June 30, 1998, and for the period from March 31, 1998 (the date of
our last examination) through June 30, 1998, is fairly stated in all material
respects.
This report is intended solely for the information and use of management of
Stagecoach Funds, Inc. and the Securities and Exchange Commission and should not
be used for any other purpose.
/s/ KPMG PEAT MARWICK LLP
August 5, 1998
<PAGE>
[STAGECOACH FUNDS LOGO APPEARS HERE]
August 5, 1998
KPMG Peat Marwick LLP
Three Embarcadero Center
San Francisco, CA 94111
RE: MANAGEMENT STATEMENT REGARDING COMPLIANCE WITH CERTAIN PROVISIONS OF THE
INVESTMENT COMPANY ACT OF 1940
We, as members of management of Stagecoach Funds, Inc. (the Funds), are
responsible for complying with the requirements of subsections (b) and (c) of
Rule 17f-2, "Custody of Investments by Registered Management Investment
Companies", of the Investment Company Act of 1940. We are also responsible for
establishing and maintaining an effective internal control structure over
compliance with those requirements. We have performed an evaluation of the
Funds' compliance with the requirements of subsections (b) and (c) of Rule 17f-2
as of June 30, 1998 and for the period from March 31, 1998 through June 30,
1998.
Based on this evaluation, we assert that the Funds were in compliance with the
requirements of subsections (b) and (c) of Rule 17f-2 of the Investment Company
Act of 1940 as of June 30, 1998 and for the period from March 31, 1998 through
June 30, 1998.
Stagecoach Funds, Inc.
By:
<TABLE>
<CAPTION>
<S> <C>
/s/ RICHARD H. BLANK, JR. /s/ MICHAEL HOGAN
- ------------------------------------- -------------------------------
Richard H. Blank, Jr. Michael Hogan
Treasurer and Chief Operating Officer Senior Vice President
Stagecoach Funds, Inc. Managing Director of Mutual Fund Division
Wells Fargo Bank, Adviser to Stagecoach
Funds, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION ------------------------------
Washington, D.C. 20549 OMB APPROVAL
------------------------------
OMB Number: 3235-0360
Expires: June 30, 1997
FORM N-17f-2 Estimated average burden hours
per response 0.05
------------------------------
Certificate of Accounting of Securities and Similar
Investments in the Custody of
Management Investment Companies
Pursuant to Rule 17f-2 [17 CFR 270.17f-2]
- ----------------------------------------------------------------------------------------------------------------------------
1. INVESTMENT COMPANY ACT FILE NUMBER: DATE EXAMINATION COMPLETED:
6419 June 30, 1998
- ----------------------------------------------------------------------------------------------------------------------------
2. STATE IDENTIFICATION NUMBER:
- ----------------------------------------------------------------------------------------------------------------------------
AL AK AZ AR CA CO
- ----------------------------------------------------------------------------------------------------------------------------
CT DE DC FL GA HI
- ----------------------------------------------------------------------------------------------------------------------------
ID IL IN IA KS KY
- ----------------------------------------------------------------------------------------------------------------------------
LA ME MD MA MI MN
- ----------------------------------------------------------------------------------------------------------------------------
MS MO MT NE NV NH
- ----------------------------------------------------------------------------------------------------------------------------
NJ NM NY NC ND OH
- ----------------------------------------------------------------------------------------------------------------------------
OK OR PA RI SC SD
- ----------------------------------------------------------------------------------------------------------------------------
TN TX UT VT VA WA
- ----------------------------------------------------------------------------------------------------------------------------
WV WI WY PUERTO RICO
- ----------------------------------------------------------------------------------------------------------------------------
Other (specify):
- ----------------------------------------------------------------------------------------------------------------------------
3. EXACT NAME OF INVESTMENT COMPANY AS SPECIFIED IN REGISTRATION STATEMENT:
STAGECOACH FUNDS, INC.
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICE (NUMBER, STREET, CITY, STATE, ZIP CODE):
111 CENTER STREET, LITTLE ROCK, ARKANSAS 72201
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INSTRUCTIONS:
This Form must be completed by investment companies that have custody of
securities or similar investments.
INVESTMENT COMPANY:
1. All items must be completed by the investment company.
2. Give this Form to the independent public accountant who, in compliance with
Rule 17f 2 under the Act and applicable state law, examines securities and
similar investments in the custody of the investment company.
ACCOUNTANT:
THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
<PAGE>
3. Submit this Form to the Securities and Exchange Commission and appropriate
state securities administrators when filing the certificate of accounting
required by Rule 17f 2 under the Act and applicable state law. File the
original and one copy with the Securities and Exchange Commission's
principal office in Washington D.C., one copy with the regional office for
the region in which the investment company's principal business operations
are conducted, and one copy with the appropriate state administrator(s), if
applicable.
THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
