<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Stagecoach Funds, Inc.:
We have examined management's assertion about Stagecoach Funds, Inc.'s (the
"Company's") compliance with the requirements of subsections (b) and (c) of Rule
17f-2 under the Investment Company Act of 1940 as of March 31, 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 March 31, 1998 and for the period from November 30, 1997 (the
date of our last examination) through March 31, 1998, except for 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 which were for the period from December 31, 1997 (the date of
our last examination) through March 31, 1998, 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
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* 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 Company's
compliance with the specified requirements.
In our opinion, management's assertion that the Company was in compliance with
the above mentioned provisions of Rule 17f-2 of the Investment Company Act of
1940 as of March 31, 1998 and for the period from November 30, 1997 (the date of
our last examination) through March 31, 1998, except for 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
which were for the period from December 31, 1997 (the date of our last
examination) through March 31, 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
April 24, 1998
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April 24, 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 March 31, 1998 and for the period from November 30, 1997 through March
31, 1998 except for 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, which are for the period from December 31,
1997 to March 31, 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 March 31, 1998 and for the period from November 30, 1997
through March 31, 1998 except for 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 which are for the
period from December 31, 1997 to March 31, 1998, 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.
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/s/ Rochelle Siote
_____________________________________
Rochelle Siote
Principal
Barclays Global Fund Advisors
Sub-adviser to Stagecoach Funds, Inc.
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Expires: June 30, 1997
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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]
1. INVESTMENT COMPANY ACT FILE NUMBER: DATE EXAMINATION COMPLETED:
6419 March 31, 1998
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2. STATE IDENTIFICATION NUMBER:
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AL AK AZ AR CA CO
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CT DE DC FL GA HI
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ID IL IN IA KS KY
- ------------------------------------------------------------------------------
LA ME MD MA MI MN
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MS MO MT NE NV NH
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NJ NM NY NC ND OH
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OK OR PA RI SC SD
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TN TX UT VT VA WA
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WV WI WY PUERTO RICO
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Other (specify):
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3. EXACT NAME OF INVESTMENT COMPANY AS SPECIFIED IN REGISTRATION STATEMENT:
STAGECOACH FUNDS, INC.
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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:
THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
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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
