<PAGE>
[KPMG Peat Marwick LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Stagecoach Funds, Inc.
and
Securities and Exchange Commission:
We have examined management's assertion that the California Tax-Free Bond Fund,
Index Allocation Fund, Overland Express Sweep Fund, Short-Term Government-
Corporate Income Fund, Short-Term Municipal Income Fund, Strategic Growth Fund,
U.S. Government Income Fund, and Variable Rate Government Fund (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 December 31, 1997, 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 December 31, 1997 and for the period from November 30, 1997 (the
date of our last examination) through December 31, 1997, with respect to
securities transactions:
* Confirmation of all securities with the custodians, Wells Fargo
Bank, N.A., and Barclays Global Investors, 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
<PAGE>
* Tested a selected sample of security transactions to determine
if they were properly recorded.
We believe that our examination provides a reasonable basis for our
opinion. Our examination does not provide a legal determination on the Funds'
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 December 31, 1997 and for the period from November 30, 1997 (the
date of our last examination) through December 31, 1997, 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
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January 16, 1998
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-17f-2
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]
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1. INVESTMENT COMPANY ACT FILE NUMBER: DATE EXAMINATION COMPLETED:
811-6419 12/31/1997
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. ADDRESS OF PRINCIPAL EXECUTIVE OFFICE
(NUMBER, STREET, CITY, STATE, ZIP CODE):
111 CENTER STREET, LITTLE ROCK, ARKANSAS 72201
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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:
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
<PAGE>
[LETTERHEAD OF STAGECOACH FUNDS, INC.]
January 16, 1998
KPMG Peat Marwick LLP
Three Embarcadero Center
San Francisco, CA 94111
RE: 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 Rule 17f-2 requirements. We have performed an evaluation of the
Funds' compliance with the requirements of subsections (b) and (c) of Rule 17f-2
as of December 31, 1997 and for the period from November 30, 1997 through
December 31, 1997.
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 December 31, 1997 and for the period from November 30, 1997
through December 31, 1997 with respect to securities reflected in the investment
accounts of the Funds.
Stagecoach Funds, Inc.
By:
/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.
111 Center Street * Little Rock, AR 72201
<PAGE>
Page 2
KPMG Peat Marwick, LLP
January 16, 1998
/S/ Rochelle Siote
- ------------------
Rochelle Siote
Principal
Barclays Global Fund Advisors
Sub-adviser to Stagecoach Funds, Inc.
